Thursday, July 15, 2010

My Numbers Can Beat Up Your Numbers

You all know that I'm a verbal, rather than a numeric person. I'm comfortable with reading and writing, and with the intricacies of German and Russian grammar. With numbers, not so much. I was okay through basic algebra, trigonometry, and plane geometry before crashing on the rocks of calculus and matrix algebra and the sort of mathematics that use Greek letters to make them even more incomprehensible. I haven't understood anything about numbers since Numeric Life stopped doing her blog three years ago (and I still miss her).

So I don't understand numbers. I don't understand how two accountants can adjust their green eyeshades and look at the same set of numbers, and one can show a fine profit and the other a staggering loss. I find the concept of generally accepted accounting principles more than a little bizarre, serving only to underlie the truth of the old adage that if you torture the data long enough, it will tell you what you want to know, whether it's true or not...truth, in many cases being defined by the political leanings and requirements of the observer.

Which brings me to the numeric fairy tale summarized by this article: It's Unanimous! GOP Says No to Unemployment Benefits, Yes to Tax Cuts for the Rich.

If you are a Republican who worships at the festooned altar of St Reagan, the solution to every economic problem lies in two actions: cut taxes, preferably on businesses and on the rich; and cut unnecessary spending. The theories behind this are supply side and trickle-down economics, which hypothesize that the government takes in more money by reducing taxes and other barriers to business activity, which in results in more goods and services at lower prices for consumers, and more tax income for the government because of increased business activity.

Magicians understand this. Real People don't.

How's it all working out? Taxes are low as a result of tax cuts instituted during the Bush era, which means that business should be booming and the government rolling in dough. The reality, of course, is a bit different. Millions of people are out of work, their unemployment benefits are expiring, there are no new jobs to be had, and the Republican answer is that all will be well if we keep cutting taxes on the rich while also cutting unnecessary, say, unemployment benefits. After all, the rich spend more than the poor, which is better for the economy, right?

The government has plenty of money to spend, though. Unfortunately, it's not because of taxes. It's because we've borrowed astronomical amounts of money from places like China (which, oddly enough, has neither a Republican party to argue for lower taxes on the rich, nor a Democratic party to argue on behalf of Real People). I have carefully studied the concepts of supply-side and trickle-down economics, and they fail to mention the part about compensating for lost tax revenue by borrowing from other countries that may not have our best interests at heart. Lenin once said that the capitalists would sell the communists the rope with which the communists would hang them. That didn't work out quite so well for the Soviet Union, but it seems to be working just fine for the Chinese.

So, how do we interpret the numbers?

Senate Minority Leader Mitch McConnell sees it like this: "That there's no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy." The Congressional Budget Office, among other observers, disagrees.

Who's right?

All I know is this: the economy is in the toilet, we've sold ourselves to China, and taxes are low...which doesn't help you much if you don't have a job that pays wages which can be taxed at those low rates. "Experts" disagree on how to fix the problem, but to me - as a guy who, admittedly, isn't very good with numbers - cutting taxes on those who are able to pay them while cutting aid to people who desperately need it doesn't make a whole lot of sense.

It'll be difficult to convince me otherwise, but you're welcome to try.

Have a good the numbers.

More thoughts tomorrow.



Mike said...

Figures don't lie but liars can figure.

KathyA said...

You are right on! And yet many respected (albeit in my opinion delusional) subscribe and are committed to that 'other' point of view. I guess 'trickle down economics' still lives.
We all have the right to our opinions, but not the right to make up facts. Seems to me many do the latter confusing it with the former!

PS Was sent to your blog by another friend. Glad I visited.

Bilbo said...

Mike - Yep.

KathyA - Glad to have you! Please come back again.

Jean-Luc Picard said...

It shows how figures van be massaged to present a view.