As 2012 draws to a close, Wonkblog asked our favorite professional wonks — economists, political scientist, politicians and more — to see what graphs and charts they felt did the best job explaining the past year. Here are their nominees.
Sheila Bair — former chairperson, Federal Deposit Insurance Corp. (FDIC)
"There has been much discussion about income inequality, but not enough focus on its corollary: debt inequality. As real wages for the masses decline, they try to sustain consumption through borrowing from the wealthy. This economic model is, of course, unsustainable, and eventually collapses, as we discovered in 1929 and again in 2007. Unfortunately, our tepid recovery continues to rely primarily on asset inflation and cheap credit to support economic growth, even as real income for most people erodes, likely setting us up for another bust down the road."
Jared Bernstein — senior fellow, Center for Budget and Policy Priorities; former chief economic adviser to Vice President Biden
"Here's a simple one I keep thinking and talking about. While we're all wound up in self-imposed fiscal madness, there's still an economy out there that's not working too well for a lot of people. Real hourly wages of middle-wage workers* have been drifting down for the past few years, a function of the persistently large amount slack in the job market. This figure also serves as a reminder that high unemployment doesn't just hurt the unemployed — it hurts people with jobs, too. Finally, it's a reminder as to why this is a lousy time to let the payroll tax cut expire. All that in one little line!"
*This is BLS hourly wage series for so-called production, non-supervisory workers (non-managers in services and blue-collar in manufacturing) deflated by the CPI.
Raj Chetty — professor of economics, Harvard; recipient, 2012 MacArthur "Genius" Grant
"Out of our own group's research, the graphs that had the most impact on my own thinking — and, I believe the public debate — are the trio of graphs from our paper on teachers' long term impacts. I was very surprised to see how sharp teachers' impacts are — as soon as a good teacher enters, students immediately start to do a lot better — and how long their impacts last."
Kent Conrad — Democratic senator from North Dakota; outgoing chair, Senate Budget Committee
This chart demonstrates that additional revenue has to be part of any deficit reduction package. It shows that the last five times the budget was in surplus (in 1969, 1998, 1999, 2000 and 2001), revenue was near 20 percent of GDP. Revenue is now at 15.8 percent of GDP, near its lowest level in 60 years. And under the House Republican budget plan, revenue would reach only 18.7 percent of GDP by 2022, a clearly inadequate level. Even with spending cuts and entitlement changes, given the retirement of the baby boom generation and rising health costs, it is clear we are also going to need more revenue."
Source: Data comes from OMB historical tables and the House Republican budget proposal.
Peter Diamond — professor, MIT: 2010 Nobel laureate in economics
"Cutting Social Security benefits by changing the COLA is bad economics and bad politics. That the benefit cuts would hit a vulnerable population is shown in the graph. Keeping the politics of Social Security within the issue of Social Security, not as part of the annual budget process, is vital for good pension design. "
Chrystia Freeland — editor, Thomson Reuters Digital; author, "Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else"
"This is my graph of the year — known as The Great Gatsby Curve. The Great Gatsby Curve draws on the research of Canadian economist Miles Corak and was widely popularized in a January 2012 speech by Alan Krueger, chairman of the Council of Economic Advisors. The Great Gatsby Curve is this year’s most important chart because it shows how social mobility declines as income inequality increases. At a time of rising income inequality, this is a hugely important finding because it suggests that the widening economic chasm imperils one of the characteristics many Americans believe is central to their society."
Robert Greenstein — president, Center on Budget and Policy Priorities
"This is our 'parfait' chart that shows what drives our record deficits. We’ve updated it periodically since its first release, since we think it really captures how we got here, as we debate the best ways for us to address the issue."
"Our second selection addresses the “takers vs. makers” claim and outlines households who owed no federal income taxes in 2011."
Michael Greenstone — professor of economics, MIT; director, Hamilton Project
"By unlocking vast new resources of natural gas in the U.S., fracking has transformed the energy landscape and dramatically reduced the price of natural gas. This graph summarizes the three types of costs associated with various sources of electricity generation: (1) the private costs of production; (2) external costs due to the release of conventional pollutants (primarily increased rates of morbidity and mortality); and (3) the external costs associated with the release of carbon dioxide and the resulting increase in climate change. When all three of these costs are considered, natural gas is the least expensive source of electricity."
"This graph shows that children born to families on the high end of the earnings distribution have more resources available than did their counterparts in 1975, while children on the low end of the spectrum have fewer resources than low-income families in 1975. While there have been great increases in inequality over the last several decades, the figure suggests that further increases may be in store during the coming decades."
Douglas Holtz-Eakin — president, American Action Forum
"AAF looked at 10 years of data and more than 230 regulations issued during the last 10 years to illustrate what drives regulatory spending by businesses and consumers; the bulk of the cost of regulations involves mandates to improve energy efficiency, with various environmental rules coming in second place. Together, those two categories account for roughly two-thirds of the economy-wide costs of complying with various federal regulations. Despite a pronounced regulatory slowdown before Election Day, regulators still managed to add more than $215 billion in final rules this year."
Glenn Hubbard — dean, Columbia Business School; former economic adviser to Mitt Romney
"My all-time favorite graph is from the long-term revenue and spending graph in the CBO long-term outlook. In a holiday spirit of something different, I offer a chart from a piece earlier this week by David Wessel, illustrating that tax changes for the rich are a small part of changes in the nation's fiscal outlook over the past decade — just as they will be going forward."
Paul Krugman — professor, Princeton University; columnist, New York Times; 2008 Nobel laureate in economics
"This is the labor share in nonfarm business. I chose it because it highlights a dramatic new turn in the story of rising inequality, which hasn't yet made it into most of our discussion. The story is no longer about a rising education premium, as it was in the '80s and '90s; since 2000, we've been looking instead at a major redistribution from labor in general to capital."
Maya MacGuineas — president, Committee for a Responsible Federal Budget
"It is so important to put in place a sensible plan that stabilize the debt, and it is useful to have a tracking mechanism to see how various offers stack up. Let's hope we don't go any smaller than these."
Bill McBride — Proprietor, Calculated Risk
"This graph shows the quarterly contribution to GDP from Residential Investment and State and Local governments for the last several years. Residential Investment is now adding to GDP growth, and it appears the drag from state and local governments is ending — two key stories going into 2013."
Bill McKibben — environmental activist; founder, 350.org
"This shows that the fossil fuel companies have five times more carbon in their reserves than even the most conservative governments think would be safe to burn."
Peter Orszag — vice chairman of global banking, Citigroup; former director, Office on Management and Budget
"This graph from S&P illustrates two key facts: health-care costs have decelerated over the past few years, and Medicare costs have decelerated more than other health costs. That pattern suggests at least part of the slowdown is structural (since if it were all just a reflection of economic weakness, we wouldn't expect Medicare to slow down more than other health costs, but if it were partly structural, that's exactly what we would expect). If this slower growth continues, the impact on our long-term fiscal gap will be much more meaningful than any plausible outcome of the fiscal cliff negotiations."
Alice Rivlin — former director, Office of Management and Budget; co-author, Domenici-Rivlin debt plan
"Federal spending has risen since the recession, but over the long run the increases have been entirely in 'mandatory spending programs,' which reflect increases in the number of unemployed, low-income, disabled or retired people eligible for benefits. Discretionary spending appropriated annually by congress is heading towards its lowest percent of the economy since 1970."
Cass Sunstein — professor, Harvard Law School; former director, Office of Information and Regulatory Affairs (2009-2012)
"There have been a lot of wild charges about regulation being "out of control." True, we must control costs, but benefits matter too, and as demonstrated by this chart (produced by technical analysts in the federal government), the net benefits of final rules in the first three years of the Obama Administration exceed $91 billion. Not bad."
Neera Tanden — president, Center for American Progress; former HHS senior adviser for health reform
"This year, Americans faced a choice between an America that works for everyone, and a top-down America that works only for the wealthy few. Voters chose an America where we create shared prosperity by strengthening the middle class. When America’s middle class thrives, America will prosper and maintain its economic edge."
Ruy Teixeira — senior fellow, the Century Foundation and Center for American Progress; coauthor, "The Emerging Democratic Majority"
"In a phrase: density = Obama voters."
Sam Wang — professor of neuroscience, Princeton; director, Princeton Election Consortium
"This XKCD speaks to most of the pundit class in 2012, even if they don't realize it."