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Tuesday, February 1, 2011

basic math

Democratic Governor Cuomo of NY has made a major mathematical discovery. It turns out that government programs all over the state of New York have annual increases built into the law that created them. Therefore the default position is that the budget will increase. Furthermore if the budget has a built in increase of 13% (as NY's does) and you reduce that increase by 3% then the folks in his party typically describe this as "cutting the program by 3%." This is an important technique in increasing the budget while claiming to cut it. This discovery holds great promise for budget discussions in the future.

This is comparable to Governor Huckabee discovering that evolution is a very good explanation of how things change over time, except for the fact that these math concepts are simpler than those biological ones.

PS I think the Republicans have known about this (the math part) since Darwin's time.


  1. Oh those pesky numbers.

    1. If your banker is giving you a 3% APR on your savings then you are getting a true percentage of less that 3%.
    2. A cash back of 3K when you buy a new car means you are financing an additional 3K on your car loan.
    3. A reverse mortgage is a loan on your home – you pay the interest and the lender gets to keep your home. And, the lender is betting you will die before he/she pays the value of the home.
    4. O’s freeze on Federal discretionary spending means they are frozen at a level 20% higher than the 2008 levels.
    5. If I budget for a 13% increase and then cut that to a 10% increase that is truly a budget reduction.

    Unfortunately, many will not listen closely enough to know that Cuomo was telling the truth and the truth is, as you point out, a 10% increase over previous years. I did not hear Cuomo’s remarks so I am unsure whether he was clarifying what a 3% budget reduction actually means or perpetuating a misunderstanding. Still, it seems that Cuomo stated the facts as they are and unfortunately many listeners may not understand what the numbers actually mean. If there is a misunderstanding perhaps the listener is at fault.

    I agree that people in business (you said Republicans) have known this for a while. Indeed, I have been in many board rooms where no one was allowed to show a figure unless they show how it was calculated and the assumptions that go with it.

    I learned what the term budget means in a 10th grade practical math class along with concepts such as the difference between income and revenue, why consignment (bottom line) is a bad deal for both parties, if your terms are net 30 you are giving you customer a 30 day loan, and how to make money on float. The teacher was an absolute terror but perhaps I owe her more than I ever realized. Perhaps everyone should have a teacher like her.

    Since we are discussing numbers and what they mean - In a previous post you listed groups that irritate you. Well, individuals that irritate me are ones that say they are giving 110% (or any % over 100). 100% is all there is. I think I learned that in that 10th grade class as well.

    P.S. did Huck actually give a nod to evolution?

  2. I think that this is a level beyond pesky numbers and Cuomo is apparently shocked by how his party counts things.

    With respect to #5 it may be a "budget reduction" but it is not a spending cut, which is how it is normally sold.

    Huck has not been on the road to Damascus as far as I know. I wouldn't expect it.

  3. The budget released by the WH today would result in a projected deficit THIS year of 1.6 trillion and the US would have to borrow an additional 7.2 trillion over the next 10 years. This estimate is down from previous projection of borrowing 9 t over the next 10 years. Here is a quote from the administration.

    “Obama's plan would reduce deficits by more than $1.1 trillion over the next decade, the officials said,”

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  5. Another example of tax/math double speak.

    "Of all the states that have an income tax, Illinois is one of only two that exempts retirement income. Cullerton said creating a 5 percent tax would raise $1.6 billion/year."

    "Cullerton's clarification said his aim is to broaden the tax base so that overall taxes can be lowered."