Well while I’m on the topic of the future of Healthcare here’s another one for you.  The CEO of the CMA, Joe Dunn, came and spoke at the UCD School of Medicine several weeks ago and he gave a great speech.  And now, through the miracle of technology, that speech is available to all of you!  His speech was directed towards medical students but it really has relevance to anyone who wants to get something done in politics.  Its long but he’s a very engaging and entertaining speaker and the speech really gets better as it goes along so if you have the time its definitely worth watching it through.  You would be hard-pressed to find a better primer on how things get done in government.

No related posts.

I doubt I will ever write many articles that fit better into the theme and mission of this blog than this one.  And despite the fact that the piece it’s based on is over 3 years old, it couldn’t be more topical.  There was an article in the New Yorker in December of 2005 entitled “Everybody’s An Expert” that discusses a book by UC Berkeley Psychology Professor Philip Tetlock called “Expert Political Judgment: How Good Is It? How Can We Know?”.  The article is a fascinating read and I’d encourage you to go through it if you’ve got a few minutes.  But it is long so I’ve tried to draw out the more important and politically relevant points and I’ve added them below, along with a little of my own commentary.

The article (and the book) revolve around the information provided by the following study, performed by Tetlock over a 20-year period:

“He picked two hundred and eighty-four people who made their living “commenting or offering advice on political and economic trends,” and he started asking them to assess the probability that various things would or would not come to pass, both in the areas of the world in which they specialized and in areas about which they were not expert. Would there be a nonviolent end to apartheid in South Africa? Would Gorbachev be ousted in a coup? Would the United States go to war in the Persian Gulf? Would Canada disintegrate? (Many experts believed that it would, on the ground that Quebec would succeed in seceding.) And so on. By the end of the study, in 2003, the experts had made 82,361 forecasts…

“Tetlock got a statistical handle on his task by putting most of the forecasting questions into a “three possible futures” form. The respondents were asked to rate the probability of three alternative outcomes: the persistence of the status quo, more of something (political freedom, economic growth), or less of something (repression, recession). And he measured his experts on two dimensions: how good they were at guessing probabilities (did all the things they said had an xper cent chance of happening happen x per cent of the time?), and how accurate they were at predicting specific outcomes. The results were unimpressive. On the first scale, the experts performed worse than they would have if they had simply assigned an equal probability to all three outcomes—if they had given each possible future a thirty-three-per-cent chance of occurring. Human beings who spend their lives studying the state of the world, in other words, are poorer forecasters than dart-throwing monkeys, who would have distributed their picks evenly over the three choices.” (emphasis added)

So with so many political pundits throwing out predictions on a daily basis, somebody finally decided to check their accuracy.  And surprise, surprise, they’re extremely bad overall.  But they also collected a large amount of data about the personalities and perspectives of the their test subjects and they found that some pundits were much more accurate than others, and I think the associations they discovered are incredibly interesting:

“Tetlock uses Isaiah Berlin’s metaphor from Archilochus, from his essay on Tolstoy, “The Hedgehog and the Fox,” to illustrate the difference. He says:

‘Low scorers look like hedgehogs: thinkers who “know one big thing,” aggressively extend the explanatory reach of that one big thing into new domains, display bristly impatience with those who “do not get it,” and express considerable confidence that they are already pretty proficient forecasters, at least in the long term. High scorers look like foxes: thinkers who know many small things (tricks of their trade), are skeptical of grand schemes, see explanation and prediction not as deductive exercises but rather as exercises in flexible “ad hocery” that require stitching together diverse sources of information, and are rather diffident about their own forecasting prowess.’

“Tetlock did not find, in his sample, any significant correlation between how experts think and what their politics are. His hedgehogs were liberal as well as conservative, and the same with his foxes. (Hedgehogs were, of course, more likely to be extreme politically, whether rightist or leftist.) He also did not find that his foxes scored higher because they were more cautious—that their appreciation of complexity made them less likely to offer firm predictions. Unlike hedgehogs, who actually performed worse in areas in which they specialized, foxes enjoyed a modest benefit from expertise. Hedgehogs routinely over-predicted: twenty per cent of the outcomes that hedgehogs claimed were impossible or nearly impossible came to pass, versus ten per cent for the foxes. More than thirty per cent of the outcomes that hedgehogs thought were sure or near-sure did not, against twenty per cent for foxes.”   emphasis added

So the lowest scorers are those who are confident that they understand the world and can predict its future, they are the type who express anger at those who “do not get it”, they tend to be on one of the farther ends of the political spectrum, they have particular themes that they focus on and which they tend to see everywhere, they form “grand schemes” and conspiracies, and they tend to make extreme and probably startling predictions about the future.  Does this sound familiar?  These are the Rush Limbaughs and the Michael Moores of the world.  The Glenn Becks and the Bill Mahers.  In fact nearly all of our most popular pundits would probably qualify as hedgehogs and in fact that’s exactly what Tetlock’s study found:

“And the more famous the forecaster the more overblown the forecasts. ‘Experts in demand,’ Tetlock says, ‘were more overconfident than their colleagues who eked out existences far from the limelight.’…  ’Our system of expertise is completely inside out: it rewards bad judgments over good ones.’”

This probably shouldn’t be too surprising.  I mean can you imagine listening to a “fox” on talk radio?  There would be no angry rants and no apocalyptic predictions about the future.  There would probably be very few claims that their perspective was being silenced or persecuted, and there would be no group to demonize or blame the country’s problems on.  Rather than fitting the events in the world together into a cohesive conspiracy theory and sounding the warning they would be deconstructing the world’s problems and pointing out areas where we still need more information.  When asked to predict something they’d often be able to give their thoughts but they’d frequently have to say, “I don’t know exactly, its an extremely complex situation.  It could go this way, but who knows for sure?”

In other words it would be boring.  The fact is, we like to listen to people who seem like they have got it all figured out.  We are drawn to charismatic TV commentators who can point out the enemy and give us a target for our frustration and confusion.  We enjoy reading books and editorials from people who can fit all the pieces together and make it all seem so simple.  The problem, of course, is that the world is not actually simple at all, current events are the result of millions of actors each with a multitude of motivations, we don’t have half of the puzzle pieces let alone the ability to fit them together, and in the end these people are literally wrong more often than dart-throwing monkeys.

I guess the lesson is, and this seems to be a common refrain on this blog, to be wary of those who seem to think they’ve got the world figured out.  Be careful of those who are confident, popular, or heavily partisan.  I suppose we could say we should try to get our information from “foxes” but perhaps the best course of action is to strive to become one ourselves.  And that’s the conclusion that the article seems to come to as well.  Though Tetlock kind of downplays some of the implications of his study (he is a pundit himself after all) the author finishes off with this observation, which I’ll allow to end this post:

“But the best lesson of Tetlock’s book may be the one that he seems most reluctant to draw: Think for yourself.”

No related posts.

Hey look, a timely article for a change!  Finally I’m addressing a phenomenon before it happens and not days/weeks after it has passed.  Anyway, you may or may not have heard about the “tea-party” anti-tax movement that’s developing around the country.  This tea-party movement consists of people gathering in various cities on April 15th holding protests about the “terrible taxes burdening americans”, and what they see as America’s coming descent into socialism.  Here’s a quote from one of the two fawning FoxNews articles that were up about it today.  From one of the organizers of the tea party protests:

“People are getting killed — they’re getting hammered with taxes and it’s not the way this country is supposed to be run. … We want to fight back,”

Are people really getting hammered with taxes?  I don’t challenge their right to gather and protest taxes or whatever they want, but they may want to check a few facts first.  And to make it convenient for them, I’ve gathered the pertinent graphs and information after the jump.  I should also note before I begin that not all tea-party participants are claiming taxes are too high and that some are doing this for other reasons (to protest the stimulus, just to express their anger that McCain lost etc), I’m not addressing those concerns here.  But these tea-parties are being billed as “anti-tax protests” so this is a significant part of what they’re organizing for and this article will address that issue.  Anyway, as best as I can deduce, here’s some relevant historical perspective…

Taxes on the Average Family

Click to enlarge

First up is this graph showing data compiled from the treasury department.  It only runs up to 2006 but I’m fairly certain the tax rates haven’t changed since then.  It clearly shows that the median-income family of four’s average effective income tax rate is currently at its lowest level since at least 1955.  And Obama’s budget will lower that substantially as described in this AP article.

Also, in this analysis from the Center on Budget and Policy Priorities from 2001 we read, “…this analysis’ update of the CBO data on overall federal tax burdens finds that when households’ total federal tax burdens are considered — including their payroll, excise, and other taxes, along with the income taxes they pay — most categories of households will face a lower average tax burden in 2001 than in any year from 1979 to the present. (1979 is the first year these CBO data cover.) For example, the middle fifth of taxpayers will pay an average of approximately 16.3 percent of income in total federal taxes in 2001, the lowest percentage during the 22 year period examined.”  And once again, for all but the highest earners, these tax rates, already at historic lows, are only going to fall further under Obama’s budget.

Taxes on Corporations

Click to enlarge

What about our poor businesses and corporations?  I mean during the election the (misleading) statistic that America’s corporate tax rates are higher than any other industrialized country was thrown around left and right!  And some members of congress have continued to call for them to be lowered further.  As we can clearly see from the accompanying graph, corporate tax rates are also at near record lows.  Whether or not they need to be lowered further from here is a topic for another article.  But the fact that they’re already lower than they’ve been in 50 years should be enough to make tea-party organizers think twice.

It’s been surprisingly difficult for me to find information on what specifically  Obama’s proposed budget would do to corporate tax rates but it seems that it includes a mixture of focused tax breaks and closure of current tax loopholes and there is some uncertainty about how it will end up affecting the average corporation.  But any change in the average rate will be a matter of a few percent and won’t substantially change our position on the graph.

Taxes on the Rich

Click to enlarge

Here we go!  Everyone knows Obama’s budget raises taxes on the rich right?  Its part of his socialistic plan for wealth redistribution!  Well this graph shows the top marginal personal income tax rate since 1913 according to the IRS.  And as you can see, the rich have had it relatively easy for the last several years.  The current marginal income tax rate for the rich lies at about 35% and Obama’s budget would move it to a little over 38%, which would be about equal with the 1997 levels on that graph.  And keep in mind we’re talking about the marginal rate.  So it’s only the income the wealthy receive that is above and beyond $250,000 that would be taxed at a higher rate.  Anything they make up to $250,000 would actually be taxed at a lower rate than it was before.  So their overall tax burden will increase by something less than 3%.  And these tax increases aren’t set to kick in until after 2011.

Wealth Redistribution

Click to Enlarge

A couple more charts and then I promise I’m done.  While we’re on the topic of wealth distribution and tax stratification, lets look at some of that data.  So when pundits and partisans throw around the word socialism in reference to Obama’s tax policies (they also use the term in reference to his spending policies but that’s another discussion) they’re talking about his lowering of the tax burden on the poor and his raising of the tax burden on the rich.  As we’ve already shown, the rich are getting a pretty paltry tax increase and even so, as this graph shows, our tax policies are flatter than they have been in decades.  The tax rates for nearly all households have been dropping since the 60s, but the rates of the richest have been dropping the fastest.

In fact they’ve been dropping so fast that when you take all sources of taxation into account our tax policies are already flat and bordering on regressive!

Click to enlarge

When you count sales taxes (which are regressive) and all other kind of specialty taxes (most of which are also regressive), the bottom 20% of income earners in this country pay a larger percentage of their income in the form of taxes than anyone but the highest 20% of earners.  and even then its only 1% less!  So when we are starting with what we see here in this graph, a slight decrease in the tax rates of most and a slight increase in the rates of the rich will not result in a substantially imbalanced tax burden by any means.

So what backbreaking taxes are these tea-parties protesting exactly?  Taxes are at historic lows (some would say they’re irresponsibly low) for almost everybody and for 95% of America they’re set to go down further.  Corporate taxes are also near all time lows and our country’s tax burden is spread fairly evenly amongst all income groups.  The only group facing any kind of tax increases at all are individuals with an income of $250,000 and even then its not until 2011, its less than 3%, and their rate will still be much lower than its been for most of this century.  And furthermore that income bracket voted predominantly for Obama in the last election, knowing full well that increasing their income taxes was one of his campaign promises.  So if these tea parties are being organized to protest increasing taxes we can only assume they’re doing it on behalf of the rich, which seems odd in its own right, but even more so when you realize that most of the wealthy don’t actually want the help.

No related posts.

Well its long been my position that the largest bias of the media is their bias towards the exciting, tantalizing, scandalous, lurid, and enraging.  Nowhere is this more evident than in the way that the media treats the actions of murderers who commit mass shootings.  I was reading an interesting article in MindHacks (an excellent psychology/neuroscience blog) the other day about this subject and with the immigration center shooting that happened in New York today, I thought this was an appropriate time to post something about it.

A very interesting video clip on this subject and a brief commentary can be found after the jump (which means after you click “continue reading” for my readers who are new to the blog culture)

This video is from a BBC show called Newswipe and contains a bit of commentary about a shooting in germany and an interesting perspective from a forensic psychologist at the end.  Please forgive the bleeped out cussing and sneering tone, it is a British show after all!  ;)

While we didn’t get much coverage of this particular tragedy in the US, it seemed to strongly parallel our national coverage of the Virginia Tech shootings last year.  I mean we were reading essays that he had written for his english class two years ago.  All of his personal webcam videos were broadcast day in and day out.  There were interviews with his family members and teachers.  It was horrible really.  There are thousands of bitter loners out there who feel like they should be famous but the world isn’t giving them a fair chance.  And they now see mass murder as a way to go down in history and make the world see that they shouldn’t have looked down on them.  They know that all they have to do is burst into their school/workplace/local mall and shoot up the place to get their face and story plastered all over cable news for the next several weeks.

But its a hard thing to stop.  Ultimately the news dwells on these details because its what their viewers want to see.  It appeals to our basest and most primal instincts.  Its kind of a modern form of Roman bloodsports.  If everyone else was showing the home videos of the Virginia Tech shooter and one news station refused to do it they’d get destroyed in the ratings.  They’d all have to make the responsible choice together and to do that successfully they’d need an atmosphere of mutual trust that is not even close to existing in the news industry.

It’s a manifestation of a classic economic and business quandary best represented by the famous “prisoner’s dilemma”. A situation in which the “invisible hand” fails to guide self-interested individuals to optimal results because of imperfect information and a breakdown of trust, instead leading all sides to mess themselves over in the long-run in the pursuit of short term goals.  And if modern game theory is correct, there’s really no good way to stop it.

ps – this will be my last post for a few days because it will be a busy weekend for me but i’ll be back with plenty more posts next week.

No related posts.

The internet was full of jokes today in celebration of April 1st.  I thought one of the best was Yahoo’s new “Ideological search”, both because of its astute social commentary and its near-believability.  Their info page on the subject has this to say:

Tired of being inundated with the contradictory and offensive beliefs of others? Today, the scientists at Yahoo! are releasing a groundbreaking new search filter that keeps controversy out of your search experience. I’m extremely pleased to announce the immediate availability of Ideological Search, which allows you to control the ideology of your search results.

Our research found that web searchers are regularly affronted by articles, blogs, facts, and pages that contain perspectives directly contradicting their own personal beliefs and values –- whether political, religious, economic, scientific, philosophical, etc. If consumers have the freedom in whether they navigate to the HuffingtonPost.com or FOXNews.com, why not extend that same choice to search? Until today, no other search engine could provide this level of personalization –- ensuring that consumers can search with the utmost confidence, knowing that they won’t be antagonized by their results.

Its a sad fact that the news in our country is becoming increasingly politicized.  With both sides accusing the main stream media of liberal or conservative bias, people are now increasingly turning to blatantly partisan news sources.  Local newspapers and organizations like CNN are dying while FoxNews and MSNBC are thriving on the backs of their outspoken, partisan pundits.

Its just easier to bask in the warmth of your own viewpoint than to allow it to be challenged.  I’ve heard several people tell me recently that they don’t discuss politics because it just never goes well.  I say that’s because we’re out of practice.  We’ve lost the art of rational debate.  And the longer we sit in our own ideological corners the more difficult it will be to understand the other side.

Anyway, kudos to Yahoo for skewering this insidious tendency that’s dividing America.  And if you want to try it their ideological search actually works and can be found here.  I wonder how long it will be before a product like this is actually released?

No related posts.

Okay well I know the stimulus bill is passed and settled now so this will likely be my last post on the subject.  But I’ve had several questions recently about whether or not there’s any truth to accusations of pork in the stimulus and while I’ve mentioned some stimulus myths in a previous post (see “ACORN, Fieldmice, Banning Prayer, Socialized Medicine and other Stimulus Fear-Mongering“) and I’ve talked a little bit about pork in some of my previous posts, I haven’t yet focused on it specifically.  So with this post I intend to answer this question to the best of my ability: “Does the American Recovery and Reinvestment Act of 2009 (aka. The Stimulus Bill) contain pork-barrel spending?”

To address this question we’ll first have to decide on a definition for “Pork-Barrel Spending”.  A pretty representative definition can be found at TheFreeDictionary.com:

“A government project or appropriation that yields jobs or other benefits to a specific locale and patronage opportunities to its political representative.”

While the various definitions I’ve found do vary slightly they all seem to agree on the common theme that pork-barrel spending (which is synonymous with “earmarks” according to most sources) is a “pet project” inserted by a legislator primarily for the benefit of that lawmaker’s constituents.  Some examples of “Pork-Barrel Spending” taken from the website of the organization Citizens Against Government Waste include:

• $375,000,000 for an unrequested and unneeded amphibious assault ship in the state of Senate Majority Leader Trent Lott (R-Miss.);

• $700,000 for the Admiral Theater in Bremerton, Washington, the district of House appropriator Norm Dicks (D-Wash.), despite a $4.2 million privately-funded facelift; and

• $500,000 for the Olympic Tree Program in the state of Senate appropriator Robert Bennett for the 2002 Winter Olympics.

So now that we’ve established what an earmark is, are they in the stimulus bill?  The short answer, as far as I can tell, is “not really”.  By the standard definition of earmarks, the definition listed above, the definition that has always been used to refer to earmarks in the past, I haven’t been able to find any evidence of any earmarks/pork-barrel spending items in the bill.  I’ve read the bill, and you can feel free to read it yourself (“Read The Stimulus For Yourself“).  The money is doled out very generally to various government departments.  Money intended for private industry is never allotted to particular companies or projects, and those specific projects that are mentioned are solely those run by the federal government, designed to benefit the government itself or the nation as a whole and can not accurately be called “earmarks”.  There are a couple items that could be classified as earmarks using a loose definition of the term and I’ll discuss those at the end of this article.

So what of all the angry rumors of money going to specific dog-parks, butterfly preserves, fieldmice in SF, golf carts, volcano monitoring, and on and on and on.  Some legislators claim that there are billions of dollars of pork-barrel spending in the bill.  Well most of those allegations are based on the same line of reasoning, which I think most readers will find to be pretty tenuously constructed.  We’ll review one of the most outlandish and oft-repeated claims, that there is “8 billion on the stimulus for a levitating train to DisneyLand”, as an example.

So the story of the Levitating train to Disneyland has been told by Sean Hannity, Rush Limbaugh, Ann Coulter, Glenn Beck, and made its way up to John Boehner, John McCain and Mitch McConnel, before finally being included in Bobby Jindal’s official Republican response to President Obama’s speech to the joint sessions of congress.  This money was supposedly inserted into the stimulus by Harry Reid, or so the story goes, to build a “levitating train” connecting Las Vegas and Disneyland.  Certainly this has to be an outrageous example of government waste gone wild!

Well the truth behind this claim is that Harry Reid, Arnold Schwarzenegger and the Republican Gov of Nevada Jim Gibbons, have been in talks for some time about building a high speed train to connect Las Vegas and LA.  In fact environmental research was performed last summer to those ends.  And “levitating trains” are in the works.  They’re more commonly called “Maglev trains” and they’re used all over the world because their use of magnets reduces friction allowing for higher speeds, increased safety, and greater energy efficiency.  So the Maglev train to LA became the “levitating train to Disneyland” and I can only assume that choice was made because that phrasing elicits a greater visceral reaction.  Now the rumor about this project being included in the stimulus arose because when the stimulus bill was transfered over from the house to the senate, the amount of transportation department money designated to go to high speed rail projects was increased from 2 billion (i believe) to 8 billion.  Since Harry Reid is in the senate, and he has apparently always wanted a bullet train connecting LV and LA, stimulus opponents jumped on the opportunity to portray this bump in funding as an example of wasteful pork-barrel spending.

Early on this claim may have been somewhat excusable, since Reid’s train may have been eligible for at least some of the money if the Department of Transportation had chosen to fund it.  While still not an “earmark” by the normal definition it, theoretically, could have been some underhanded attempt at an earmark if Reid has some kind of prior, secret, massively illegal agreement with the head of the transportation department.  Not a very likely conspiracy since the Transportation secretary is Republican Ray LaHood, but it was at least theoretically possible.  But after a few weeks the department of Transportation released their map of planned high-speed rail corridors.  And it looks like this: Designated High Speed Rail Corridors.   You’ll notice there isn’t a Las Vegas Train on the list.  And yet myths about this flying, disneyland-bound train persist even to this day and are repeated even by highly regarded stimulus opponents.

So we see that even in this example, there is no money designated for any specific train to anywhere.  There is money (8 billion) in the stimulus bill for high speed rail generally, with the decision of which trains should be funded left up to the transportation secretary.  Nearly all claims of stimulus pork are projects that stimulus opponents believe these departments may use their money on, but it has become common practice to say, “there is money in the stimulus for _____”  when in reality there is money in the stimulus for a particular department and stimulus opponents fear that money may be used for _______.   Remember the definition of Pork-Barrel spending is funding inserted into a bill for a particular “pet project” designed to benefit his/her constituents.  If items that a bill’s funds could possibly be used for in the future count as “pork” or “earmarks” then it is a drastic redefinition of the term, and its a definition that could be used to label any spending someone finds even potentially objectionable as “pork”.

The second way pork-claims are justified is very similar.  The US Conference of Mayors issued a report on Jan 17th listing all of the “shovel-ready” projects they had in their cities that could benefit from stimulus money.  You can see these lists, broken down by state and city at StimulusWatch.org.  Of course none of these projects are included specifically in the stimulus bill.  But money is being sent to states to use how they see fit, some of which will trickle down to various cities and will likely be used to fund some of these projects.  So stimulus opponents combed through this list, selected the most ridiculous sounding items, and then paraded them around as pork-barrel spending.  Statements such as this one from Erik Paulson of Minnosota…

“the [stimulus] bill contains a huge amount of spending on many things that are unrelated to saving or creating jobs… It will fund requests such as $2 million for neon signs in Las Vegas, $4.5 million for an eco park featuring butterfly gardens and gopher tortoises, $500,000 for a dog park, $3 million for a municipal golf course clubhouse, $886,000 for a 36-hole disc golf course, $1.8 million for replacement tennis courts, $6 million for three aquatic centers with water slides … the list goes on and on.”

…are simply lists of items from this report from the US Conference of Mayors.  In reality each of these projects would have to compete for stimulus funding and individual states would decide if they get the money.  Obviously the vast, vast majority of projects on these lists will not end up being funded at all, and we have no way of knowing right now which ones will and which ones wont.  And some of the projects on this particular list aren’t even eligible for funding since the Stimulus Bill stipulates that:

“ARRA: Sec. 1604: None of the funds appropriated or otherwise made available in this Act may be used by any State or local government, or any private entity, for any casino or other gambling establishment, aquarium, zoo, golf course, or swimming pool. “

The claims of 3,000 or more pork-barrel spending items in the stimulus bill are arrived at by counting all of the shovel-ready projects listed by US mayors, governors, and government agencies.  Once again, this is a very new definition of “pork-barrel spending” and I think most people will agree its not very accurate, and could even be called purposefully sensationalized and distorted.

Now as I said above, the answer to whether or not the stimulus bill contains earmarks is probably more properly given “not really” than a straight “no”.  Because while 99% of “pork-barrel” claims are accounted for by one of the two methods described above, and its true that there aren’t any elements of the bill that fit the strict historical definition of pork, there are a few items that would probably be considered “earmarks” by a reasonable person.

Specifically, there’s several million dollars for philipino veterans of WWII from US owned islands who never previously received normal veteran benefits.  There’s also a provision in the bill calling for $2 billion for a “near zero emissions powerplant.” Which many suspect is intended to restart FutureGen, a near-zero emissions coal power plant in Illinois.  There’s also $70 million for “supercomputer activities, especially as they relate to climate research.” The Senate Conservatives Fund, a political action committee, says that is probably targeted for the National Center for Environmental Prediction in Camp Springs, Md.  The group also cites $250 million that is designated “to repair NASA facilities damaged by Hurricane Ike and to reduce the significant backlog of maintenance and repair projects at NASA facilities nationwide.” That appears to be for the Johnson Space Center in Houston.

Those were the only items in the stimulus I could find that could reasonable be construed as earmarks.  Though even these items are not earmarks in the strict sense since they were not planted by any particular legislators and they aren’t really clearly benefitting the constituents of any particular legislator.  But they could be considered earmarks because they contain cash that is specifically set apart for certain companies or projects.  Or at least they appear to be even if not explicitly designated as such.

So that’s it.  Not nearly as exciting or scandalous as its made out to be.  There are a few spending items that could be loosely defined as earmarks, so the administration’s claims that the bill is “earmark free” may be technically accurate though a little bit of a stretch.  But none of the projects often cited by stimulus opponents are mentioned specifically in the stimulus bill and most claims of “pork-barrel spending” are really hard to see as anything other than a misrepresentation, when investigated more thoroughly.

On a personal note I think the lack of significant earmarks in the stimulus bill is a laudable accomplishment.  Completely earmark-free or not its certainly a huge improvement over what we’ve done in the past.  The new “omnibus” spending bill, on the other hand, which is currently making its way through the legislature is unfortunately laden with thousands upon thousands of earmarks.  Most of those were established before the current administration took office but Obama hasn’t specifically spoken out against the pork-filled bill yet.  It remains to be seen whether the relative cleanliness of the stimulus bill signals a new direction for our government or just a momentary reprieve from pork-barrel spending.  Time will tell.

For more interesting stimulus fact-checking be sure to check out Politifact.com and Factcheck.Org both of which were used in researching this article.  They are the two most unbiased, non-partisan political fact-checking groups I’ve come across, and they’re very thorough.  I recommend checking their websites on a regular basis.

No related posts.

Well I’ve had several questions lately about a statement I made in my post CA Obstructionism and Political Games in which I was pretty dismissive of tax cuts in the stimulus bill.  All the questions came via email of course (this is what the commenting system is for guys!  You can comment anonymously if you want!).  Anyway, while I’m planning on writing a much larger treatise on tax policy at some later date, I thought I’d address why I think tax cuts provide for relatively little stimulus.  I’m going to try to keep it as non-technical and conversational as possible.  And I should note before I begin that the principles I’ll present in this post are not universally agreed upon in the field of economics, but they are reflective of the economic philosophies that seem most reasonable to me given my educational experiences, and the views that are most widely held among economists today.  So with that, lets just jump right in, this is the trouble with tax cuts as far as I can tell…

So while I’m going to try to minimize jargon here I’ll have to define one term right at the start, and that’s the “Spending multiplier”.  When you spend a dollar, it actually adds more than a dollar to the economy.  Because that dollar ends up in the pocket of an employee who uses it to pay his rent, whose landlord uses it to buy some groceries, etc etc.  The longer this cycle goes, the more impactful that dollar has been.  And money spent in different ways will multiply at different rates depending on the propensity for that spending method to lead to a cycle like the one described above.  So the spending multiplier is a number that essentially tells us the real GDP increase that one dollar of injected cash will create when spent in a particular way.  So in a stimulus plan, you want to inject as much money as is feasible at the highest spending multiplier possible, so as to increase GDP as much as you can, counteracting our current recession.

So when money is returned to an average person via tax cuts, where does it go?  Well a lot of it is saved.  In fact Nobel Prize winning economist Joseph Stiglitz calculated that less than half of the tax rebates of 2008 were spent in the first 9 months, the rest being saved.  And several things affect this savings rate.  For example when the populace is in an unusual amount of debt, they save a larger percentage of their tax cut.  When there is a lot of uncertainty about the future of the economy or if its expected to decline, they save a larger percentage of their tax cut.  Its also important to note that the rich save a much larger percentage of their tax cuts than the poor, since they require a smaller percentage of their income to pay for basic necessities.

So if we give a dollar in tax cuts, lets say 40 cents right off the bat is put into savings and not sent out to be part of the “cycle of spending” (this is probably a low estimate in today’s economic climate.  Also note that this number would be much higher for the rich and much lower for the poor).  Then of that money spent, a fair portion of it will be spent on foreign products (lets say 40 percent of that – again probably a low estimate) which will go to stimulate that country’s economy and not our own.  So that leaves us with 1*.6*.6 or 36 cents of each dollar of tax cuts that actually goes out into the American economy and is subject to the normal cycle of spending.  This leaves tax cuts with a pretty miniscule spending multiplier.

And of that 36 cents spent, most of it will likely go to credit card companies, grocery stores, and the consumer electronics industries.  Not exactly the industries that most need stimulating right now, and not the industries which are most likely to create more valuable jobs as a result of their income growth.  If only there was a way we could have a tax cut in which all of the returned money was spent, all of the money went to American companies, and most of the money was spent in industries that need it the most.  Well we have something like that, its called government spending.

When the government spends a dollar, none of it is saved, all of it goes to American companies, and we the people (through our elected leaders) can send it to the industries that need it most.  For these reasons, it seems to me that when economic stimulus is your goal, government spending works far better and more efficiently than tax cuts.  Mark Zandi, chief economist for Moody’s Economy.com testified before congress last summer in favor of a stimulus bill and cited these numbers as the calculated spending multiplier for various stimulus options:

Fiscal Bang for the Buck

Source: Moody’s Economy.com

No related posts.