"Barack Obama is the smartest President"?

Have you heard it before? We have all heard how “dumb” George Bush is/was. I think it is about time to reveal that there is a big difference between book-smart and street-smart; Obama being the former and in no way the latter. The media being much of the former as well, has little to no respect for the latter. I guess, for the sake of honesty, I would be the reverse. I respect more what people have done and how the interact with people then I do what their grades were and where they went to school.

Obama can’t find the door.
1. Might have seen this one. Yes that is a window. Dear Sir, Please note that there are no hinges or a handle. I am sure you have seen this one (again and again). But note it has handles and hinges and is simply locked. Even when it is covered, Bush must be mentioned and bashed. Mr. Obama simply “hasn’t gotten acquainted” with his surroundings. That was not an excuse for Mr. Bush who was in CHINA. The Bush gaff was often labelled “Bush has no Exit Strategy”; including by the network news (see below). Is also became a top ten list on Letterman.

In the opening tease at 7:00am, co-host Charlie Gibson announced over video of Bush trying to open the locked doors: “No way out. President Bush tries the wrong door on his trip to Asia and has fun for the cameras. But the big question now: Does he have an exit strategy for Iraq?”

Not the same “oops, ha ha” coverage Obama got is it?

Gifts for our UK “friends”.
2. Anyone can make a silly honest mistake…but it take a special person to insult a respected ally. Have you heard about the gift exchange between President Obama and Gordon Brown (UK Prime Minister)? Probably not. This article covered it but missed one of the gifts given to our President; The framed commission from the ship that was used to make his desk. How thoughtful and personal. And from the US 25 pack of DVDs. I hope they were not Region 1 (US) encoded. I am sure their were personalized by making sure they were Region 2. Like school on the weekend… no class.

Obama the stock advisor.
3. The confidence his policies give the stock market has been pretty obvious. Maybe one of those books he reads should have include the definition of P/E Ratio (Price to Earnings). Of course, his definition may explain a lot of his policies. I am so glad we have someone so smart now running our economy. No sense in leaving it in the hands of those Bankers and Finance folks. By the way Price to Earnings only matters when there are Earnings! Otherwise, it is called speculation .. a practice that helped us all so much in the Internet boom.

More brilliance to come, I am sure.

How to lie with statistics (politics II)

I have mentioned a few in a previous post and I now have a few more that are bugging me.

The income gap

One you have likely heard and may fall into is this…The income gap between the have and have-nots is widening. I do not deny that the gap is widening in fact if it was not the economy would likely be in serious trouble. It is just a function of simple math. Let’s take some simple examples. One, let’s say plumber, makes $40,000 a year. The second makes a clean $1,000,000. The plumber has a great year, things go really well and he increasing his income by a whopping 50% to $60,000 the following year. Now the millions did ok, his business was not growing as fast as he would like but he did out pace inflation and increased his income by 5%. This would take him up to $1,050,000. Yep there it is, the income gap is widening. In the first year the difference in income was 960,000 (1Mil – 40k) and this year it is over 990,000 (1.05Mil-60k). Everyone is making more money and the government would get more revenue… and this is BAD.

Now let’s look at more realistic numbers. If employee making 40k got a more traditional 5% increase to 42k, the millionaire would have to make less then 1/5th of 1% to keep the gap from widening. I am not sure how you can make sense of changes in this number?

So what we come to is this, the millionaires in this country would have to stop making money just to keep it fair. Suppose one of those millionaires instead was a founder of say…Google…and clears 100Million. Well then we are all toast they will outpace 100,000s of Americans combined. So to make it fair we need to take more of their money. Right? Raise their taxes to level the playing field… hold on… taxes do not change income levels. So in fact, to stop this gap from widening we have to stop them from making the money in the first place. What options do we have to stop millionaires from making more money? The most obvious one I can think of is slowing the economy and making it harder for businesses to turn a profit. I am sure their are others but this seems to be the one currently in practice.

Median incomes

Closely tied to the last is the median income argument. The next statistics you will hear about is “median income”. This is the logical counter to the simple math used in the income gap analysis above. Again, I submit that mathematics and normal economics is the cause of such statistics.Remember that the median is not an average it is the middle salary of all employed Americans. It is used to approximate the expected income of a “normal” worker and from this aspect is a better indicator then the average.

In a given year, employees join and employees exit the work force. Other employees move up the brackets. In a growing economy it is likely that more people are entering the workforce as jobs open up then those that are leaving it. With the workforce always changing, all that is necessary to shift the median downward is to have more employees enter the work force under the median then above it.

Here is a simple example. We have a small company of 5 employees. They all make 50K a year. So the median is 50K. Let’s say that 2 of those people are principles in the company and due to company growth they report 100k each on their taxes. The average moves up but the median (middle/third employee) is still 50K. This growth allows them to hire 3 new employees at 30K each. The average moves back down and the median is still 50K (30k,30k,30k,50k,50k,50k,100k,100k). But if they were to hire 3 more employees (at anything lower then 50K) the median would now move down. What does this statistic tell us about the health of our company? It is failing right? NOT MUCH of a useful metric on its own.

So, if the economy is growing, is it more likely to be hiring high-level employees and managers or staff level employees? Most corporations have more staff level employees then management level (at least they should). When they grow, the dominant trend would be to promote from within and hire junior staff. Since the overall number of Americans employed increases the median is likely to go down. Again, and this is somehow BAD?

So What really happened these past years?
My intent is simply to have you take the numbers going up and/or down with a grain of salt and think about them. Each statistic alone can mean many things. It is only when we combine multiple indicators that we can truly see the full picture. I attempt to combine more information from the IRS statistics to clarify the economic picture around the median income levels.

In 1999, There were 94.5 million tax returns that paid taxes. There were 30.5 million returns for Americans making under $25,000 which amounts to 32.3% of the returns from that year. The median income that year was $50,641 (2007 dollars). Just bank those numbers as comparisons.

By 2003, [after the beginning of the recession and the attacks on 9/11/2001], we [logically] seem to have slid back a bit. There were 89 million returns that paid taxes but a full 3 million more returns were filed than in 1999 (more returns; less tax payers). Of those returns 23 million of those were from Americans making less than 25,000. There were 3 million more returns filed but 7 million less low income tax payers. Is this proof the shrinking economy was hurting those at the bottom the most? The median income that year was down to $48,835 (2007 dollars). Or is it proof that the Bush tax cuts of 2001 eliminated more lower income people from the tax roles completely while adding 3 million new wage earners?

Slide forward to 2006. There were now 10 million returns that paid taxes. Of those 28 million were filed by Americans making less than 25,000. We were now are up another 8 million tax filers including almost 5 million of those under 25,000. I believe that this is proof that the economy is growing and more wage earners are joining. If this is the case depending on the type of jobs being created, it is very possible that an influx of lower paying wage earners would bring the median income down. Would this be good or bad? If you know please let me know. Well… the median income for 2006 was $49,568 (2007 dollars). So it moved up.

I am unconvinced that median income means much at all by itself. But in this more complete context of more tax returns being filed and more wage earners it would seem to indicate a growing economy.

Final Conclusion

For further confusion the median income in 2007 was now $50,233. So what do we now have. We have increasing tax filings, increasing median incomes, increasing revenues. I would think that this is proof of the value of cutting taxes to avoid recession. I would also think that this exemplifies “a rising tide lifts all boats”. Simple proof of conservative principals in action for the benefit of all.

But for my liberal friends, I have a statistic to help you out…it is listed within these numbers and you might have even heard it before…”Median incomes are down during the past eight years of the Bush presidency.” Yep down from $50,641 to $50,233 over the eight year period. Of course, you have to ignore the facts of the recession of 1999-2000 and the attacks of 9/11 and the fact that the major drops all occurred before the Bush tax plan was fully in place. But hell, if you are going to use a confusing statistic in the first place, no need to burden it with the truth.