Monday, November 21, 2011

The Misery Index

Jeffrey Sachs, author and liberal pundit, has developed a Misery Index (believe Sachs is following in the footsteps of others). This adds up a country's budget deficit, its unemployment rate, and its current account deficit. He then adds Tax receipts and Government Outlays (as a percent of GDP), suggesting this is a good way to compare countries on some key measures. Take a look:

The chart points up some very interesting stuff:

1. Northern Europe is a whole lot less "miserable" than we are. But so is Japan and Canada.

2. The GIIPS countries are truly "miserable", except for Italy (before their bonds blew up).

3. Looking at these numbers, it's not at all apparent why Italy is the "undisciplined, profligate, Mediterranean" country, whereas France is disciplined and well run: Italy has a lower budget deficit ratio, a better Misery Index, collects almost as much in taxes (% of GDP) and spends considerably less compared to France. And except for the Current Account category, Italy doesn't compare too badly with Germany.

4. Who can possibly say the US is overtaxed? We have the lowest Tax (percentage of GDP) of any country on the list. The only large country close to us is Japan.

5. As for spending, we are also at the bottom of the list. Only Canada, Japan, and Luxembourg spend at our low levels.

What utter hogwash we are fed every day in our economic/political conversations!

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