Cato Has an Even More Severe Quality Control Problem than I Realized

Last March, Alan Reynolds attacked Washington Post columnist Steven Pearlstein. First Reynolds teed up the ball:

The Top 10 Percent, Again: [T]he eternal ambition of Robin Hood economics is to steal money from those who earned it and "redistribute" it to those with more political clout. When in pursuit of such a worthy cause, it appears quite respectable to torture innocent statistics. Those deploying statistics in this campaign take special care to select their favorites. Washington Post columnist Steven Pearlstein.... "in 1979, the top 10 percent of households earned 33 percent of all pretax income. By 2003, their share had climbed to 44 percent. The shares of everyone else declined."

Then Reynolds struck, claiming that the Congressional Budget Office's estimates do not show an increase in income inequality:

Where did [Pearlstein's] numbers come from?... Pearlstein's statistics obviously didn't come from the CBO... [which] estimates that in 1979 the top 10 percent of households earned 39.3 percent of all pretax income. By 2003, their share had dropped to 38.3 percent (or 33.7 percent after taxes).... It is easy to see why the CBO is not Pearlstein's favorite source of income statistics...

Paul Krugman pointed out that the CBO's estimates did show a substantial increase in income inequality. Reynolds had simply looked at the wrong table. Reynolds had looked at Table 3: Elderly Households and not at Table 1: All Households, which showed that between 1979 and 2003 the percent of income received by the top tenth had increased from 30.5% in 1979 to 37.2% in 2003.

Yesterday I find Reynolds, in the Washington Times, misrepresenting not only others but himself as well:

My [March] column showed their estimated 44 percent [figure cited by Pearlstein] is much higher than any official source. The authors exclude Social Security and other transfer payments from the denominator (total income), then pump up top incomes with such indefensible items as accelerated business deprecation and nontaxable IRA rollovers... That [I read from the wrong table] is true. I missed that fine print when the spreadsheet popped up on my monitor. How does the fact that the correct figure is even smaller than I said (37.2 percent, not 38.3 percent) debunk my skepticism about that bloated 44 percent figure?...

As Reynolds knows very well--but as he hopes that his Washington Times readers are too gullible to figure out--back in March Reynolds was claiming that Pearlstein's conclusion was cherry-picked from a particular analysis favorable to Pearlstein's priors. The conclusion that income inequality had risen was, Reynolds claimed, contradicted by other analyses like the CBO's.

That, as Reynolds knows well but hopes his Washington Times readers won't discover, is the claim is debunked by pointing out that Reynolds read from the wrong table.

And the reference to "fine print"? "All Households" and "Elderly Households" are not in fine print at the bottom of the tables; they are in BIG PRINT at the top of the tables--they are in the tables' titles, after all http://www.cbo.gov/ftpdocs/77xx/doc7718/SupplementalTables.xls. I have never before seen anyone claim that the title heading of a table is "fine print." Never.

Comments

[Ragerz]

I don't mean to be elitist, by why are you even bothering to take a pathetic guy who got his Masters in Economics from Sacramento State seriously? (Notice that Mr. Reynolds conspiciously declines to list his education on his Cato profile.) As your posts have demonstrated, besides being undereducated relative to yourself, he is obviously very sloppy and unreliable.

I would say even addressing anything he says is a waste of time. Of course, if your larger point is that Cato's hiring of him implies that Cato is full of hacks and is unreliable in general, this is hardly news.

[Matt]

Renyold's is an ideologe and an idiot on economics, he probably should have become an economist and been good at it the way he lies.

Let me pose some questions:

Would we have "No Child Left Behind" if tax rates were at their Clinton levels? No. Bush ran on the principle of moving private sector expenses to the public sector and having the middle class pay for it.

The Bush (and Renyolds) principle is one of government growth with flat tax rates. It is not a suprise that this combination favors the rich, it is the rich who are buying all this government.

Simple rule. Want to find out if the rich are getting richer? Look at tax rates and the growth of government. When progressive rates are down, and we are running huge deficits, and government is growing some 10% per year, then you know the rich are getting richer.

I see this all the time around central California. Surplus cash at the lower levels is drying up and minimal county/city planning fees skyrocket as private sector labors runs to government employment.

Government, which the middle class can least afford, is growing at higher than the national average around here; and small business struggles with the cost.

[James Killus]

I'm more interested in the way that the first line is so seldom challenged:

"[T]he eternal ambition of Robin Hood economics is to steal money from those who earned it and "redistribute" it to those with more political clout"

This is an absolutely breathtaking lie. Ken Lay and company "earned" their money, and are in danger from those with more political clout? A Powerball multi-millionaire is being "productive?" Defense contractors with no clients other than the federal government are fine, but someone on Socila Security is a leech?

Mr. Reynolds begins with the assumption that anyone who gets money has earned it, provided it has somehow been laundered by passing it through a corporation of some sort. This doesn't even deserve the dignity of being called "libertarian." It is an apologia for organized crime.

[NBarnes]

I have no other response, Mr. Killus, other than 'Woo! Hit him again! Harder!'

There is no more misunderstood word in the minds of pseudo-libertarians than 'earned'.

[wcw]

While I sympathize with this current line of attack, I believe it should be reserved for Cato types with brains. Reserve the body blows for those who are not repeatedly caught cherrypicking quotes, misreading tables, mischaracterizing research, misunderstanding regressions and stumbling through a field of numerical rakes, proclaiming anew how fabulous and bracing each sharp rap to the noggin.

Reynolds is well on his way into Stupidest Man Alive territory. When your opponent is drowning, don't throw him the rope of changing the subject.

Toss him the anvil of disdain.

[Giant Step]

It's truly a shame. You see, many of Cato's scholars do excellent work: I'm talking about people like Arnold Kling, Michael Tanner, and Ted Galen Carpenter. But others, like Reynolds and Pat Michaels, don't belong at the most high-profile libertarian think tank in the world. What's a quasi-libertatian to do? We'll probably have to continue sifting through the intellectual garbage until Niskanen et. al. decide to take out the trash.

Or until the market offers a better alternative. I'm not holding my breath.

[James Killus]

"Reynolds is well on his way into Stupidest Man Alive territory. When your opponent is drowning, don't throw him the rope of changing the subject.

"Toss him the anvil of disdain." --Posted by: wcw

"If any of my competitors were drowning, I'd stick a hose in their mouth". -- Ray Kroc

[Sonia]

Whops, I didn't know that Alan Reynolds is a Sacramento State Graduate. He is certainly not representative of my classmates of many years ago. But his degree is really beside the point. The Cato folks higher in the organization either don't know the data or don't care enough to do basic fact checking.

[Alan Reynolds]

I can't imagine how anyone could think I was "claiming that Pearlstein's conclusion was cherry-picked from a particular analysis favorable to Pearlstein's priors." I simply suggested he had been tricked by someone (an obscure SOI conference paper didn't just fall into his lap) into giving credence to a ridiculous estimate.

I should not have blamed the messenger, which was rude. But it was a handy journalistic "hook" -- a news item used to illustrate why the reader should pay attention to what follows.

I wrote then and now that indefensible quirks in the paper by Strudler, Petska and Petska wildly exaggerate top income shares even when compared with figures from CBO or Piketty and Saez. That was true and it still is.

Unless Messrs. DeLong and Krugman want to argue that it makes sense to count nontaxable IRA rollovers as income, or to consider any gap between accelerated and straight-line depreciation as personal income, then my point about the Top decile NOT getting anything close to 44% of income still stands. I am still waiting for someone to try defending that number rather than simply rehashing what schools I attended in the sixties (everyone seems to have missed Santa Monica City College and the Auto Mechanics Institute in Watts).

If I had printed out the CBO table, as is customary, I would have seen that I picked the wrong page. The 2006 CBO titles are much easier to read on a dinky monitor -- perhaps to aid us seniors. Paul Krugman didn't think I used the wrong table on purpose; he just thought it was a funny blooper. And it was.

Yet the CBO data for top decile shares show no upward trend "since 1988," which is the part of my December 14 Wall Street Journal piece that got everyone so upset they neglected to find any fault in my calculations or logic. CBO data, like all tax-based measures of income, spiked in 1986-88, but that was indisputably a response to the Tax Reform of 1986. Does anyone wish to try denying that? I certainly hope so.

Nobody on this blog has dealt with any substantive issue in the column about my alleged error of 1992, or in my book, or in the Wall Street Journal piece. My next one will be about the CBO data. But if you'd all prefer to just rehash 1992 again, I can't say that I blame you. This is endlessly amusing.

[Uncle Jeffy]

It's funny - three weeks or so after Brad posted this, and three weeks - less one day - after anyone commented, Alan Reynolds sneaks in by the back door and leaves his indignant little whimper.

Mr. Reynolds, please go back for that Ph.D. you so desperately need. Or stop by Ben Bernanke's office the next time you're over at the Fed - apparently he's got a better grasp on the issue than you do (not that this would surprise anyone).