Brendan Nyhan

A reader who prefers to remain anonymous suggests a parsimonious explanation for why Iraq “right decision” numbers are up in public opinion polls — inattention to the news during the summer due to vacations, etc. He did some preliminary analysis of the time series and couldn’t find enough data to draw a strong conclusion either way, but his theory would certainly make sense. If he’s right, we should expect the “right decision” numbers to decline again in September as voters return from vacation and confront the bad news.

Back on July 13, the Wall Street Journal editorial page published an editorial (sub. req.) claiming that “Lower corporate tax rates with fewer loopholes can lead to more, not less, tax revenue from business,” a claim that it attempted to support with this graphic:

But as numerous bloggers pointed out at the time, the alleged “Laffer curve” drawn in the graph is absurd. It’s fitted directly through the data point for Norway, an obvious outlier with significant oil revenue (and an omitted excise tax), and then plunges straight down toward zero (who knew that increasing your corporate tax rate from 28% to 32% was so destructive?).

Well, Kevin Hassett of the American Enterprise Institute, who provided some of the WSJ’s data, released a defense of the Laffer curve yesterday (PDF) that he co-wrote with Alex Brill. By using the data sources he provided, I was able to reconstruct the Journal’s data exactly. (Replication data and the Stata .do file for this analysis are here.)

Unsurprisingly, when I fit linear and quadratic models to the same data (29 OECD countries plus the United Arab Emirates in 2004) using the approach of Brill and Hassett (regressions with a linear and squared term), the predictions come nowhere close to WSJ’s “Laffer curve”:

When we exclude the UAE, which is not directly comparable to OECD countries and seems mostly to be included because it has a zero corporate tax rate, the results become still less favorable to the WSJ:

When we exclude three possible problem countries identified by Brill and Hassett: “Ireland (a noted tax haven), Norway (a country with unusual oil revenues), and Switzerland (a country with significant internal variation in taxation),” there is again virtually no difference between the predictions of the linear and the quadratic model and certainly no evidence of a “Laffer curve”:

The difference from the original WSJ graphic is especially clear when we put these results on the same scale and place the graphs side-by-side:

In sum, let’s just say that Rupert Murdoch shouldn’t let these guys do his books…

(Postscript: As for the larger issues Hassett raises, I haven’t replicated his analysis, but I remain skeptical that the negative sign on the squared term in his quadratic models is evidence of a substantial Laffer effect for a variety of reasons.)

Update 8/2 2:10 PM: As commenters have pointed out on the blogs of Matthew Yglesias and Kevin Drum, the dependent variable here — corporate tax revenue as a percentage of GDP — doesn’t make a whole lot of sense. I agree — that’s part of what I was alluding to in the postscript about my skepticism. The purpose of this post, however, is simply to show that even if we grant that the WSJ’s measures are appropriate, the data don’t prove what the Journal claims. I make no claims about the value of my regression results, which are provided solely as a counterpoint to the original graph.

New York Times media columnist David Carr attempts an awkward riff today on the classic New York Post headline “Headless Body in Topless Bar”:

What will The Journal be with Mr. Murdoch at the helm? At heart, he’s a tabloid newsman but critics expecting headlines like “Hedgeless Funds in Stop-Loss Market” may be disappointed.

Uh, yeah. I hear crickets.

With all their excitement about potentially taking back the White House, few Democrats seem to have given serious thought to what exactly they will be inheriting from President Bush.

It’s increasingly clear to everyone that Bush will delay any serious withdrawal from Iraq until after he leaves office, forcing a Democratic president to withdraw and setting up the feared narrative that the troops were “stabbed in the back”.

However, few people seem to have thought much about the economic situation, which from a political perspective may be even more difficult. The economy has been in an expansion since late 2001 that has done little to improve the economic situation of most Americans. Inevitably, it will end. Brad DeLong cites one forecasting model that estimates a 26.2% probability that a recession is already underway. This seems high, but a recession will come.

The most likely scenario is that the recession does not take place until next year or even that it is forestalled until the Democrat assumes office. Imagine the scenario. It’s 2009 and the Democrat is simultaneously trying to get the economy going again while also having to roll back the Bush tax cuts, which expire in 2010, to clean up the looming budget mess. And that doesn’t even take into account any action to fix the Alternative Minimum Tax, expand health care coverage, or address the longterm shortfall in Medicare.

Could all of these obstacles be overcome? Yes, particularly if the pain is concentrated in the first part of the president’s term. Ronald Reagan, for instance, overcame an early double-dip recession, declared it was “Morning in America,” and won in a landslide in 1984. And of course Democrats would still prefer to inherit Bush’s mess than to be shut out of the presidency for another four years. Still, there’s no question that the Democrat would potentially be inheriting an ugly situation, especially compared to Bush, who assumed office in peacetime with a large projected budget surplus.

Mark Thoma distills the collected works of Robert Samuelson into three banal claims:

Someone said that Robert Samuelson thinks three things are true, deficits are bad, there’s a demographic crisis coming, and both parties share the blame for any problem. Based upon these beliefs, he’s been writing the same column in one form or another for many years.

That’s why I stopped reading Samuelson a long time ago. Sadly, though, the Washington Post continues to feature his Broderesque “insights” in a column that has been going since 1977! Thirty years of this nonsense!

The sad thing that, even after writing the same column for decades, Samuelson still doesn’t understand the problem, as Thoma points out:

Notice, for example, how he weaves all three of these points into the opening of his latest column:

Just in case you haven’t noticed, the major presidential candidates — Republican and Democratic — are dodging one of the thorniest problems they would face if elected: the huge budget costs of aging baby boomers. In last week’s CNN-YouTube debate, New Mexico Gov. Bill Richardson cleverly deflected the issue. “The best solution,” he said, “is a bipartisan effort to fix it.” Brilliant. There’s already a bipartisan consensus: Do nothing. No one plugs cutting retirement benefits or raising taxes, the obvious choices.

…The aging of America is not just a population change or, as a budget problem, an accounting exercise. It involves a profound transformation of the nature of government: Commitments to the older population are slowly overwhelming other public goals; the national government is becoming mainly an income-transfer mechanism from younger workers to older retirees. …

…Consider the outlook. … Social Security, Medicare and Medicaid — programs that serve older people — already exceed 40 percent of the $2.7 trillion federal budget. By 2030, their share could hit 75 percent of the present budget, projects the Congressional Budget Office.

Social Security is not the problem, it won’t take much to get it on solid footing, though the scare stories over the past several years have made many people believe otherwise (and Samuelson has helped to generate this false impression). The problem is not demographics either, though it certainly costs more to serve a larger number of people.

The main problem is rising medical costs, and unlike the misplaced emphasis on Social Security in the last election, there is a lot of focus on health care reform in the political debate this time around. Samuelson seems to have completely missed the connection between health care reform and his pet column peeve, hence his claim that the problem is being ignored in the political debate when that isn’t the case. In addition, Samuelson’s continual focus on the budget deficit obscures the real problem. It doesn’t matter whether health care is in the public domain or the private domain, the costs will be daunting either way if they continue on their present trajectory, so finding ways to hold down health care costs is where the focus needs to be.

If Samuelson really wants to help, he can quit writing the same misleading and counterproductive column over and over again. Quit saying “cutting retirement benefits or raising taxes” are the “obvious choices” when it’s not obvious at all. Cutting retirement benefits or raising taxes will do nothing to reign in health care costs so these measures do not address the main problem. It’s time for Samuelson to write a new version of this column and address the core issues, or perhaps better yet, just stop writing about these issues altogether.

When I criticized a David Brooks column last week, Matthew Yglesias linked to it and then noted the problem it highlights with the op-ed format:

Brendan Nyhan gears up for battle with David Brooks’ anti-neo-populism and he’s backed up with a whole bunch of charts.

This is a reminder, I think, of why we should look forward to the day when the op-ed column is a dead format and everyone just blogs. Brooks’ original column would, obviously, have been better if it — like Nyhan’s reply — had come with links to data and charts. What’s more, it’d be good if we could expect Brooks to reply to the sort of criticisms he’s getting from Nyhan, Dean Baker, and others. Maybe he has something fascinating to say on his own behalf. But the way the columnizing world works, there’s almost no chance he’ll address his next column to trying to rebut the critics of this one. But a back-and-forth debate on this subject with links and charts and data would be much more interesting than what we’re going to get instead where liberals decide Brooks is a liar and Brooks remains convinced that liberals are crazy.

And I wasn’t the only one — many other bloggers questioned the claims that Brooks made.

However, just as Yglesias predicted, Brooks has failed to address most substantive criticisms of his last column. Instead, he ran only this clarification at the end of his column today:

Last week I cited data on rising earnings among the working poor. I should have made it clear that the data referred to poor households with children, since poor households without children did not enjoy those gains.

It’s true that Brooks failed to make clear that his quotation from this Ron Haskins op-ed pertained to earnings for poor families with children. I’m glad he clarified the point.

However, the larger problem is that Brooks claimed “earnings for the poorest fifth of Americans are also on the increase” and then cited the Haskins quote on gains between 1991 and 2005, a formulation that implies earnings are “on the increase” now. In fact, income hasn’t really been “on the increase” for this group since President Bush took office, as the report (PDF) that Haskins was citing made clear in this graph:

In particular, the bottom quartile of families with children has seen their earnings tail off particularly dramatically during this period.

Shouldn’t these points (and the similar problems with the first claim in his column) be clarified? Unfortunately, being a Times columnist means never having to admit that you might be wrong…

Via my officemate MCB, the New York Times has an amusing picture of George W. Bush and Gordon Brown riding in “Golf Cart One”:

I’ll open the caption contest in comments.

Update 7/30 9:15 PM: Wonkette, which picked up the post, has many more caption suggestions in comments.

Via Andrew Sullivan, Rush Limbaugh is again suggesting that Democrats want to lose the war in Iraq and the war on terror and are on the side of Osama bin Laden:

You look at the Democrat Party, look at their leaders and how they are trying to secure defeat in Iraq and secure defeat in the war on terror.

…You know, how do we know which side John Kerry is on in this war, folks? In the last war, Vietnam, he was with the enemy. He met with them. He lied for them before a Senate committee, and now here we have Senator Kerry downplaying the enemy’s role in slaughtering Iraqis and downplaying their danger! We’re the problem — once again. So whose side is he on here? He’s being very consistent, ladies and gentlemen. I’ll tell you something else. This is absolutely hilarious. “Mr. Bin Laden’s group” is how the New York Times refers to Al-Qaeda! (Lauging.) Why don’t they just say, “Osama bin Laden, D-Afghanistan”? (Laughing.) Mr. Bin Laden’s group? Osama bin Laden, D-Afghanistan. (Laughing.) Democrat, Afghanistan. Like Congressman William Jefferson (Democrat-Louisiana).

…On whose side is Senator Kennedy? Folks, I’m telling you, these people treating this not as a US national security issue. They’re arguing with President Bush about that.

On Limbaugh’s site, the transcript is accompanied by this graphic:

Meanwhile, Defense Secretary Robert Gates repudiated Undersecretary of Defense Eric Edelman’s loathsome attack on Hillary Clinton as aiding enemy propaganda, but annoyingly reserved the right to smear dissent in the future:

I emphatically assure you that we do not claim, suggest or otherwise believe that Congressional oversight emboldens our enemies, nor do we question anyone’s motives in this regard. My statements to this effect have been frequent and unambiguous. That said, we all recognize that there are multiple audiences for what we say, and need to be careful not to undermine the morale of our troops or encourage our enemies — the point I think Ambassador Edelman was trying to make in his letter.

(For more, see our coverage at Spinsanity on Limbaugh and attacks on dissent and my blog posts on Limbaugh and attacks on dissent.)

With no significant evidence of progress in Iraq, why are poll numbers up for whether we made the right decision to invade? Here’s a New York Times Week in Review article on the puzzle:

The Times and CBS News conducted a poll from July 9 to July 17 with 1,554 adults, mostly about Hillary Clinton…

In the poll, The Times and CBS News posed a standard question that asks respondents to think back to the invasion. Specifically, the poll asked: “Looking back, do you think the United States did the right thing in taking military action against Iraq, or should the United States have stayed out?”

Forty-two percent of those polled said the United States did the right thing, and 54 percent said the United States should have stayed out of Iraq. The last time the question was asked, in May, 35 percent said taking military action against Iraq was the right thing and 61 percent said the United States should have stayed out.

The July numbers represented a change. It was counterintuitive. None of the other war-related questions showed change. Mr. Bush’s approval rating had not changed. Nor had approval of his handling of Iraq. The level of support for Mr. Bush’s decision to send more troops to Iraq — the “surge” — was about the same as it had been in past polls. Support for the decision to go to war had risen modestly and nothing else in the poll could explain it.

A Newsweek poll conducted July 11-12 had a similar finding for the same question. But the magazine had not asked its question since December, so it is hard to know whether its current reading measured any recent change.

…When the second round of results came back, the numbers were nearly identical to the ones found in the poll about Mrs. Clinton. In the poll conducted last weekend with 889 adults, 42 percent of the respondents said the United States did the right thing in taking military action against Iraq, and 51 percent said the United States should have stayed out.

There was also a drop in the number of people who said the war was going badly. In the latest poll, 66 percent of Americans said things were going badly for the United States in its efforts to bring stability and order to Iraq. That is down from 76 percent who said the same thing in May.

Here is a plot of the “right decision” numbers over time, which shows that Republicans, Democrats and independents all ticked upward:

I can’t come up with a convincing explanation — can you? (One possibility, of course, is that it’s a statistical artifact, but the fact that three polls have all shown an increase for the same question suggests that it’s not.)

Bizarrely, the New York Times published a review today of Bob Shrum’s book No Excuses: Concessions of a Serial Campaigner, which was released on June 5. I can understand late reviews of sleepers like The Kite Runner that take a while to gain recognition, but Shrum’s book got a lot of press attention from the beginning. So why review it now?

Postscript: I did learn from the review that “the networks declined to show footage of Kerry at an Iowa party jokingly miming a toke while Peter Yarrow of Peter, Paul and Mary sang ‘Puff the Magic Dragon’” during the 2004 campaign. That’s great — who cares? — but it’s surprising given the media’s apparently endless appetite for trivia. We’re talking about a press corps that gave extensive coverage to the fact that Kerry ordered Swiss cheese on his cheesesteak during a campaign stop in Philadelphia. Is that “news” supposed to be more substantive than a joke about pot?