Economic BS in rich countries is reinforced by BS about Venezuela
By Joe Emersberger at Dec 13, 2012
The US media is busily trying to scam US readers into accepting cuts to Medicare and Social Security so as not to fall off a “fiscal cliff”. In a very recent TNR article, Toro also hypes the imagined perils of discarding neoliberal lunacy. Toro wrote
“…some forecasters estimate Venezuela's 2013 budget deficit will reach an insane 19.5 percent of GDP (consider that Greece's deficit topped out at 15.4 percent of GDP in 2009). “
In fact, the “forecasters” Toro cites are saying – insanely - that Venezuela’s fiscal deficit will hit 20% of GDP by the end of this year which has just about arrived. The Guardian, CNN and Washington Post have also run articles claiming Venezuela’s fiscal deficit is presently 16-20% of GDP. To its credit, as of December 17, the Guardian updated their article after I called their attention to the IMF's estimate of Venezuela's fiscal deficit.
The IMF, which is hardly run by Chavistas, said as recently as October that Venezuela’s fiscal deficit would be about 7.4% of GDP by the end of this year. Without checking the IMF projections, any competent and diligent reporter should have seen that the 16-20% numbers were extremely suspect. Venezuela’s budget deficit for 2011 was 5% of GDP. Venezuela’s economy grew in 2012 and oil prices didn't plummet, so it would have taken jump in government spending relative to GDP in one year that is totally unprecedented in the Chavez era to drive the deficit up that high.
Additionally, the absurdity of Toro’s comparison of Venezuela to Greece is nicely illustrated by the data for the country from which Toro now blogs.
As of 2011, Japan’s fiscal deficit was 9.7% of GDP. Its gross debt to GDP ratio was 211%. The numbers for Greece are 9.4% and 170% respectively. Based on Toro’s facile analysis, we’d have to ridiculously conclude that Japan is in worse shape than Greece. Clearly, debts (and deficits) relative to GDP do not tell us if a government’s fiscal policy is sustainable.
For a competent analysis of the sustainability of the Chavez government policies see this study by Mark Weisbrot and Jake Johnson. Weisbrot also took the WAPO editorial board to task in this blog post for citing a bogus figure for Venezuela's fiscal deficit and for other foolishness.