Statistical Tyranny

According to Mark Twain, "there are three kinds of lies: lies, damned lies, and statistics." In today's world, we are at the mercy of statistics that are thrown in our faces every day. It never fails to amaze me just how often statistics are used by the media to mislead and confuse. Here are a few of my favorites:

1) Every week, the government reports on the number of new unemployment claims filed the previous week. Like clockwork, the government also revises the reported number upwards the following week. And also like clockwork, the media each week compares the higher revised figure of the week before with the lower original figure of the current week. As a result, we get reports that are slanted towards showing things better than they actually are. For example, we went through a period earlier this year where the initial report each week was that there had been 370,000 new unemployment claims and the next week the number was revised up by 3000 to 7000 claims. The press used this bogus comparison to report each week that the number reported had declined from the previous week and was at the lowest level in many months (even though week after week the numbers were the same.)

2) President Obama is promoting his Equal Pay Act by telling us that women are paid only 77% of what men are paid. Women are victims, don't you see. Of course, Obama ignores the actual reality that among women under 30, the pay levels for women are actually a bit higher than those for men doing the same work. Once many women have children, however, they choose to work fewer hours outside the home than the men. Many also interrupt their career paths for years as they opt to stay at home to raise small children. As a result, men are compensated for the additional work that they do and they get seniority for their uninterrupted years on the job. that is the basis for the 77% figure. Of course, no one ever mentions this in the statistics.

3) Obama and his campaign are claiming that federal spending under his presidency has risen at the slowest level of any president since 1952. In order to compile these statistics, all of the major spending initiatives undertaken by Obama in his first year in office were attributed to George W. Bush. In reality, this is actually more than just statistics; it is a damn lie. But it gets reported in the press nevertheless.

4) We heard today that the net worth of the average American family has declined by 40% in the last few years. This is certainly an important number, but it is just another way of saying that the prices of houses have declined substantially. Remember, most folks have a mortgage on their homes, so the total value of the house is broken into two parts: the debt (which reduces net worth) and the equity (which is included in net worth.) When the value of the home declines, the full amount of that decline comes out of the equity since the mortgage loan remains unchanged. If home prices start to rebound, there will be a quick rise in the net worth of the average family.

5) For the last 12 years, we have heard over and over that the Bush Tax Cuts were tax cuts for the rich. Right? Those tax cuts, we were told, gave the overwhelming bulk of the tax reductions to the upper half of the income spectrum in the USA. We were also told that tax cuts for the truly wealthy cost the federal government nearly $800 billion since they were enacted. Of course, these statistics are completely misleading. First, only the upper half of the income spectrum in the USA actually pay income taxes. If one reduces tax rates, obviously all of those reductions will go to the people who actually pay taxes. Second, while the wealthy did get $800 billion of tax reductions, the middle class got about $4 trillion in reductions during the same time. That's right, the wealthy who pay about 40% of all taxes got about 16 % of the reductions, while the rest of the taxpayers who pay about 60% of total income tax revenues got about 83% of the reductions.