Innumeracy 2012

Demonstrations of innumeracy in the campaign talking points of 2012

Various fact-checking sites exist. The purpose of this page is not to be another fact-checking site. The purpose of this page is to show how many common lines of economic and political lines of reasoning used during election years demonstrate innumeracy. This can occur as a result of people ignoring readily available numerical information or ignoring easy to recognize trends or relationships. The examples on this page are given to encourage readers to recognize the mathematical reasoning and say, "Oh yeah, that should have been obvious."

Popular errors

Draft: May 2012

 

“It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.”

- Mark Twain

  Gas Prices
"When George Bush left office gasoline was $1.83" This phrase has been used by many who oppose Obama and claim that Obama has been bad for the economy.
How is it an example of innumeracy?
1: Failure to check readily available data. Gas prices are still lower than the peak near $4.25 in early 2008.
2: Failure to extrapolate trends. If gas prices had continued rising at the same rate as 2001 - 2007 they would currently be between $4.50 and $6.00.
3: Failure to correlate trends to their causes and related trends. The drop below $4.00 / gal in 2008 was caused by the worst economic crash since 1929. Not only were gas prices crashing, so were investment values, real estate values, international trade, and employment. If the trend that brought gas prices down had persisted, most mortgages would be underwater, most retirement accounts would be worth less than the money put into them, and employment would be about 12 million jobs lower than it is now. Would a person complain, "When Bush left office the economy was bleeding 4 million jobs a year!"
4: Inconsistent logic. In 2008 FOX reported that the president had no control over gas prices. In 2012 media pundits blamed the president for gas prices. The logic driving prices did not magically change over 4 years.
5: Failure to consider well-known long-term causes or contributing factors. We've known since the early 1970s that increased dependence on fossil fuels would eventually drive prices up. Yet, in 40 years we have done nothing to change our choices that increase our dependency. Even worse, many of those currently complaining about high gas price opposed attempts to reduce our demand for oil.

The 99% vs. the Job Creators Various pundits have been describing our economic situation in terms of either the 99% or the Job Creators.
How does this demonstrate innumeracy? 1: Incorrect correlation of readily identifiable sets; equating unequal sets
  • Most of those labeled as "job-creators" have positions that do not create jobs such as news caster, athlete, investment speculators, etc.
  • Many of those labeled as "job creator" have actually used their positions to destroy jobs through downsizings, leveraged takeovers, and promoting risky investments.
  • Not all of the 1% have received special government subsidies or bailout money.
  • Many, but not all of the 1% pay lower tax rates than the upper middle class.
  • The divergence in gains over the last 40 years occurs closer to 99.5% (incomes over about $450,000).

Tax Cuts
"Tax cuts stimulate the economy." "Job creators need tax cuts." Various phrases like these have been repeated ad nauseum to promote tax cuts and oppose politicians who support tax hikes.
How does this demonstrate innumeracy?

1. Failure to check readily available empirical evidence: After the tax cuts of 2001 employment and wages stagnated leading to the creation of the term "jobless recovery" which we now recognize as the housing-commodities investment bubble. In fact, in the 8 years following the Bush tax cuts private sector employment actually dropped by 2 million jobs.

Since 1961, when the marginal tax rate was below 35%, maximum and average private sector growth were lower than when the marginal tax was above 70%. And the worst recession occurred after the marginal tax had been 35% for 7 years.

a. Since 2001, the rich have had the highest incomes with lowest tax rate in the last 70 years and yet this correlated to the only long term spell of declining employment!
b. The tax cuts of the 1920s were followed by similar sluggish job growth and bubble and crash.
c. Each of the tax cuts of the last 40 years was followed by stagnation or decline.

d. When the marginal tax on the rich was higher during the 1950s - 1970s growth was also higher. Higher taxes did not impede growth.
e. Various studies have shown the highest growth occurs when the marginal tax rate on the rich is higher than 35%.
f. The "job creating" Kennedy tax cut put the marginal tax on the rich to 70%, nearly twice the current level.

2. Reducing the many non-linear dimensions of income and spending to a single linear dimension: Not all spending and investment creates jobs. Not all income is derived from creating jobs. Not all investment creates jobs. Some income is actually derived from down-sizing, investment bubbles, and job-destroying risky speculation.

3. Linear extrapolation of nonlinear relationships: The opportunity costs of taxes change drastically with wealth. Consequently, the impact of taxes on the economy will also.


Deficit & Spending

Various sound bites have been used to blame the deficit on Obama including: binge spending, most liberal president ever, socialism, etc. Yes, Obama could have made more fiscally austere choices. But these accusations demonstrate innumeracy for a number of reasons.

How does this demonstrate innumeracy?

1. Inconsistent Logic

  • Many of those complaining about spending and the deficit supported the politicians and policies that most contributed to the deficit.
  • The tax cuts and the wars were the two largest factors contributing to the deficit increase.
  • TARP was passed in 2008 by Bush but went on the 2009 budget report.
  • Spending as a percent of GDP is roughly the same level as during the Reagan administration.

2. Failure to check readily available data & failure to extrapolate trends

  • Revenues are now at their lowest point in decades (less than 15% of GDP Vs the 30 year median of 18.3% of GDP).
  • From 2001 to 2008 (GWB) spending rose at an average annual rate of roughly 8.3%. If that rate persisted through 2012 spending would be about the same as or higher than current estimates of the 2012 budget.
  • Tax cuts since 2000 have contributed over $400 billion to the deficit and increased military spending have contributed over $400 billion to the deficit. (Yet, most of those complaining and the deficit support both of these policies.)
  • Social Security is not part of the deficit.

     

     

    Current spending is slightly below the Bush trend line. Had spending persisted at the Clinton trend the budget would be nearly balanced now. The Obama trend is basically an extension of the Bush trend.  



Employment & Unemployment
Since Obama took office job growth has remained low, and unemployment has remained high. Naturally, many blame Obama. Although growth has been disappointing, much of this blame is founded in innumeracy.

How does this demonstrate innumeracy?

1. Failure to recognize contributing factors and integral relationships

a. Unemployment is the integral of both employment growth and population growth. As a result, current unemployment includes all changes in employment, including the decline 2001 through 2003 and the decline 2008 - 2009 both of which preceded Obama.

2. Failure to recognize trends and extrapolations

a. Over the 8 years before Obama took office total private sector growth was negative (ie. 1.4 million more jobs were lost than created.)
b. When Obama took office the economy was bleeding jobs at a rate of nearly 5 million jobs per year.
c. Currently, private sector growth is positive with roughly 2.3 million more jobs than when Obama took office.

The trends strongly hint that unemployment was grossly under-reported ever since 2001.

3. Inconsistent logic

a. Most of those blaming Obama for the high unemployment praised Bush even though most of the decline occurred under Bush.
b. Most of the jobs eliminated were eliminated by those currently termed "job creators."
c. Most of the jobs lost since Obama's policies went into effect were state government jobs eliminated due to balanced budget austerity measures typically supported by those blaming Obama.

Outside Links

 

Data Sources

 

Related Pages at this site

 

  Summation and Conclusions
It is important in the discourse of democracy that we challenge actions and ideas that are not working. However, the most important parts to that challenge is to get both our fact right and our logic correct. The examples given above are given to show how easily we fall prey to ideas that sound plausible but actually have blatant underlying flaws that we should be able to identify quickly.
One side being wrong does not necessitate that the other side is right. But an invalid line of reasoning means we need to seek another line of reasoning. Each of these examples demonstrates invalid reasoning. Since, the real world does not simply divide into one dimensional binary opposites we can not just assume that an opposite is true. But we can be certain about what is false.
 

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