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August 22, 2007
NY TimesWatch: Fun With Numbers Edition!
Today the Editorial Staff casts The Hairy Eyeball on the NY Times on account of this article, in which the Grey Lady proclaimed the Bush economy ... brace yourselves, mes amis, for the inevitable Miserable Failure Alert ... Worse Than It Was When Clinton Left Office:
Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.
The combined income of all Americans in 2005 was slightly larger than it was in 2000, but because more people were dividing up the national income pie, the average remained smaller. Total adjusted gross income in 2005 was $7.43 trillion, up 3.1 percent from 2000 and 5.8 percent from 2004.
Total income listed on tax returns grew every year after World War II, with a single one-year exception, until 2001, making the five-year period of lower average incomes and four years of lower total incomes a new experience for the majority of Americans born since 1945.
The White House said the fact that average incomes were smaller five years after the Internet bubble burst “should not surprise anyone.”
From long experience with the Times' unusually creative methods of number crunching, the first question that leaped into the cerebellum of the Editorial Staff was, "Hmmm...we are now 3/4 of the way through 2007 - what happened to 2006"? But no matter. It may well be that the numbers aren't out yet. Or, on the otter heiny, they may not have proved convenient.
The article in question plopped into our Inbox at the behest of The Unit, who found it mildly amusing. The Princess replied that she was just as stupified by the Times' bar graph as she had been with this exemplar of unparalleled profundity, sent earlier by the intrepid KJ:
News of the Tautological* "Job Seekers Push Up Unemployment"--headline, Crain's New York Business, Aug. 16
* "Speakers to Speak in Sweden"--headline, Baltic Times (Riga, Latvia), Aug. 17
* "Half the nation's families earn below the median family income of about $56,000."-- McClatchy, Aug. 15
And it turns out her skepticism was grounded in something more than past experience. Short explanation:
The Times and Johnston chose their “2000-2005″ reportorial spin, even though:* The more important news by far is that the real increase in Revised AGI in both 2004 and 2005 is greater than during either of the final two good years of the Clinton economy;
* The real decreases in 2001 and 2002 occurred largely because of the bursting of the Clinton-Era dot-com bubble and the September 11 terrorist attacks. The dot-com bubble got mentioned by the Times in the context of quotes from White House sources (the better to make it look like excuse-making); Johnston and the Times made the September 11 attacks invisible.An obvious omission: The IRS does not include the Earned Income Credit (EITC) in its compilation of Revised AGI, even though the EITC represents real money that either reduces other taxes or goes directly into beneficiaries’ pockets. Total EITCs claimed increased from $19.5 billion in 2000 to $42.4 billion in 2005, largely because of the credit’s expansion in the Bush tax legislation of 2001 and 2003. Spread over the annual average of roughly 132 million tax returns filed during that period, the $22.9 billion increase in the EITC ($42.4 bil minus $19.5 bil) amounts to over $170 per return.
Don’t forget the tax-rate cuts: Now add the benefit of the Bush rate cut in the lowest bracket, which has benefited all but the very top few percent of taxpayers. Since its inception in 2001, that rate cut from 15% to 10% — never mind the reduction in higher brackets — has reduced taxes for most single filers by at least $350 per year, and for most joint filers by at least $700.
The EITC expansion, the cut in the lowest rate just noted, and the reductions in the rates applied in higher income brackets, when combined, surely more than make up for the $477 difference ($55,715 minus $55,238) between 2000’s and 2005’s Revised AGI amounts. So while average pre-tax income may have fallen, average after-tax income has risen — even during the Times’ artificially induced period of analysis.
Do read Tom's entire post - it is well worth your time to understand.
Just more grist for the mill on the media's persistent negative reporting of economic good news during Republican administrations. Incroyable.
Via Instapundit.
Update: Interestingly, Mr. Johnston from the Times has gotten into it with Lex over Lex's characterization of his article. Lex responds (and I agree, for reasons I'm about to expound upon) thusly:
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.
The economy moderated last year, but the unemployment rate is still just 4.6%, almost a full percentage point below its 20-year average of 5.5%. Since the jobless rate first fell below 5% in December 2005, average hourly earnings have expanded at a 4.1% annualized rate–as good as any year during the late 1990s. And recent research shows that incomes for the bottom fifth of wage earners have risen faster in the past few decades than incomes at the top, hard work is being rewarded more by performance pay, and income volatility is no worse today than it was in the 1980s and 1990s.Stranger still is a July poll by the American Research Group (ARG) in which 68% of respondents rated their own personal financial situation as “good, very good or excellent.” This is a huge improvement from March 2003, when another ARG poll found only 46% of Americans were either “hopeful or happy” about their personal financial situation, while 46% were “worried or angry.”
Each of us should look within ourselves to see if we’ve contributed to that cognitive dissonance.
There. I’m done. How about you?
The Editorial Staff has written any number of posts about the NY Times' legendary propensity for skewing the perspective - for picking seemingly arbitrary and capricious baselines for comparison, which (mirabile dictu!) somehow always serve to underscore the central message that the Republican administration is Failing Miserably at x, y, or z.
Take the question of presidential approval polls, in which the Times cites polling numbers in blissful isolation, somehow managing to miss the interesting long term patterns in the data that might inform and enlighten its readers:
Comparing time series data on presidential approval ratings, a few interesting observations pop out.First of all, a prolonged, fairly steady decline in approval ratings is more the rule than the exception. Truman, Kennedy, Johnson, Nixon, Carter, Bush I, and Bush II all had longer periods of declining than increasing popular approval.
Second, there appear to be two striking patterns or models of presidential approval: the two-term expanding peacetime model (Reagan/Clinton in rectangles) and the wartime onset model (Truman, Bush I, Bush II). The first, and Ford and Eisenhower may arguably fall into this category, is characterized by roughly equal or greater than equal increasing over declining approval ratings.
The wartime onset model (and I leave Johnson out because he inherited a war, and thus never experienced that giddy 'surge' in popularity experienced by Presidents who arrogantly rush the nation to war without the prior approval of France and Germany) is characterized by a wild upswing in approval at the onset of military operations, followed by a sharp and unrelenting decline in popular approval.
The third interesting observation is that the tenures of the wartime presidents (Truman, Johnson, Bush I, Bush II) were all characterized by "extremes" of opinion: they swung from highs unattained by peacetime presidents (over the high 70s) to lows never experienced by those who never led the nation during time of war.**
Let's not even talk about economic reporting.
And then there's the Grim Specter of a war that is, to hear the Times tell it, Worse By Every Available Measure...
...that is, if you're willing to cherry-pick the data:
Citing the rather dubious measure of bombs planted, as I observed earlier, is an interesting metric. It does measure insurgent activity. But it is incomplete without a corresponding measure of effectiveness. The Times quotes a statistic:70% of IEDs are ostensibly being aimed at US troops.Presumbly the enemy is doing this for a reason. Therefore, we should expect to see a corresponding "bang for the buck", preferably something other than the number of white flags being run up on Capitol Hill.
Appropriate metrics might be US fatalities and wounded from IED attacks. TigerHawk's post stated US fatalities were "down slightly, but that is because we have hardened the target". He states American wounded are "way up". That premise would seem to be belied by this slide, which I prepared from statistics garned from globalsecurity:
Note how the Times blithely skips over roughly eight months of wounded data, somewhat "arbitrary" picking January as a starting point. Do you notice anything about the month of January? It is a low point in the 18-month cycle: you have to go back to February of 2004 to find a lower data point. Interesting choice, huh? That ought to tell you something about the Times' methodology.
They are not going to show you the entire pattern because they do not want you to see the whole picture.
The other point is that the insurgents are expending double the amount of effort and getting a far less than proportional return on their investment, except in terms of what commenter DGF terms the irksome fact that they are killing some of us, which is hardly unexpected during wartime. Our numbers have remained essentially the same, their efforts have increased drastically, yet our casualties have declined.
This is the kind of thing bloggers object to - misleading analysis which most readers are never going to check up on, because they don't have access to primary documentation. The average person has neither the time, inclination, nor the statistical knowledge to look up the source data and ask the right questions. about the methodology used to generate some of these charts, and unfortunately if the methodology is flawed, then any analysis which flows from it going to be pretty much worthless.
As Ace said so eloquently yesterday, bloggers can't do the job journalists do, and no credible blogger I'm aware of claims we can replace the mainstream media. We are completely, utterly dependent upon them - we are consumers of their reporting. But what we can do, and what we DO do well, I think, is perform an audit function.
And that is what many in the journalistic community cannot and will not abide: they can't stand the idea that anyone would question their authority, their accuracy, their integrity. I often wish we (and they, for that matter) would be more civil while we were about it.
But transparency and accountability are not bad things. We, like journalists, are accountable to OUR readers. If we get it wrong, we look bad too. And we are subject to the same scrutiny, the same derision, the same fisking, the same peer review.
In the end hopefully you, the reader, get a better product and we all benefit from the inevitable corrections in the news cycle. I think it's not only patronizing but hypocritical for the media to want to act as gatekeepers on the information highway.
Posted by Cassandra at August 22, 2007 07:56 AM
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Comments
Other than the fact that I'm Tom, thanks for the very good rundown.
Mr. Johnston commented at my place (comment 4) and a couple of others yesterday (Just One Minute and Engram's place are the ones I'm aware of), and IMO didn't do too well.
Posted by: Tom Blumer at August 22, 2007 09:44 AM
The combined income of all Americans in 2005 was slightly larger than it was in 2000, but because more people were dividing up the national income pie, the average remained smaller.
How many more people sharing the same pie does it take to make the claimed drop in average income $500 bucks a year?
Posted by: spd rdr at August 22, 2007 09:56 AM
*Warning Statistics Content*
Classical Statistical Blunder. It appears the NYT took average income at two different times and compared.
This is wrong.
In cases like this you have to use "Paired" data.
That is:
Person1_2000 - Person1_2007 = Growth1
Person2_2000 - Person2_2007 = Growth2
.
.
.
PersonN_2000 - PersonN_2007 = GrowthN
Then you average Growth.
Posted by: Yu-ain Gonnano at August 22, 2007 09:59 AM
I'm sorry! I scrolled down and thought I saw a "Jim" at the bottom. I may be losing my mind. I'll make the correction :)
Thanks for letting me know.
Posted by: Cassandra at August 22, 2007 10:03 AM
That was my question yesterday, YAG, when I was discussing this with the Unit (not that I knew anything about paired data, because I didn't). I am always extremely suspicious of averages unless I know exactly how they were calculated. I have just seen too many wacky things go on, even with very large samples, to put a whole lot of trust in them.
Posted by: Cassandra at August 22, 2007 10:07 AM
For that matter, I hate bar charts. Period.
Posted by: Cassandra at August 22, 2007 10:07 AM
Johnston also took on Lex Lex. It wasn't pretty. :D
Posted by: FbL at August 22, 2007 10:12 AM
For that matter, I hate bar charts. Period.
*sneering*
Chartist.
Posted by: Yu-ain Gonnano at August 22, 2007 10:33 AM
"Johnston also took on Lex Lex. It wasn't pretty."
Yup, you got that right. My money (AGI of course ;-) ) is on Lex if for no other reason than being based on the fencing duel's scoring (data, thrust, parry and risposte) so far.
Yeeeouch! That's going to leave a mark.
Posted by: bthun at August 22, 2007 11:10 AM
"..based on the fencing duel's scoring..."
Don't forget "right of way." You get no credit for a touch if you ignored an incoming attack to make it. Thus, responding to an attack with an attack, instead of defense, is counted as you being killed by the first attack.
Since Mr. Johnston seems to reply to attacks in just that way, he would be credited no score, and assumed dead.
Posted by: Grim at August 22, 2007 11:44 AM
All this fencing talk makes me want to break out my sabres.
Seriously though, the most of what Mr. Johnston attempts to do is classic "appeal to authority." Didn't he get the memo?
We're bloggers. We don't do authority.
Posted by: lex at August 22, 2007 12:11 PM
Sneering rabble. Clinging remora fish on the flanks of your betters, the mainstream media!
Unkempt blog mob. How dare you question authority!!! Do you not know your place?
Posted by: Joseph Rago at August 22, 2007 12:28 PM
My place is at the bar.
Posted by: spd rdr at August 22, 2007 01:08 PM
In the spirit of the brother/sisterhood of the MSM and the blogs, fencing, thrust, parry, risposte, and "How dare you question authority!!!". I give you, this tribute to the spirit of the major (and minor) media's valuing the difference of opinion oft encountered in the blogosphere.
Viva la diferencia de valorar... or heat and kitchen or something along those lines.
Posted by: bthun at August 22, 2007 01:22 PM
How dare you question authority!!!
1. Why do you use three exclamation points when one will suffice?
2. Do you think that blog mobs would be more acceptable if we made a sincere effort to be kempt?
3. Where *did* you hide Cassie's cheese?
Posted by: BillT at August 22, 2007 02:56 PM
While you are talking about media slant, you may want to include an article in the Opinion Journal in which the columnist was saying that all the other news outlets were incorrectly stating there was a dark economic cloud on the horizon, while he was arguing that the economy was growing (at about 2.3% relative to GDP)and the market was expanding.
One week later the news about the mortgage shake-up and the impact on our economy.
As well, the fine Op Journal columnist failed to discuss real wages and their decline for the majority of Americans, while the top 10% of wage earnings saw an incredible increase in average wages over the past twenty years. When adjusted for inflation and CPI, the lower third of American wage earners saw an actual decrease in wages. This according to the Cato Institute, Brookings Institute and Paul Krugmann. Now I know how you folks like Paul Krugmann, so I included other centrist and libertarian groups to off-set your reaction. Although Krugmann pulls his stats from the GAO.
So, real wages have grown as an average, but like GDP, economic growth and all other indicators, alone they tell you nothing.
Posted by: Sammy at August 22, 2007 05:35 PM
Krugman is a delicate flower. That actually makes him more right than not, given the intoxicating effects of his columns and articles. Well, at least considered more right by those under the spell, the languishing and intoxicating spell.
As a peasant, all I can say is that Krugman's wages and Soros' wages and Moore's wages have increased.
Posted by: Ymarsakar at August 22, 2007 05:52 PM
And so have mine, but that is irrelevant in the big picture. Nice though, how it always has to turn to polemics. Placing Krugman, Soros, and Moore in a trifecta. As Joe Friday said, "Just the facts ma'am".
Posted by: Sammy at August 22, 2007 06:06 PM
Krugman's got his own trifecta. He doesn't need anyone else.
Posted by: Ymarsakar at August 22, 2007 06:12 PM
Or Maybe Troika is a better word for it, in Russia, than trifecta.
Posted by: Ymarsakar at August 22, 2007 06:12 PM
Hello Professor, but I don't know if you read much, but Russia is in chaos and no longer a Communist nation. Read..no more cold war. You've been watching too much O'Reilly.
So refute any statistics or comments Krugman has made about American wages and economic growth. Substance, please.
Posted by: Sammy at August 22, 2007 06:20 PM
Either you are scurrying to find data to refute him, which is hard to do, or you only like to engage in ripping on "Commies" you don't like, or someone informed you not to like. I'd rather let information and facts speak to the validity or reputation of someone. Maybe more comments like "Bodies piled sky high" are needed at this point.
Posted by: Sammy at August 22, 2007 06:53 PM
Read
In no way can I ever have your ability to read things into a word like Troika, Sammy.
You've been watching too much O'Reilly.
I don't watch tv. Perhaps you watch too much O'Reilly and seek to explain your guilt by accusing others of your own sin.
Posted by: Ymarsakar at August 22, 2007 08:16 PM
MY EYES!!!! We hates the stats charts, we does, gollum since it proves Sauron wrong...
Posted by: James "Smeagol" Carville at August 23, 2007 12:33 AM
Sammy,
At this point there is no real conclusive evidence that the housing market bubble will have any long term effects on the whole economy one way or the other.
Housing prices have been inflated due to agressive lending products (Interest Only and Neg Ams, for example) that have allowed consumers to bid up prices while maintaining a lower payment (Consumers, unfortunately, are payment buyers not price buyers).
It's simply not possible for housing to continue appreciating at the rate it was for a very long time.
The temporary reduction in housing prices could go either way.
It could be that builders (and lenders to a lesser extent as their problems are rate driven moreso than housing market driven) are the only ones affected (just because your home loses value doesn't mean you stop paying your mortgage). This will of course ripple through as all things do, but may be a fairly minor ripple and other areas may negate those effects.
At the other end, if something else in the economy goes which causes job loss then not only do builders suffer as people choose not to enter the housing market but people who are already in can't pay their mortgages and will be getting out. Then you also layer in the lenders who are already suffering from a poor rate environment (inverted yeild curve) and additional losses on customers who would have stopped paying anyway (increased severity) but new customers who stop paying (increased frequency) and lenders get double whammied. Now you're talking about messing with the banking system which would cause much larger ripples.
Which will it be?
I think it'll be the former, but I seem to have lost my Magic 8 Ball.
Posted by: Yu-ain Gonnano at August 23, 2007 10:16 AM
God forbid that Sammy would lose the ability to watch O'Reilly, the world might come to the Final Days then.
Posted by: Ymarsakar at August 25, 2007 10:41 AM