Lies, damned lies and statistics.
I do not know who predicted this NYT headline, come Judgement Day, “World to End Tomorrow, Poor to Suffer Most,” but their faith in the Gray Lady must once again have been restored. In an article purporting to show that the average US income for most people had dropped in the first five years of the Bush presidency (as contrasted to the final throes of the dot com bubble) in an article whose headline had to be later softened up, Times journalist David Cay Johnson Johnston managed to choose his data points rather carefully.
So carefully indeed, as to paint a rather misleading conclusion. To his credit, Johnston shows up in comments at Bizzyblog to defend his result, if not his method. Points on for playing the game, but still - bad form.
I don’t know what’s more disturbing: That the paper thinks the rest of us are too stupid to check their numbers, or that - based on the earnest approbation such news receives in partisan quarters - the fact that they may be right.
We have a term we use for people in the Navy who attempt such cavilling - they are called “sea lawyers”, and the term is by no means an honorific. Plebe midshipman are taught what label the Honor Concept attaches to any attempt to use language which, while it may be technically accurate, is intended to foster a false impression.
This, we were told, is known as a “lie.”
Update: Mr. Johnston has acknowledged certain flaws in his methodology even while letting others - like the 2000 bubble and 9/11 effects - go unremarked upon. Other complications to the method as presented, including the fact that he chose to use pre-tax incomes as a proxy for disposable income, are ignored entirely as are the implications of changing tax policy from 2000 - 2005. After all, since we’re taxed on AGI, it’s in all of our selfish interest (gross income remaining constant) to reduce our AGI insofar as possible. Finally, mean (as opposed to median) incomes are a terribly ineffective way of judging how “most” of us are doing, tax adjusted or otherwise, since the data can cause skews and “fat tails” rendering the measurement useless.
One way to have avoided the impact of tax policies and capital gains would have been to use the common GDP per capita metric as found here. It’s instructional:
Although per capita GDP did in fact decline marginally from 2000 to 2001 - the last full year of the previous regime’s economic influence - they increased markedly thereafter (these are measured in constant 2000 dollars). Disposable income never decreased on a per capita basis. I wonder why this data wasn’t presented?
Perhaps they didn’t quite tell the right story.
Huh.
You know, an alternate theory to truth-shading or agenda-pushing presents itself at this point - it’s quite possible that the folks over at the NYT simply don’t understand the math.
25 responses so far ↓
1
Pixelkiller
// Aug 21, 2007 at 1:22 pm
Babs;
Sorry to hear it, but, here in “Doity Joisey” it’s the same. Saw a poster on the back of a bus that proclaimed that it cost the Newark School system $750,000 for each ordinary high school diploma. I fear for us all.
2
Babs
// Aug 21, 2007 at 1:37 pm
You know Pixie… This thread hits a raw nerve. When my oldest was taking HS Calculus the teacher announced that two days prior to the 8 school day spring break he would not be in attendence because he was getting an early start on the holiday he was taking at his condo in Aspen… This guy was making over $100,000/year as a HS math teacher along with health insurance and pension! I thought I would go nuts as the kid wasn’t doing very well in the class. I once called this same bastard to talk about my son’s performance in his class and he told me that “if I got to the school within the next 15 minutes he could give me 10 minutes of his lunch hour.” I wanted to tear his throat out.
3
Babs
// Aug 21, 2007 at 1:52 pm
Heh, it is a funny thing but when the boys were babies I had to supress the idea of killing anyone I thought would harm them…
The HS math teacher sort of fell into the same category and I can’t help but think that during our brief interview some of that hormonal energy bled into the discussion…
The fact is that this elite teacher found room in his schedule to work with my son and things turned out OK.
I still hate him like crazy and hope he never crosses my path again (or I smell him in the wind and get my fur up!)
4
David Cay Johnston
// Aug 21, 2007 at 1:57 pm
So just what do you assert I lied about? That is a very serious charge and yet you do not cite above a single fact, you just make assertions (and get my name wrong), while my article relied on my careful analysis of official government data.
We may reasonably disagree about we think is most significant — five-year data affecting everyone as opposed to one-year results, for example. But your post does not assert a disagreement over significance, but takes a quantum leap in asserting that I lied. The data say just what I reported they say.
I take great care to deal with these complex numbers, which virtually no one else reports on, so that readers get a rounded view taking into account perspectives such as time and other relevant factors.
That said, in retrospect I should have given more attention to the one-year data.
I had on my mind two thoughts. 1. Those who criticized me two years ago and one year ago for focusing on one-year changes in the same dataset. 2. Multi-year data is more revealing and affects more people and gives more historical perspective.
By every journalistic convention and standard because of significance both in numbers of people affected and duration the longer term is a better measure and would come first, but, as I said above, in retrospect I should have included a line high up with more on the one-year data change.
Lying is such a serious charge that you should either prove I made up facts (and The Times should fire me forthwith) or you should have the good manners to acknowledge that this is a disagreement about what is most significant out of the innumerable possibilities from the thousands of data points I examined and reported on.
5
Grumpy
// Aug 21, 2007 at 2:05 pm
Lex, Well written, Sir. I’m not exactly a kid and I’m not dead, yet. Just don’t tell the coroner. You make a good point. Did you ever notice when people argue or debate, their strategy is whoever can talk the longest or loudest wins? Did you notice, there is no mention of fact or THE TRUTH, not just truths or true statements. There was an old man that I the privilege of knowing until he was over 100 years old. He would often say, “The judge of the debate is not length or volume, but the real judge is a real hag (Lex, what you might call a real ’sea hag’.) This hag has no forgiveness, she’ll make sure THE TRUTH comes out. She’s a nasty old hag. But there is one thing I want you to do, I want you to remember her name. Her name is ‘History’”. He is gone, but the old hag is still here.
Thank you,
Grumpy
6
fliterman
// Aug 21, 2007 at 3:59 pm
Personally, I am far more interested in the article’s actual message rather than quibbling over the methodology and data used; and more importantly in finding answers to the question: Why are so many Americans feeling economic stress, and are so gloomy about the economy?
Regardless of what average incomes have been for the past year, 5 years, or a decade, they will certainly fall in a future recession. And given the many current red flag indicators, a slowing of growth if not a true recession certainly looms in our future.
[As an aside, I have noticed frequent critiques of the NYT here, and the resulting and uninhibited great sport of piling on with negative comments. It's therefore refreshing to see Mr. Johnston come on to provide some balance and counterpoint, and to state his case well.]
7
lex
// Aug 21, 2007 at 4:03 pm
Re: “focus… on the facts.”
Fair enough. Do you think it’s fair to judge the end-of-era dot.com boom as just another cyclical peak? I mean the tech collapse “vanished” billions of dollars in market capitalization that probably shouldn’t have ever existed, based on the market’s subsequent reaction. It also threw tens of thousands of high paid workers on the streets and culled something like half of all tech start ups from the rolls. Had to happen of course, but it does rather color the value of that year when used as a comparison, not to mention the effects of the terrorist attacks on 9/11.
Wouldn’t you call the 2000-2001 period someting of a statistical outlier? You’re tacitly arguing that this is the equivalent of a random five-year peak-to-peak comparison - a hard sell, especially given the fact that there’s no reason to suspect real income growth after taxes - the kind of money people actually “make ends meet” with - had yet peaked by 2005. Growth remained strong throughout 2006 and we’ve yet to understand what the effects of the sub-prime mortgage driven credit crunch will do in 2007.
Do you really think that Americans are concerned about present day spending power - which can only be sensibly be defined by the combination of after-tax income and benefits - because of their 2005 pre-tax incomes? To me it smacks more than a bit of begging the question, Mr. Johnston.
Wouldn’t a better comparison have been the peak of the 1987 equities market followed by the October crash? Five years after that, George H.W. “Read My Lips” Bush was getting creamed by the Kid from Hope for failing to have the “vision thing” on the economy. You could have easily - and more accurately - written, “Bush economic policies quickly generated new highs in American spending power despite market collapse, terror attacks.”
This isn’t just a matter of reasonable people disagreeing on what the right numbers are to pick, it’s about the context in which those numbers are presented. That’s the analysis work people like you get paid to make, and the distinction is not merely technical.
Unemployment has been at frictional levels for year over year even as inflation remained low, tens of thousands of people moved out of poverty and the economy has grown for quarter after quarter. That may not suit the redistributionist policies of those at Citizens for Tax Justice, but it’s true nonetheless.
There’s probably a good reason why Americans are down on the prospects of the general economy, even as they’re overwhelmingly satisfied with their own situations.
Each of us should look within ourselves to see if we’ve contributed to that cognitive dissonance.
There. I’m done. How about you?
8
Pixelkiller
// Aug 22, 2007 at 8:26 am
God, but how I love this! My thanks to you all, even the NYT, (although I no longer get it since my parrot died).
My thanks to you especially, Lex, for stirring the pot.
9
fliterman
// Aug 22, 2007 at 4:11 pm
lex #15
Rarely are data alone the message. To be telling, data must be selected, organized, processed, analyzed, and yes even interpreted to have meaning. Still data are most often then used to support a message, rather than convey it. And factual but limited selected data from the same source can indeed support conflicting theses, whether intended or not. Just like the Saxe’s The Blind Men and the Elephant.
Indeed in the WSJ article you linked, that author (while ironically using the media to critique the media) conveniently selected only a few positive data points to support his message while he conspicuously, by their omission, avoided several major data points that would severely weaken his message ?¢‚Ǩ‚Äú something I believe you accused Mr. Johnston of.
Your interest is using AGI rather than personal or disposable income unfortunately would skew the data, since unlike personal income, AGI includes capital gains and losses, but it also excludes the income of those many who do not file tax returns. Nor does it include nontaxable benefit and transfer payments like VA disability, Medicare, or a portion of Social Security payments.
Likewise, using Per Capita GDP would be a very poor metric for personal income since there is no direct relationship between the two.
Whatever data Mr. Johnston selected, and whatever added or replacement data may be used, I believe the message is the same. While the economy and personal income on the surface may have been growing nominally, there are some underlying problems.
Essentially, the rich have been getting richer, and the far less rich have essentially stayed poor. This is better explained by the well known Gini Index which shows that for three decades, the gap between America’s rich and poor has been ever widening.
And while for now a growing GDP and rising incomes (either mean or median) do raise almost all boats (but certainly not farm income…), unlike a rising tide, not all our boats are rising equally.
Income inequality is a seriously growing problem. And surprisingly it is a greater problem now for the US than many other advanced economies, as can be seen in the Gini graph. But while Bush tax cuts and policies may have exacerbated this widening gap, it also occurred under the Clinton administration.
It is a growing problem that will eventually have to be addressed. And widening income inequality is only one of many serious and growing economic problems that beg to be addressed…. And better addressed smartly, sooner rather than later for all our aggregate welfare.
10
J.M. Heinrichs
// Aug 22, 2007 at 4:44 pm
He lost me when he mentioned “quantum leap”, followed by “complex numbers”. Fortunately, he missed using “decimation”.
Cheers
11
lex
// Aug 22, 2007 at 5:36 pm
Per capita GDP is equally valid as a measure of economic activity as is Mr. Johnston’s pre-tax AGI. Certainly it runs the risk of biasing the average via the extremes, but consider the opposite case: Suppose President A in 2010 sponsors a confiscatory tax policy in the name of “fairness” whose effect it would be to place a flat tax of 95% on all incomes. In 2014, President B replaces that flat tax with a 5% rate. Even if the median AGI - pre or post tax - under President A was twice the median under President B, everyone would have more disposable income under the second regime. That’s why it was disingenous of Mr. Johnston to use pre-tax data and minimal deviations and declare that to be the cause of current economic melancholia.
As for the rest, you have hit upon the core of the liberal/conservative economic divide. You are uncomfortable that, while the lower quintiles are experiencing economic growth, the pace of that growth is overtaken by those at the top. Your remedy for this “growing income inequality” I can only presume is some form of redistributionist tax policy. I would argue for an equality of opportunity rather than an assurance of outcome.
So long as all boats rise - or at least, all those not hopelessly mired in dependency, despondency and deficiency - then we all have access to a rising standard of living, and social pressures are eased. Focusing on the fact that some people are doing better - risk takers usually, quite often the people driving the engine of general economic growth which generates those same rising tides - is to play upon the politics of envy while simultaneously killing the goose that lays the egg.
Our entire society excels because smart people who take bold entreprenuerial risks are rewarded commensurately by a free market. Their success in turn fuels general economic activity, not the smothering hand of government attempting to regulate common outcomes.
12
fliterman
// Aug 22, 2007 at 7:29 pm
Economic activity ≠ personal income.
While GDP is an excellent measure of economic activity and national wealth, it does not measure personal income. And while pre- or after-tax metrics each have their limitations, both are far better measures of income than GDP.
Furthermore, personal income for many can certainly decrease during times of increased economic activity and a growing GDP.
Various tax policies, while they certainly have a significant impact upon personal income, are never the overriding or deciding factor. Therefore I believe ‘hypotheticals’ in the tax arena, while important and instructive, are nevertheless if not tangential, then secondary discussions.
However, you are most correct that we are both discussing the “core of the liberal/conservative economic divide.” However, while I certainly advocate some tax reform, your presumption that I view tax reform as “the remedy” is off target.
I’ll save for later some points/counterpoints in the economic liberal vs. conservative debate. And standing alone, your comments make very good sense. But meanwhile, our currently wonderful GDP obscures many underlying problems that should not be ignored.
It is forecast that the US gap between the nation’s rich and poor if current trends continue, will match that of Mexico’s in the not too distant future. If our much greater GDP remains, that will still compensate for the gap, and other problems.
But if GDP drops as it certainly does cyclically, and if it drops precipitously, as it sometimes has in history, we will have major problems stemming from our past and current economic policies.
In looking at the Gini graph, I (facetiously) wondered if like Mexico, our future recession/depression poor would then cross illegally into Canada, where the income gap would be far less, even given their lesser GDP.
You say, “Our entire society excels because smart people who take bold entreprenuerial risks are rewarded commensurately by a free market,” and I wholeheartely agree! But it is not that simple. There are many other important factors to consider.
[Oh yes, regarding geese and golden eggs & class inequality, it reminded me of this, although it is not "exactly" related:-]
13
Jim C
// Aug 23, 2007 at 2:12 pm
I find it telling that Mr. Johnston never addressed the fact that he only looked at pre-tax incomes rather than after tax incomes. I mean it is after tax incomes that we all have to “get by on” isn’t it? Wouldn’t those numbers be a better indicator of how the American people are doing financially?
Ahh, agenda journalism at it’s best worst…
Jim C
14
Jim C
// Aug 23, 2007 at 2:13 pm
that should have read “agenda journalism at it’s worst…
Jim C
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