Friday, January 20, 2012

Is Being an Ideologue a Contributor to Stupidity?

A gratuitously provocative question?

Maybe not.

Consider the following equation:

TA * TR = TB.

Let's say TB represents some "financial obligation" among a group of people. Further, let's say that at some point in time, the group has a TB of 40. And then, almost 30 years later, TB equals 55.

Now, if you don't know the values of TA and TR, what would be logical to conclude about how they must have changed over that period?

This one is so simple, it couldn't stump an eighth grader who wastes most of math class staring out the window. For TB to increase on the right side of the equation, one of the two variables on the left side of the equation must have increased -- or perhaps both did, in some combination.

But what if you're an ideologue? And what if your ideology leads you to think a "TB" of 40 for this particular group is already high? And what's more, you vehemently insist that TR should be as low as possible, and that a lot of economic problems result from a high TR?

So what happens when you see:

TA * TR = 40

Jump to:

TA * TR = 55

It's clear to you what the problem is. TR! Because TR is always the problem! You don't spend a lot of time mulling over what may be going on here. You fixate on TR, because that's what you always fixate on.

In which case, your name might be Ari Fleischer.

Because this equation is really: "Taxable Amount (taxable income of the top 10% of the population) times the Tax Rate (tax rate of the top 10% of the population) = Tax Burden (the percentage of overall federal taxes paid by the top 10% of the population)".

Fleischer, President Bush's former press secretary, recently tweeted that the "Tax Burden" of the richest 10 percent soared from 40 percent in 1979 to 55 percent in 2007. The implication: the TR (Tax Rate) on this group is already high enough, and this group is carrying more than its fair share of the TB (Tax Burden).

But ideology -- his visceral dislike of taxation, and the welfare state, and wealth redistribution -- has made him too dumb to see how a simple equation works.

Because consider this thought experiment: if in 20 years, the income of the top 10 percent explodes and the other 90 percent of the population become their slaves and earn no income (and meanwhile the Tax Rate doesn't change at all), the top 10 percent will pay 100 percent of taxes (up from 55 percent). But what does that show? That they're being taxed too much?

Of course not. It shows that we've regressed to something akin to a feudal society.

There are two variables on the left side of this equation, TA * TR = TB. If you're an ideologue you tend to miss stuff like that. (See Mark Thoma proving here that, yes, the answer to the mystery of what happened with the Tax Burden does lie with "TA," as the richest scored the biggest income gains over the last three decades.)

But ideologues don't do nuance well. They also abhor cognitive dissonance.

This is why I think Peter Wallison has become a sort of trivial hand puppet for the right, a useless one-note screech owl in his vehemence that it was Fannie and Freddie that caused the financial crisis (and he apportions no blame at all to Wall Street's securitization machine). He can't see beyond his ideological blinders.

P.S. For those of you thinking that Fleischer's "tax burden" is a percent, not a straight-up number like 40, yes, I've simplified. But the argument isn't impaired by this simplification. The ratio just introduces a second layer of complexity. If you understand math, you know what I mean. If you don't, I can write it all out ...