Saturday, January 25, 2014

Arithmetic and Heritage Foundation’s Chief Economist

Heritage Foundation has a new “chief economist”?
That's why Heritage's most recent hire could mark a potential return to normalcy and respectability for the foundation. The new man is Stephen Moore, most recently of the Wall Street Journal's editorial page, who is joining Heritage as its chief economist. He has previously worked at Heritage in the 1980's, the Cato Institute, and Club for Growth before spending the last nine years at the Journal.
I’ve read some of what Stephen Moore has written in the past and I was shocked that anyone would call him an economist. But I hear he did receive an M.A. in economics over 30 years ago. But seriously. Paul Krugman notes:
Moore has adamantly denied that the demand side can ever matter, at all. And he has done so in flat-out know-nothing terms: hey, never mind “fancy theories” that conflict with “common sense”.
Never mind fancy theories – let’s talk about 3rd grade arithmetic. Several years ago, Moore tried to convince his National Review readers that corporate income was subject to a 73% effective tax rate by summing the 35% corporate tax rate with an 38% individual rate faced by high income households. Never mind that this calculation ignores the deferral benefits most corporate tax attorneys get – it is just incredibly bad math as was pointed out by Kevin Drum and Brad DeLong. Suppose your shares in IncrediblyBadTaxPlanning Corporation generated $100 in pretax income in 2013 and they actually paid you a $65 dividend immediately. You pay a 38% tax on the $65 – not the $100. That comes to $24.70 – not $38. Brad found another arithmetic error with his:
Wall Street Journal Total Fail: Stephen Moore Takes a Weighted Average of 2% and 48% and Gets 50
Stephen Moore really did write:
Federal workers on balance still receive much better benefits and pay packages than comparable private sector workers, the Congressional Budget Office reports. The report says that on average the compensation paid to federal workers is nearly 50% higher than in the private sector, though even that figure understates the premium paid to federal bureaucrats. CBO found that federal salaries were slightly higher (2%) on average, while benefits -- including health insurance, retirement and paid vacation -- are much more generous (48% higher) than what same-skilled private sector workers get.
Let’s generously assume that the weight for benefits should be 30%. Then the weighted average is less than 16%. I’m told that Stephen Moore is not trying to deceive his readers as he actually believes the nonsense he writes. But then my question is why would anyone call someone who is this challenged by simple arithmetic their “chief economist”?

2 comments:

Roger said...

Could it possibly be because he will reliably promote their favored ideology, and because he used to work for Rupert Murdoch's Wall Street Journal, many viewers of Fox News will believe he has profound knowledge of economics? After all, nobody to the left of Roger Ailes believes anything written on the WSJ editorial pages any more, and even many of their news stories are simple propaganda mpe/ Idon't think anybody seriously interested in either politics or economic policy believes anything Heritage puts out these days, but many low-information right-wingers do.

Mike Huben said...

But shouldn't 30+ years on wing nut welfare make him an expert on regular welfare?