An Analytic Mind

Let me apologize in advance for the length, breadth, and depth (I hope) of this post. You’ll want to pour a large drink (coffee or something stronger), get comfortable, and take a few deep cleansing breaths before reading further!

Often during the past four years of blogging, and even back when I worked, I decried efforts to engage emotions over facts. Sometimes this happened in academia, more so in politics, frequently in news media, and overwhelmingly in social media. I found myself constantly warning others NOT to fall for the easy tug on one’s emotions. Ask yourself “why am I being told this?” Question “what is the rest of the story?” Ponder “how accurate is this data?” Always think “what else–beside the obvious aspect–could this mean?”

Analysts, indeed anyone with an analytic mind, must be careful when reaching for the very persuasive tool that is emotions. When I was still in the business of grading analysis, we had a rigorous debate about the use of graphics–pictures and graphs and maps and videos–to support analysis. After all, we all know “a picture is worth a thousand words.” One of the guidelines we instituted was the graphic should elaborate the analytic point (making it clearer, for example) but not extend beyond the analysis. Thus in an analysis which concludes that Bashar al-Asad used chemical weapons against innocent civilians in his own country, you don’t include a photo of gassed, dead babies, because the issue is DID HE DO IT? If the analysis was concluding he ordered the gassing in order to terrorize his opponents, you might include the same photo, because the point is his use of terror. As you might imagine, such a guideline raises interesting and difficult questions, but these are exactly the kinds of questions that should be debated when using emotional graphics in analysis.

But I realize that I benefited from years of training and practice in these arts, and constantly warning others not to fall for easy emotional grabs was not as useful as explaining how to avoid them. So here goes, with some examples of how to look at things and question what they mean:

This graph was from a New York Times’ OpEd piece. I didn’t embed the GIF for security reasons, but the graphic movement just shows that effective tax rates on the ultra wealthy have steadily decreased from 70% in 1950 to around 20% in 2018, while rates on most everyone else have slightly increased! Are you outraged yet? Take deep breaths, I’ll wait.

I am willing to concede that this data is correct, but what does it tell you? That the rich pay less in taxes? No. The wealthiest 1% of taxpayers pay 40% of all federal income tax revenue. That the government is stupidly ignoring taxing the rich? Unlikely, since the government needs revenue. Our leaders are corrupt? Believe that if you like, but to do so you must indict both parties at all levels of government: Democrats & Republicans, federal, state and local officials. That’s quite an indictment!

So ask yourself: why (primarily) does the government tax? To gain revenue. It can also tax to discourage spending (e.g., sin taxes) or to encourage investment (home mortgage exemptions) but these are secondary to the main purpose. The government can only print money, it has to tax to acquire it. Why would the government lower taxes on the rich, if the rich have so much money? Because rich people have many more ways to avoid paying taxes. And like everybody, they will only pay what they feel is a “fair share.” Beyond that, they will use every legal trick to avoid extra taxes. And they will avoid those taxes, because they are rich and have more tax-avoidance tools.

The poor, on the other hand, have much greater difficulty avoiding taxes. They can’t simply move their residence on paper to another state. The poor can’t shelter income as dividends or business expenses, and they can’t avoid gas taxes and tolls. They are more inclined to see taxes as inevitable, and only react strongly when the situation gets way out of hand. Thus the poor are easier to tax than the rich.

The real kicker here is the middle class. They too only want to pay what they feel is their fair share: any more and they rebel and seek some form of evasion. This was the story of Proposition 13 in California back in 1978, which restrains that state to this day. The middle class has more resources for the government to tax, but also more active voters to avoid taxes. So go back and look at that chart, and you’ll see the government stops trying to tax the rich (which is popular but ineffective) but raises taxes on the middle class and near-rich, which is an effective way to raise revenue as long as there are more of them and they don’t revolt. As to the poor, they can’t avoid taxes, so they get hit too (when you count all forms of taxes). It may not be “right” but it is absolutely rational, and doesn’t require you to be outraged or believe the system is corrupt.

This post has been marinating for a week while I waited for another, current example: the Good Lord (and the Washington Post) provided. In yesterday’s WaPo there is an article about a real world policy issue: whether the additional federal unemployment benefits provided during the pandemic were keeping people from returning to work. The article is here, and is based on a WaPo & Gusto study you can read here. Go ahead and read the article, I’ll wait.

The essence of the debate is that red state Republican governors ended the extra benefits early, in the belief that workers were staying home cashing in on benefits rather than returning to work. Blue state Democratic governors kept the benefits flowing. Thus we have a natural experiment, the results of which should answer the question whether workers really were skipping a return to work because of the increased benefits.

The WaPo headline and lede demonstrates their analytic take: there was no hiring boom for the states who cut benefits. And they have a graph which proves the point:

However, the study also concluded that “who” was getting hired was different:

So red states saw a surge in 25+ year olds in hiring, but blue states saw a surge in teenagers to come up with the same numbers. Except those teenagers (1) weren’t eligible for the extra benefits, and (2) won’t be around in the Fall when they return to school. As the Post stated in a single sentence buried in the article: “The analysis also adds perspective to the teen hiring boom, revealing that more generous unemployment payments played a role in keeping more experienced workers on the sidelines, forcing employers to turn to younger workers.” (emphasis added)

Or, those who said the extra benefits were keeping workers from returning were correct. Which is not in the headline, or the lede, or anywhere obvious in the story. Now note I am not taking sides on whether it was a good idea, or moral, or anything else to reduce benefits early: just that the data suggests adult workers were staying out of the workforce because their enhanced unemployment benefits assisted that option. Which is/was the case in point.

The article also referenced workers who suffered from the reduction in benefits, which is an old emotional ploy. I wonder if the Post looked for someone in the states that maintained benefits and who used the extra money to buy oxycodone and died from an overdose? See how easy it is to tug at the heartstrings? Perhaps the article could have considered whether the best use of teenager’s time was to get them into dead-end jobs, or whether working affected their virtual schooling performance?

One last point: the WaPo piece also describes the other factors delaying workers from returning: schools or day-care, fear of the virus, or workers re-assessing their careers. It did so without mentioning why schools are still out (teachers union’s demands), whether vaccinated adults should be “afraid” and whether workers should be permitted to remain unvaccinated and opt out of working, or why federal benefits are appropriately used for workers to decide to change careers.

Nothing that the Washington Post wrote was factually wrong. But I think you can see how all of it was shaded toward an end. And that was done with all the data plainly provided for you to see. For those with an analytic mind, it isn’t hard to blow off the mists and see things as they are.

Look closely, because sometimes the smoke is just an illusion, and the only fire is in the eyes of the salesman.