Common Leftist Economic Claims, Part I: Exposing the Ignorance. Or Maybe the Dishonesty.

In a comment to a previous article here at TAH, one of our regular commenters made the following statement.

Here is a purchasing power chart showing Reagan’s tax cuts did not flow down in actual purchasing power.

http://www.advisorperspectives.com/images/content_image/data/f1/f1bddfd60a7085c654daea1353d98626.gif

I’ve pointed out much what follows to the individual via a reply in those same comments.  Since there was no response or acknowledgement, my working assumption is that he actually believes what he said above.

I bring this up here because it’s indicative of a common behavior of those on the political Left.  Often, they don’t know a damn thing about the subject about which they’re pontificating.  They merely parrot whatever blatant bullsh!t or “buzzword du jour” their superiors in the      Politboro      Progressive hierarchy give them.

And while doing so, some of them act like arrogant, insufferable, “superior” a-holes, looking down their noses at everyone else.  In reality, virtually all of them they have little if any reason to think they’re superior, and no justification whatsoever for acting arrogant.

So I’ll use this case as an example – and I’ll explain how the chart above is being misused to support a specious  claim, either out of ignorance or by design.  I’ll let you decide which it was.

Here’s the figure in question.  Remember, it was supposed to prove the Reagan-era tax cuts “didn’t work”.

 

 

The claim is that the above chart is a “purchasing power chart showing Reagan’s tax cuts did not flow down in actual purchasing power.”  That claim about the Reagan era tax cuts – like many made by those on the Left – is specious, but that’s not the issue here.  The issue is that the chart doesn’t support the claim whatsoever.

There are multiple problems with trying to use the chart above for that purpose.  In fact, it fails to do so so badly that one wonders if the person making the claim was joking, was ignorant, or was trying to “pull a fast one”.

First:  the chart above doesn’t address the Reagan era tax cuts.  They’re not depicted on the chart in any way – so the chart is silent about them.  It neither supports nor undercuts any claims about the Reagan era tax cuts.

Therefore, claiming that the chart above “shows the Reagan tax cuts didn’t work” (or words to that effect) is, to be charitable, simply not accurate.  To be less kind:  it’s evidence of either a gross error, gross ignorance,  or an attempt to deliberately mislead.  Or maybe of an outright lie.

Second:  to anyone who has even a smattering of knowledge about finances and inflation the actual purpose of the chart is quite evident – and that purpose is unrelated to the Reagan era tax cuts.  Two terms on the chart make the chart’s purpose crystal clear:  the terms “nominal” and “real”, used in the context of discussing money and time.

The upper line on the chart is “nominal US median household income”.  In the context of money and time, the term “nominal” has only one reasonable meaning:  “current year dollars”.   That is, dollars that are NOT indexed for inflation.

However, anyone who’s not a bona fide idiot knows that inflation reduces the purchasing power of money over time; a dollar in 1980 is simply not worth the same as a dollar today (in terms of purchasing power, a dollar in 1980 was worth substantially more).  Therefore, to compare incomes from different years a correction for inflation is required.

Other than the chart’s axes, the only other line on the chart is “real US median household income”.  In the context of money and time, the term “real” means “indexed for inflation”; there isn’t any other reasonable interpretation.  In fact, the chart even specifies what measure was used to adjust for inflation to obtain real dollars, albeit not the source:  CPI-U-RS.  That is the emerging preferred index for correcting for data, and is generally regarded as an improvement over CPI-U.

The purpose of the chart is thus clear to anyone who (a) understands even the basics of finance and inflation, (b) actually read it, and (c) isn’t wearing ideological blinders.  It’s intended to show the effect of inflation on actual purchasing power.  It’s not intended to show anything else.

In particular, the chart is not intended to say anything whatsoever about Reagan, taxes, or the effectiveness (or lack thereof) of Reagan-era tax cuts.  Saying that it does is at best a truly foolish error, and at worst a deliberate falsehood.

The Left does things like that quite often – e.g., claims one thing, then uses invalid arguments, bad data, irrelevant examples, or outright lies to support their claims.  They apparently do so hoping that no one will catch on and call them on it.  Hell, I don’t think many of them even have the background (or smarts) to realize they’re doing so.  They’re simply Polly Parrot, regurgitating the “party line” they’ve been fed.  That may or may not be the case here; decide for yourself.

Third:  the chart also illustrates a potential shortcoming in using data presented in graphical form.  The chart above indeed compares different variables – but it does so using a scale that obscures relevant changes in one of the variables being plotted.  For the intended purposes of the chart, that’s not a “biggie”; the scale used shows the discrepancy between nominal dollars and actual purchasing power, and the fact that the details present on the lower data plot aren’t apparent is irrelevant in that context.  But the scale used indeed makes examining the data presented on the “real US median household income” line in detail impossible. There’s simply not enough definition on the lower line to see what’s going on.

That lack of definition issue also makes it impossible to use the above chart together with other data to assess the effectiveness of the Reagan-era tax cuts.  That’s true because there’s so little definition for the line depicting real income that inferring the actual data point values with anything approaching accuracy is impossible; the necessary detail simply can’t be seen in that chart.  That’s a third reason why the chart can’t be used to say anything about the Reagan era tax cuts.

For comparison, here’s virtually the same data (it continues for an additional year or two), presented alone, from a known source (US Census Bureau).  It shows the detail obscured by the scale used on the other graph:

 

A larger version of the same image may be viewed here.

Clearly, this second version does provide enough information to allow visual analysis.  Those details cannot be seen on the original chart.

I could probably go on, but this is likely enough to prove my point.  Very obviously, claiming that the first chart proves the Reagan era tax cuts were ineffective is simply . . . ridiculous.  It’s either a gross error, or it’s a deliberate lie.  Take your pick.

. . .

In the same comment that started this article, links were provided to charts prepared by that “fountain of economic insight and analysis” Mother Jones purporting to support other Leftist claims.  Still other claims were made that are specious at best if not outright falsehoods.  Those other charts and claims will be the subject of the next 2 articles in this series.

 

Category: Economy, Politics