Data and Common Sense Be Damned

July 9, 2008By Chuck Sheketoff

The Cascade Policy Institute’s most recent paper assessing states’ spending levels reminds me of an old joke about an economist, a doctor and a lawyer stuck in a deep hole. The doctor couldn’t operate his way out. The lawyer couldn’t argue his way out. But the economist had a solution, or so he said. “Assume we have a ladder . . . .”

Related materials:

Cascade Policy Institute report The Ranking of Oregon State and Local Spending (PDF)

OCPP's 2004 commentary Bizarre Study on State Spending Exposed

Economic models are only as good as the assumptions on which they rest, and sometimes economists are so blinded by their ideologies that they don’t notice when their models produce meaningless fantasies. The study by economists Eric Fruits and Randall Pozdena, published by the Cascade Policy Institute, is a good example. Their study predicts spending levels for states and compares their predictions with actual spending data.

Odd results for some states, however, reveal that the authors’ zeal to show somehow that Oregon and other states spend too much led them to use false assumptions, bad math, or both.

For example, why should anyone rely upon their predictions for Oregon and other states when they claim that the District of Columbia overspends on public health and public hospitals by a whopping 23,800 percent?

That would be like a doctor saying to a 180-pound man, “Based on my model, you are overweight by a little more than 179 pounds.” If the doctor’s predictor was that far off, wouldn’t she or he realize that there could be a flaw in the model? Would you want that doctor to predict your ideal weight?

Not so with the dismal scientists Pozdena and Fruits and their megaphones at Cascade. To them, Washington, D.C., must be “overspending” by 23,800 percent. The ideological model says so, data be damned.

They didn’t bother investigating why their prediction was so far off. In fact, they didn’t bother investigating any of the absurd numbers that appear in virtually every category in which they rank the states. Why bother actually thinking, when blindly following ideology is so much easier?

Apart from their indefensible numbers, the two economists and Cascade ignore common sense questions such as: “What do the residents of the states get for the spending?” and “What level of services is needed to ensure that all residents have an opportunity to succeed?”

Their study ranks states' spending regardless of the quality or quantity of public services the states provide. That's like being told that you spent too much on groceries because your neighbor spent less. To these economists and Cascade, the only thing that matters is that your neighbor's junk food was cheaper than your healthy square meals; they don't care about the nutritional value for the dollars spent.

Their ideological bias is also obvious when they declare in relation to health and hospital expenditures, “Oregon’s overspending declined since the last study largely because the intervening recession prompted substantial reductions in spending on the Oregon Health Plan.” In the strange world where Pozdena, Fruits and Cascade dwell, an increasing number of uninsured Oregonians is apparently an indicator of good state fiscal health.

But their analysis isn’t just strange; it’s fundamentally flawed. The Census Bureau data that they used does not include most Oregon Health Plan spending in the public health and public hospital spending category that Fruits and Pozdena used to make their claim. They didn’t even bother to learn this basic, crucial fact about the data they were analyzing. They jumped to a conclusion that fit their ideology, data be damned.

And that’s not all that’s odd about the report. The authors’ analysis includes the federal dollars a state spends, not just state tax dollars. Thus, they chastise a state for using federal dollars to supplement state tax dollars in order to provide better state services or for securing a greater share of federal tax dollars than another state.

Based on their twisted logic, we can expect Oregon’s ranking to “improve” in their next report, now that Congress has cut off federal timber payments to our cash-strapped rural counties. That counties must slash spending on roads, courts, libraries and public safety is “good,” according to the ideological model used by Pozdena, Fruits and Cascade.

Oregonians deserve a more rigorous fiscal policy debate than what the Fruits, Pozdena and Cascade model offers. Would you want to end up in a 10-foot-deep hole without a ladder with these economists advising you? It could end up being 2,390 feet deep after they crunch the numbers.

Charles Sheketoff is the executive director of the Oregon Center for Public Policy. You may reach him at [email protected]

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