Sunday, September 26, 2010

Come on...

Over the last couple of days have run across a number of articles in which various pieces of 'evidence' are adduced to support dubious conclusions. Correlation is taken as causality, complex situations are 'simplified' to one or two main issues and other, possibly confounding, factors are ignored, etc. Three examples:

  • A. Following in the same vein as The Death of American Manufacturing (from 2006), and 'The Plight of American Manufacturing' (from December 2009), the article '19 Facts About The Deindustrialization Of America That Will Blow Your Mind' (September 2010) continues the meme that U.S. manufacturing is going down the tubes. This is mostly based on the facts that manufacturing accounts for a smaller share of GDP over time... and also the ongoing decline in manufacturing jobs. Both are taken as clear evidence that U.S. manufacturing is on its way down/out. Umm, not quite. Manufacturing as a percentage of GDP has declined for most of the industrialized countries, as it eventually will for the China and Indias of the world. However, U.S. manufacturing output and production continues to grow, its share of GDP has diminished because other sectors of the economy have grown faster. And manufacturing employment has decreased due to increases in productivity, and not because "jobs are being shipped abroad." (On a side note, manufacturing jobs have also decreased - for the same reasons, improved technology and productivity - in the countries to which U.S. jobs are "being shipped to." For example, while the U.S. lost approximately 11% of its manufacturing jobs over the last decade, the other manufacturing powerhouses have also lost manufacturing jobs - Japan 16%, Brazil 20%, China 15%, etc.). True, China will soon overtake the U.S. as the world's largest manufacturer, but that's hardly the same as the "weak manufacturing giant" characterization of the U.S.

The Future of Manufacturing, GM, and American Workers

  • B. So How Did the Bush Tax Cuts Work Out for the Economy? looks at the Bush tax cuts. It starts out: "... The 2008 income tax data are now in, so we can assess the fulfillment of the Republican promise that tax cuts would produce widespread prosperity by looking at all the years of the George W. Bush presidency..." and then goes on to point out that over the Bush years "... Total income was $2.74 trillion less during the eight Bush years than if incomes had stayed at 2000 levels..." OK, so one could perhaps draw the conclusion that tax cuts did not stimulate the economy sufficient to cause growth. (Note: some might argue that this ignores a number of other factors and that absent these cuts things would have been worse - similar to the Obama "jobs created and saved" argument). However the article then goes on to strongly imply causality i.e. that the tax cuts actually caused the decrease in income. This is definitely a step too far, this blogger is unaware of any suggested economic mechanism or model that would argue this effect for tax cuts...
  • C. '15 Shocking Facts Show That the Middle Class is Being Wiped Out' and 'The Middle Class in America Is Radically Shrinking. Here Are the Stats to Prove it' (both incidentally by the same author) purport to show that the middle class is "being wiped out." It doesn't particularly help that in neither does the author bother to define "middle class." The statistics quoted do go to show that there is much inequality in the U.S. (no surprise to anyone who has looked at its Gini coefficient, the highest among the industrialized G10 countries), and that the people at the two extremes of the spectrum are really hurting or doing extraordinarily well. However, the leap to the middle class "being wiped out" is not supported. It doesn't help that the reasons for this happening given in the two articles are that "... Both parties have absolutely refused to stand up to the Federal Reserve and the horrific economic policies that they have been shoving down our throats for decades..." and Ross Perot's "... giant sucking sound..." i.e. globalization and free trade. Ah, the yearning for easy answers, associated with the need to blame someone else!

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