Rational Military Spending

And by rational, I mean "of or relating to ratios." I raised this point in comments over at Tree of Mamre a few months ago, related to a Heritage Foundation graph. The topic came up again in the debate Wednesday, when Rick Santorum said this:

Some people have suggested that defense spending is the problem. When I was born, defense spending was 60 percent of the budget. It's now 17 percent. If you think defense spending is the problem, then you need a remedial math class to go back to. Defense spending will not be cut under my administration...

Rick Santorum was born in 1958, when "Major National Security" spending (PDF, page 69) was 61.4% of the federal budget, according to the Census Bureau's Statistical Abstract of the United States. So you can give Santorum credit for underestimating, at least. The 2012 edition (PDF) lists total federal spending in 2011 as $3,818.8 billion (page 4), and "National Defense" as $768.2 billion (page 5). Astute observers will note that 768.2/3818.8 = 20.1%, not 17%.* Nevertheless, 20.1% is less than a third of 1958's 61.4%. Is Santorum right?

This is where rationality comes into play, again referring to ratios. These percents are ratios, equal to defense spending divided by total spending. If you have a ratio q = a / b, there are two ways that q can get smaller. If either a gets smaller or b gets larger, while the other stays the same, q will shrink. What happens to q when both a and b move in the same direction? If both a and b increase, q will fall if b increases more than a, and q will rise if a increases more than b. (This may be elementary, but Santorum did suggest a remedial math class...)

In this case, a is defense spending and b is total spending, and Santorum's clear implication is that since q is falling, a cannot be too large. Both Santorum and the Heritage Foundation before him disregard the possibility that q is smaller only because b is larger. Santorum does so even though he had just finished saying he wanted to shrink b because it had grown too large!

According to the PDFs linked above, in 1958 total federal spending was a hair below $72 billion, while in 2011 it was about $3,819 billion. That's a 53-fold increase, although these numbers don't adjust for inflation. Military spending, on the other hand, increased from $44 billion in 1958 to $768 billion in 2011, a 17-and-a-half-fold increase, once again not adjusting for inflation. Military spending has increased, but total spending has increased far more.

Returning to the discussion of ratios, in the case of military spending since 1958, it is clear that b has increased more than a. It is true, as the Heritage Foundation and Santorum both said, that q is smaller now than it was when Santorum was born. That is emphatically not because a has fallen, by any means! The ratio of military spending to total spending has fallen solely because total spending has risen so dramatically!

What does the fall in the ratio of military spending to the total budget mean for actual military spending? Since the total budget has increased by such a vast amount, absolutely nothing! The ratio has zero mathematical significance, and is even misleading since military spending has actually increased since Santorum was born.

Is there some policy reason to prefer this measure of military spending to others, flawed and misleading as it may be? Not that I can think of, not unless your goal is to misrepresent the numbers to reach a predetermined outcome. Controlling for inflation with the GDP deflator, absolute military spending is about 3.17 times higher today than in 1958 in the middle of the Cold War. On a per capita (inflation-adjusted) basis, it's about 1.76 times higher today. As a percentage of GDP, military spending has fallen from about 9.4% in 1958 to 5.1% today, although once again, this is because the denominator, in this case GDP, has risen so much, not because military spending has fallen.

Could current military spending levels be appropriate, or even too low? Hey, anything is possible. But those who want to argue from that position at the very least need to get their numbers straight, and argue why more military spending is needed despite spending three times more than we were in the middle of the Cold War. Getting the numbers and fundamental math concepts wrong, then suggesting that the people who understand the math need a remedial math class, is not the way to make your case-- only Paul Krugman can get away with something like that. Rick Santorum should've known better.

*The ratio was 20.0% in 2010, 18.8% in 2009 and 20.7% in 2008. In fact, the ratio has been 18.8% or higher since 2003; it was 17.3% in 2002, but surely that wasn't what Santorum meant.

Less Poor than Ever Before

This is old news, but I recently rediscovered the Brookings Institution's "Poverty in Numbers" report [PDF] thanks to Bryan Caplan. The results of their analysis are so stunning that they bear repeating.

In 2005, over 1,300 million people lived in extreme poverty, defined by Brookings (and the World Bank) as living on less than $1.25 a day. By 2010, that number had fallen to less than 900 million, and if trends continue, that will fall to less than 600 million by 2015. Considering that this is happening while the human race is adding about a billion people per decade, this should put an end to Malthusian fears of overpopulation once and for all.

Expressed as a percentage of the population, the trend is even more astonishing. In 1981, the global poverty rate was higher than 50%. In 1990, when the UN established the Millennium Development Goals, the poverty rate had fallen to 41.6%. The MDG target of 20.8% by 2015 was already met in 2008. According to Brookings, in 2010 the poverty rate was 15.8%, and if trends continue, that will fall to only 9.9% by 2015.

To put that another way, not only have we achieved the Millennium Development Goal of halving the global poverty rate seven years early, but we are on track to halve it again by the MDG's deadline.

Not only is the overall poverty rate falling, but poverty is falling in every region studied by Brookings. The slowest progress is in Sub-Saharan Africa, but even there we have reason for optimism. For decades, the number of poor in Sub-Saharan Africa just continued to grow. Since 2005, for the first time on record, the total number of poor in that region has fallen. Also for the first time on record, the Sub-Saharan poverty rate fell below 50% between 2005 and 2010. If trends continue, it will fall below 40% by 2015.

It's worth noting that this is not a pre-recession report painting an overly rosy picture. The result was released in January 2011, and these results are despite an extra 64 million people kept in extreme poverty by the Great Recession. As the report says, "if not for the financial crisis our results would be even more dramatic than they are."

To emphasize just how dramatic these results are, the global poverty rate is lower than at any other point in human history. There has truly never been a better time to be human.

Richer than Ever Before

There has never been a better time to be human. Even in the depths of the global Great Recession, average per capita incomes are higher than they have been for most of human history. This is true in rich and poor countries alike, and within developed countries it's true at all income levels. The rich are getting richer while the poor and middle class are getting richer too!

It's true, the last couple years have been a struggle for many around the world. Lots of people, including me, lost their jobs to the Great Recession. However, despite the hardships of the last couple years, we are still living in the greatest era in human history.

According to the World Bank, world GDP per capita in 2010 was $6,035, which is 99.77% of 2008's peak of $6,049. (All dollar amounts in this entry are expressed in constant 2000 US dollars.) GDP per capita in 2010 was 3.04% higher than in 2009, nearly twice the 1970-2008 average of 1.60% growth. The world economy is well on the way to recovery, and there's every reason to expect 2011's GDP per capita to be higher than ever before.

The Great Recession is clearly visible in the graph to the right, as are a handful of other global recessions and slowdowns over the past forty years. The Great Recession is clearly the sharpest decline the world has seen lately, and GDP per capita in 2009 was less than it had been in 2006. Even so, incomes were 2.59% higher in 2009 than in 2005. Indeed, in 2006, for the first time in human history, the average human being earned $16 per day. The average person has not earned less than $16 per day since 2005. To put that another way, the five most prosperous years in human history so far were 2006, 2007, 2008, 2009 and 2010.

This is especially true for the low- and middle-income countries, who as a group have not seen a decline in GDP per capita since 1983. The 2010 GDP per capita of $1,834 was the highest ever recorded for this group of countries, and a full 6.26% higher than the previous record set in 2009. The past decade in particular has seen incredible growth, averaging 4.53% growth in GDP per capita per year. Income per person in 2010 was three times higher than in 1969.

An income of $1,834 per year might not sound like a lot to those of us in first-world countries. Indeed, it's just a little more than $5 per day. But 2010 was the first year ever when the average person in these countries earned $5 per day. It's not a lot, but it's more than they have ever had before. As an indication of just how fast the poor countries are joining the rich, the $4-per-day threshold was first passed as recently as 2006, and the $3-per-day threshold in 1998.

The Great Recession has hit high-income countries much harder than low- and middle-income countries. GDP per capita in high-income countries was still 2.23% lower in 2010 than the 2007 peak of $28,095. Per capita incomes were higher in 2006, 2007 and 2008 than they were in 2010, and even 2005 was higher than 2009.

However, the hardships of the last few years have not undone the prosperity we have achieved. At the lowest point of the Great Recession, in 2009, income per person in high-income countries was $26,807. This was a full 6.92% higher than the heights of the dot-com bubble in 2000. As this video posted by Greg Mankiw notes, "Even after the worst financial crisis since the 1930s, US per capita income is still higher than at the peak of the 1990s boom."

We are also on the road to recovery; incomes grew 2.47% between 2009 and 2010. If we achieve a similar level of growth in 2011, we will set a new record for the most prosperous year ever. Even if we don't set a new record, GDP per capita in the high-income countries will still be twice what it was in the mid-1970s.

Despite the great recession, incomes are at or very close to the highest they have ever been for most people around the world. This is especially true for poorer countries, but it's also true for the recession-ravaged wealthy countries. No generation in human history has had it better than we do. There has never been a better time to be human.

The Train They Call the City of New Orleans

Bryan Caplan links to some sobering statistics from DHS. When it comes to deporting people, the US government distinguishes between "removals" and "returns." Removals are compulsory, while returns are voluntary. Caplan notes that "'voluntary returns' are about as voluntary as the payment of taxes." (More here.)

Year	Removed	Returned	Total	Comparison
2010	387,242	476,405	863,647	New Haven, CT (862,477)
2009	395,165	586,164	981,329	Tucson, AZ (980,263)
2008	359,795	811,263	1,171,058	New Orleans, LA (1,167,764)
2007	319,382	891,390	1,210,772	Hartford, CT (1,212,381)
2006	280,974	1,043,381	1,324,355	Maine (1,328,361)
2005	246,431	1,096,920	1,343,351	Jacksonville, FL (1,345,596)
2004	240,665	1,166,576	1,407,241	Hawaii (1,360,301)
2003	211,098	945,294	1,156,392	Buffalo, NY (1,135,509)
2002	165,168	1,012,116	1,177,284	Raleigh, NC (1,130,490)
2001	189,026	1,349,371	1,538,397	Milwaukee, WI (1,555,908)
2000	188,467	1,675,876	1,864,343	West Virginia (1,852,994)
1999	183,114	1,574,863	1,757,977	Charlotte, NC (1,758,038)
1998	174,813	1,570,127	1,744,940	Indianapolis, IN (1,756,241)
1997	114,432	1,440,684	1,555,116	Idaho (1,567,582)
1996	69,680	1,573,428	1,643,108	Virginia Beach, VA (1,671,683)

I, for one, am amazed at the level of deportations. Maybe I just haven't paid enough attention before now, but the numbers are truly sobering. The number of people we deport every single year is staggering. Caplan reproduces the data going back to 1980; the DHS has data going back to 1892. Here, I've decided to show the last 15 years, plus a state or city (MSA, actually) of comparable size to the number of people deported that year.

Now I'm aware that these people are by definition illegals, and many of them illegal for good reason. At the same time, many are not. Many of these people are business owners who would be employing Americans right now if we hadn't kicked them out of the country. Even those that aren't business owners would be creating jobs by increasing demand.

If there is anyone reading this who believes we really are better for having deported more than 20 million people over the last 15 years, answer me this. Why stop there? If deporting 863,000 people in 2010 was good for our economy and our country, why not also deport the 862,000 in New Haven? If deporting almost a million immigrants creates jobs for Americans, wouldn't deporting almost a million Connecticuters have the same effect?

Worrying about China

Ian Talley at the Wall Street Journal's Real Time Economics blog draws our attention to new numbers on just how much US debt China actually owns. A recent revision takes into account China's practice of routing its purchases of US securities through other countries, especially the UK. China's holdings were revised upwards by $268.5 billion, while the UK's holdings were revised downward by $269.2 billion.

The revised numbers for the largest holders of US debt can be found here. China owns $1,160.1 billion, even after the recent revision. The "Grand Total" of foreign holdings of US securities is $4,439.6 billion, near the bottom of the table. Total US federal debt is about $14,193 billion.

Compare that total to China's mere $1,160.1 billion. China's portion might sound like a lot, but it's only 8.17% of the total. I often hear complaints that China owns the US, but this could hardly be further from the truth. If you owed $100 to a bunch of different people, would you be very concerned with the one guy you owed $8.17 to?

To put it another way, US GDP in 2010 was $14,657.8 billion, meaning total federal debt is about 97% of the country's total income in 2010. If you started on January 1st, and took every dollar of income in the country to pay back the debt, starting with China, you would have paid back China by January 29th. But you'd still be paying off the rest of the debt until December 20th! Still think we need to worry about China?

Lies and Damn Lies

One of my pet peeves is when people, especially those in the media, play loose with statistics just to make a point. For example: today's front page story in the Metro. A Chinese Canadian's life was saved by a stem cell donation, all well and good. But the real moral of the story is how it's hard for Chinese Canadians to find compatible donors.

It’s a “miracle” he found two matches in three months, Chu said, because the Chinese population is dramatically underrepresented on the national stem cell donor database, OneMatch. [...] Chinese donors make up only 2 per cent of those registered on OneMatch, compared to 82 per cent of registered Caucasian donors.

And therein lies the problem. The Chinese are "dramatically underrepresented" because only 2% of registered donors are Chinese. Meanwhile, an astonishing 82% of registered donors are Caucasians! What a travesty!

To merit the claim that the Chinese are "dramatically underrepresented," you need to have some context.

“For (Chinese Canadians) to represent such a small piece of the pie, that’s just embarrassing, considering how many Chinese people there are in Vancouver.” Chu added the under representation is likely due to old world values.

Does anyone else see the problem in comparing Chinese representation in the national stem cell donor database to the Chinese population of one of the most Chinese cities in North America?

According to Canada's 2006 Census, 83.8% of the population are "non-visible-minority" (Canadianese for Caucasian), and 3.7% of the population are Chinese. Compare that to their representation in the donor database, and both groups come up short about 1.7-1.8%. That would be within the margin of error of any random selection of Canadians.

In other words: The statistic is meaningless, with just a little bit of context. Don't get me wrong, I'm glad the guy lived. But he can rest easy knowing he doesn't need any scapegoats like "old world values" to explain his nonexistant "dramatic underrepresentation."