Numerical Illiteracy
Robert Waldmann
Jonathan Chait has a very good article on Paul Ryan in The New Republic. In it he displays striking confusion on simple arithmetic.
It’s worth keeping in mind that the current tax system in this country is only very slightly progressive. State and local taxes are regressive, federal taxes are somewhat progressive, and the net effect redistributes income, very slightly, from the rich to the not-rich:
It is true that the tax system is only very slightly progressive. It makes no sense to talk about whether the tax system redistributes income from the rich to the non-rich. The tax system redistributes income from the rich and the non-rich to the public sector. To assess redistribution from the rich to the non-rich one has to look at what the public sector does with the money. Even if one assumes that the public sector provides no valuable services (not I think Chait’s view or even, for that matter, Ryan’s) much of the money is sent right back as old age pensions, disability pensions and some more as unemployment insurance, housing vouchers, and even a tiny bit of TANF,
The standard model of redistribution used by lazy economists is a flat tax which finances an equal grant to all citizens. According to Chait, there is no redistribution since the tax code is not progressive at all. It is not very hard to calculate what the effect of the public sector on income inequality would be if pre-tax and transfer income were unaffected by taxes and transfers (this is not an interesting calculation but it isn’t very hard). Here one finds a much larger effect of the central government tax and transfer system in Europe than in the USA even though the US federal tax system is more progressive. The amount of redistribution has a lot to do with the scale of taxes and transfers and, across developed countries, very little to do with progressiveness.
Chait should check with his fan Matt Yglesias who vastly overstates the importance of this simple fact.
Speaking of whom, a commenter recently wrote that Yglesias was “mathematically illiterate.” I was puzzled and replied that I thought he was very good with numbers. I’m not going to search through threads to find the exchange and so just let me apologize here. After reading this
“three countries in Western Europe (Sweden, France, Denmark, and Austria)”
I must admit that I was wrong.
By the way, I remain wildly enthusiastic about increasing the progressivity of the US tax code. This is partly because I am partisan and increased progressivity is very popular. It is also partly because, other things equal, increased progressivity implies increased transfers from the rich to the poor. It’s just other things aren’t zero.
Robert,
You once said that Rep. Mike Pence was “dumb as a bag of hammers.” Where does Rep. Paul Ryan rank in the common household tools IQ scale?
Good question. I don’t really have a personal opinion about Pence. Matty Yglesias says he’s dumb. Back then, I just assumed that everything Yglesias says is true (Now I can think of three things he’s wrong about : Sweden, France, Denmark, and Austria).
My guess for what it’s worth (zero) is that Ryan’s IQ is above average for a representative and that their IQs average well over 100. Smart and sane are not the same.
nor is it clear that IQ measures anything interesting.
Progressive taxes dissuade the welthy from seeking government services. The problem it solves is one in which the middle class get wage subsidies and benefits from each other (via government), while these subsidies appear as lowered wage costs to the firm.
Something which adds to the difficulty of making these estimates is that “taxes” are not simply the earned dollars shuttled back to the government to be used in one way or another. A lot of citizens pay their “taxes” in the form of services, the most obvious of which is child-rearing, but which can also include things like “security” provided by people just being around creating a crowded, public place.
in addition, tax dollars pay for things which everyone uses, the most obvious of which are roads. The provision of roads for one and all appears at first to be progressive, until you realize that it is in the nature of roads that they can’t be easily devoted to the sole use of the wealthy or of the industries which require them in order to disperse their goods. This is a kind of inadvertent progressivity which I am cynical enough to believe would be restricted by the wealthy if they could think of a way to do it which wasn’t more expensive than just letting everybody use the roads.
Noni
Robert,
Most Americans don’t want this world you lefties are trying to build. Big government serenty now means insanity latter. I does not feel right. It’s un-American, capiche?
Ummmm… if Americans are doing it, doesn’t that make it American, rather than un-American? It sorta ticks me off when someone says “X is un-American” when they mean “I dissaprove of X”.
Big government is here to stay when the defense budget for the country is closing in on a trillion dollars a year. Taxes haven’t gone up in real terms over 30 years, although wages in “real dollars” appear to have fallen greatly during the same time period.
Republicans have been in power for nearly 25 of those 30 years, so get used to “Big Government”, because it isn’t gonna change in the next 30 years either.
“because I am partisan and increased progressivity is very popular. It is also partly because, other things equal, increased progressivity implies increased transfers from the rich to the poor.”
A far better argument, for progressivity, IMHO: because more progressive taxes are more efficient; they result in faster economic growth.
http://www.asymptosis.com/want-prosperity-tax-the-rich.html
Why? Seven surmises here:
http://www.asymptosis.com/the-party-of-prosperity-the-seven-reasons-that-democrats-policies-are-more-economically-efficient.html
Actually not quite true on roads, toll roads do just what is suggested. Of course tolling local streets is likley not practical at least until tech gets cheaper. The first example of this is the Indiana Toll Road which is designed to get traffic from Ohio to Chicago fast, and does not carry a lot of local traffic. It was build to get the thru traffic to pay.
Well, no, the federal income tax is actually highly regressive, and not slightly progressive.
Mr. Waldman has completely ignored corporate welfare, whereby lower-class taxpayers subsidize the wealthy through the agency of corporations. Most of the discretionary budget is corporate welfare.
2slugbaits:
US senators and representatives are anything but stupid. When they pretend to be stupid it’s to avoid responsibility for their actions. Ever since Reagan, when caught the standard defense is to feign cluelessness. Even Greenspan has used it, and he’s one smart fellow. And ever since Bush II the Stupid Defense has been pre-emptive.
The same goes for every financier on Wall St. and every economist who serves them. There is nothing accidental about deregulation, or derivatives, or toxic assets, or sub-prime loans. The fraud for fun and profit could not have been anything but deliberately engineered, and they certainly knew it was fraud or they wouldn’t have gone to such lengths to avoid prosecution well in advance.
They knew exactly what they were doing. They’ve been playing these games for over 200 years. And they know that most people are unaware of this and can therefore easily be played for fools.
By the way. Long time no see.
“Speaking of whom, a commenter recently wrote that Yglesias was “mathematically illiterate.” I was puzzled and replied that I thought he was very good with numbers. I’m not going to search through threads to find the exchange and so just let me apologize here. After reading this
“three countries in Western Europe (Sweden, France, Denmark, and Austria)”
I must admit that I was wrong.”
I suppose that you are ribbing Yglesias. 😉
OC, with word processors it is easy to make revisions that are inaccurate. Austria, in particular, may have been an afterthought. Besides, is Austria in Western Europe? After all, the “Aust” is a cognate of “East”. 🙂
Sorry about the multiple posts. That was unintentional.
Only what one has gleaned from their learning environment at a relatively young age, and then been able to retain and recall from that gleaning. Using the gleanings in an effective manner is probably part of it as well, but that is less the measured phenomenon we refer to as IQ.
Cantab,
Do you ever have anything to add that is other than a catch phrase or cliche?
Walter,
You should be able to delete any of your own comments using the “delete” button appearing just below the comment to the right of the Reply button.
Thanks, Jack. I’m not seeing a delete button. I’m not sure why.
In knew bag of hammers. Bag of hammers was a friend of mine. Mike Pence is no bag of hammers.
Pence is one of those people who can talk the leather off a baseball. He also defines what Harry Frankfurt means by “bullshit”. Pence doesn’t care whether what he says is true, or even if it makes sense. Given that sort of relationship to reality, judging his intelligence is difficult. The “lying or stupd” question is all clowded up by the frequency of lying.
Must take issue with the notion that “taxes” are something other than taxes. Let’s call things what they are. If child-rearing is of value to the community as well as to the parent (sibling, granny), then let us say so. If you thnk you have a mechanism to caluclate a tax-equivalent for things of value to the community, analogous to calculations of tariff equvalents for trade barriers, I’d love to see it, but slapping labels on things because they are kinda like the thing that rightly carries the label gets out of hand fast.
I would also note that, when I pay taxes and get police in return, the policy help everybody (according to their status and race, of course) the same. Child rearing gives the parent (at least in my case) far more than it gives the neighbor.
It’s OK. Happens to the best of us.
It’s OK. Happens to the best of us.
It’s OK. Happens to the best of us.
The delete button disappears after 15 minutes.