More Everyday Progressivity

Suppose you walk into your favorite restaurant and you suddenly discover all of the menu prices have been cut by 10%. Sweet! Then you turn the menu over and notice that the senior citizen prices have been cut by 20%. How nice, this price cut was progressive in favor of seniors. What a great restaurant policy.

But wait! You look closer and notice that 20% of the cheaper senior price is smaller in absolute value than 10% of the more expensive regular price. So, the menu change actually reduced the amount of the “senior discount”—the difference between the regular price and the senior citizen price. What the *&%$? Does that mean that this restaurant policy was regressive toward seniors? It must be that regular customers are gaining more at the expense of seniors! How unfair!

Of course, this is obviously ridiculous. Everyone benefitted from the price cuts. Seniors received the largest percentage reduction in their prices, but because they already paid a lower price, their prices are cut by a smaller amount. In the extreme, suppose seniors ate for free. Then if we cut prices, seniors wouldn’t be affected at all. Would anyone possibly suggest that policy was harmful toward seniors?

And yet, this is exactly the argument that is used to suggest tax cuts, even when they make the tax code more progressive, are unfairly benefitting the rich. When someone poses the argument it is hard to tell if they are completely confused or if they actually know what they are talking about and are intentionally demagoguing the issue to advance an agenda of bigger government and egalitarianism. If you prefer more government and less inequality then, by all means, argue that on its own merits. But don’t pretend a tax cut takes money from the pockets of the poor and gives it to the rich. The truth is quite, quite different.

I can’t decide which is misunderstood more by the public and mischaracterized more by populist political pandering: trade policy or tax policy?

Oh, What Do Economists Know

Hillary Clinton’s sit-down with George Stephanopoulos on ABC’s “This Week” quickly delved into her plan to suspend the federal gas tax during the peak summer driving season.

Stephanopoulos played a clip of Sen. Barack Obama criticizing the plan. Obama quoted New York Times columnist and Princeton economist Paul Krugman’s assessment that the idea is “pointless and disappointing,” and asked the New York Senator to name “a credible economist who supports the suspension.” Krugman has previously been favorable of Clinton’s economic proposals.

“Well I’ll tell you what, I’m not going to put my lot in with economists,” Clinton said, a response in line with some of the populist notes she’s been hitting in recent stump speeches on the gas tax.

Just when my misgivings on Obama are about to peak, Hillary finds a may to outshine him. Memo to Hillary: consider NOT trying to defend this ridiculous policy/pander.

Boo Alpha

It always brings to mind the last words Gary Chamberlain said in his econometrics class: "I didn't mention hypothesis testing, because I don't like it. And don't ever use those damned stars."

Quote of the Day

Via Walter William in the Washington Times:

"Of all tyrannies a tyranny sincerely exercised for the good of its victims may be the most oppressive." -C.S. Lewis

No Really, Middle Class, Your Life Still Sucks

From KPC:

Of course one big downside to a lessening of the business cycle apocalypse meme, is that it will lead directly to an equi-proportionate increase in inequality hysteria.

This is a direct application of Will Self's "quantity theory of insanity" which posits that whenever insanity falls in one dimension, it rises in another.

Awww. Thank goodness there will always be some way to make people feel sorry for themselves.

What Gives?

Why is health care reform treated like it can only originate from the desk of the President? Congress ignores it in the media as if its not an issue they have control over....the opposite is true. Why don't members of Congress stop acting like they would be stepping on toes by bring it up and start suggesting their own proposals? Is it because there is pressure to let it be an election issue?