Docangel's diary yesterday got me thinking. How many times have the Republicans lied about economics? More importantly,
how do they lie? What is their particular methodology? I have spent a fair amount of time dissecting Republican economic spin, and in that writing I have found the examples below.
In addition, it's near campaign season. Therefore, we can expect all sorts of interesting claims from Republicans running for office. The Right Wing Noise Machine has a wonderful way of spinning economic facts. What they are counting on is the listener not catching the finer details of their comments. Hopefully, the examples below will help you debunk some of the more outrageous claims.
Not adjusting for inflation.
Inflation is simply a measure of how much a specific item has decreased or increased in value over time. The Republicans are great at using numbers that aren't adjusted for inflation, which makes the cited numbers look better. The best example was Barney Frank's exchange with Treasury Secretary Snow earlier this week (and already diaried by docangel:
Treasury Secretary John Snow, testifying before a House committee today, boasted in prepared remarks, "Average hourly earnings are picking up. We learned from this month's jobs report that average hourly earnings have risen 3.8% over the past 12 months -- their largest increase in nearly five years."
"Mr. Secretary," Frank said, "I agree with much of your statement, but I confess to some trouble with your citation of the rise in hourly wages. What's the CPI increase over the past 12 months? Do you know?" Replied Snow: "Well, about 5, I think, 5.1."
To which Frank said: "OK, because you've got hourly earnings going up 3.8%, and I believe...that's not adjusted for inflation. So my understanding is that even in the past 12 months, which are your best 12 months, hourly wages have barely kept up with inflation..... But you would acknowledge that 3.8% increase in wages you're talking about is nominal, not adjusted for inflation, correct?
"I know it's not," replied the Treasury secretary. He then confirmed that the 3.8% was nominal, that is unadjusted for inflation.
This example was simply so tasty I had to use it again. If Frank hadn't have called Snow out on this lie, it would be entered into the Congressional record as if it was a correct number. Notice how Snow is simply stating a number that he knows is wrong (he has a Ph D in economics), hoping no one will call him out on the lie.
Another Great example comes from Polipundit from earlier this month:
Regarding lower-tiered workers, i.e., non-managers in the services sectors and production-line workers in manufacturing:
$ 14.44 = Avg. hourly earnings - April 2001.
$ 14.82 = Avg. hourly earnings - April 2002.
$ 15.26 = Avg. hourly earnings - April 2003.
$ 15.58 = Avg. hourly earnings - April 2004.
$ 16.00 = Avg. hourly earnings - April 2005.
$ 16.61 = Avg. hourly earnings - April 2006.
That gain exceeds by a pretty fair margin the total consumer inflation rate throughout that period.
In November 2001, nonsupervisory wages were $14.70/hour. These increased to $16.61 in the latest report for an overall increase of 12.99%. Over the same time, inflation increased from 177.4 to 201.5, or an increase of 13.58%. Therefore, since the beginning of this expansion, wages for 80% of the population have actually decreased .59%. (FYI: the paragraph repeats below)..
Using Advantageous Time Frames
The most common recent example is Bush's claims about job creation. The administration has done this repeatedly for the last year.
The past two-and-a-half years, we've added more than 5.2 million new jobs
Notice the time frame for his jobs statement. The President is using the job creation figures starting 2.5 years ago. What no one in the press corps has mentioned is this is the absolute lowest point of job creation during this expansion. According to the Bureau of Labor Statistics, when the correct starting point is used (November 2001), Bush's job creation numbers are 1 million less.
Forgetting History
Tax relief has helped a growing economy, which means more tax revenue for the federal treasury. 2005 tax revenues grew by $274 billion, an increase of nearly 15 percent over the previous year. This year the economy is still growing, and tax revenues are growing with it. So far, tax revenues are 11 percent higher than they were at the same point last year, which is better than projected
Bush fails to mention the 2001 tax cuts and the two-year drop in government revenue. Interestingly enough, no one in the press mentions this either. (He also uses an incredibly convenient time frame).
Forgetting history is a favorite Republican tactic. No one in the Republican party ever mentions that Reagan raised taxes 7 times during his presidency. Sean Hannity is an especially egregious example of this trend. He always talks about the Reagan tax cut, but never mentions all of Reagan's tax increases.
Using macro numbers incorrectly
Wealth in the US is incredibly stratified:
...as wealth holdings in the United States are skewed toward the top 10 percent of families (see Chart 3, next page). The median family net worth was $1,700 for the lowest 25 percent of U.S. households and $43,600 for those in the 25th to 49th percentile. In contrast, those in the 75th to 89th percentile had median family net worth of $506,800, while the figure for those in the top 10 percent was $1.4 million. These data do not apply only to baby boomers, however. Chart 3 suggests that although many families have a fairly substantial amount of assets, a large number have few resources with which to supplement retirement income.
Whenever the Republicans talk about macro numbers such as gains in disposable income and personal net worth, the numbers sound fantastic. Larry Kudlow loves household net worth (which he never quoted when Clinton was president). However, notice the extreme stratification of wealth from the FDIC passage above. Wealth for those in the 75th to 89th percentile of all US incomes is 11 times higher than that of people in the 25th to 49th percentile. With macro statistics, a large bump in the upper 10% of income earners can have a disproportionate effect on the entire data set.
Compare the increase in disposable income for all Americans to the wage gains for non-supervisory employees which represent the bottom 80% of the US population. In November 2001, nonsupervisory wages were $14.70/hour. These increased to $16.61 in the latest report for an overall increase of 12.99%. Over the same time, inflation increased from 177.4 to 201.5, or an increase of 13.58%. Therefore, since the beginning of this expansion, wages for 80% of the population have actually decreased .59%. Considering the explosion of executive pay and the massive 20003 tax giveaway to the rich, it shouldn't be surprising that the upper income earners are doing just fine.
Incomplete Statements
In recent speeches, both Rove and Bush mention they have cut "non-defense discretionary spending" to make it could as though they are really tough fiscal conservatives. This is a true statement. What neither mentioned was the absolute ballooning of defense spending. Under Bush, discretionary spending has increased from $649 billion to $967 billion from 2001-2005. While Bush's and Rove's claims are true -- they are only half true because they omit some really important data.
The basic issue with the right wing noise machine econ division is they have placed politics over policy. They aren't moved by facts, they are moved by truthiness. What is more egregious is the press has let the Republicans get away with this for so long.
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Update [2006-5-19 18:9:25 by bonddad]:For those of you unfamiliar with Donald Luskin, consider yourselves very fortunate. While he fancies himself an economist, he is in fact nothing of the sort. However, he scores a hat trick in one of his recent blog entries.
The economy took off after the 2003 tax cuts, creating more revenues than even the spendthrifts in Congress imagined.
Take just one example: capital gains tax cuts, one of the favorite targets of those who want to soak the rich.
According to Congressional Budget Office data, the reduction in the cap-gains rate to 15% was expected to cost the federal government some $27 billion in revenues. But it didn't happen that way.
In fact, as [Trend] Macrolytics' Donald Luskin recently pointed out, the tax cuts ended up bringing in $26 billion in added revenues -- exactly the opposite of what was predicted.
This has happened everywhere in the economy. Revenues from cap gains, corporate and income taxes are up sharply, pouring into government coffers across the board.
Fact is, tax cuts do "pay for themselves" -- by creating strong new incentives to work, produce and invest that make the economy larger and stronger. Data show this conclusively.
Donny forgets four key historical facts here and uses incomplete statements. First the Federal Reserve started to lower interest rates in mid-2001. Conventional economic analysis states it takes 12-18 months for interest rate changes to move through the economy. 18 months from mid-2001 is the first quarter of 2003. In addition (here’s the second forgotten historical fact), from 2000-2003 the Dow lost about 30%, the S&P 500 lost about 40% and the NASDAQ lost 80%. Third, he forgets the 2001 tax cuts which (here’s the fourth) decreased revenue.
Also note the advantageous time frame. Revenues decreased from 2001-2003 after a tax cut, so Luskin uses 2003 as the starting point in his statement.
This statement is amazingly deceptive, yet the Investor’s Business Daily printed Luskin’s statement with no fact checking.