state of the economy; WSJ article

[harley]

ladelfina, may I suggest that, along with the 'boo hoo hoo' silliness that Abreutime referenced, if you really want a fair-minded discussion of these issues, it might be helpful not to lump-sum characterize those who might disagree with you as simpletons.

You are right against the limits of my interest to continue this conversation.

Personally, ERD50 and abreutime, I consider you both saints already for the patience you've been showing. I have enough to keep reading off and on, but with all the mean-spiritedness that's been flowing I couldn't bring myself to join in.

And I don't even totally disagree with ladelfina's feelings about the current admin. So it's not like I'm a retarded conservative.

 

[tuixiu]

I agree Harley. I've been enjoying the discussion but we're in the finance forums (which makes sense it's a thread about tax burden) so why start throwing mud at this anonymous easy target called "conservatives" instead of sticking with points?

 

[Running_Man]

----
http://www.brookings.edu/articles/2003/0101useconomics_gale.aspx?rssid=galew


Let's imagine a country with just two citizens, A and B.
A makes $100k and B makes $50k.
A pays 35% tax ($35k) and B pays 25% tax ($12.5k), so the tax total is $47.5k.
A's share of the total taxation is 73.7%; B's share is 26.3%.
Now fast-forward 10 years..
A makes $500k, and B makes $55k.
The tax rules have been changed such that A is taxed at 30% and B at 20%.
Now the total taxation is ($150k + $11k) = $161k.
And what is A's share of the total tax collected? 93%

What I take from this simple example is that B has gone from ($50-12.5+[47.5/2]) $61.25 in value for his government and individual income to ($55-11+[161/2]) $124.50 a 121 percent increase in income and services with only a 10 percent increase from his actual contributions.

A has seen his return from the government on his taxes fall from $27.5/$35 the 78 percent you mention to $80.5/150 to only 53.6 percent of every tax dollar paid returned to him.

As the tax rates are increased more and more the poor return will force taxpayer A to avoid paying the increasingly unprofitable tax. As Abruetime pointed out, B is dependent on A to maintain his standard of living as in your example more is coming from the government than he earns himself.

 

[ladelfina]

Point taken about the prickly language.. I apologize but have just been on my last nerve with some gratuitous negative attacks with no backup or constructive criticism.

---
I probably should not have offered the simplified example as it raises more questions than it seeks to resolve. One particular flaw is that it implies person A is the same person who has of his own accord become "more valuable", which is not necessarily the case. ERD50 took that and ran with it.. but in real-world analyses we are talking about a whole group whose makeup and actual productivity changes over time. (see FNM and other execs, whose income hardly reflects the billions they have left us in losses)


One thing I did think about is how, actually, lowering taxes overall naturally and necessarily exacerbates the "rich pay a higher percentage of all taxes" situation:

A wealthy (top 20% earner) person is "better off" (solely in terms of paying a lower proportion of the whole) in a regime that taxes the quintiles 50%/40%/30%/20%/10% than in a regime that taxes the quintiles 40%/30%/20%/10%/0%.

The more taxes are lowered overall, the more marked this differential will be, as long as even one iota of 'progressivity' is maintained. It remains even if the regimes go from, say, 39%/38%/37%/36%/35% to 25%/24%/23%/22%/21%. The least differential would register at 99%/98%/97%/96%/95%, and the most at 5%/4%/3%/2%/1%.

This is the core of my argument on the taxation score.

I am not saying that any one apportionment is "correct". I am just calling foul on those who use "higher proportion of all taxes" as a distraction.

 

[ERD50]

Preface - I'm really not trying to make this a political argument about one admin versus another ( and therefore keep it OUT of the Soap Box). This started when ladelfina ref this article, and it appeared to me that she dismissed it as biased simply by the title and source. So let's see if the content is biased. It may well be, I'm actually more interested in the thought process of detecting bas than I am the result - the journey versus the destination, if you will.

OK, my bias grade, item by item, for Section #1:

#1 - Economic growth. U.S. output has expanded faster than in most advanced economies since 2000. The IMF reports that real U.S. gross domestic product (GDP) grew at an average annual rate of 2.2% over the period 2001-2008 (including its forecast for the current year). President Bush will leave to his successor an economy 19% larger than the one he inherited from President Clinton. This U.S. expansion compares with 14% by France, 13% by Japan and just 8% by Italy and Germany over the same period.

The latest ICP findings, published by the World Bank in its World Development Indicators 2008, also show that GDP per capita in the U.S. reached $41,813 (in purchasing power parity dollars) in 2005. This was a third higher than the United Kingdom's, 37% above Germany's and 38% more than Japan's.

1a: U.S. output has expanded faster than in most advanced economies since 2000 Grade B probably true, but when I see words like 'faster' and 'most', it does not give me the specificity to be able to check it, and it gives me the impression that the author is trying to put the statement in a favorable light, rather than just present the fact. Is 'faster' significant, or a 3rd decimal point? Which countries? What is 'most', 50.1%? None of that makes it wrong, or even 'spin', it might just be an attempt at easy readability, but it always makes me wonder.

1b: The IMF reports that real U.S. gross domestic product (GDP) grew at an average annual rate of 2.2% over the period 2001-2008 (including its forecast for the current year). Grade A. I couldn't get to the IMF data, but other data supported this number. Any error in 2008 forecasts would be unlikely to affect it by one significant digit.

1c: President Bush will leave to his successor an economy 19% larger than the one he inherited from President Clinton. Grade B I started with an 'A', but I'm assuming he is using GDP as a proxy for 'economy' and I won't accept that single measurement is enough to tell a story. But, many people use GDP as a measure of 'the economy' so I won't dismiss it either.

1d: This U.S. expansion compares with 14% by France, 13% by Japan and just 8% by Italy and Germany over the same period. Grade B. I don't care for self-selected data (3 specific countries), but again, it may be a matter of readability. Naming specific countries may resonate more with a reader than dry statistics? admission - I got lazy, I did not take the time to fact check each of the GDP numbers for each country listed. Based on the veracity of other numbers, I skipped it in favor of breakfast . If anyone can point out errors there, I'll update my grade).

1e: ... GDP per capita in the U.S. reached $41,813 (in purchasing power parity dollars) in 2005. This was a third higher than the United Kingdom's, 37% above Germany's and 38% more than Japan's. Grade C. Maybe I'm just dense, but this one leaves me with 'duh?'. The numbers appear correct ( ftp://ftp.bls.gov/pub/special.requests/ForeignLabor/flsgdp.txt ), but without comparing these to earlier numbers, it's a bit odd. OK, so as a snapshot, it tells a positive story, but it does not show a trend. Hmmm, I took the time to compare US/Germany 2005 to US/Germany 2000, and 2005 *was* better ( GDP/capita was only 32% larger for US in 2000). So, maybe just some shorthand/editing? Plus, they jumped from GDP to GDP per capita w/o an explanation. Not really a problem in and of itself, but enough for me to rate 'questionable'. I may be grading a bit tough on this one item, it's not that I know the facts to be wrong, but the presentation of them and their relevancy leaves me questioning it overall. After all, it is an article geared to the public, not an economic Master's Thesis. But I still have standards.

Overall Grade #1: B ....... (B,A,B,B,C)

I know that ladelfina listed the flaws in GDP. I agree that it is flawed, any measurement is. If the article used GDP as the sole measurement, I'd put more weight on that issue. But since GDP is commonly used as one measure of the economy, let's continue, shall we?

Anyone strongly disagree with my bias assessment of the content?

-ERD50


A = largely factual;
B = mostly true, some spin & distortion, maybe cherry picking;
C = Questionable on facts;
D = mostly false, major spin & distortion;
F = mostly lies.

 

[rs0460a]

While "entertaining" (and really does belong in the S/B forum), I just don't understand why the debate is being done by people that live in different countries (regardless of current citizenship) and different taxation "rules"...

- Ron

 

[haha]

Edit: It's sort of annoying when someone posts in a thread saying "this thread sucks" using slightly different words, when it is very easy to simply close the thread and go to one you find interesting. This isn't aimed at just you, but it is something that I find slightly grating.

You perhaps haven't noticed that a major function of the board is allowing us who have withdrawn from the daily combat and one-upsmanship of work to stay in shape by trying to demonstrate our superiority to fellow posters. A man's gotta do what a man has to do...

Ha

 

[ladelfina]

There's this funny thing, Ron.. I write "Pay to the order of: U.S. Treasury" on my checks to the IRS just like most of you..

since GDP is commonly used as one measure of the economy, let's continue, shall we?

No, let's not. If a false metric is used to support a false argument.. I should agree with the argument based on the degree of the arguer's acceptance of the false metric

ERD50, many of your posts have merit but I just can't get behind this grading thing..
you give the 19% economy growth statement a "B" when I explained to you that population growth impacts GDP growth. It's not a "B", it's at best a D or an E because no president can take credit for growth based sheerly on increased population and correlated increased economic activity. This ties in to your 1d. which continues the spin and distortion.

ERD50, where were you when I was in college? I could have really used a prof. who graded like you..

 

[rs0460a]

There's this funny thing, Ron.. I write "Pay to the order of: U.S. Treasury" on my checks to the IRS just like most of you..

Nah - I do an ETF from my Van/Fidelity funds directly to the IRS. Haven't wrote a check (or bought a stamp) since I retired ...

- Ron

 

[ERD50]

I probably should not have offered the simplified example as it raises more questions than it seeks to resolve. One particular flaw is that it implies person A is the same person who has of his own accord become "more valuable", which is not necessarily the case. ERD50 took that and ran with it.. but in real-world analyses we are talking about a whole group whose makeup and actual productivity changes over time.

ladelfina, I fail to see how I took any flaw and 'ran with it'? Look at my post - I referred to groups of people throughout

... what would you expect to find on average among a group that increased their income over a ten year period by 5.0X, versus a group that increased their income by 1.1X? Sure, there would be some sad cases in the lower group, and some silver-spoon lucky ones in the upper group, but on average I think you would find more of a tendency toward risk taking, entrepreneurship, education, and hard work in the upper group.

-ERD50

It seems like a straw-man to now claim that we need to consider whether the group that raised their income from $100K to $500K did it honestly, fairly and ethically. That would be pretty hard to determine with any certainty in real life, and impossible in any forum example. It is a separate argument that does not affect the taxation. You might assign different values to the contributions of a Doctor, rapper, bank executive, or pro ball player, but we don't tax their $500K of income at different rates based on that.

And conversely, I guess you would tell us that it would be unfair to think that the group that failed to raise their income just might included some slackers who screw around on company time? So let's drop the social class conspiracies, and measure bias in the story regarding those 6 bullet points, shall we?

At any rate - the Income and wealth distribution. topic is #4 on the list. At this pace, we won't get there until the next election silly season

-ERD50

 

[cute fuzzy bunny]

I thought the chart Spanky put up on unemployment was interesting. Everyone seems to have this opinion that almost everything is horrible, far higher or far lower. Yet when you put up a long term chart of almost anything, 99% of the time where we are now is pretty average compared to history.

Everyone is so focused on the high point of the bubbles and where we've ended up since then as a comparator. The truth seems to be that you can pull up a chart of almost any major economic stat and draw a straight line from <1995 to where we are now that says that where we are now is just fine.

As far as the rest of the "oh my god these numbers are all made up and the reality of the situation is far more grave than it seems". Fine. What am I supposed to do about it?

I know the solution for some has been to run to cash. I cant do that. Cash is a losing proposition. I'd rather take my chances that the real world is better than the doom-and-gloomers think it is, that many wounds will be healed (and heals wounded), and that since almost everyone is reading from the same playbook that it'll work out.

Teams and people who presume the worst, see the cloud wrapped around every silver lining, and play to not be blown out on the score generally lose anyhow and are miserable along the way. No thanks.

I'm not saying 'dont worry, be happy'. I'm saying that at any time in human history there were plenty of things that could have gone wrong and sometimes things did go horribly wrong for some period of time. We worked out way through it and we're still here.

But playing for the worst case scenario and scraping everything raw to try and get to the lowest common denominator sucks.

That having been said, it seems like nobody has any good control over the economy, and it seems like a good number of people are able to manipulate portions of it to their own financial gain with little or no repercussion. I hate that. But I'm not really able to think up any way to change it or punish the bad guys.

 

[ERD50]

you give the 19% economy growth statement a "B" when I explained to you that population growth impacts GDP growth. It's not a "B", it's at best a D or an E because no president can take credit

Ahhh... but I am not trying to attribute the results to any administration. I stated that a few times. I'm just trying to evaluate if the statements in the article are presented with the extreme bias that you suggested.

Personally, I think the relationship between the economy and the standing President is very weak - maybe non-existent (maybe even inverse?). I guess I look at that article title not as "Bush's economy", but the economy that happened while Bush was in office. I can still evaluate the bias of the statements. It a matter pf pragmatism. We can measure the economy, or, we can try to measure the cause/effect of each action the Pres took. The second method is 100X more difficult and even more subject to bias.

There is merit to your arguments on the flaws of GDP as a measurement of the economy. Once (if?) I get through the other points, I might come back and adjust it based on the overall weight. I don't claim to be doing this scientifically, I'm just taking what I think is a decent shot at picking it apart.

AFAIC, we can agree to disagree on the 'B' for #1. As I said, I'm more interested in the thought process behind the evaluation.

Can I ask - outside of you not considering GDP a valid measure, was there bias in the presentation of the number itself (outside of what I listed)

-ERD50

 

[ladelfina]

ok.. ERD50, you say the relationship between the pres. and the economy is weak.. would that not make the article biased from the get-go? Sheesh. If you now want to re-interpret the title "Bush Has Good Economic Record" then all bets are off.

You seem also to want to focus only on what is said, rather than what is not said, which is where most of the bias lies, such as crowing about consumption with total disregard to debt. I have no doubt Americans are world-champion consumers, but this is neither indicative of a healthy economy, nor part of a "good economic record". Pretty much the whole article falls into that realm. In the glaring case of health spending, the numbers are false. Why should I spend more time on it?

 

[ERD50]

ok.. ERD50, you say the relationship between the pres. and the economy is weak.. would that not make the article biased from the get-go?

Sure, you can look at it that way, and I'll even say that it is the correct view. But the reality is, both sides use the economic record that occurs during any administration in their arguments (for or against). So I think the title is kind of a given, considering the political posturing on both sides.

The first line of the article is:

Successive speakers at the Democratic National Convention poured scorn on President Bush's economic record.

So, if there is no connection, why are the Dems making one? I guess I'm just saying that is a wash in this political climate. It is a response that happens both ways. That's why I'm willing to throw the title aside, and say, 'OK, but are they playing with the numbers?'.

You seem also to want to focus only on what is said, rather than what is not said, ...

Good point. However, I am trying to do this in some sort of orderly fashion, and that seems to lead to evaluating what *is* said for bias. There is an infinity of things not said. I'm not sure how to deal with that off the top of my head... mmm, I guess the reality is, that is why we listen to different sources. Sure, it is bias to leave something out, in order to put yourself in a good light, but I think it is more egregious to distort or lie about what you *did* say. And, it's easier to catch - so if there is bias in what they do say, I'm pretty certain there is bias in what they choose to leave out. So I guess my first level of BS detection is to ask if what they are saying is accurate. Second is to evaluate what's missing, and/or the appropriateness of the data, etc. But yes, it needs to be considered. I think we'll be doing good to even get through the first level

Sometimes they are closely related, like to say "Electric Vehicles emit Zero Pollution", w/o accounting for the generation of the electricity. Like that.

In the glaring case of health spending, the numbers are false. Why should I spend more time on it?

OK, want to move that up to #2? I have not done more than a cursory look at these until I posted #1, and only went that far, so no diff to me.

-ERD50