Federal Government Spending 2000 through 2020

Given that my life is already very boring, I decided to bore myself to tears with a digital trip to the Office of Management Budget where I found federal government budget numbers. Talk about a nap-inducing exercise. 

I could have chosen budget numbers back as far as when Tuna's grandtuna was a mere minnow.  Instead I decided to be modern and look at recent numbers -- looking at the columns for 2000, 2010, and 2020. I could have gone out to projections through 2026 but I decided that I was interested in history and not fiction. 

Where do I start? I printed some of the numbers and they lay in front of me like an army of wannabees.  I have to be choosy over what I report here as I know you might need a little nap too. So let's hit the high points. 

Total government expenditures rose from $1.8 trillion in 2000 to $3.5 trillion in 2010, and then landed on $6.6 trillion in 2020. That's a lot of change, but keep in mind that these numbers reflect decades of change and that government is an unstoppable runaway train. I won't do the calculations, but the changes between decades are pretty similar. Government spending roughly doubled in each of the two decades. These government numbers are not adjusted for inflation -- they have not been purged of inflation like a lot of GDP numbers. So they are going to look pretty large because of this.  Just fyi -- the CPI rose by 28% in the first decade. It rose by 16% between 2010 and 2019. It rose by 19% between 2010 and 2020. 

What else? How about national defense spending? After rising by nearly $400 billion in the first decade -- it rose by $31 billion in the second one. Luckily the world because a safer place and so we didn't need to waste all that money on national safety and security. Please note the sarcasm as indicated by italics. 

And then, that's when it hit me that my results were too much affected by Covid by using 2020 as my terminal point for the second decade. So I used instead changes between 2010 and 2019. My results changed markedly. Instead of total government spending rising by $3.1 trillion in the second decade, they rose by only $990 billion. 

Wow. What's the point? Covid meant that the government was going to come to the rescue with spending. In just one year (2020), the change for the "decade" went from less than a trillion before Covid to $3.1 trillion after government had a little time to react (in 2020). 

What else? Defense spending was goosed some by Covid -- rising in the second decade through 2020 by $31 billion. That was a lot more than the planned decrease through 2019. Before Covid hit, defense spending was going to shrink from $693 billion in 2010 to $686 billion in 2019. That's a Covid-induced increase of $39 billion for defense. 

Similarly, income security spending was set to decline from 2010 to 2019 by $107 billion. By 2020, the change from 2010 was  an increase of $642 billion or a swing of almost $750 billion. Clearly Covid made a huge difference for federal spending for income security.

Similarly, the Feds were going to spend an additional $57 billion between 2010 and 2019 for Commerce and Housing Credit. And then Covid caused that number to swell to $651 billion between 2010 and 2020. That's a swing of almost $600 billion. 

Most of the key categories of federal government spending show the same increases because of Covid. Education, Health, Medicare, Social Security, and many others show increases beyond what was planned in 2019. 

Note that the numbers I quoted above are past outcomes. They do not count any of the spending increases planned for the future. When the emergency is over, will we have the discipline to move these spending numbers back to something more normal? It's hard to imagine it. The budget requires legislators to either reduce spending or raise taxes. They don't seem to excel at either. If they don't, then the only other option is a much large national debt. 

Inflation 2015 to 2021

The Fed met last week and after a good lunch of weenies and baked beans they spilled the beans and said that they no longer believed that inflation would require them to leave interest rates at zero until 2024. They pushed up the date when they might maybe perhaps would possibly raise interest rates above zero to 2023. The markets swooned and left-wing commentators drooled. 

Geez guys. Have you looked at a calendar lately? Some folks are worried about inflation NOW...and the Fed is going to quell inflation by raising interest rates a smidge in 2023. The last time I looked, 2023 is two years from now. This is like me telling you all that since I gained thirty pounds recently, I am going to cut out bacon on my baked cheese-soaked potatoes in 2023. Recall that money is supposed to hit inflation with a lag. So if they start putting the brake on in 2023 then inflation will begin to come down in 2024? 

How dumb do they think we are? Never mind. 

My last post was pretty long and pedagogical. The summary mainly suggested we wait and see as to how long inflation stays high. 

I wasn't happy with that result so I looked at some CPI  numbers -- focusing on each May from 2015 to 2021. Doing that suggests to me that the recent bout of inflation is more than temporary. 

Below are the May CPI figures from 2015 to 2021. The last column is the change from May of one year to the next year. 

Year   CPI*   Change

2015   237

2016   240   3

2017   244   4

2018   251   7

2019   255   4

2020   256   1

2021   269   13

*The numbers below are CPI index numbers. You calculate inflation by taking percentage changes in the index numbers. 

Wow. The 13 point change from May of 2020 to May of 2021 is huge compared to the changes before. It is true that 2020 showed a very small increase. But the change of 13 in 2021 more than makes up for that one year. 

The average change from 2015 to 2019 was 4.5 points. Even if you bring in the two extreme points, the average from 2015 to 2021 is 5.3. Either way, the 13 point increase in 2121 looks very large. 

Prices generally rise year after year. They rose by very little in 2020 mostly because the Covid change was minus 3 from February 2020 to May of 2020. But guess what? By July of 2020, prices had already returned to the number attained in February 2020. 

So the huge 13 point swing in 2021 is not just a temporary bounce back from a Covid induced drop in prices. There is a lot more going on there. 

Could that 13 have something to do with the Fed and the government stimulus? Might these impacts be lasting if the FED and government don't remove that stimulus?

Inflation 2021

Now that inflation is back in town I have been reading all the articles and thinking more about what it all means. 

It made me want to start at the beginning and that's where it gets really strange. Inflation is a very unique word. It has way too many meanings to be easy to discuss. For example, inflation can be a very general word meaning to increase in size or function. You inflate your tires and some people inflate their egos. Those meanings have very little to do with economic inflation though they share the idea that something is changing in size. Inflate means to become larger. Deflate means to get smaller.

While that first step is logical, it doesn't help us much to understand today's news.  Ok, economic inflation  is getting bigger. What exactly is inflating? How do you measure that? Once we get through all that, we ask is inflation good or bad? If it is usually bad -- then how is it ever good?

What is inflating? While my waistline is often inflating, what we mean by inflation usually has something to do with the consumer price index -- the CPI. Each month the labor department surveys a lot of stores and asks about the price being charged for the goods and services they have defined as part of the consumer's typical purchases. They average the prices of the typical consumer's "basket" of goods and services. If the average this month is higher than the average last month, they say there is inflation. If lower, they say we experienced deflation. 

Typically they also report the percentage change from one month to the next. So they might say that the inflation rate was 4% in May. If the inflation rate was 1.8% in the previous month they we would say the inflation rate increased. 

Think of all the prices out there. There are prices for new things: nondurable consumer goods (food), durable consumer goods (autos), consumer services (electricity) -- when we measure changes in those things we are mostly looking at consumer inflation. The Bureau of Economic Analysis produces a similar consumer oriented price index called the personal consumption expenditures deflator. It is very similar to the CPI but differs in several ways. They sometimes come up with different results for consumer inflation, 

There is a similar long list of non-consumer items -- that business firms buy. Like households, businesses buy food and clothing (uniforms) and energy, but they also buy tools and other equipment their workers use as well as the structures they erect, like new office buildings and plants. They also buy partially finished goods from other firms. And they may buy a host of business services like accounting and consulting. These items are often measured in wholesale price indices or in business cost indices. It might be possible that consumer prices are rising one month even though business prices are falling. Both measures are important in their own right and tell us different things about inflation. 

If households or businesses import goods or services from other countries these are factored into inflation too. Exchange rates complicate the valuations of import prices since we know that a lower (higher) dollar makes foreign items cost more (less) for any given sticker prices. 

Main point so far. Inflation comes in a lot of flavors.

A second point is that much depends on the time period you are measuring. Like your weight, inflation can fluctuate a lot on a given day. Most of the time we measure price change in months or quarters or years. The longer the interval, the more we can conclude there is a trend and that is another way of saying that it has gone on long enough to really impact us. Sometimes we ignore a big in change in inflation in one month -- preferring to wait and see what happens over the next months 

Lots of flavors. Lots of time periods. Lots to think about. 

Is a sustained increase in inflation something to worry about? Most of us think from the perspective of buyers and we usually don't like consumer price inflation. But if you sell apples and the inflation rate of apples rises, then you are probably happy. Your customers might not be so happy but at least they are getting apples. Maybe with less inflation sellers would be less willing to bring apples to the market? You see, now it is getting complicated. Is inflation good or not? 

Generally we think that inflation is like grease -- a little grease applied in the right place at the right time makes the machine work well. But too much grease can clog up the works. Inflation is similar. We don't mind a little inflation. As a firm, it's nice to think that your prices are rising. As a worker, rising goods prices often bring higher wages and incomes. But when inflation starts jumping around and rises in leaps and bounds, then it drives us crazy. When the average increase in each month goes up for several months, then we start to get concerned. 

So that's a little ditty about inflation. At the moment, we have seen some large one-month changes. While that gets our attention it does not mean the large changes will continue in the future and it does not mean that higher inflation is sustainable. It does mean that we need to look into it more and make sure that policy is not making it worse. 

May Flowers Disappoint

The article cited below ( A Good Worker is Hard to Find) is one of many that shows once again why we should not read or listen to the press. I used to think the Wall Street Journal was different but that was then and this is now. 

https://www.wsj.com/articles/a-good-worker-is-hard-to-find-11622845855?mod=hp_opin_pos_1

My spleen is over-running today because of all the fuss over the employment number for May 2021. The main theme is this. The BLS reported an increase of 559,000 private sector jobs for May of 2021. You would think  that the press would have been ecstatic with Andre pseudo corks popping everywhere. But no. Not our press. Harrumph. 

Why ecstatic? For one thing, employment rose by only 278,000 in April. Or maybe the fact that employment in 2020 fell by 9.4 million jobs. Wouldn't you be happy if after your weight rose by 94 pounds, you soon lost about 15 pounds? Should you have lost all 94 pounds? How many pounds should you have lost?

Apparently unnamed economists had met these journalists in a smoky bar on a unnamed street and told them that May was going to be the big month. Place your bets on employment to show in May. I guess they all expected at least 660,000 more jobs. 

All that got me thinking about jobs numbers. So I went to bls.com and downloaded monthly private sector employment statistics for each month from January 2010 to May 2021. 

My first thought was that jobs numbers ought to be stable -- not like stock prices careening all over the place. And that is true. In every year since 2010, employment was higher in December of each year, except for December 2020 and Covid. It was higher each December by about 2.4 million jobs. Those one-year employment increases ranged from 2 million in 2019 to 3 million in 2014. Pretty stable stuff.

But then all that came to a screeching halt in 2020. Covid made employment in 2020 look like a wet firecracker contest. In April of 2020 alone, employment fell by almost 21 million jobs. That cliff fall was followed by several months of gains and then the year ended with a jobs decline of 306 thousand jobs in December 2020. In 2020, there were 3 months of jobs declines and 9 months of increases. 

So far with five months of data for 2021 we see some numbers more like the past. We have had five months of employment grains averaging about 500,000 jobs per month. Compared to the past average of about 200,000 jobs gains per month, those 500,000 jobs per month were pretty high but one would expect such large gains as we return to post-Covid normalcy.

Okay, so why haven't we made up for those huge job losses of 2020? Maybe the press and the unnamed economists should show some patience. A number of 559,000 in May sounds pretty darn good to me. 

We should keep in mind one thing. If you face a catastrophic challenge and get through it, then maybe you won't go back to living the same way you lived before the incident. What is normal in our future may be quite different from what used to be normal. Covid has taught us that there are a lot of ways to live and a lot of ways to make money that we might have never considered before 2020.

Ask all those arm-chair economists what models they are using to convince us that we should be disappointed in May's near 600,000 job increase. What do they know about the future that we don't?

A New Favorite Cocktail

Those of you who know me know that I prefer bourbon. Sure, I drink beer and wine and an occasional frozen Margarita, but I really like the bourbon. 

Bourbon is very flexible. You can drink it straight from the bottle. If there are people around to watch you, you might rather drink it straight up -- meaning that rather than sucking it out of the bottle, you find a nice glass and drink it from there. The good thing about straight up is that it is not easy to drink it fast -- and therefore you don't get drunk in 15 minutes as you might if you added a bunch of coke. A close cousin to straight up is bourbon on the rocks. Pouring bourbon over some ice cubes is a compromise between straight up and adding some sweet tasty liquid to the bourbon. In this case it might only take you an hour to walk a crooked line. The water makes it easier to gulp but not like adding coke would. 

I spent many years drinking bourbon on the rocks. That was my go-to-drink. When I walked into a bar or a friend's house, they knew immediately that I was that kind of guy. At least that was true until I learned about a drink called an Old Fashioned. Since I was older, it made sense to most people who know me that Old Fashioned was a perfect description of me. So why not have that be my signature drink? It was a lot like a bourbon on the rocks, except for a tiny bit of red vermouth added into an altogether almost perfect bourbon on the rocks. 

That sounded good but it turned out that I don't really like red vermouth. With vodka or gin martinis, if you don't want a lot of white vermouth, you can tell the bartender to make it "dry". Dry is a code word that means mostly vodka or gin and very little vermouth. If you say VERY dry, the bartender knows you want only a small eye dropper full of vermouth added to your otherwise perfect vodka or gin. 

Sadly, when it comes to Old Fashioneds, there is no standard terminology akin to "dry". If you told a bartender to give you a dry Old Fashioned, she would call in the white coats. So that leaves you with the English language. If you want an Old Fashioned that has very little red vermouth in it, then you have to spell it out. I found over many years of data collecting on this important issue that there is no standard language to tell said bartender how much red vermouth you want in your Old Fashioned. This is not a good state of affairs and it has led to much personal anguish if not stress. 

You are on the edge of your barstool wondering what comes next. Simple, I never really liked the red vermouth anyway. But the other part of the Old Fashioned that I loved, was, tada, the cherries! Problem solved -- "Bartender, I would like a bourbon on the rocks with two cherries and a half-teaspoon full of cherry juice." Solved, Done. Nirvana. 

Well, maybe. I purposely did not say much about gin above. But I also love gin and therefore I love dry martinis and gin & tonics. I won't go into a lot of detail because the Tuna is already sleeping loudly. I will lay on you the main point. I wanted some gin the other night and I was out of white vermouth and I was out of tonic. What to do? Easy, try something that no one would even think of. Pour some gin over some rocks and then....and then....add two cherries and a half teaspoon of cherry juice. 

You serious gin drinkers will say pasha and look down your pimply noses at me. But the truth is that a gin and cherries is freaking amazing. In case any of you are still awake I will issue a challenge to you. This new drink must have a name. I thought of Ginerry and Chegin. But those names are lame. I'm not exactly a marketing type. 

What would you call this incredible new drink? If you win the naming contest you will be eligible to win a free seaplane ride over Green Lake. 

Note: There are some gin/cherry drinks but to my knowledge most of them add soda, lime or something disgusting like that. My drink is gin, ice, two cherries, and a half teaspoon of cherry juice.