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Saturday, June 30, 2012

Cliché Time: Lies, Damn Lies & Statistics

If I had more time, I'd examine this June 25 Courier-Journal op-ed by John David Dyche in more detail. Dyche fills his paragraphs with "facts," implying that this means it is not biased or distorted in any way.


Here's a sample of the mediocy:
The Urban Institute-Brookings Tax Policy Center estimates that 46 percent of households will not pay federal income tax for 2011. The Heritage Foundation asserts that in 1984 only 14.8 percent of the population paid no federal income tax.
Obviously, Dyche is trying to imply that the U.S. has so expanded the social welfare state that few Americans now pay income taxes. Compared to 1984, that is obviously untrue. Rather, the problem is that since 1984, the wealthiest Americans have acquired a far greater share of the country's wealth and capture a very large portion of annual income. Just between 2002 and 2007, the wealthiest captured two-thirds of all income growth. The data over the last 30 years is particularly depressing. And since 2008, the Great Recession has further concentrated wealth and massively increased poverty at the bottom.

Moreover, the Earned Income Tax Credit explains some of the change as well.

Dyche also ignores the payroll tax.

This set of "facts" from the op-ed is also misleading:

NPR, using inflation-adjusted dollars, reports that, “In 1962, federal spending was $707 billion and accounted for 18 percent of U.S. GDP. In 2011, federal spending was $3.1 trillion and accounted for 24 percent of GDP.” As recently as 2008, total federal spending was about $2.5 trillion, and the long term, historical average of federal spending is 20 percent of GDP.
Why pick 1962 as the baseline? That was before Johnson's Great Society, so it ignores Medicare, Medicaid, etc. Does Dyche mean to suggest that America was a better place when those social welfare protections were not in place? The "long term, historical average" is fairly ridiculous since the U.S. had fairly limited federal spending until the Great Depression. The social safety net that is in place helps protect against the wild economic swings capitalism periodically suffers.

One fact Dyche did not note: federal revenues (thanks to tax cuts, as well as the recession) are now lower than they have been as a portion of GDP in over 60 years. Obviously, deficits would be much lower if taxes on the wealthy had not been repeatedly reduced. What was the top rate in 1962? Answer: over 90%!!

Incidentally, a significant portion of current spending is debt service, meaning that higher revenues over the past 30 years would have meant a lot less government spending now.

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