Budget Apples, Oranges and Cherry-Picking

Yesterday, I cited Texas jobs' data as the perfect example of how data can be cherry-picked in different ways to tell two completely different stories. Do the jobs' data make Rick Perry's case for a Texas economic miracle? Or do they make his critics' case for a Texas economic myth? The answer to both questions is yes.

Last week, I explored the City of Richardson's proposed budget. I reconstructed historical data from the last six of Richardson's budgets. I concluded that "the fact that Richardson's proposed 2011-2012 budget shows a very slight deficit is not a cause for concern."

Is this another case of cherry-picking data? After the jump, an analysis.

The Best of Times, The Worst of Times

"There are three kinds of lies: lies, damned lies, and statistics."

" 'Lies, damned lies, and statistics' is a phrase describing the persuasive power of numbers, particularly the use of statistics to bolster weak arguments, and the tendency of people to disparage statistics that do not support their positions. It is also sometimes colloquially used to doubt statistics used to prove an opponent's point. The term was popularised in the United States by Mark Twain (among others)."
-- Wikipedia

Never was that phrase more apt than in first days after Texas Gov. Rick Perry announced his run for the 2012 GOP nomination for President. Perry made his record of job creation in Texas a centerpiece of his campaign. Critics, including a Nobel Prize-winning economist, quickly pointed out weaknesses in Perry's claim (see here and here). My topic today isn't so much who is correct, as how this topic has provided the perfect illustration of the old saying about "lies, damned lies, and statistics."

After the jump, two charts.

Global Warming, Evolution and Team Eve

Jon Huntsman, the 2012 GOP candidate for President, tweeted, "To be clear. I believe in evolution and trust scientists on global warming. Call me crazy."

To which, Time's Joel Stein tweeted back, "I'll call you Not the GOP Nominee."

That exchange gives me the opportunity to round up news items on some of my favorite topics. After the jump, Global Warming, Evolution and Creationism, the conversation starters - and enders - that never let you down.

Deficit or Not, Numbers Matter More Than Words

"A billion here, a billion there, and pretty soon you're talking real money."
-- Senator Everett Dirksen

Yesterday, I asked what I considered to be a very simple question: Is Richardson's proposed 2011-2012 budget in balance? The city says yes. I looked at the numbers and concluded no.

Wouldn't you think that's a simple question that we ought to be able to agree on? Look at revenues. Look at expenditures. Subtract. If the number is positive, you have a surplus. If the number is negative, you have a deficit. I have a pretty hefty background in mathematics. I've studied differential calculus and matrix algebra and non-Euclidean geometry. But I admit my accounting training is limited (and by limited, I mean non-existent). So, I won't claim I'm necessarily right on an accounting question. But this one seems simple. And no one's stepped forward to educate me on why I'm wrong. I have several theories why that might be.

One, maybe because I'm actually right, but the city has a mental block preventing them from admitting that their budget has a (slight) deficit. Their belief that it's just prudent fiscal management to draw down those excess funds (it might well be) prevents them from conceiving how that can be compatible with a budget deficit. They are ingrained to believe that deficits are always bad, so how can they possibly be recommending a budget that is in deficit? The only way to resolve their cognitive dissonance is to deny the obvious: that their budget has a (slight) deficit.

Or two, maybe because there's a state legal requirement that city budgets be balanced, meaning there's a legal definition of what "balanced" means that doesn't exactly match the dictionary definition. As long as the city meets the legal definition, their budget is in (legal) balance, even if the numbers show a teensy-tiny (dictionary) deficit.

Or three, maybe because I'm just too dense to understand accounting and the city has given up trying to explain it to me. Let's go with this last possibility as our working hypothesis.

After the jump, moving on to the next question.

Fashion in Finance: Red is the New Black

Monday night, the Richardson City Council spent four hours reviewing the 2011-2012 Proposed Budget. Of that four hours, almost an hour was spent on essentially one topic -- raises for city employees. The discussion was led by city employees. Perhaps a university sociologist might want to research the connection between those facts. If the discussion were instead led by, say, HOA presidents, might the time spent on different areas of the budget have been different? Not that I begrudge city employees a raise. I'm just reporting the idle thoughts I had while I watched all the evidence collected and presented by city employees justifying raises for city employees.

After the jump, a more effective use of your time -- the budget in a nutshell and the key points that affect your pocketbook.