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Adventures In Fact-Checking, GOP Debate Edition…

September 8th, 2011 · 29 Comments
Fun With Math

Those who know me know that I’m not particularly inclined to universally agree or disagree with any political party. Those who know me also know that I get really annoyed when people brashly make factual statements that aren’t even close to being true. Therefore, political debates are always, uh, fun for me. The latest GOP debate was no exception, especially where the Federal Reserve, Ben Bernanke and inflation were concerned. A few choice quotes:

  • Newt Gingrich: “I would fire him tomorrow. I think he’s been the most inflationary, dangerous, and power-centered chairman of the Fed in history.” Gingrich even went so far as to blame Bernanke for the current price of gasoline.
  • Mitt Romney: “I think Ben Bernanke has overinflated the amount of currency that he’s created.” He then goes on to say that he would take a different approach than Ben Bernanke has taken, which makes sense if for no other reason than Mitt is running for President, not Fed chair.

(I have to admit that this was the point where the audience cheered for Perry executing prisoners, and I may have immediately turned off the TV in disgust. Please let me know if there were more inflation-related comments.) Something about these comments didn’t seem quite right, so, armed with only a list of Federal Reserve Chairmen and an inflation calculator, I got to work. Here’s what I found regarding Federal Reserve Chairmen and inflation:

  • Charles S. Hamlin (August 10, 1914 – August 10, 1916) – 6.86% = 3.37% annually
  • William P. G. Harding (August 10, 1916 – August 9, 1922) – 52.29% = 7.26% annually
  • Daniel R. Crissinger (May 1, 1923 – September 15, 1927) – 2.37% = 0.54% annually
  • Roy A. Young (October 4, 1927 – August 31, 1930) – -5.17% = -1.86% annually
  • Eugene I. Meyer (September 16, 1930 – May 10, 1933) – -24.10% = -9.82% annually
  • Eugene R. Black (May 19, 1933 – August 15, 1934) – 6.35% = 5.05% annually
  • Marriner S. Eccles (November 15, 1934 – February 3, 1948) – 74.07% = 4.27% annually
  • Thomas B. McCabe (April 15, 1948 – April 2, 1951) – 8.40% = 2.73% annually
  • William McChesney Martin, Jr. (April 2, 1951 – February 1, 1970) – 47.29% = 2.08% annually
  • Arthur F. Burns (February 1, 1970 – January 31, 1978) – 64.47% = 6.49% annually
  • G. William Miller (March 8, 1978 – August 6, 1979) – 16.40% = 11.32% annually
  • Paul A. Volcker (August 6, 1979 – August 11, 1987) – 55.01% = 5.63% annually
  • Alan Greenspan (August 11, 1987 – January 31, 2006) – 73.34% = 3.03% annually
  • Ben S. Bernanke (February 1, 2006 – ) – 13.70% (through July 2011) = 2.40% annually

(In fairness, I may have also had some help from Microsoft Excel.) Can I paint you a picture here? Actually, I can:

Or perhaps you’d like it ordered…

The point is that, however you look at it, statements made by at least two of the candidates at the GOP presidential debate were gross misrepresentations of the actual truth. (Don’t worry, I have no doubt that Democrats do the same thing.) In fact, there have even been concerns about deflation at several points during Bernanke’s tenure. (Price instability in both directions is considered undesirable, but for different reasons.) Romney at least made his statement seem less about literal inflation and more about money supply (and technically turned his statement into a value judgment), but he’s still misleading. My calculations on historical money supply numbers indicate that Arthur Burns, not Bernanke, was the most expansionary Fed chair in recent history*, and Bernanke is actually kind of middle of the road in terms of overall monetary expansion.

Update: Due to popular demand, I’ve refined my money supply calculations and made a graph for you:

(You can thank the free wireless in JFK Terminal 5 for the somewhat timely update.) M1 and M2 are just two different measures of the money supply, with M2 using a broader definition of money than M1. Even with this limited dataset, I can’t find a reasonable expansionary horse race that Bernanke can win. I suppose I could have used absolute dollars created rather than a percentage increase, but that makes about as much sense as Rick Perry bragging that he created more jobs in Texas than Romney did in Massachusetts.

This isn’t fair to people who are actually hoping to learn something from watching these debates, and I really don’t feel comfortable voting for anyone who, knowingly or not, is so obviously comfortable doling out misinformation.

Economists make it a point to distinguish between positive and normative analysis (i.e. fact versus opinion) for a reason, namely that, as Daniel Patrick Moynihan put it, “Everyone is entitled to his own opinion, but not his own facts.”

* I am realizing that I would be much better at fantasy economists than I am at fantasy football.

Tags: Fun With Math

29 responses so far ↓

  • 1 Eben in NYC, NY // Sep 8, 2011 at 9:42 am

    These demagogues are speaking to inflation in food and gas prices, but to blame Bernanke for it is scary..

  • 2 econgirl // Sep 8, 2011 at 10:09 am

    I fail to see how Bernanke’s money supply decisions could somehow wreak havoc on food and gas prices while leaving other prices mainly alone, so I don’t give their claims a lot of credibility. (There are two types of inflation: demand-pull inflation and cost-push inflation, and monetary policy tends to create the former, whereas the food and gas situation seems to be the latter.) Furthermore, food and gas are components of the Consumer Price Index, which is used to measure inflation, so these price increases are baked into the numbers above. You can see more on CPI composition here:

  • 3 Dan L // Sep 8, 2011 at 10:12 am

    But then why is everything is so expensive!?


    I don’t believe that Newt and Mitt are actually complete idiots, so the only logical conclusion is that they are shameless liars. But we knew that already. Unfortunately, some of the other candidates may actually be this stupid.

    But I have to give credit to Romney for being a better liar (at least in the quotes above). He was less explicit about claiming that Bernanke is causing inflation. Instead, he complains that Bernanke has “overinflated the amount of currency,” whatever that means. I suppose that one could claim that he is making some sort of statement about the money supply rather than actual CPI.

  • 4 econgirl // Sep 8, 2011 at 10:51 am

    Exactly right, and I was thinking the same thing- I think I was playing with Excel again as you were writing this. The numbers on the money supply don’t really support Romney either, though it’s hard to explicitly disagree with “overinflated” since that’s a value judgment rather than an objective measure.

  • 5 Eric M // Sep 8, 2011 at 11:04 am

    The devil can quote scripture for his purpose.

  • 6 David M // Sep 8, 2011 at 11:23 am

    It would have been clearer simply to disagree with the policy of letting banks borrow at 0.25% and use those same $ to buy Tbills at 2-3%. I don’t see why a bank would want to be in the loan business at all, when they can make a virtually riskless profit borrowing and lending to the US gov’t.

  • 7 Dave // Sep 8, 2011 at 11:44 am

    I think it is important, here, to distinguish between money supply inflation and consumer price inflation. We have seen sizable money supply inflation during the past twenty years (which was mostly on Greenspan’s watch, not Bernanke’s). But we’ve largely been spared sizable consumer price inflation during the same time.

    Is that good? bad? neither? It’s hard to say.

    In principle, it should be impossible for one to be sizable, while the other remains trivial. However, because the U.S. Dollar is the world’s reserve currency, the growth of both the U.S. economy and the economies of the rest of the world tends to absorb our money supply inflation. Sooner or later, when the U.S. Dollar is no longer the world’s reserve currency (or if the world economy starts shrinking on a massive scale), most of those Dollars will come home, likely resulting in exceptional consumer price inflation. So some might claim that we need to do a better job of controlling money supply inflation to prevent this eventual consumer price inflation. And they have a good point.

    However, look at what happens if you don’t increase the money supply now: Because the growth of the world economy is absorbing U.S. dollars, you’ll end up with consumer price deflation in the United States if you don’t keep growing the money supply. Prolonged, high consumer price deflation would certainly impact economic growth.

    (Looking at the data econgirl linked, it looks like M1 inflation was 16% during the past year, and M2 inflation was 8% during the past year, yet consumer price inflation was considerably less — and there was even talk of possible deflation. If there had been no money supply inflation, there would have been real deflation in consumer prices.)

    So, when it comes to what to do with the money supply, it’s really hard to say what is best. You can cause problems in the short term, or you can cause problems at some unknown time in the distant future. However, as far as the Federal Reserve Chairman is concerned, Congress has arbitrarily decided what choice is best — among other things, Congress has tasked the Fed with keeping consumer prices in check, and Bernanke has, as econgirl pointed out, done a pretty good job of that.

  • 8 Punditus Maximus // Sep 8, 2011 at 12:37 pm

    Republicans want deflation, because they want the economy to be trashed.

  • 9 John F. Opie // Sep 8, 2011 at 1:07 pm

    Two points: one a pet peeve and the other content.

    I just hate the labels of the x axis being at the axis: they need to be moved to tbe bottom of the chart. Hard to read otherwise…

    Second: you may have to adjust the inflation figures for the differing definitions of inflation over time. Constant or hedonic deflators, aye, that is the question…given the effect of hedonic deflators, inflation is, to a certain degree, underreported at the current edge of the data…

  • 10 econgirl // Sep 8, 2011 at 5:32 pm

    @ David M: I can’t help but think that politicians assume that people are too dumb to understand anything but vague inflammatory language and sound bites.

    @ Dave: I updated the post with a nice graph on monetary expansion, and it still doesn’t align with the quotes from the debate.

  • 11 Dave // Sep 8, 2011 at 7:37 pm

    I do not disagree econgirl. When it comes to economics, I think that Americans seem to have fuzzy memories, and politicians take advantage of that (or, perhaps, also have short memories themselves). For some strange reason nobody remembers all the easy money and inflation (both consumer price and money supply) during the Volcker era. Thus, Volcker is often hailed as having turned around the economy by being tight with money (!) (often by the same people who ‘remember’ Ronald Reagan as being fiscally conservative — they’re always a bit incredulous when I pull up the stats on Reagan’s spending record).

  • 12 Paul Jenkins // Sep 9, 2011 at 1:58 am

    I’m glad you chose to look at this topic. There seems to be a lot of misinformation going around about economics, and as an academic, it’s pretty depressing. If these candidates wanted to inform their base, they’d spend time talking about the rise in personal savings rate and the massive shortfall in aggregate demand. Instead, they seem intent on pandering to low information voters who simply know “in their guts” that inflation is happening, and public sector debt is exploding.

    The problem here is that for every ridiculous statement made by a person who seems to have some authority, it requires an army of economists to set the record straight. To make matters worse, millions of Americans denounce economics as some sort of “social science voodoo,” and for these folks, no amount of explanation will get them to challenge their beliefs.


    Great article. Keep filling the information gap. 🙂

  • 13 Dr. Goose // Sep 9, 2011 at 11:57 am

    Fact-checkers are like the street sweepers after a parade of horse-drawn carriages – performing a dirty but vital job while few are looking.

    Besides that, for some reason people increasingly don’t seem to want to hear the facts.

  • 14 TJ Weldy // Sep 11, 2011 at 5:49 pm

    As a fierce independent and one who is mildly disdainful of the idea of political parties, I am only attacking the target presented, not practicing selective criticism of only the Republicans. Disclaimers aside, there is a certain comedy in all this. One of the more compelling aspects of the Republican dogma is a notion of personal responsibility. Yet it seems that everyone else is a fault for various circumstances.

    As the Republicans are not speaking to academics, their reference to inflation is almost certainly not the CPI, or any other standard measure of anything, but the ‘feeling’ that prices of frequently purchased items such as fuel and food have increased relative to wages however true or untrue this may be.

    One thing that almost anyone can glean from Economics is that demand is part of the equation that drives prices in most market conditions.

    Therefore, I would ask that such complainers pause to consider the immortal wisdom of Bart Simpson: “I can’t help but feel partially responsible”. If there is anything that is for certain, Americans have a surplus of fatness and laziness. I humbly submit to those that are buying fuel and food in quantities that are unjustifiably large while at the same time complaining about the prices to ride a bike and enjoy a light salad for dinner tonight.

  • 15 veganarchonomics // Sep 12, 2011 at 4:49 pm

    There has been substantial change in the methodology of the CPI (mostly in the form of hedonics and attempts to account for consumer substitution) most of it happening under Volcker or Bernanke. Whether or not the old or the new methodology is better (on could probably make a pretty strong case for either) you are comparing apples to oranges when you compare Bernanke’s CPI numbers to those of previous Fed chairmans. I have heard that based on the old methodologies the CPI would have shown an increase of almost 11%, but I cannot speak to that estimates accuracy.
    With regards to money supply inflation, neither M1 or M2 is controlled by the Fed (at least not directly), would it not be more telling to look at expansion of the monetary base?

  • 16 Is Bernanke the Most Inflationary Fed Chair? - The Curious Capitalist - // Sep 12, 2011 at 5:25 pm

    […] higher inflation than under any other Fed chairman in history. According to this chart by Jodi Beggs (care of WonkBlog’s Brad Plumer), that allegation appears to be […]

  • 17 econgirl // Sep 13, 2011 at 5:32 pm

    @ TJ: You’re going to kill aggregate demand with crazy talk like that. =P

  • 18 TJ Weldy // Sep 13, 2011 at 6:12 pm

    @econgirl – well the increased demand for bicycle repair services, chiropractors, and smaller sized clothes has some offset effect… maybe?

  • 19 jmpsfs // Sep 13, 2011 at 8:24 pm

    “(Don’t worry, I have no doubt that Democrats do the same thing.)”

    When Democrats do the same thing, please come back and tell us. In the meantime, this is just the sort of gratuitous aside that lends credibility to the sort of behavior you’re criticizing.

  • 20 Is Bernanke Really the Most Inflationary Fed Chief Ever? | Stock Prices: Live stock prices, historical stock prices, news & more // Sep 14, 2011 at 12:08 am

    […] higher inflation than under any other Fed chairman in history. According to this chart by Jodi Beggs (care of WonkBlog’s Brad Plumer), that allegation appears to be false. The average annual […]

  • 21 bmc // Sep 14, 2011 at 1:55 am

    Since we are fact checking, it appears to me that the chart actually shows the total for Hamlin, rather than the annual rate. It doesn’t change the point, it’s just ironic to have what appears to be a mistake on the first bar of a graph that tries to point out mistakes.

    And since so many of the comments (not yours, which I appreciate) are focused on what horrible liars and/or dolts all the Republicans must be, I would like to challenge the assertions that have been made. If you really want to call Republicans and Tea Party folks (like me) such names, you should at least be willing to look in a mirror and entertain an additional point of view before casting your stones.

    I challenge all of you who have posted here to go view the SAME source the author uses to build the chart and draw conclusions. In specific, see the commentary on current inflation. Note the trend line which has been down for a long time and how it has reversed course to be upward. Note how the huge impact of the housing bubble and financial crash have impacted the data. There is more going on than is evident in the spurious single data point of Bernanke’s entire time in office. Finally, note this last point, made by the very same source used to build this chart: “So based on the 1 to 2 year timeframe you would expect inflation from QE1 to begin between March 2010 and March 2011 and if no more easing occurred to end somewhere between June 2011 and June 2012.
    As predicted, inflation began almost smack dab in the middle of that target range. Inflation began in earnest in January of 2011 with a monthly rate of 0.48% roughly 21 months after QE1 began. It probably started a bit slowly because of the massive deflation that was affecting the world-wide economy. Since QE1 money creation spree lasted 19 months it is quite possible that the inflationary effects will last approximately 19 months. If that is the case, we still have another 11 months of inflation to go just from QE1. QE2 began in November of 2010 and ended in June of 2011. So we have an additional 8 months or so of monetary increases from that. Based on that we can estimate that inflation from QE1 will run through July of 2012 and then possibly slack off until around December 2012 and then pick up again through August 2013. By that time we could possibly be seeing inflation in the 10-12% range. Inflation rates above 5% begin to cripple the economy as we saw with the last Oil spike. So as the low monthly numbers continue to drop out of the equation over the next six months we could see a significant spike in the inflation rate and possibly another round of recession. And an inflationary recession can not be fixed by printing more money. The only cure is fiscal responsibility and that takes time and a government that is willing to act responsibly- which is sorely lacking these days. The only reason Inflation isn’t 100 times worse than it is currently is because the Fed is paying banks to hold on to all that money it printed.”

    To any of you who are at Harvard, to Rachel Maddow, and to those of you who have posted inflammatory remarks about Republicans on this page, I dare you to read the full source and see if any of your predisposed opinions are shaken at all. My hunch is no. You are looking for data to reinforce your existing opinion rather than to form an objective one. I am not telling anyone what to think, but I do contend that accepting this chart and the conclusions it attempts to draw, without regard to additional facts from the very same source, is both misleading and lazy. Maybe you are right. Maybe you are not. You should at least look and think before you post. I will make it easy, the site is at:

  • 22 econgirl // Sep 16, 2011 at 5:35 pm

    @ bmc: I fixed that issue in an early draft of the post- is it still showing up incorrectly for you?

  • 23 Barack obama guardian group II - Page 728 // Sep 21, 2011 at 12:06 pm

    […] mandate to focus on employment and price stability. On prices, the Bernanke Fed has presided over unusually low inflation while unemployment is unusually high. The question facing FOMC members today is whether […]

  • 24 Ben Bernanke: Not That Inflationary | // Sep 22, 2011 at 9:47 am

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  • 25 Ranking the Fed Chairmen: Why Paul Volcker Really Was the Best in Recent History (and Bernanke isn’t Bad) // Oct 20, 2011 at 11:22 am

    […] Do It With Models“.  Perusing her recent history, I came across an article entitled “Adventures in Fact-Checking, GOP Debate Edition” where Jodi fact checked some statements made by Mitt Romney and Newt Gingrich and found […]

  • 26 Ranking the Fed Chairmen: Why Paul Volcker Was The Best (And Bernanke Isn’t Bad…) // Oct 20, 2011 at 11:36 am

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