The Most Important Economic Stories of 2013—in 44 Graphs

David Dayen, Salon: What has been generally recognized as a housing recovery has much to do with a spike in all-cash sales, as this chart shows. That comes from two sources: wealthy foreigners picking up homes in America, and institutional investors scooping up properties in communities hard-hit by the housing bubble, with the plan to turn them around for rent (with predictable slumlord-like consequences). As you see here, when mortgage rates rose with the threat of the taper in the summer, the share of all-cash sales rose as well, as financing became less affordable. This chart shows how inequality has manifested itself in housing - potential first-time homebuyers, increasingly debt-burdened and job-insecure, have delayed big purchases, leaving the market to those with cash. The chart also raises questions about the durability of a housing recovery based increasingly on rich people and bargain-hunting investors.

Edward Harrison, Credit Writedowns: This is the one I like, since people are starting to talk about housing bubbles again. Notice where America is—still undervalued.

The Year in Debt: Talking Points & Tipping Points 

Justin Wolfers, New York Times, professor at the University of Michigan: Let's talk about our fiscal situation—and this chart is a clear reminder that it's time to update those tired old talking points. Rather than bemoaning rising public debt, realize that in fact, as a share of GDP it's stabilizing, and is set to be stable over the next decade. Surprised? Don't be. Remember the 2011 continuing resolution, the debt ceiling deal called the Budget Control Act, the "fiscal cliff" deal, and the sequester? They've all cut the deficit. And the ongoing economic recovery is a particularly powerful force in cutting spending. The result? The budget deficit has declined dramatically, from 10% of GDP in the wake of the Great Recession, to less than 4% last year, and it'll fall to a couple of percent of GDP in the next couple of years.

This isn't to deny that we have important fiscal issues. In the short run, it's critical that Washington does something to spur the recovery that it has leaned so heavily against over recent years. And my chart omits the more worrying (and also more uncertain!) longer-run projections, which suggest that demographics and trends in medical spending could raise the debt. But over the next decade, the non-partisan Congressional Budget Office is effectively saying, "she'll be right, mate." Don't believe me? Check out their latest numbers.

Josh Bivens, Researcher and Policy Director at the Economic Policy Institute: At this point, the agonizingly slow recovery from the official end of the Great Recession can be almost entirely explained by austerity in the public sector. The chart below shows growth in real public spending (state, local, and federal, and including transfer payments like unemployment insurance and Social Security, as well as direct spending like hiring teachers to staff public schools) following the trough of recessions since 1954.

At this point in the recovery, public spending following recovery from the Great Recession is by far the weakest on record. Particularly instructive is comparing the past 4 years with the 4 years following the recession that ended in 1982. That early 1980’s recession was extraordinarily steep – unemployment rose to a higher peak than during the Great Recession. Yet 4 years following its end all economic slack it caused was gone, whereas today’s economy is far from fully recovered. Yet if public spending following the Great Recession had mirrored its trajectory following the recession ending in 1982, the U.S. economy would essentially be back to pre-Great Recession health.

Miles Kimball, Supply-Side Liberal, professor at the University of Michigan: Because of the controversy over Carmen Reinhart and Ken Rogoff's suggestion that high debt would lead to lower growth, Yichuan Wang and I decided to look at the Reinhart and Rogoff data for themselves. This chart (which first appeared here) encapsulates their bottom line: they found no evidence for a negative effect of national debt on economic growth in the Reinhart and Rogoff data once they took into account the routine predictive power of past growth for future growth.

Kevin RooseNew York magazine: Hands down, the best economic story of 2013 was the David-and-Goliath tale of the 28-year-old UMass Amherst grad student, Thomas Herndon, who debunked a famous study by two Harvard professors Carmen Reinhart and Ken Rogoff. Herndon's paper showed that Reinhart and Rogoff had made a basic math mistake and therefore wrongly claimed that a country's growth fell off sharply once its debt-to-GDP load reached 90 percent—a claim that was borrowed by conservatives all over the world to argue for government spending cuts. The paper, and its implications for the political debate about debt, made Herndon an instant celebrity (he appeared on the friggin' Colbert Report!), was the talk of economists for months, and had a real impact on the discussion about global austerity. It was the Excel error heard 'round the world.

John Sides, The Monkey Cage: This graph charts the trend in what's called "public mood" -- the public's overall liberalism or conservatism, derived from hundreds of different survey questions. (Lower scores mean more liberal, and higher scores mean more conservative). The questions concern many different topics, but they all boil down to one basic thing: whether the public wants the government to do more or less in terms of spending, regulation, and the like. The graph shows that public opinion tends to move in the opposite direction as the party that holds the White House—in a liberal direction under Republican presidents, and in a conservative direction under Democratic presidents. Under Obama, public opinion has taken a very sharp conservative turn, leaving the public more conservative than it has been in decades.

Presented by

Matthew O'Brien

Matthew O'Brien is a former senior associate editor at The Atlantic.

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