DISCLAIMER: Because this topic is about rhetoric to a certain extent, the title is purposely provocative. I want to impress upon you that communication is both what is said and how it’s said. There isn’t a communication situation devoid of rhetoric. Also, in case you think I have something against all economists, I don’t. I doubled majored in Economics and English at Virginia Tech, and my father was an economist. I just have problems when talking heads in the media (and poorly informed relatives who claim to be experts on everything) espouse myths, half-truths, and outright lies about economics.
Plan for Today
- Midterm Grades for D and F grades
- I will submit midterm grades tomorrow for those of you who have overall grades below 70% or below a C. The BIGGEST reason students get below 70% is from not doing the work. Missing discussion posts and tests affects your grade tremendously. If you haven’t set reminders for your assignments, do so now.
- The Media vs Journalism
- Being careful with our terms
- Economic Definitions
- Economic Growth
- Taxes and Government Spending
- Fallacies
- Unwarranted Assumption (post hoc ergo propter hoc)
- Today’s Reading: Clingenpeel & Goodspeed “Setting the Record Straight on Wealth Inequality”
Journalism vs “The Media”
While journalism and the journalists who create such material are part of the vast, amorphous entity of the media, journalism—true journalism—is committed to providing an accurate narrative of events. Just as we’ve discussed the concerns with getting emerging science right this semester, we need to have a similar approach to assessing journalism. When journalists communicate their information, they are often working with quickly unfolding events and may not always (or ever) get the full picture before their work goes live. This isn’t the same thing as being unethical and purposely misleading audiences. Just as science is self-correcting, conscientious journalists* and editors strive not to publish anything they haven’t vetted. Their exposés and long-term investigative stories go through much more fact checking and scrutiny than will reports on emerging events. We rely on good journalists and editors to provide accurate information or tell us when they hope to know more. Does this mean they’re always correct? No. Ethical journalists will correct things when new information appears. In the event they were misled, lied to, or “ran with something” not properly vetted, reputable outlets will mention it and apologize. In a world that demands up-to-the-minute reporting, we can’t possibly expect 100% accuracy: some things we just won’t know immediately.
- Relate this to Collins & Pinch’s “Conclusion” for their science book:
- p. 140: Can’t expect certainty from scientists: “…things will always go wrong in any human enterprise.”
- p. 140: “Scientists should promise less; they might then be better able to keep their promises.”
- Economists ought to be more up front with predictions and explain that the economy is very complicated and doesn’t “behave” in the exact same way when new policies are enacted.
- *“Conscientious” is the key term. You can put lipstick on a pig, and it’s still a pig. You may call charlatans journalists if they purportedly communicate information via news outlets, but they’re still charlatans.
Besides there being extremely biased and not even close to fair and balanced news outlets, some journalists “get taken” by those they interview, meaning their sources mislead or flat out lie to them. It happens. Hopefully, after they find out, they apologize, retract their story, and learn to follow up on sources better. Admitting mistakes is a good thing and builds a journalist’s and outlet’s ethos. They are members of the press, and democratic societies need these professionals to uncover the information that allows us to make informed decisions. Just as we wouldn’t claim science has been debunked if a theory is overturned by new information, we shouldn’t claim the press is worthless if they happen to correct past narratives when new information comes along. However, if a journalist or an entire outlet continues to lie over and over again, then they probably are worthless.
To make a blanket statement that the press, hard-working journalists providing citizens with vital information, is the enemy of the people is the height of fascism and authoritarian aspirations. Faux News is not equal to well-researched reporting that seeks to elevate information in the public sphere in order to advance the democratic process of a well-informed citizenry making important decisions. Demagoguery is not journalism. Knowing the difference is vital to democratic society, and this education is a cornerstone of General Education.
Now, not all outlets are equal in their delivery of news. Some are obviously biased. In fact, I would go as far to say that broadcasted news (TV, cable, and radio) is more likely to promote infotainment and appeal to audiences not as interested in in-depth analysis. After all, they’re competing with all the entertainment available to us. Traditional print sources that have made their way online are less likely to engage in infotainment and more likely to seek to inform, which makes them less concerned with fitting in quick soundbites on topics. However, even among the broadcast sources, there are outlets more biased than others. When the primary goal is not to inform but “infotain” or push an overt Political (as in party politics) agenda, that outlet has next to no credibility.
- Is it fair to claim that TV-watching audiences are less concerned with in-depth analysis?
- Are we conditioned to want superficial infotainment, or do we “demand” it by tuning into it?
Overall, let’s all be more aware of our use of “the media,” “the press,” and “journalism.” They aren’t interchangeable terms.
Economic Predictions
Collins and Pinch in Ch. 5 of their technology book point out that it’s difficult for economic models to predict the future, but that’s not the same as saying economists lie. “All things being equal” is nearly an impossible standard to have for modeling, but, as Collins and Pinch point out, we ought to trust their theories on the economy because they spend so much time on predictions and studying the economy (p. 148). Below, I’ll cover some important topics that come up constantly in the media regarding the economy: growth, taxes, and government spending. This isn’t supposed to take the place of an economics class; instead, it’s supposed to detail how complicated economic assumptions are and why we need to scrutinize the opinions of those claiming to have certainty in their economic predictions. Then, we’ll go over today’s reading that lies to readers in order to advance a Political agenda.
Economic Growth
When people discuss economic growth, they usually refer to the increase (or decrease) of the gross domestic product, which is the value of all goods and services produced within a country. I know you like equations, so here’s the equation for growth:
- GDP = C + G + I + NX
- GDP= Consumption + Government spending + Investments + Net Exports
- Net Exports are (exports-imports)
Another way to assess growth is through per capita income, which is the nation’s average income. Currently, as of 2022 data, the per capita income is $69,288 (macrotrends). I particularly like this webpage’s definition of per capita GDP because it states, “[GDP] is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources.” One thing we haven’t been doing is considering the environmental impacts of growth. We have finite resources and a dying planet.
Consider what that video leaves out. Does the video capture the nature of work? What about its assumption of unemployment? Also, what happens to work(ers) when there are technological advances? For further discussion on GDP and economic growth, see this article “What Is the US GDP Growth Rate?” (not required reading). If you really want to rile up a relative, tell them your professor for a “liberal studies” course provided a link to a YouTube video about Karl Marx! That covers an alternate view of productivity and work satisfaction (not required viewing).
Taxes and Borrowing
Everyone’s favorite topic: taxes! It will come as a surprise to many of you, but the United States doesn’t have a purely capitalist economy; instead, it’s a mixed economy with market forces and government intervention, including regulations, taxes, and spending (defense, welfare, quantitative easing, etc.). The Treasury Department collects revenue through taxes and Congress then appropriates…sometimes appropriately…spending. Although the President has great influence on spending, especially military spending, they sign budgets into law after getting approval from Congress. Therefore, it’s somewhat unfair to blame presidents for increases in spending that they have no legal authority to carry out on their own.
Here’s a breakdown of where the Treasury Department gets taxes
- Personal Income Taxes: around 50%
- Payroll Taxes (FICA—Social Security): around a third (36%)
- Corporate Taxes: 7%
- Excise and other taxes: 8%
Source: Center on Budget and Policy Priorities
Of course, we all know the federal government spends more than it takes in, so the Treasury Department issues bonds to borrow money. The yearly borrowing to cover federal spending is the deficit, and the accumulation of deficits year after year is the national debt, which is currently $31,123,887,781,401.34 (as of 10/03/2022) or $31.1T. By the way, T=trillion.
If GDP is around $24.85T (Nominal GDP for 2nd Quarter 2022), the numbers aren’t out yet for Fiscal year 2022), we owe $6.25T more in debt than the US economy makes in a year, or our debt-to-GDP ratio is roughly 125%. Consider the deficits the federal government has run over the last decade—before COVID-19:
- 2020 – $3.3T
- 2019 – $960B
- 2018 – $779B
- 2017 – $665B
- 2016 – $585B
- 2015 – $439B
- 2014 – $514B
- 2013 – $719B
- 2012 – $1.1T
- 2011 – $1.3T
- 2010 – $1.3T
Of course, the Great Recession and pandemic caused the government to drastically increase spending to keep people working, consuming, and paying rents and mortgages. These policies are to stave off a financial collapse.
If you still haven’t gotten enough economic information, take a look at the Nominal vs Real GDP. Anyone heard of inflation? Scroll down to Compare U.S. Nominal GDP to Real GDP (2012 to 2022) for a look at the graph.
Tax Cuts and Increases…and Economic Growth
If all things are equal, we’ll be able to once and for all prove that cutting or raising taxes affects economic growth. Most economists will tell you that cutting taxes increases growth because, when people have more money, they demand more, so companies offer more goods and services, and consumers spend more. Cutting taxes for organizations means more money for research & development and, in theory, wages, which can be used to spend money on more goods and services. While economic historians would have more detailed investigations of exactly what was going on when taxes were cut or raised, these explanations rarely—if ever—come out in soundbite media. Let’s look at when taxes were cut and raised and what happened to economic growth. Before we get into that, here are the current numbers we’re working with:
- GDP (2021): +12.18%
- GDP in USD (2021): $19.36T
- Top Income Tax Rate: 40.8%
A Deeper Look at Taxes and Growth Rates
In order to drive home the point that doing something—cutting taxes in this case—doesn’t produce the same results at different times, click on the link below and scroll down to the graph.
“How Past Income Tax Rate Cuts on the Wealthy Affected the Economy” (09/27/2017)
If you read the entire article, you’ll find that it’s a myth that cutting taxes ALWAYS leads to increased growth.
The Realities and Myths of Higher Income Brackets Paying More in Taxes
In another context, we’d go into the reasons many point to evidence of higher income earners paying more in taxes. They aren’t necessarily wrong, but they aren’t being completely transparent. The same issue that you probably saw clearly in today’s reading—percentages not being a full picture when we look at actual dollar amounts—is going on when economists point to increases in tax revenue coming from higher incomes while tax rates fall. Below are three articles very much in support of lower taxes, and you probably will hear representatives from the organizations in soundbite media (none are required reading, but I have to include them as evidence of my claim):
- Heritage Foundation—“The Historical Lessons of Lower Tax Rate” Daniel Mitchell (13 Aug. 2003)
- Hoover Foundation—“Tax Rate Hikes And The Economy Daniel Heil (18 Feb. 2021)
- CATO Institute—“The Economic Impact of Tax Changes, 1920–1939” Alan Reynolds (Winter 2021)
If you’re interested in their perspectives, please see those readings for more details. One argument the above articles make (as do most lower tax proponents) is that the wealthy pay more taxes when rates are lower because there’s less incentive to hide or off-shore their profits. All things being equal, I have no doubt that’s true. We’ll just focus on the Heritage Foundation article and this specific part:
The Reagan tax cuts
The share of income taxes paid by the top 10 percent of earners jumped significantly, climbing from 48.0 percent in 1981 to 57.2 percent in 1988. The top 1 percent saw their share of the income tax bill climb even more dramatically, from 17.6 percent in 1981 to 27.5 percent in 1988.
Heritage Foundation—“The Historical Lessons of Lower Tax Rate” Daniel Mitchell (13 Aug. 2003)
Basically, this article claims that cutting taxes actually led to the wealthy paying more of a percentage of the total tax revenue the federal government brought in. This is a logical fallacy: an unwarranted assumption or post hoc ergo propter hoc (after this therefore because of this). Unfortunately, there isn’t enough proof that the amount of increased revenue from the wealthy had ANYTHING to do with a tax cut. Furthermore, the language of the article foists the (unwarranted) assumption that cutting taxes led to increased tax revenue from the wealthy. More investigation needs to happen to “retrodict” (Collins & Pinch, [Technology], p. 129) a model that proves the above assumption.
What we need to do is look at the increase in incomes of these top earners, and you’ll immediately recognize where that increased revenue came from: taxing higher incomes at a lower rate still brings in more revenue because those incomes have grown. Reflect on the above “Reagan Tax Cuts” blurb in light of this graph on income growth:
The above graph shows that the top 5% of earners’ incomes grew the fastest during all time periods except 2001-2010, when the average of all incomes dropped. Yes. Because they have higher incomes, their losses in real amounts are greater. That brings us to today’s reading regarding the myth that a more equitable distribution of wealth happened between 2017-2020.
The Myth of Income Distribution
From the end of 2016 through the end of 2019, real wealth for the bottom half of households grew at an annual rate of 17.2 percent, while real wealth for the top 1 percent of households grew at a 5.2 percent pace. Following landmark tax reform in 2017, real wealth for the bottom half of households grew at almost four times the pace of that of the top 1 percent.
National Review. “Setting the Record Straight on Wealth Inequality.” Cale Clingenpeel and Tyler Goodspeed (23 July 2021)
The Main “Facts” of the Article
- 17.2 ÷ 5.2 = 3.3…not sure that’s “almost four times,” but it is just over three times the percentage growth.
- During the Great Recession, real wealth for the bottom half of earners fell by 36.9% and dropped 13.7% for the top 1 percent of earners.
- Let’s use $50K for income of “bottom half of earners”
- $50K * 0.369% = $18,450
- Let’s use $500K for top 1% of earners
- $500K * 0.137 = $68,500
- These estimates are for discussion purposes. Please feel free to research the exact averages for all income levels and report back to me…
- Keep your eyes on the actual dollar amounts.
- Let’s use $50K for income of “bottom half of earners”
- By the end of 2020, aggregate real wealth held by the bottom half of households was 21.9 percent
- Aggregate real wealth among the top 1 percent of households was up 10.3 percent
What are the real numbers? The authors might have a bias. Cale Clingenpeel was Senior Adviser to the Chairman of the White House Council of Economic Advisers during the Trump administration. Tyler Goodspeed is a Fellow at the Hoover Institution. They are very committed to keeping taxes low.
They actually link to the source but fail to provide where they exactly got their annual rate calculations (para. 5) for a supposed increase in income distribution on the link they give in para. 3: DFA: Distributional Financial Accounts. Let’s attempt to reengineer their argument and look at wealth in real dollars. I found these number at the above link when I clicked on Explore the Distribution of Wealth Over Time. Incomes (and inflation) have changed since Clingenpeel & Goodspeed’s article came out, but I’m looking at the numbers from the time period they analyze, which was up to 2020.
- Bottom Half of Households wealth in Dollars (USD)
- 1st Quarter 2017: $1.17T [$117*17.2%=$137.1*17.2%=$160.7*17.2%]=$1.88T
- 1st Quarter 2020: $1.9T {close enough to $1.88T, and 17.2% is most likely an average}
- Percentage increase: 61.5% over three years
- Dollar amount increase: $73B
- Top 1% of Households wealth in Dollars (USD) {Add top 0.1% to 99-99.9%}
- 1st Quarter 2017: $27.9T [27.9*5.2%=$29.35*5.2%=$30.87*5.2%]=$32.48T
- 1st Quarter 2020: $30.36T {5.2% seems a bit high of an estimate, but DFA might have revised the amounts after Clingenpeel & Goodspeed’s article came out.}
- Percentage increase: 8.81% over three years
- Dollar amount increase: $2.49T…notice the T for Trillion
- Bottom Half of Households wealth in Dollars (USD)
- 4th Quarter 2016: $1.13T
- 4th Quarter 2019: $1.97T
- Percentage increase: 74.3% over three years
- Dollar amount increase: $84B
- Top 1% of Households wealth in Dollars (USD) {Add top 0.1% to 99-99.9%}
- 4th Quarter 2016: $27.01T
- 4th Quarter 2019: $33.43T
- Percentage increase: over 23.7% over three years
- Dollar amount increase: $6.42T
Is the above assumption that the bottom half’s income distribution increased warranted based on dollar amounts? Also, if they’re using specific dollar amounts to get the percentages they derive, where exactly are those amounts? I might have assumed the wrong numbers in the above calculations, but what was I supposed to assume? It’s unethical not to be accurate in identifying the exact data for your arguments. If “unethical” is too strong, then let’s say it’s “sloppy” research not to be accurate–don’t just give a link and expect us to do the work. If the reader has to guess or can’t trace back the actual data used, the source is being unethical. Let’s be clear: I think they’re just liars.
Just so we’re clear: Economists revise results all the time and adjust previous estimates, so some calculations can fluctuate, but they usually aren’t drastic changes. Some of the numbers from the DFA will be revised in the future. Clingenpeel & Goodspeed are mostly correct about the percentage increases, but they do not take into account that one group’s real dollar amount is measured in Billions while the other is measured in Trillions.
Next Class
Keep up with the reading on Canvas. We’re going to be covering the History of Medicine on Monday, 10/17. Then, on Wednesday, 10/19, and Monday, 10/24, we’ll cover COVID-19 medical communication. After that, we start our science fiction section of this course.
Don’t forget to do your Weekly Discussion Post by Friday, 10/14, at 11:00pm.