Checking the numbers means more than checking just the numbers

Reader Jody A. didn't like what she saw in this Zero Hedge post. I think the site is fun to read and often makes good points in very provocative ways but this post is careless. Here are some points to ponder:

1. The quantitative part of their argument relies on Tom Friedman's Law of Statistics (explained here); that the extreme case of some lower-income person exploiting every angle is used to represent the average such person.
2. Assuming that a group of dishonest people exists who exploit every angle to get government money, it is hard to imagine that this group constitutes all, if even most, of the low-income people who receive government aid. If there are different types of poor people, they should be analyzed as separate groups. This is the central idea behind Chapter 3 of Numbers Rule Your World.
3. The ideological basis of their argument makes no sense to me. If we concede that the middle-income person would end up with less disposable income than the lower-income person, then we'd expect that the middle-income people will take lower-paying jobs so as to increase their disposable income. But I have not seen reports of such reverse social mobility. Theory needs to fit reality. This hole in the theory needs to be covered.
4. An implicit assumption of this argument is that people choose to be poor, or that people are given incentives to choose to be poor. The implication is that poverty is a problem of misconstrued incentives. This suggests that poor people would not exist if we had the right incentives in place. This suggests we live in Lake Wobegon where everyone is above average.
5. It is often useful to think about the relative scale of numbers. The US poverty rate (living at or under minimum wage) was 14% in 2009, equalling 44 million persons (see here). The proposed tax cut to the super-wealthy (top 1%) is valued at $36 billion next year (using the numbers here). This amount is sufficient to pay $820 to every person living under minimum wage.

We are often faced with quantitative claims like this. Of course, we wish to "check the numbers". Checking the numbers means more than checking the computation. I have checked various other things here: whether the observed result is properly generalized to the population for which the claim is made; whether like is compared to like; what the underlying theory is, and whether it makes sense; how the underlying theory can be reality-checked, in both its assumptions and its implications; and how to put the numbers into perspective.

Comments

[derek]

Many middle-income people I know claim plumbers make "a lot" of money. No amount of number-checking is going to clarify whether it is "a lot", because that's not itself a number.

But I can check whether they send their children to plumber school; they never do, it's always doctor school or lawyer school. Which suggests they don't actually think plumbers make a lot of money, they just resent paying low-income people any money at all.

[sb]

Wyatt Emmerich (or Emerich) of The Cleveland Current does not exist.

[Andrew Gelman]

Derek:

I always say that statisticians are like plumbers: Most people don't want to look at the mucky crap we deal with, so the few of us who decided to go into the profession get paid a lot.

[njnnja]

Isn't the easier conclusion to take away from the presentation that ex-Medicaid, the numbers make sense? So you should really focus on the health care aspect. As a fully credentialed health care actuary, let me start by saying that the general cost for family coverage looks about right.

And while it is strange that they would look at someone who makes $60K per year but has no employer sponsored health care, let's take that person. A more tax-efficient employer would pay the employee something like 50K, have $10K of employer paid benefit with the remainder picked up by employee contributions or higher copay/deductible. This would also decrease the tax burden of 13,034 by probably several thousand dollars.

But let's take their case of a really dumb employer as a given. Assuming that "fairness," (as opposed to "equity") as defined by ensuring that the $60K earner gets more net benefit than the low earner, is your only concern, you could argue for more fairness by taking away Medicaid benefits from the low earner or give some benefits to the high earner. Luckily, when major provisions in the 2010 PPACA act come into force, the $60K earner will be entitled to something like a 60-70% subsidy for healthcare premiums when purchased on an exchange.

Sorry for the long post, but if you want to increase the fairness (by reducing equity) in this scenario, and you want to be logically consistent, then you are either in favor of eliminating (or substantially reducing) Medicaid ("Let them eat cake") or you are in favor of the most important provisions of "Obamacare." And yes, I know that the kind of person who puts together this kind of analysis is a partisan hack that starts with their conclusion and puts together facts to support them and will never admit that PPACA was a good idea.

But if you were a little taken aback by these findings (as I was at first), and were open to how it might be possible, then take comfort in the fact that the linchpin of the analysis (healthcare) proves almost exactly the opposite of what he wants, namely, that health care reform that looks a lot like the Romney-backed Massachusetts plan or the Obama-backed PPACA is a very good thing for the middle class.

[Basil]

It's hard to make critical decisions on peoples lives based on numbers. This is the reason why out nation is going more into debt and we keep electing public officials that want to increase it. Some day someone has to make a tough decision. It won't be until we've all passed that this person will be deemed postively.

[Gary]

@njnnja - very nicely done to focus this on healthcare where all the high-impact $$ are. It will go entirely over the head of "Tyler Durden," alas.