Learning Not to Trust the All-In Podcast in Ten Minutes

Gross incompetence or purposeful deception?

My coworker and I enjoy having debates about whether the American economy is in the express lane to collapse or cruising in the good times (I’m really fun at parties). For the two-and-a-half years I’ve worked at my current company, one of us has been a bull while the other has been a bear. I’ll let you guess which one is me.

Monday, November 4, when I walked into the office he brought up a podcast he had been listening to on the drive to work: All-In. I had never heard of it, but I guess it’s a group of four venture capitalists that talk about politics, current events, and the economy.

My coworker surfaced a point that the podcasters had made in the opening segment of last week’s episode: 85% of the past quarter’s economic growth came from government spending. I was stunned. I had in my mind that government spending composed something like 30%-40% of GDP thanks to Noah Smith and Matt Yglesias’ recent tirades about how imports don’t subtract from GDP, resurfacing the macro-101 equation:

My coworker showed me the first few minutes of the podcast, where they flash this chart after noting the economy grew by 2.8% in Q3, and one of the hosts, Chamath Palihapitiya, describes what he sees as going on:

This is where you can get a little confused by data. Jason, this is net outlays. And that's different from total gross government spending, which also includes QE… So just to be clear about what's happening, 85% of this quarter's GDP was induced by the government. If you sub it out, so take 2.8% and multiply it by 0.15, that is the true growth X the United States government that exists in the United States economy today. Sacks, your thoughts here on the GDP, obviously looks pretty good for Biden-Harris to have all these stats going in their favor, but there is the caveat obviously about the government spending in there.

“This is where you can get a little confused about data” yeah, okay big guy. Let’s see who is confused here.

Putting aside the comment about quantitative easing, which feels irrelevant, I left my coworker’s office and went straight to the Department of Commerce’s website, where the Bureau of Economic Analysis publishes GDP estimates. The third-quarter advance estimate table 2 provides us the information we’re looking for, and, in fact, is the source of Chamath’s graph.

You can see the Macro-101 equation recreated here. All of these subcategories (personal consumption + investment + net exports + government consumption) add up to 2.8% (2.82% to be precise) of Q3 GDP growth.

0.85% of the total 2.82% GDP growth is from government spending. Meaning that 0.85% / 2.82% = 30.1% of Q3 GDP growth came from government spending, not 85%.

If you look closely at Chamath’s chart, you can tell that he’s using this exact data source to develop his gross misinterpretation of the data.

So, Chamath’s thesis that “if you back out the percentage of government consumption that is included in GDP, you start to see a very different picture, which is that over the last two and a half years, all of the economic gains under the Biden administration have largely been through government consumption” is total hogwash. The claim that makes up the entire talking point of this initial segment of the show is a misreading of the data that I, a random nonexpert guy, noticed and disproved in ten minutes of research and writing this up.

Looking at government expenditures as a proportion of GDP over time, you can see that the current period is nothing new—in fact, it’s typical for the post-Great Recession era, roughly in line with government spending from the late Obama years through Trump’s presidency, pre-COVID.

Source: St. Louis Fed

Was this gross incompetence or purposeful deception? I’m not sure. But I know that I won’t be tuning in for the next episode of All-In to find out. I will not fall prey to Gell-Mann Amnesia. In my first and only 15 minutes of watching, Chamath’s confidence in making this false claim, coupled with his co-hosts’ complete lack of critical pushback, suggests to me that these kinds of mistakes happen often enough to where these guys’ content isn’t worth consuming.

Have a nice Tuesday.

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Edit: Given the attention this has received, I’d like to note that a great way for the showrunners to illustrate that this segment was a mistake rather than a malicious misdirection would be to own up to it as a mistake.