SUBSCRIBE NOW WELCOME BACK. Do you want to continue reading where you left off? New Republic subscribers can pick up where they left off no matter which device they were previously using. SUBSCRIBE NOW

Go Home Dismal Scientists Vs. Credulous Public

TIMOTHY NOAH JANUARY 31, 2012

Dismal Scientists Vs. Credulous Public

BY TIMOTHY NOAH

Take a look at the following statement: 

"Permanently raising the federal tax rate by one percentage point for those in the top income tax bracket would increase federal tax revenue over the next 10 years."

This is a bit like saying if you jump into a swimming pool you'll get wet. When researchers at the University of Chicago's Booth School of Business and Northwestern's Kellogg School of Management presented this statement to a "panel of distinguished economists," 100 percent of them agreed with it. But when the researchers presented this statement to the general public only 66 percent of respondents agreed with it. Only fifty percent of Republicans agreed with it, compared to 80 percent of Democrats. "This difference exists in spite of the fact that this statement is factual, not political," the researchers observed. "Indeed, all economists, regardless of their political orientation, agree with it." Well, all economists except for Arthur Laffer, keeper of the supply-side flame.

Why does the public resist believing a statement that is factually true? Because Republican candidates keep insisting it isn't true. "Studies of the American tax system have demonstrated that higher corporate rates do not necessarily lead to higher revenues," we learn from "Believe in America," Mitt Romney's economic plan. "When we cut the capital gains tax in the 90s," Newt Gingrich told CBS News, "the revenue went up dramatically." This is a fantasy that was long-ago disproven. Not even Romney economics adviser Greg Mankiw believes it. My predecessor in this space, Jonathan Chait, wrote a whole book about this.

Other interesting cleavages between economists and the public:

"Very few investors, if any, can consistently make accurate predictions about whether the price of an individual stock will rise or fall on a given day." Sixty-four percent of economists believe this, compared to 54 percent of the general public. Wealthier and/or more highly educated respondents are more likely to agree with the economists.

“Eliminating tax deductions on mortgages would lead to better financing by individuals.” Eighty-five percent of economists believe this, as against 35 percent of the public. Wealthier respondents are less likely to agree with the economists; poorer respondents are more likely to agree with the economists.

“Mandates that Federal government purchases should be ‘buy American’ have a significant positive impact on U.S. manufacturing employment.” Ten percent of economists believe this; 75 percent of the public does.

SHARE YOUR THOUGHTS

Show all 18 comments

You must be a subscriber to post comments. Subscribe today.

18 comments

“Mandates that Federal government purchases should be ‘buy American’ have a significant positive impact on U.S. manufacturing employment.” Could someone explain to me why this is false? Is it the "significant" part that's false since it may already be the case? If a large purchaser decides to buy from a certain class of suppliers I would think it would benefit that class of suppliers. I'd like to see some extra detail on this one.

- tmmats

January 31, 2012 at 12:16pm

You must be a subscriber to post comments. Subscribe today.

I suspect there are two, very different, explanations for this. One, cognitive dissonance (or people believe what they want to believe), which doesn't say much for people's reasoning skills. The other explanation is that for almost 30 years people have been told that their tax rates have gone down, even as their taxes went up and take-home pay went down; so it's only logical for people to conclude, when told that tax rates would go up, to believe that taxes would go down, which says a lot for people's reasoning skills.

- rayward

January 31, 2012 at 12:36pm

You must be a subscriber to post comments. Subscribe today.

most people are low information because they don't have the time so none of this surprises me, and with the people who have the most time, the elderly, are glued to things like the Fox channel. And I have to be honest, I wish I were inclined to be a low information person. In the areas that I am (I don't even know the name of the Mayor in my town) that lack of knowledge has not bothered me in the slightest. my co-workers who don't care the slightest about these topics spend their weekends scuba diving and eating mojara at the beach or getting drunk at Velas. I wonder how much happier I would be if I did the same instead of reading TNR or Chait or Sullivan.

- blackton

January 31, 2012 at 1:11pm

You must be a subscriber to post comments. Subscribe today.

Apparently believe what they want to believe, such as, the earth is flat and there is some guy up in heaven deciding who gets in (Jews, forgetaboutit!) Blackton, unfortunately I don't think it's just old folks who have this mindset though. Unfortunately there are a lot of young people who are mired in the Middle Ages, you can see this in Europe too; some of the most extreme right wing parties have very young, very angry members who hate everybody.

- Sophia

January 31, 2012 at 1:18pm

You must be a subscriber to post comments. Subscribe today.

I wonder how many people really know what their effective tax rate is? I don't, and I'm a pretty well-informed sort of guy. I guess I could find my tax return and do the arithmetic, but even that's daunting for some people. Maybe the IRS ought to send everyone a little notice that says, "Your effective federal tax rate for 2011 was 20.9%" or something, then show what it was for the previous five years.

- benjamin81

January 31, 2012 at 1:18pm

You must be a subscriber to post comments. Subscribe today.

I don't know the answer. Does the military defense manufacturing industry increase employment during increased government procurement ie, war time? Some study out there must consider this question.

- Doug12

January 31, 2012 at 1:35pm

You must be a subscriber to post comments. Subscribe today.

Now that we live in the age of the Internet (the ultimate global village) all information in human history is now available to us. Unfortunately, some of the information is correct; some of it is mistaken, and some of it is a damned lie. Even more unfortunately, although yesterday I knew what was true, and what was important to me, today I don't remember what it was.

- skahn

January 31, 2012 at 1:47pm

You must be a subscriber to post comments. Subscribe today.

once more, in terms of wilful ignorance, I am reminded of the Insane Clown Posse: "fucking magnets, how do they work?"

- miceelf

January 31, 2012 at 2:21pm

You must be a subscriber to post comments. Subscribe today.

Hey, we've always been at war with Eurasia, right?

- ironyroad

January 31, 2012 at 2:28pm

You must be a subscriber to post comments. Subscribe today.

Huge numbers of gullible conservatives believe six impossible things before breakfast because the propagandists that they read and watch and listen to feed nonsense to them constantly. But what is wrong with 20% (minus the usual don't knows) of the Democrats? Yeah, people just don't have the time to pay attention to political and economic matters. The average TV viewing time of Americans is four hours a day. So, what with work and sleep, that about sews it up. Tm: Economists will tell you that such mandates will drive up the cost of manufactured goods, hence, consumers will buy less of them. And then there is the reality that other nations will threaten to retaliate and sometimes, they will carry out those threats. As so often when it comes to economics, something that on the surface seems like a good idea turns out not to be so. Further, as a thought experiment, imagine if every nation pursued this policy, ad infinitum. It would abolish comparative advantage and the world would be much the worse off for it.

- liberalref

January 31, 2012 at 2:56pm

You must be a subscriber to post comments. Subscribe today.

There's something else about low tax rates, and that is how the federal judges react to the huge deficits, both generally, for the country which they serve, and personally, because each year the Chief Justice of the Supreme Court rants about low pay for the federal bench. When taxpayers show up in court to assert their annoying constitutional rights, expect federal judges to give them a big raspberry, bang their gavels, and deny them what they seek without giving the matter much attention. Ask the federal judges if they aren't affected by deficits. Imagine yourself as a federal judge with a paycheck and think how you would make such decisions when alleged rights threaten the fisc.

- Nusholtz

January 31, 2012 at 3:17pm

You must be a subscriber to post comments. Subscribe today.

In the (paraphrased) immortal words of Alphonso Bedoya..."Facts? We ain't got no Facts. We don't need no facts. I don't have to show you no stinkin' facts!"

- singlspeed

January 31, 2012 at 3:40pm

You must be a subscriber to post comments. Subscribe today.

The Lewdies are Gloopy.

- CRS9TNR

January 31, 2012 at 7:25pm

You must be a subscriber to post comments. Subscribe today.

Seems pretty clear to me that requiring the Federal government to buy American increases American employment, including manufacturing. It may not lead to the best price, but it sure as heck has to increase employment unless, for some reason I cannot fathom, having the Feds by offshore would have zero net impact on our traded balance. Why on earth would that be? Given the size of our government, "retaliation" by other countries in the form of a similar rule would hardly be noticeable. And most of them probably have such rules, formal or informal.

- roidubouloi

January 31, 2012 at 10:06pm

You must be a subscriber to post comments. Subscribe today.

Comparative advantage does not necessarily produce a better outcome unless trade is balanced. Economists assume that "in the long run" it will be, but there is zero evidence that that is the case for the US.

- roidubouloi

January 31, 2012 at 10:08pm

You must be a subscriber to post comments. Subscribe today.

I think that the failure of the Buy American Act to significantly affect American manufacturing is due to two relatively simple factors: -For the really big stuff, American manufacturing is already a given. The big defense contractors are very, very good at ensuring that their plane, tank, or boat requires parts from as many states as possible, so that Senators and Reps from those states step up to defend it when budget cuts come around. -For the really small stuff, the Buy American Act isn't enforced. As a fed, part of my job has been to recruit new hires. What did I hand out at the career fairs? Agency logo pins made in China.

- janus

February 1, 2012 at 8:05am

You must be a subscriber to post comments. Subscribe today.

Janus makes the excellent point that legal compulsion to Buy American may be completely superfluous in important cases. This does not change the reality that he fact of buying American manufactured goods necessarily increases or sustains American manufacturing employment. The economists who deny this relationship may have had some point to make. But I confess that I don't know what it is.

- roidubouloi

February 1, 2012 at 11:03am

You must be a subscriber to post comments. Subscribe today.

Paul Krugman blogged fairly recently about geographic clusters in manufacturing as a root cause about why "Buy American" may be not be as effective a strategy as most non-economists believe. Sorry, at lunch, can't research the link to post.

- sevenfiftyfour

February 1, 2012 at 12:38pm

You must be a subscriber to post comments. Subscribe today.

SHARE HIGHLIGHT

0 CHARACTERS SELECTED

TWEET THIS

POST TO TUMBLR

SHARE ON FACEBOOK

Close