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Manchin’s ‘historic context’ for spending is using the wrong metric

(Jacquelyn Martin/AP)
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“As a reminder, for context: Marshall Plan = $151 billion adjusted for inflation. World War II = $4.5 trillion adjusted for inflation.”

— information on a card being carried by Sen. Joe Manchin III (D-W.Va.)

Jake Sherman of Punchbowl News tweeted that Manchin “is carrying a card with what Democrats have done. He says Dems don’t talk about it enough.” He included photos of the front and the back of the card, which listed various votes on major legislation.

But what caught our attention was the back of the card, which highlighted “historic context.” The card said that Congress has provided $5.4 trillion in response to the coronavirus pandemic and another $1.2 trillion through the infrastructure deal.

“That’s $6.6 trillion Congress has already provided above and beyond annual appropriations over the past 20 months,” the card said, before making the comparison with inflation-adjusted numbers for the Marshall Plan and World War II.

The point seems to be that Congress has already spent well above those amounts. But Manchin’s card is using the wrong metric.

The Facts

On one level, inflation-adjusted numbers make sense. After all, it’s a direct comparison of dollar amounts.

But if Manchin is looking for historical context at the distance for more than five decades, he should really examine the spending on the Marshall Plan and World War II as a percentage of the overall economy, better known as the gross domestic product (GDP). This measurement — in contrast to inflation-adjusted dollars — really puts in perspective the burden these programs placed on the U.S. government.

That’s why the historical tables of the White House budget office offers percentage of GDP as a key measure over time for federal programs.

The Marshall Plan, officially called the European Recovery Program, was first articulated by Secretary of State George C. Marshall in a 1947 speech at Harvard University as a response to Communist expansion in Europe after World War II. After Marshall’s speech, Congress passed the Economic Cooperation Act in 1948 and approved funding that has been estimated at between $10.3 billion and $13.6 billion. The biggest recipients were the United Kingdom, France, West Germany, Italy and the Netherlands.

The upper range of that estimate, using the Bureau of Labor Statistic inflation calculator, would be about $150 billion in today’s dollars.

But the Marshall Plan spending was between 3.7 percent and 5 percent of GDP at the time (about $275 billion in 1948). With U.S. GDP now about $23 trillion, that would be the equivalent of about $850 billion to $1.1 trillion.

In other words, those numbers are significantly higher than $150 billion.

As for World War II, Manchin offers inflation-adjusted spending of $4.5 trillion. But defense spending was 16 percent of GDP in 1942, 32 percent of GDP in 1943, 36 percent of GDP in 1944 and 37 percent of GDP in 1945. If we assume an average annual GDP of about $20 trillion for the last four years, that translates into the equivalent of $24 trillion today being spent on the war.

We sought a comment from Manchin’s press secretary but did not get a response.

The Pinocchio Test

In both cases, using inflation-adjusted dollars ends up with a figure about one-sixth as large as using a percentage of GDP. Manchin appears to want to say the spending on the Biden agenda is higher than World War II and the Marshall Plan combined. But when seen in context, the numbers for the bills passed this year are actually significantly smaller.

We’re not going to offer a Pinocchio rating, as Manchin was just carrying a card captured by a photographer. Moreover, using inflation-adjusted dollars is common practice. But if he really wants to compare apples to apples, he should be using a metric that more accurately captures the historical context.

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