what is the best method of measuring the economy?

[rhett o rick]

Last edited Sun Feb 24, 2013, 06:12 PM - Edit history (2)

Can you link me to a graph of such for 1990 until now? My search skills are terrible. Thanks

I am sorry not to include what my goal is. I am writing an essay for an American Government class. It is to be based on a section of the text that speaks to capital gains taxes and the economy. I think the article is biased. It indicates that in 2003 Bush dropped the capital gains tax down to 15% which lead to a doubling of the capital gains revenue between 2003 and 2006. The implication is that the lowering of the capital gains tax rate caused the increase in capital gains revenue. I dont believe that's a fair assumption and I dont believe the increase in capital gains revenues equates to a better economy.

I would like to find graphs of GDP, PQLI, wealth of the lower 99% from 1990 to date. Or whatever is the best economic indicator. I believe it will show that the drop of capital gains tax rates do not improve the economy except for the top 1%.

On edit: I think I may have found what I need here: http://www.forbes.com/sites/leonardburman/2012/03/15/capital-gains-tax-rates-and-economic-growth-or-not/

[elleng]

1. Here's one:

?&id=W055RC1,GDP,PAYEMS,CPIAUCSL&scale=Left,Left,Left,Left&range=Custom,Custom,Custom,Custom&cosd=1990-01-01,1990-01-01,1990-01-01,1990-01-01&coed=2012-11-01,2012-07-01,2012-12-01,2012-12-01&line_color=%230000ff,%23ff0000,%23006600,%23ff6600&link_values=false,false,false,false&line_style=Solid,Solid,Solid,Dotted&mark_type=NONE,NONE,NONE,NONE&mw=4,4,4,4&lw=3,3,3,5&ost=-99999,-99999,-99999,-99999&oet=99999,99999,99999,99999&mma=0,0,0,0&fml=a,a,a,a&fq=Monthly,Quarterly,Monthly,Monthly&fam=avg,avg,avg,avg&fgst=lin,lin,lin,lin&transformation=nbd,nbd,nbd,nbd&vintage_date=2013-01-28,2013-01-28,2013-01-28,2013-01-28&revision_date=2013-01-28,2013-01-28,2013-01-28,2013-01-28&nd=1990-01-01,1990-01-01,1990-01-01,1990-01-01

another:
?w=640&h=370

There are more, and others here will provide.

[Warpy]

2. Forget about the median wage

and concentrate on the mode, the wage that most people earn that hasn't been skewed upward by the plutocracy and their hired help in executive suites.

Then assess the true cost of living with a market basket of goods, the mode for rents and house prices in an area, and the availability of services like health care. Then compare them.

That's how well the economy is doing.

Figures like the GDP are utterly meaningless without this.

[Benton D Struckcheon]

3. Good idea.

Does anyone publish this? I've never seen it anywhere.

[progree]

6. Do you mean forget the average wage and concentrate on the median wage?

The median wage is found by lining up all wage earners (really wage and salary earners, but we'll use "wage earners" and "wages" for short) in order of their wages, and the median is the person right in the middle of the line. If there are 200 million wage earners, than Mr./Ms. number 100 million in line is chosen. So the earnings of a few percent of extreme high earners (or even the earnings of the top 49%) do not affect this statistic.

We all know what average wage is -- sum of everyone's wages divided by 200 million or whatever the number of wage earners are -- and that is skewed by the extremes of high income.

Mode is the highest point of the frequency distribution ... more people have this wage than any other particular wage ... anyway I've never heard this being proposed as a metric for this... it certainly has its merits...

Or maybe we should be looking at income rather than wage/salary?

[Warpy]

8. Look up median, mean, and mode. They all mean different things

in statistics.

My post made it quite clear the mode is the wage paid to the highest number of people in this country, the one that will give the best picture of the "average American," unskewed upward in income by averaging in the highest wages.

Only by judging the economic health of its citizens can you judge the overall economic health of a country.

[progree]

12. I know, I'm an engineer, had many courses in statistics

Last edited Sun Feb 24, 2013, 10:17 PM - Edit history (4)

My post accurately spelled out the difference between the average, median, and mode, did it not?

[font color = blue]"My post made it quite clear the mode is the wage paid to the highest number of people in this country, the one that will give the best picture of the "average American," unskewed upward in income by averaging in the highest wages." [/font]

True, except the "best picture" part of it. I don't agree that it is the best measure of what "the average American" is earning. Nor do any economists that I have ever heard of. I've never, ever heard anyone before promote the mode before as a useful measure of the average American or about anything else in statistics. Have you? Does any economist anywhere on the spectrum talk about "the mode wage"? For all I know, more Americans make the minimum wage than any other specific dollar and cent figure (and thus it would be the mode). Does that make it a good measure of how the average or typical American is doing? I think not.

[font color = blue]"Only by judging the economic health of its citizens can you judge the overall economic health of a country."[/font]

Another thing we agree on. Did my post say anything different? Is the earnings of the person in the middle of the line (see my previous post) a poor measure skewed by the ultra-high incomes of the plutocrats? (Answer: no, other than indirectly - the plutocrats decide what almost everyone else is paid, so that of course affects the median, but the same can be said for the mode as well)

Sorry to offend. I was simply asking a question out of interest and my own learning.

On edit: for anyone interested on an explanation of mean, median, and mode, applied to a company with 10 salaries, here is an example. With an example where mode would be the most useful measure in a situation:

http://mathforum.org/library/drmath/view/57603.html

[Wellstone ruled]

4. A Wise Elderly Coffee Broker,

whom I dealt with many years back,always said this,you can tell if you have made it if you don't know what the the price of a loaf of bread costs. To me,that's is as true as it gets. The Entitlement Class doesn't have or cares what the price of a loaf of bread costs. That's the worry of their Help. Kind of like living in a Plantation Society isn't it.

[Demeter]

5. I'd look at murder and suicide rates, death rates for children, homelessness, etc.

That tells you more than you want to know about the state of the economy and the society in general.

[progree]

7. Bhutan's Gross National Happiness Index

http://www.en.wikipedia.org/wiki/Gross_national_happiness

[rhett o rick]

9. The Physical Quality of Life Index sounds good but I couldnt find a graph of such for the USofA.

http://en.wikipedia.org/wiki/Physical_Quality_of_Life_Index

[tclambert]

10. To me, it's the unemployment rate.

Everything else depends too much on corporate "persons'" profitability.

Of course, now you get into the argument over how to measure unemployment truthfully.

I vote for the "bathroom scale" strategy. It doesn't matter if your bathroom scale is off by five pounds, as long as you keep using the same scale, and pay attention to the relative change. For unemployment, take The Bureau of Labor Statistics U3 or U6 numbers. Pick one and compare that value then and now.

For your assignment, Bush's capital gains tax reduction certainly did not help unemployment.

[rhett o rick]

11. Thanks, but I looked and it looks like the unemployment went down from

2003 to 2007. Tell me if I got something wrong.

http://data.bls.gov/pdq/SurveyOutputServlet

[progree]

13. 2003 was beginning of labor market recovery from dot com bust. 2007 was height of housing boom

[font color = blue]" Thanks, but I looked and it looks like the unemployment went down from 2003 to 2007. Tell me if I got something wrong. http://data.bls.gov/pdq/SurveyOutputServlet "[/font]

I got a "The database is currently unavailable. Your request was invalid for this Data Access Service. Please attempt other data requests. Thank you for using LABSTAT." message from the above link.

This works though, to get the U3 unemployment rate:

http://data.bls.gov/timeseries/LNS14000000

It fell from a peak of 6.3% in June 2003 to a bottom of 4.4% in May 2007. That's because we had quite a recession after the dot com bubble burst in 2000 (well, that was the peak of the stock market), and we didn't begin a labor market recovery (i.e. reduction in unemployment rate) until mid 2003. The housing bubble and people using their houses as ATM machines then lifted the economy (in an unsustainable way) until into 2007.

(officially the dot com bubble-burst recession was just from March 2001 - November 2001, http://www.nber.org/cycles.html), but recovery in the labor market always lags GDP recovery (and other measures the NBER uses -- the official arbiters of when recessions and expansions occur) by years.

[rhett o rick]

14. I guess I am not smart enough to understand all that. Thanks for the info. nm

[tclambert]

17. As I recall, job numbers improved some during the election year of 2004, and maybe a little after,

but what happened after 2007? 2008 and 2009 were terrible for jobs. When Bush took office, unemployment (U3) was at 4.2%. It went up to 6.3% in 2003, then down to 4.5% in 2007. His best period did not make up for the previous 2 years, or the years after. When he left office, it was at 7.2%, and the country was bleeding jobs at a rate of 700,000 per month.

That capital gains rate is still in effect. Clearly, it is not the driving factor in the jobs market. The capital gains rate was higher in other periods, like the 1990s, when job growth was particularly strong. A larger data set and comparing a 1.8% change in U3 during one four-year stretch to other four-year stretches with your key variable (capital gains tax rate) changed, will, at the very least, make you question the cause and effect relationship during 2003-2007.

Cherry-picking makes for good debating, but bad statistical analysis.

[hay rick]

15. Cherry-picking nonsense.

The numbers here: http://taxfoundation.org/article/federal-capital-gains-tax-collections-1954-2009

Capital gains were depressed from 2001-2003 due to the dot com bust and the economic shock that accompanied the 9-11 attack. The low 2003 collections are due to the depressed stock prices that followed these two crises. The increase between 2003 and 2006 is based on a depressed starting point and a rally that was due in part to the return of normal valuations and in part to excessive valuations associated with financial stocks during the housing bubble. The housing bubble burst in 2007 and the table shows that by 2008, capital gains receipts were lower than they had been in 2004 and by 2009 they were lower than any year since 1994.

[progree]

16. Reading your post again...

Hay Rick in #15 stated it well about the capital gains.

As for other economic indicators, browsing through the many graphs at the below link might be worth your while - lots of material to draw from.

http://www.democraticunderground.com/125170175

[rhett o rick]

18. Thank you that was very helpful. nm

[progree]

19. Reagan's tax cuts in the early 1980's created the Clinton economic boom 15 years later

That's just another example of the cherry-picking nonsense a couple of other posters mentioned.

What the righties usually do is look for any period of good economic growth (at least as measured by the statistics we have like the GDP), and then pick some right-wing kind of policy change, that occurred at the beginning or just before, and then declare that that policy change created the economic growth. 2003 - 2007 is a perfect example -- 2003 was the beginning of a natural economic recovery following a crash (later boosted by the unsustainable housing bubble and the reckless policies that promoted that). But anyway they selectively select their period, and then find some right-wing policy that occurred at or near the beginning (e.g. the Bush tax cuts), and then say, yup, the Bush tax cuts (of which the capital gains rate reduction was a part of) caused the boom.

Its like the rooster taking the credit for the dawn.

And of course the period was very selectively selected. In rebuttal to the 2003-2007 period, ask why the 2003-2009 period wasn't selected? (painting a much different picture). Ask why the Bush tax cuts didn't lead to the crash of 2008-2009 (many people think they played a part -- by shifting a large share of after-tax earnings from the middle to the top. The middle class spends almost all of what they earn. The wealthy spend most of their money buying stocks and real estate -- pumping up asset bubbles that don't help and eventually harm the economy. And sending a lot of their money overseas (anyone remember Romney?) ).

Back to Reagan. When one points out to a rightie the Clinton economic boom, and that the boom period began with a marginal tax increase on the upper bracket(s) in 1993, the rightie will sputter and hem and haw and then find SOME right-wing policy SOMEWHERE that in their mind is responsible for that. Here they have to reach all the way back to the early 1980s and the big top marginal income tax rate reductions under Reagan. And then say that those tax cuts stimulated Bill Gates and Steve Jobs and so on to get out of bed in the morning and start Microsoft and Apple and that all that came to fruition in the Clinton era 10-15 years later. Or some-such nonsense.

Come to think of it, if the rightie narrative about Reagan's tax cuts creating the Clinton boom is correct, then one can just as well explain the 2003-2007 boomlet as being the result of Clinton's upper-end marginal income tax rate increase 10 years earlier. Or the Reagan boomlet of 1983-1990 as being caused by LBJ's policies.

As an aside on the Reagan tax cuts -- those were mostly marginal income tax rate cuts on the high end. They leave out the huge payroll tax increases under Reagan, and hope that people won't know about those. Yes, overall Reagan did cut federal tax rates overall (federal taxes is the sum of income taxes and payroll taxes and a few other smaller taxes), but by only a very small amount relative to the size of the economy. Hardly explains Gates and Steve Jobs getting out of bed. (And Gates and Jobs cofounded their respective companies in the 1970s, well before the Reagan presidency, but I digress further).