Keith Rankin's Thursday Column
Damned Lies and the Third "R"
25 November 1999
As usual, an election campaign brings out a number of false or misleading statistics, plus a general discomfort with issues that involve numeracy skills. While sometimes they are genuine mistakes, usually the inaccuracies are biased towards the political interests of those who perpetrate them. Ironically, given their emphasis on reading, writing and 'rithmetic as the core of education policy, National and Act are the most guilty parties when it comes to arithmetic deception.
I will note three examples of National's deception here:
In addition to problems with getting statistics right, we get challenges to do arithmetic things such as "name one country in which tax increases led to more growth". Helen Clark finds this difficult to answer because very few countries raised taxes in the 1990s, thanks in the main to pressures arising from globalisation. Nevertheless, the answer is "every single country in the OECD in the quarter-century after World War 2". Growth rates were higher than ever before as taxes were raised to fund collective goods.
Perhaps more pertinently for New Zealand, real per capita GNP doubled in the 10 years from 1932 to 1942. In 1939 - before the war - we were each paying much more tax than we were in, say, 1931.
A combination of better numeracy skills and a better appreciation of history would do wonders for the standard of political debate.
© 1999 Keith Rankin
Comments from Alan Royal andPhilip McDonald
comment from Alan Royal:
You could tell Rankin that if he did his homework and looked in the latest Reserve Bank monetary statement he will see the 4% growth figure he disputes.
rejoinder from Keith Rankin
The Press release to the November monetary statement says:
"Numerous indicators suggest that the economy bounced back strongly during the September quarter, and that it is now growing at an annualised rate of around 4 per cent."
In other words, the actual September figures have not been released yet. The RB is basing their policy on an estimate of the current growth rate, and not on official data.
Further, the RB estimates (which I do not dispute) are for an "annualised" growth rate. That means taking a single quarter's seasonally adjusted figures and raising them to the power of 4. Thus a quarterly growth rate of 0.985% annualises to 4%. In 1992, Ruth Richardson took similar figures in the middle of a recession to make the ridiculous claim that NZ had the highest growth in the OECD. More significantly, the annualised seasonally adjusted growth rate for the first 3 months of 1984 was 15%!
I certainly did my homework. As I stated, I downloaded the most recent official GDP data.
Thanks for the feedback, Keith
You wrote today: " In addition to problems with getting statistics right, we get challenges to do arithmetic things such as "name one country in which tax increases led to more growth". Helen Clark finds this difficult to answer because very few countries raised taxes in the 1990s, thanks in the main to pressures arising from globalisation. Nevertheless, the answer is "every single country in the OECD in the quarter-century after World War 2". Growth rates were higher than ever before as taxes were raised to fund collective goods."
I agree with your stance (BTW, on some talkback show I challenged Bill English to pay one dollar to a charity for each case of a country raising its taxes and enjoying GDP growth in the following 2 years I could come up with - he wisely ducked) but I disagree with the last point to a slight extent. Clinton raised taxes (on capital gains) in 1993, the French socialist government raised the tax take and business tax in 1997 and 1998 (economy is now just about the most robust in the EU with unemployment falling, the 2nd best stock market over the past 6 months in the EU, and GDP growth of around 3% with even the IMF grudgingly admitting that French growth is set to remain robust over the next few years - don't forget they have just introduced a 35-hour working week something the IMF obviously sees as pure heresy), Blair's Labour gvmt pushed through the highest increase in taxes in Europe according to the OECD and they're doing fine (...). That's just off the top of my head too.
Note that Prebble (who famously stated yesterday "the taxation rate IS the investment rate") and English also claim that the corporate tax rate is 10% in Ireland. Uh, the standard tax rate is currently 28%, though foreign companies are taxed 10% and the manufacturing tax rate is at 10%. IOW, their whole taxation policy is aimed at targeting specific areas. They also fail to mention that the top income tax rate is 50.25% and the Irish gvmt has just launched its biggest spending package ever (5% financed by the EU - pace Prebble)....
Nice to read your stuff as this campaign has plummeted unsuspected depths of sheer stupidity and economic illiteracy. I have to say, however, that I've come around to seeing ACT (and above all their tax policy) as the funniest thing since Monty Python. Don't you get the impression when watching Rodney H. and Mad Poodle that you're looking at a poor man's remake of "The Blues Brothers"?
Cheers, Philip Macdonald
Thursday Column 1999-2002 archive
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