Only 6% of Voters Know Anything

by Benjamin Studebaker

I am often told that I take too negative a view of the average voter, that people do not need to be experts to vote well or to have good political instincts. I am not the least bit troubled by these critiques. Why? Because I continue to stumble upon utterly depressing statistics. These statistics show that contrary to our optimistic inclinations or general idealistic hopefulness, the average voter is well and truly spectacularly ignorant. The one I wish to discuss today certainly blew my mind–perhaps it will blow yours.

This past February, Bloomberg took a poll. They asked:

Let’s turn to the federal budget deficit. This is the amount the government spends that is more than the amount it takes in from taxes and other revenue. Is it your sense that this year the deficit is getting bigger or getting smaller, or is it staying about the same as last year?

Their results?

62 Bigger
6 Smaller
28 About the same
4 Not sure

What’s actually been going on with the federal budget deficit? Federal Reserve data shows it’s been shrinking since 2009:

This means that only 6% of voters got the answer to this question right, with more than half not only being unsure or answering “about the same” but actually believing the inverse of the truth.

I often say that the ignorance of the average voter is reflected in the ignorance of the average politician. Eric Cantor (R-VA) is not your average politician–he’s the House Majority Leader. He should probably know quite a bit more than the average voter. Here’s what he had to say in a FOX interview about the deficit:

What we are trying to do is fund the government and make sure also that we take away the kinds of things that are standing in the way of a growing economy (and) a better health care, and all the while keeping our eye focused on trying to deal with the ultimate problem, which is this growing deficit.

Here the deficit is not merely described as “growing”, it is described as “the ultimate problem”, implying that all other problems (such as, say, persistently high unemployment) are of lesser importance. FOX did not challenge this claim during the interview, so both politician and journalist fail to meet that bare minimum standard that only 6% of Americans can match.

We should bear in mind here that knowing that the deficit is shrinking is, politically and economically, a very basic fact. Knowing that the deficit is shrinking doesn’t necessarily entail being a good theorist. You could know that the deficit is shrinking but nonetheless hold any number of zany views about what that means or what we should do in response to that. You could think that the deficit needs to shrink even more or even faster even in the face of weak employment figures and slow growth.  You could think that only a budget surplus leads to growth. Point being, even the 6% that know the deficit is shrinking are by no means guaranteed to be competent, and many politicians and journalists aren’t even that good. If we don’t even have the right basic economic information, there’s no way we even have a chance at theorizing about that information in an effective way.

What makes matters worse is that there’s a very good theoretical argument for the claim that deficit fears are largely overblown. It is often forgotten that fiscal stability doesn’t require a balanced budget at all–it merely requires that the national debt grow at a slower pace than GDP. If economic growth outpaces the rate at which the deficit adds to the national debt, the debt burden becomes easier, not harder, to manage. For this reason, the government’s financial situation can actually improve even while the state continues to run a deficit.  As the economy gets bigger, the amount of deficit the state can sustainably support without adding to debt’s share of GDP grows.

It doesn’t take very high growth rates to clear quite a lot of deficit–as Krugman argued last December (with my concurrence), if the economy grows at a mere 2% per year and inflation runs at a very meager 2%, the government can support a 4% rise in the size of the debt without worsening its financial picture in that same year. A 4% rise in the debt would equate to a deficit somewhere in the neighborhood of $400 billion. Current CBO projections indicate that the deficit will fall below that threshold on its own without any further policy changes in 2015.

But that’s not all–a lot of our deficit is currently produced by the economy’s weakness. Currently, the economy operates far beneath its maximum output; there is an output gap. If the economy were operating at full potential, it would generate quite a bit of additional revenue.  We should remember that the output gap is still quite large:

Krugman estimates that additional revenue from a recovered economy would reduce the deficit by $450-$500 billion, placing it well below the $400 billion threshold necessary for fiscal stability. But that’s not all–much of our government spending is also the result of spending programs that exist to help those who have been made worse off by the weak economy. Krugman estimates that a return to normal macroeconomic conditions would reduce these costs by $150 billion–they rose by $250 billion during the recession:

Put these together and the state could be looking at $600 billion in additional revenue and reduced costs if the economy were to recover.  This means that with a recovered economy, we’d be looking at a surplus by 2014. In view of this, perhaps instead of trying to tackle the “ultimate problem” of a “growing” deficit, we should be looking for policies that would help close the output gap. Instead of raising taxes as Obama would prefer or cutting entitlements as Cantor would, let’s raise revenue through growth and cut spending by reducing the number of people on the dole.