Virginia/New Jersey Elections

[JohnStOnge]

Another check on my memory that started my impression years ago. The image below shows inflation rates and budget deficits as percentage of GDP for the Carter and Reagan years. There is a "significant" negative correlation such that inflation rates tended to go down as deficits as percentage of GDP went up (r = -0.715638887, p = 0.005).

To me, when you see stuff like that you really need to be willing to question the conventional wisdom of higher deficit spending causing higher inflation. I mean in the context of what happens in the United States.

Now, you are going to get a data pair contributing to the higher deficit associated with higher inflation rate side with this year. But it's not going to be enough to change the overall association. And you're still going to have the three highest annual inflation rates (1979, 1980, 1981) associated with three relatively low deficits as percentages of GDP. And, if you were just looking at it empirically based on what's happened in the past (over my lifetime at least), you would not be looking at higher deficit spending as a probable cause of the increase in inflation. Not if you were just looking at the numbers themselves and looking in the numbers for associations that might indicate causes. Higher deficit spending would not be on the radar.

Once again you might be too focused on macro-data. Is it best to compare annual inflation to deficit as a % of inflation or should you be looking at what happens to monthly inflation after major spending bills are implemented? Does the start of a big government outlay juice inflation? Is that a better indicator of the impact of a particular POTUS & Congress on inflation at the time.

Feel free to cite some data and analyze it. But I think that if there really was the kind of relationship between deficit spending and inflation as had been postulated in the United States it would show up in the associations I looked at. Think about what happened between Carter and Reagan. Double digit inflation was a significant factor in Carter losing. And inflation did decline after he left office. But it declined while deficits were generally increasing dramatically.

I looked at a 64 year period and there just isn't even a HINT of association between greater deficit spending and higher inflation rate. It's just not there.

[UNI88]

Once again you might be too focused on macro-data. Is it best to compare annual inflation to deficit as a % of inflation or should you be looking at what happens to monthly inflation after major spending bills are implemented? Does the start of a big government outlay juice inflation? Is that a better indicator of the impact of a particular POTUS & Congress on inflation at the time.

Feel free to cite some data and analyze it. But I think that if there really was the kind of relationship between deficit spending and inflation as had been postulated in the United States it would show up in the associations I looked at. Think about what happened between Carter and Reagan. Double digit inflation was a significant factor in Carter losing. And inflation did decline after he left office. But it declined while deficits were generally increasing dramatically.

I looked at a 64 year period and there just isn't even a HINT of association between greater deficit spending and higher inflation rate. It's just not there.

I'm sorry that you're unable to comprehend what I'm saying. I'm not sure I can dumb down the economics enough to change that.

[BDKJMU]

Have to agree with JSO on this one TBH. People think of inflation as being created by demand shocks like a greater money supply but they can also be created by supply shocks, which we clearly have with our supply chain and labor shortage issues.

As for blaming Biden, what goes around comes around. Donks blamed the GOP for the financial crisis and got so mad at Wall Street that they punished small banks with Dodd-Frank.

The 3rd round of so called Civid relief passed at 1.9 trillion was clearly overkill and has contributed to the inflationary pressures. Biden gets the blame for that one.

You could argue round 2 was a little overkill also- that one goes on Trump..

[HI54UNI]

It's a good laugh line but, actually, government in the United States works pretty damned well at all levels. It could indeed be a lot worse. Having one guy like that in office probably won't do much damage. But it wouldn't be good to have too many people like that guy trying to run things.

Because we all know only "smart" people should be allowed to run things.

[GannonFan]

Have to agree with JSO on this one TBH. People think of inflation as being created by demand shocks like a greater money supply but they can also be created by supply shocks, which we clearly have with our supply chain and labor shortage issues.

As for blaming Biden, what goes around comes around. Donks blamed the GOP for the financial crisis and got so mad at Wall Street that they punished small banks with Dodd-Frank.

The 3rd round of so called Civid relief passed at 1.9 trillion was clearly overkill and has contributed to the inflationary pressures. Biden gets the blame for that one.

You could argue round 2 was a little overkill also- that one goes on Trump..

Indeed. It's not really rocket science - we flood the market with money (COVID relief bills, and as you say, the one passed this year was clearly too much too late, and likely the last one under Trump was too much), we hamper the supply chain (restrict energy production in the US, dis-incentivize work for many, on top of other, global pressures that were already out of our reach), and tah-dah, record levels of inflation. To say that the government (and it's not just the person in the White House, the legislature gets their credit as well) doesn't have a hand in causing this inflation is to be patently false. And on top of that, we just passed another huge spending bill, with an even bigger one so big we don't even know how much it'll cost, knowing that we're already in a crazy place when it comes to inflation. As a result, we've heated up the housing market, and we all know how well that goes when it inevitably cools down. The Dems own this right now as they are in full control of every lever of government that does impact the economy. Apologists like JSO will try to cloud the picture, but it requires further and further mental gymnastics to explain it all away.

[houndawg]

It's a good laugh line but, actually, government in the United States works pretty damned well at all levels. It could indeed be a lot worse. Having one guy like that in office probably won't do much damage. But it wouldn't be good to have too many people like that guy trying to run things.

Having an assembly of completely inexperienced legislators would likely be a disaster. Having one non-politician who could give the other legislators the perspective of a regular person could be a very good thing.

They would pick his bones clean

[JohnStOnge]

The 3rd round of so called Civid relief passed at 1.9 trillion was clearly overkill and has contributed to the inflationary pressures. Biden gets the blame for that one.

You could argue round 2 was a little overkill also- that one goes on Trump..

Indeed. It's not really rocket science - we flood the market with money (COVID relief bills, and as you say, the one passed this year was clearly too much too late, and likely the last one under Trump was too much), we hamper the supply chain (restrict energy production in the US, dis-incentivize work for many, on top of other, global pressures that were already out of our reach), and tah-dah, record levels of inflation. To say that the government (and it's not just the person in the White House, the legislature gets their credit as well) doesn't have a hand in causing this inflation is to be patently false. And on top of that, we just passed another huge spending bill, with an even bigger one so big we don't even know how much it'll cost, knowing that we're already in a crazy place when it comes to inflation. As a result, we've heated up the housing market, and we all know how well that goes when it inevitably cools down. The Dems own this right now as they are in full control of every lever of government that does impact the economy. Apologists like JSO will try to cloud the picture, but it requires further and further mental gymnastics to explain it all away.

It's not clouding the picture. It's not mental gymnastics. Show me data that indicates a historical correlation between doing things like you talk about and higher inflation. People keep saying X causes Y without having any historical evidence in the United States that X causes Y.

It's great to say that things should work a certain way. It's great to say that X should cause Y. But then you have to be able to actually show data that are consistent with that. You say saying government doesn't have a hand in causing this inflation is patently false. What data do you have to support that statement? I'm talking about historical data that is consistent with the idea that something you can point to that government did this time has historically been associated with higher inflation in the United States.

If you can point to some data to support your conclusion, that's fine. But point to some data.

[JohnStOnge]

I'll give another example: Remember the Great Recession? The "American Recovery and Reinvestment Act of 2009" to implement massive stimulus spending went into effect in February, 2009. Do you know what the 2009 inflation rate was? It was -0.4%. That's right. It was negative. Prices actually fell.

Now, I can't say that's all there is to it. To do that I would have to define some level of stimulus spending that would be considered something that people say should spur inflation and look at a number of such efforts over time.

But, at this point, it looks to me like the constant conservative thing about "government spending is going to cause inflation" thing in the United States is a canard. It's something that is said when there aren't really any empirical data to support it. Not in the United States.

Seriously. This is one of those things where you hear people say something all the time then when you look at what has actually happened it doesn't really work in the United States context.

[AZGrizFan]

Have to agree with JSO on this one TBH. People think of inflation as being created by demand shocks like a greater money supply but they can also be created by supply shocks, which we clearly have with our supply chain and labor shortage issues.

As for blaming Biden, what goes around comes around. Donks blamed the GOP for the financial crisis and got so mad at Wall Street that they punished small banks with Dodd-Frank.

The 3rd round of so called Civid relief passed at 1.9 trillion was clearly overkill and has contributed to the inflationary pressures. Biden gets the blame for that one.

You could argue round 2 was a little overkill also- that one goes on Trump..

But according to Biden himself there’s no “shortage” in supply, instead, the stimulus money has increased demand to the point that the supply chain got overwhelmed.

I mean, it’s a bunch of revisionist bullshit, but that’s his story and he’s sticking to it.

[SDHornet]

It's a good laugh line but, actually, government in the United States works pretty damned well at all levels. It could indeed be a lot worse. Having one guy like that in office probably won't do much damage. But it wouldn't be good to have too many people like that guy trying to run things.

I recall Trip making a "we shouldn't allow noobs into the political class" argument once. I remember how retarded that idea was then, and how retarded it is with you saying it. Well done, dumbass.

[SDHornet]

The 3rd round of so called Civid relief passed at 1.9 trillion was clearly overkill and has contributed to the inflationary pressures. Biden gets the blame for that one.

You could argue round 2 was a little overkill also- that one goes on Trump..

Indeed. It's not really rocket science - we flood the market with money (COVID relief bills, and as you say, the one passed this year was clearly too much too late, and likely the last one under Trump was too much), we hamper the supply chain (restrict energy production in the US, dis-incentivize work for many, on top of other, global pressures that were already out of our reach), and tah-dah, record levels of inflation. To say that the government (and it's not just the person in the White House, the legislature gets their credit as well) doesn't have a hand in causing this inflation is to be patently false. And on top of that, we just passed another huge spending bill, with an even bigger one so big we don't even know how much it'll cost, knowing that we're already in a crazy place when it comes to inflation. As a result, we've heated up the housing market, and we all know how well that goes when it inevitably cools down. The Dems own this right now as they are in full control of every lever of government that does impact the economy. Apologists like JSO will try to cloud the picture, but it requires further and further mental gymnastics to explain it all away.

All the damage since Jan 2021 is 100% on donks.

[GannonFan]

Indeed. It's not really rocket science - we flood the market with money (COVID relief bills, and as you say, the one passed this year was clearly too much too late, and likely the last one under Trump was too much), we hamper the supply chain (restrict energy production in the US, dis-incentivize work for many, on top of other, global pressures that were already out of our reach), and tah-dah, record levels of inflation. To say that the government (and it's not just the person in the White House, the legislature gets their credit as well) doesn't have a hand in causing this inflation is to be patently false. And on top of that, we just passed another huge spending bill, with an even bigger one so big we don't even know how much it'll cost, knowing that we're already in a crazy place when it comes to inflation. As a result, we've heated up the housing market, and we all know how well that goes when it inevitably cools down. The Dems own this right now as they are in full control of every lever of government that does impact the economy. Apologists like JSO will try to cloud the picture, but it requires further and further mental gymnastics to explain it all away.

It's not clouding the picture. It's not mental gymnastics. Show me data that indicates a historical correlation between doing things like you talk about and higher inflation. People keep saying X causes Y without having any historical evidence in the United States that X causes Y.

It's great to say that things should work a certain way. It's great to say that X should cause Y. But then you have to be able to actually show data that are consistent with that. You say saying government doesn't have a hand in causing this inflation is patently false. What data do you have to support that statement? I'm talking about historical data that is consistent with the idea that something you can point to that government did this time has historically been associated with higher inflation in the United States.

If you can point to some data to support your conclusion, that's fine. But point to some data.

You're oversimplifying the situation to come to your pre-conceived outcome. You want to say that Biden and the Dems in Congress have had zero impact on the economy and then you crafted a narrative to fit that. However, it just ignores the reality on the ground. It's more complicated than deficit spending versus the inflation rate. If you honestly spent that time making graphs and checking the correlations then you are just plain daffy. Which I suspect you are anyway.

[LeadBolt]

The results are always more complicated than given credit for.

In VA, where I reside major issues were education, safety in schools, parental rights, over reach of the state and federal governments since flipped from R to D, inflation and embarrassment of current government.


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[BDKJMU]

I'll give another example: Remember the Great Recession? The "American Recovery and Reinvestment Act of 2009" to implement massive stimulus spending went into effect in February, 2009. Do you know what the 2009 inflation rate was? It was -0.4%. That's right. It was negative. Prices actually fell.

Now, I can't say that's all there is to it. To do that I would have to define some level of stimulus spending that would be considered something that people say should spur inflation and look at a number of such efforts over time.

But, at this point, it looks to me like the constant conservative thing about "government spending is going to cause inflation" thing in the United States is a canard. It's something that is said when there aren't really any empirical data to support it. Not in the United States.

Seriously. This is one of those things where you hear people say something all the time then when you look at what has actually happened it doesn't really work in the United States context.

What was that- 800+ billion. We‘re talking 7 times that now (5.7 trillion).

[Ivytalk]

Well, here's a good one for you. I just went ahead and ran a correlation between annual inflation rate and annual budget deficit for the years of my lifetime through 2020 (1957 through 2020). I used the inflation rates reported at https://www.minneapolisfed.org/about-us ... ndex-1913- and the budget deficit numbers reported at https://www.thebalance.com/us-deficit-by-year-3306306. And there is a significant (p = 0.02) NEGATIVE correlation. In other words, there is an association such that inflation rates have tended to be LOWER when budget deficits have been HIGHER.

I'll do more with this probably. Stuff like adjusting budget deficits FOR inflation and looking at deficits as percent of GDP. But the first cut was consistent with the impression I've formed over my lifetime. In the United States during my lifetime, there just hasn't been a thing where inflation rates tended to be higher when deficit spending was higher.

You can regress all you want, and tantalize us with the red herring of deficits. It’s the spending, stupid: the amount and velocity of money in the system that creates inflation, thus raising prices and devaluing currencies. That’s what’s wrong with the Biden economy. Chew on that.

[AZGrizFan]

I'll give another example: Remember the Great Recession? The "American Recovery and Reinvestment Act of 2009" to implement massive stimulus spending went into effect in February, 2009. Do you know what the 2009 inflation rate was? It was -0.4%. That's right. It was negative. Prices actually fell.

Now, I can't say that's all there is to it. To do that I would have to define some level of stimulus spending that would be considered something that people say should spur inflation and look at a number of such efforts over time.

But, at this point, it looks to me like the constant conservative thing about "government spending is going to cause inflation" thing in the United States is a canard. It's something that is said when there aren't really any empirical data to support it. Not in the United States.

Seriously. This is one of those things where you hear people say something all the time then when you look at what has actually happened it doesn't really work in the United States context.

Correlation <> causation.

[bobbythekidd]

But according to Biden himself there’s no “shortage” in supply, instead, the stimulus money has increased demand to the point that the supply chain got overwhelmed.

I mean, it’s a bunch of revisionist bullshit, but that’s his story and he’s sticking to it.

We have product. That's not the supply we are short on. What we are short of is the labor and capacity to move it to market.

I work for a trucking company and we have been over capacity for almost a year and a half. We have been raising prices in an attempt to drop the bad customers and they accept GRI and keep shipping with us because no one else will pick them up. They don't have room either. Our account managers are not allowed to sell for over a year and our pricing department will not consider any new business.

Our shortages are people and equipment.

[JohnStOnge]

It's not clouding the picture. It's not mental gymnastics. Show me data that indicates a historical correlation between doing things like you talk about and higher inflation. People keep saying X causes Y without having any historical evidence in the United States that X causes Y.

It's great to say that things should work a certain way. It's great to say that X should cause Y. But then you have to be able to actually show data that are consistent with that. You say saying government doesn't have a hand in causing this inflation is patently false. What data do you have to support that statement? I'm talking about historical data that is consistent with the idea that something you can point to that government did this time has historically been associated with higher inflation in the United States.

If you can point to some data to support your conclusion, that's fine. But point to some data.

You're oversimplifying the situation to come to your pre-conceived outcome. You want to say that Biden and the Dems in Congress have had zero impact on the economy and then you crafted a narrative to fit that. However, it just ignores the reality on the ground. It's more complicated than deficit spending versus the inflation rate. If you honestly spent that time making graphs and checking the correlations then you are just plain daffy. Which I suspect you are anyway.

I have been consistent for many years in holding that people way over estimate the effect that any particular President has on the economy. I am also not saying that Biden and the Democrats are responsible for the GDP growth, the job growth, the record stock market index highs, etc.

The correlation analysis doesn't take much time. You can copy and paste the data from the two tables into an Excel worksheet and run a correlation analysis. Takes maybe two minutes.

We've all heard for years that having the government spend more than it takes in will cause inflation. Doing a correlation analysis is a perfectly reasonable way to see if there is evidence that such an association has been manifested. In this case I didn't worry about lags or anything because the idea is that the inflation we see now is associated with Biden and the Democrats spending a bunch of money. Immediate response. So it was fair to look at correlation between deficit spending in a given year vs. inflation during that same year. I didn't cherry pick. I started off by using my lifetime to see if the correlation would consistent with the impression formed just being around to experience things. And it was. If the correlation coefficient had shown a significant positive association between deficit spending and inflation, I would have accepted that and not been upset by it at all. But it didn't.

I can also pretty much tell by looking that doing a lag...something like doing deficit as percent of GDP vs. inflation rate 1, 2, 3, 4, 5 or whatever years later...would not yield "significant" correlation either. Not necessary to do it in this context though because people basically saying the inflation response occurred during the year that Biden took office.

BTW, since it was interesting. I went as far back as I could using the tables at the two pages I linked. That gave me 92 years to look at (1929 - 2020). The coefficient is 0.016. Pretty much nothing. 0.206 would be necessary to reach "significance" by convention.

Noticed some interesting anecdotes too. Like for instance the New Deal started in 1933. The 1933 inflation rate was -5.2%. In other words, prices went down instead of up when the New Deal started. I did a Google search and it said the New deal was 1933 through 1939.

Can you provide some empirical data/analysis to show that, in the United States, greater government spending and/or more deficit spending has historically been associated with higher inflation rates?

[JohnStOnge]

I'll give another example: Remember the Great Recession? The "American Recovery and Reinvestment Act of 2009" to implement massive stimulus spending went into effect in February, 2009. Do you know what the 2009 inflation rate was? It was -0.4%. That's right. It was negative. Prices actually fell.

Now, I can't say that's all there is to it. To do that I would have to define some level of stimulus spending that would be considered something that people say should spur inflation and look at a number of such efforts over time.

But, at this point, it looks to me like the constant conservative thing about "government spending is going to cause inflation" thing in the United States is a canard. It's something that is said when there aren't really any empirical data to support it. Not in the United States.

Seriously. This is one of those things where you hear people say something all the time then when you look at what has actually happened it doesn't really work in the United States context.

Correlation <> causation.

You can never show causation with observational data. Actually you could show causation with correlation analysis if it was the analysis at the end of a controlled experiment. But, no, in a situation like this correlation would not show causation.

But if you don't have correlation you don't have any suggestions at all that there is causation. If there was correlation you could at least say there is an association consistent with causation. Correlation with observational data may not prove causation but NO correlation SURE as heck doesn't. And that's what we have here.

[JohnStOnge]

I just found something interesting while looking for something else. I think I have heard of cases outside of the United States where government "printed" a bunch of money and there was hyper inflation. I was going to read about some. But I got this hit:

https://www.stlouisfed.org/on-the-econo ... -inflation

It's a St. Louis Fed web page and the author is (or was at the time) with the Federal Reserve Bank of St. Louis. Here is a quote:

Across the board, we found almost no effect of government spending on inflation. For example, in our benchmark specification, we found that a 10 percent increase in government spending led to an 8 basis point decline in inflation. Moreover, the effect is not statistically different from zero.

So at least I know there is at least one person out there who would probably agree with what I'm saying.

[LeadBolt]

I would agree that you can decrease inflation while increasing government spending.

To do that, you need to increase taxation by an equal, nearly equal or larger amount than the spending.

It is not the level of government spending but rather the level of creation of money without backing that creates inflation.

It used to be referred to as the law of supply and demand.


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[CID1990]

I would agree that you can decrease inflation while increasing government spending.

To do that, you need to increase taxation by an equal, nearly equal or larger amount than the spending.

It is not the level of government spending but rather the level of creation of money without backing that creates inflation.

It used to be referred to as the law of supply and demand.


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You also have to raise interest rates.


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[SeattleGriz]

But according to Biden himself there’s no “shortage” in supply, instead, the stimulus money has increased demand to the point that the supply chain got overwhelmed.

I mean, it’s a bunch of revisionist bullshit, but that’s his story and he’s sticking to it.

We have product. That's not the supply we are short on. What we are short of is the labor and capacity to move it to market.

I work for a trucking company and we have been over capacity for almost a year and a half. We have been raising prices in an attempt to drop the bad customers and they accept GRI and keep shipping with us because no one else will pick them up. They don't have room either. Our account managers are not allowed to sell for over a year and our pricing department will not consider any new business.

Our shortages are people and equipment.

What? Biden said he fixed that a couple weeks ago.

[LeadBolt]

I would agree that you can decrease inflation while increasing government spending.

To do that, you need to increase taxation by an equal, nearly equal or larger amount than the spending.

It is not the level of government spending but rather the level of creation of money without backing that creates inflation.

It used to be referred to as the law of supply and demand.


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You also have to raise interest rates.


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True. Anyone can create a scenario where increased government spending is not inflationary in an academic paper.

So far it has not been the norm in the real world.

A lot like socialism leading to improving the lot of the poor and increasing the economic vitality of a country.


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[AZGrizFan]

I just found something interesting while looking for something else. I think I have heard of cases outside of the United States where government "printed" a bunch of money and there was hyper inflation. I was going to read about some. But I got this hit:

https://www.stlouisfed.org/on-the-econo ... -inflation

It's a St. Louis Fed web page and the author is (or was at the time) with the Federal Reserve Bank of St. Louis. Here is a quote:

Across the board, we found almost no effect of government spending on inflation. For example, in our benchmark specification, we found that a 10 percent increase in government spending led to an 8 basis point decline in inflation. Moreover, the effect is not statistically different from zero.

So at least I know there is at least one person out there who would probably agree with what I'm saying.

I repeat: correlation <> causation. You, of ALL people, should at least be able to understand THAT.