Misleading Uses of Statistics, Chapter 57,942

A conservative interlocutor on a facebook thread challenged me the other day:

...Let's just use numbers without liberal or conservative pundit spin, okay? Here's how things stood at the end of 2006, no commentary:

Economic expansion was in its 74th month. The country had a rolling average of 103,000 job increases for the last three months of 2006. Unemployment stood at 4.7 percent. The household job count, which picks up small businesses, posted a 303,000 average gain.

Worker wages rose 3.8 percent in 2006, a full percentage point ahead of inflation. U.S. productivity surged 6.3 percent in the third quarter, its best pace in four years. Business inflation fell from 3.5 percent a year ago to 1.5 percent.

U.S. household net worth hit a record high of $58.6 trillion, and household wealth increased 43 percent from 2001-2005.

Now give me numbers showing me how "delusional" I am. No spin, just facts.

No problem...

First, I have to say I find your periodization of data bizarre. Aside from anything else, no government spending makes its presence felt in the economy for about a year, regardless whose it is. It just takes a while to get the ball rolling. This was noted in the Obama team's projections when they introduced the stimulus plan, by the way. It is absurd to draw any conclusions about the efficacy of the stimulus plan (or any of the others, for that matter) 5 months into a new administration.

Secondly, your reliance on 2006 data (I'd like to know your sources, by the way--I'm relying on the Bureau of Labor Statistics and several economists, as noted in the links below) is a bit odd, given that Bush was in office for 8 years. I think it's much more objective to compare apples to apples, so I'm comparing 8 years of Clinton to 8 years of Bush. Surely with 8 years of data for each, there can be no question as to the onset of the economic policies of each president or responsibility for same. Sound fair to you? I knew it would...

One last point: I also think it's unreasonable to compare the economic performance of any president in the midst of a major economic crisis (this one's generally considered the worst since the end of the Great Depression) with that of a president not facing a similar situation. Compare Obama in a few years to FDR if you like. Or if you really want to stretch way back and account for lots of data problems, try the panic of 1873 or, even worse, the economic crisis of the early 1820s. But again, apples to apples seems a reasonable approach.

1. Employment Rates:

Here’s the Employment-Population Ratio, 1992-2009:

Type of data: Percent
Age: 16 years and over

1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008
62.0	63.1	62.7	63.4	64.0	64.3	64.4	64.4	62.9	62.4	62.2	62.4	62.8	63.4	62.7	61.0

The graph and data above show remarkable growth in the employment-population ratio from 1993 (61.4%) through 2000 (64.4%), followed by a sharp drop in employment from 2001 (64.4%) through 2004 (62.4%). This was followed by a modest increase in employment from 2004 (62.4%) through 2007 (62.7), followed by a dive off a cliff from 2007 (62.7%) to present (59.7%) coinciding, of course, with the economic crash.

Incidentally, the reason I use the employment-population ratio instead of raw employment numbers is that, unlike the latter, the former illustrates the extent to which employment rate changes reflect, by lagging, equalling or exceeding population growth rates, actual increases or decreases in the availability of jobs. The economy gained somewhere in the neighborhood of 22 million new jobs under Clinton. I forget offhand how many jobs we lost under Bush, but it was a lot.

2. Wages:

From 1993 to 2001, wages were flat for the first 2 years, followed by net changes in percentage points of .4%, .3%, 2.6%, 2.1%, .9%, .7% and 2.0%. From 2001 to 2007, net changes in wages in percentage points were .6%, 0.0%, -1.0%, -0.4%, 1.8% and -0.7%. By any measure, net increases in wages were greater from 1993-2001, than from 2001-2007.

3. Productivity:

Percentage changes in productivity from 1993 to 2008 were as follows:

1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008
0.4	1.1	0.5	2.7	1.6	2.8	2.9	2.8	2.5	4.1	3.7	2.8	1.7	0.9	1.4	2.8

In other words, productivity increased almost continually from 1993-2002, then declined consistently until 2008.

4. Business inflation:

Business inflation rose slowly from 1993-2001, increasing faster from 2001-2007, then experiencing a levelling out.

1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008
124.4	126.6	129.3	132.9	131.4	131.3	135.2	140.5	138.0	139.7	145.1	151.4	159.7	161.4	171.8	169.7

5. Household Net Worth:

As far as household net worth is concerned, let’s disaggregate your statistics. The wealthiest 1% of the population experienced a 40% increase in wealth during the Bush years; everyone else either had level net worth or lost ground. Adjusted for inflation, the real wages of the average American worker has actually decreased slightly since the 1970s. Use of an aggregate household net worth number obscures these differences.

To understand why consider a hypothetical case in which you have 5 income levels: $10,000, $20,000, $30,000, $40,000 and $1,000,000. Assume the number of households at each level is, respectively, 10, 30, 50, 40, 10--a very rough bell curve. Multiplying the number of households at each income level by its income, then adding up the subtotals (140 households, $13,800,000) and dividing the total income by the number of households yields the average income of the whole group: $98,571.43. Now consider another group with the same number of households, but with these 5 income levels: $10,000, $18,000, $29,500, $39,000, $1,500,000. For the sake of simplicity, lets keep the distribution of incomes at each level the same as before. We still have 140 households, but the total income is now $18,675,000--solely because of the increase in income in the highest quintile. The average income per household is now $133,392.90, simply because the highest quintile value is so much higher than it was in the previous example. Did most households experience an increase in income from the first example to the second? Of course not--only those at the highest quintile did, but their increase was so great it pulled up the average for the whole group. The numbers I used were obviously not taken from the U.S. Census, but the phenomenon I've explained in simplistic terms is roughly what has happened to American households since the 1970s--those in the highest income brackets experienced a dramatic increase in income, especially over the past 8 years, while the average working household (I'm referring here to the median, or midpoint value in an index of U.S. incomes) either experienced no change or a slight decline in income during that period.

(Additional source data available at U.S. Department of Commerce website—fee required for access.)

Commentary

By the way, the contrast turns out to be even more stark than the numbers above indicate. It turns out that, no matter how you slice it, the economy always has done better under Democratic than Republican administrations—with the exception of every 4th year of a GOP president’s term in office (the exception to the exception being, of course, 2008 under Bush).

It’s interesting, by the way, to see how heavily my conservative challenger relies on 2006. Bush was in office for 8 years—why not data for his whole term in office? His economic record was anemic compared to Clinton’s (see charts above), and it was topped off with a global economic collapse, which, contrary to claims from the right, was not caused by Fannie Mae and Freddie Mac, but by wildly irresponsible behavior by mortgage brokers, ill-informed consumers, many of this country’s biggest investment banks, and the insurance company they relied on to hedge their bets via credit default swaps, AIG. (The latter, incidentally, didn’t think it necessary to back those financial instruments with their own money. And of course, they were unregulated (thanks largely to GOP Sen. Phil Gramm), so who was going to notice?) And yes, it’s true, Bush didn’t cause the collapse all by his lonesome, and some Democrats were complicit in the mess, but any honest measure of the economic history of the US from 1980 to present will unavoidably conclude that the GOP was the prime mover in the rush to deregulate, reflexive hostility to government, and the near-religious devotion to the idea that unfettered “free” markets would naturally police themselves. We’ll all be living with the results of that folly for a long time to come.

And people who try to blame Obama for the mess are being disingenuous. Sorry—5 months just isn’t enough time for any president to have a significant effect on the economy. It just takes time for programs to start & for money to flow through the pipeline. I realize my conservative challenger is a libertarian and particularly aggressive in his belief in the sanctity of the marketplace. But fair is fair—and if anyone attacked a conservative or libertarian politician with the intensity, obsessiveness and peculiar one-sidedness he exhibits toward Obama, he’d have no trouble recognizing how unreasonable that sort of behavior really is.

Incidentally, while I can't speak for your sources, not knowing what they are, I don't look to pundits when forming my opinions. Nor do I have one iota of patience for spin, regardless who does the spinning.

Hurricane Katrina, Economic Version

I've scoured the web for commentary by economists and others on the collapse of the U.S. finance industry (and economy in general) so you don't have to:

Background

Brad DeLong: Mark Thoma Is a Leading Indicator

Economist’s View (Mark Thoma): An Overview of the Crisis and What to Do about It (

Paul Krugman: Crisis Endgame

Brad DeLong: Thoughts on the Big Buyout

Thomas Palley: The Liquidation Trap

Econobrowser (Menzie Chinn): Some Observations on the Ongoing Crisis: Causes and Opportunity Cost Again

Brad DeLong: Understanding the Three Ways of Dealing with Financial Crises

Capital Gains and Games (Andrew Samwick): The Ownership Society, International Edition

Paulson’s bailout proposal

Calculated Risk: Bailout Proposal

Objections to the Paulson bailout plan

Daily Kos (gjohnsit): What in the Hell Just Happened?

emptywheel (Marcy Wheeler): No

Glenn Greenwald: The complete (though ever-changing) elite consensus over the financial collapse

Paul Krugman: No Deal

Mark Kleiman: Paulson Channels Cheney

Tyler Cowen: Luigi Zingales on the Paulson Bailout—Kazow!

Capital Gains and Games (Andrew Samwick): Financial Frustration

The Edge of the American West: New Deal or No Deal

Matt Stoller: If a Legal Armed Robbery Happens in Front of Everyone, Does It Make a Sound?

Alternatives

Dean Baker: Progressive Conditions for a Bailout

Matthew Yglesias: Mallaby: This Deal Stinks

Coverup and Call to Action

Doubtless you already know that the Senate Intelligence Committee, now under Democratic control, has finally released the second part of its report on the Bush administration’s misuses of intelligence in the prelude to the Iraq war.

For those who haven’t followed the issue closely, Bush and his cronies set up an "alternative" intelligence outfit in the Pentagon (the Office of Special Plans, run by Douglas Feith) to provide the administration with phony “evidence” to back up a decision he arrived at beforehand. Like Alice in Wonderland, “first the sentence, then the evidence.”

Then, adding to the fun, when forced to set up a congressional investigation of government activities in the lead-up to the war, Bush and Cheney, working with their cronies in Congress, arranged to have the “investigation” split in two—the first part, dealing with intelligence failures, focused on the CIA and was completed before the 2004 election (the timing is crucial here). The second part, dealing with the activities of the White House, was delayed until after the 2004 election (again, timing is everything here). Then the Republicans in Congress dropped the second part altogether, which is why it’s taken until now for a Democratic Congress to finish and issue the report. Clever, yes/no? I believe the term that describes this whole process (except the last part, obviously) is “coverup.” Needless to say, even if there were enough Democrats willing to support impeachment (and a number of Dems representing conservative districts do not), it’s too late now for that.

Now add another piece to the puzzle. The obvious question when faced with all this is, why didn’t people organize massive protests, flood the media with letters, e-mails and phone calls, and generally raise a ruckus about this? Let me answer that by asking another question: Who was going to tell them? As you can see, the machinations undertaken by Bush and friends were pretty convoluted. It bears mentioning here that 80% of the public gets ALL of its news from television. Yet there were no arresting visuals to show on the evening news. There hasn’t been, until now, anything close to a smoking gun—just a steady stream of reports occurring outside the glare of MSN exposure (McClatchy newspapers were stellar, as were the National Journal and a number of lefty blogs). The result? Up until fairly recently, somewhere in the neighborhood of 70% of the public thought Saddam Hussein was involved in 9/11. Many thought Iraqis were among the 9/11 hijackers. In short, a news media devoted to entertainment in the chase for advertising dollars and cowed by the administration into docility provided no useful information for the American public to use in evaluating the situation. After all, it was only a story about the way this country was manipulated into backing the unprovoked invasion of another country, with its attendant loss of thousands, perhaps millions, of lives.

So here’s where we come in. Barack Obama, as we all know, is running on a platform of bringing change to the way Washington functions and the ways we think about what government can and should do. Part of that, obviously, involves ending the misbegotten war in Iraq. To do that, we need to educate the public about the reality of what’s been done by President Katrina and his cronies in our name. The starting point of that education, it seems to me, has to be alerting people to the coverup outlined above and then the reality that coverup was designed to obscure.

Please feel free to offer your observations in the Comments section below.

Links:

For an excellent collection of essays on the Iraq war by noted historians, see Iraq and the Lessons of Vietnam: Or, How Not to Learn from the Past, ed. Lloyd Gardner, Marilyn B. Young

emptywheel has a discussion of the politics around the release of Phase II of the report here:

See the Center for Public Integrity’s War Card for an exhaustive record of the entire history of manipulation.

John Dean on the Bush Administration’s manipulation of the Senate’s Iraq Commission

Republican Senate Intelligence Committee chair shifted blame from the White House

Rep. Jane Harmon charges House Intelligence Committee Republicans with refusing to investigate White House behavior prior to the war

NYT: Report Warned Bush Team About Intelligence Doubts

White House hid evidence of NIE doubts re claims made in Bush’s 2003 State of the Union speech

Cheney, Libby withheld key documents on Iraq war intelligence from Senate Intelligence Committee in 2004

NPR: Iraq War Intelligence Fact Check

Will McCain Be Worse Than Bush?

(Originally posted April 30th, 2008 at 11:54 pm EDT on Ye Olde Low Budget Ideaworks)

Impossible, you say...

George from Wilmette, IL writes:

I have a hard time believing that McCain is worse than Bush. His most off-the-wall ideas will never be put into effect. I have to agree with Senator Obama that any of the three credible possibilities to become our next president would be an improvement over Bush.

I realize that it’s a hard thing to wrap one’s mind around. After all, Bush is a nightmare wrapped in a catastrophe inside a disaster. It’s a real challenge to think of a single thing Bush has touched that hasn’t turned into a flaming wreck. The idea that John McCain, with his carefully cultivated image as a maverick, could be somehow worse than that requires imagination of even worse problems than we’ve faced for the past 7 years. What could be worse? is the obvious question that comes to mind.

McCain has famously said he doesn’t care if American soldiers are in Iraq for 100 years. He clearly envisioned their role during that period as peacekeepers, and mentioned Korea as an example of what he had in mind. Evidently someone forgot to tell him that North & South Korea are two distinct countries. They have borders and each has a flag. They have armies. Their soldiers wear uniforms, making them rather distinctive. It’s pretty easy to tell when you’re in the presence of one side or the other.

Compare that to the situation in Iraq. Our soldiers are caught in the middle of sectarian strife, a sort of low-level civil war. Unlike our civil war (and the standoff between North & South Korea), the antagonists do not have uniforms, defined territory, flags or a demilitarized zone. Rather, the situation is characterized by random acts of horrific terrorist violence, widespread corruption, enormous internal migrations and generalized chaos. To the extent that there has been a recent decrease in violence (although that’s starting to pick up again), it has largely been due to decisions made by local sheikhs based on increasing hostility to foreign terrorists and largess from the U.S., which has been buying temporary peace at the expense of long-term stability. The Sunni sheikhs make no secret of their continued enmity towards the Shiites, and with U.S. military assistance have been stockpiling arms in anticipation of future conflict with the Shiites once our forces leave the country. Having destroyed the (admittedly hideous) standing government (as well as the country’s infrastructure) and dismantled the Iraqi military, and failed totally to plan for the aftermath of the conflict, we seeded the ground for the insurgency that subsequently developed. Having done so, we essentially gave Iran much greater influence over events in Iraq than it might have otherwise had. So having set the stage for sectarian antagonism, we’re now funding and supplying with arms one side in the conflict with the expectation that that will tamp down the tensions long enough to give us a graceful exit. But given the conditions we’ve established in Iraq, what reason do we have for expecting the outcome, at some point after our departure, to be an explosion of sectarian violence on a scale heretofore unseen in Iraq?

There’s a lot more to the situation, making it even more complicated than I’ve indicated above. For much more learned discussion on all of the above plus much more see the following:

Fact Check on McCain and Political Progress in Iraq

Not a Great Day for Iraqi Politics

The Myth of the Surge

Yet McCain sees Korea as a model for the future? How can this be? Well, it happens that McCain’s foreign policy team is dominated by neocons—yes, that same illustrious bunch who touted the war i Iraq with visions of Iraqis greeting our soldiers with flowers—just like Parisiennes in 1944. When Barack Obama talks about changing the mindset that got us into the war, this is a prime example of what he’s talking about. These are people who view every conflict through the lense of World War II, never mind the evidence. Because they can’t conceive of a conflict in terms other than of established states with armies, fixed territories, etc., they continually misread modern conflicts as outward manifestations of traditional warfare conducted by other means. Many of the same people, by the way, misread Vietnam in a similar way—Vietnamese nationalism couldn’t possibly have been a significant factor—instead, war supporters tended to describe the conflict as one directed from Moscow and/or Beijing. This despite the fact that Ho Chi Minh’s government was extremely distrustful of both & played one against the other to maintain support while avoiding being swallowed or manipulated by their putative allies. Thus the U.S. negotiated for a long time with the Soviets but avoided negotiating with the North Vietnamese and NLF for as long as possible.

The upshot of all this is that persistent misidentification of a problem precludes a solution. We have every reason to expect, therefore, that a McCain presidency will result in a significant extension of our involvement in Iraq because the mindset dominating his foreign policy shop has managed over the past 7 years to learn absolutely nothing from experience.

There’s an old joke that went around the Soviet Union during that country’s occupation of Afghanistan:

Question: Why are our troops still in Afghanistan?
Answer: They’re still trying to find the people who invited them in.

Let’s do whatever we possibly can to ensure that we don’t end up telling that joke about ourselves.