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This Week In Statistical Silliness

May 3, 2013, 8:13 pm

The Cato Institute discovers that – during hard times – the government spends more.

Being the Cato Institute however, that’s not interesting, so they spin it around. More government spending leads to lower GDP:

Higher government spending growth in a year corresponds to reduced private GDP growth that year. For example, if real government spending growth was zero, private GDP would be expected to grow at 4.2 percent. If real government spending growth was 5 percent, private GDP growth would be expected to fall to 2.8 percent.

IT’S THE GOVERNMENT’S FAULT. BIG GOVERNMENT BAD, LITTLE GOVERNMENT GOOD. DROWN IT IN THE BATHTUB.

What’s really happening, of course, is that during recessions, government spending goes up because of unemployment insurance and welfare programs in general get more (unfortunately) customers. It’s not that government spending knocks down private GDP, it’s that government spending tends to go up when GDP is shrinking.

(Update: Welcome, Paul Krugman readers. Dr. Krugman has a quality title for his link (better than my original): Soup Kitchens Caused the Great Depression)

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