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• ##### It's late, I'm headed to bed(21+ / 0-)

See you in the AM.

We are all in the same boat on a stormy sea, and we owe each other a terrible loyalty. -- G.K. Chesterton

• ##### Very interesting... but a bit suspicious(3+ / 0-)
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Growth has a strong negative correlation with tax rates on incomes of \$100,000 but a strong positive correlation with tax rates on incomes of \$200,000(?) (hard to tell because your blue section in the graph is not labeled as tightly.)

But don't tax rates on incomes of \$100,000 and \$200,000 correlate very closely?

It seems very strange that there is such a difference in the correlations of two very closely correlated variables with a third variable.

In fact, this very abrupt transition around \$150,000 is very suspicious.  It suggests that this effect is primarily based on one period with a strong correlation... which may very well be a historical coincidence (ie. imposition of higher taxes on the wealthy at the end of the Depression when the economy was already exiting the Depression and growing very strongly.)

Have you looked more closely at the sensitivity of this result to a small number of years?

• ##### Where did you get "strong"?(0+ / 0-)

It should be pretty clear from the y-axis that all correlations here are pretty weak (as mentioned in the diary). The 90% confidence level for significance is +- .163, which means only incomes above about 600k have significant correlations. Since I'm only looking at years 1947-2010, there are no Depression effects. Further, since the x-axis is logarithmic (as explained in the text, and as should be obvious from a glance), it's pretty easy to determine the exact income levels associated with each colored bar.

If you think my analysis is flawed, there is enough information in the diary for you to replicate my work entirely. Then you can write your own diary and tell us where I'm wrong.

We are all in the same boat on a stormy sea, and we owe each other a terrible loyalty. -- G.K. Chesterton

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• ##### The Analysis in Diary is highly suspect(2+ / 0-)
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People who follow the US economy even casually understand the US GDP is about \$15 trillion/yr  see here

in a comment below, the diary's author writes:

For 2009: GDP 55,755.70, Government spending 11,670.10, ratio 20.9%.
For 2010: GDP 58,106.20, Government spending 12,011.20, ratio 20.7%.

By the author getting such a basic part of the data grossly wrong, one cannot have confidence in the author's competance for any part of the diary's analysis concerning GDP or any other economic issue.

The most important way to protect the environment is not to have more than one child.

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• ##### It's quite a bit of an oversimplification, but(1+ / 0-)
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Keith Pickering

overall I think he's on the right track.
It's well known that a major fault of modern economics is not taking class into account. That a rich person isn't going to spend money the same way a poor person is.

I'd go one step further: recently a lot of economists were complaining about a "global savings surplus". Which I dismissed when I first heard it. After all, who has extra money that you know?
But then I got to thinking. The 1% are getting richer every day. The wealth disparity is growing larger every day. That small percentage have to invest that enormous amount of money somewhere.
So what you have a huge amount of un-productive cash washing around the world, looking for the highest rate of returns possible. When the amount of cash gets that large, it becomes a destabilizing force in global economics.

Thus taxing the rich would also contribute to calming the global financial system.

"The rich are only defeated when running for their lives." - C.L.R. James

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