Sunday, September 16, 2007

Dependence day

There's been a lot of blogospheric chatter about this graph:

Radley Balko asked:
Perhaps someone on the left (or for that matter, the right--since they've mostly been in charge of the government the last six years) can explain why having more than half the country's income dependent on the government (and rising) is in any way a healthy development.

and Matthew Yglesias replied
I see a population that's a lot healthier, longer-lived, and better educated than the one of 1950; a population where radically fewer people suffer from severe economic deprivation in absolute terms even as millions of impoverished people form around the world have moved to our shores.

I also see a population that, as a result of prosperity, is aging and it's a society that's prosperous enough for elderly people to generally not work and where retirees are given some public-sector guarantees of health care and economic security in their golden years. Most of all, I see a society that's shown that both Marx and Hayek were wrong -- that there's no need for capitalism to entail the immiseration of the vast majority of the population, and no need for efforts to use the public sector to better the condition of the majority to lead to tyranny and Communism; it's a society of democratic capitalism and social insurance and, despite its problems, it's one of the very best places to live throughout the entire history of the world.

See also: Daniel Larison, Reihan Salam, Andrew Sullivan.

I haven't yet seen anyone look at the chart and say: "BS."

I'm pretty sure the magazine Insight is being treated as an authoritative source here, which is our first clue that we're looking at something less than especially rigorous social science. Second clue: Two lines that mirror one another perfectly, which is to say two categories that are being defined as mutually exclusive and jointly exhaustive (they always sum to 100%). "Private workers" and "government beneficiaries" total to 100%-- according to the legend, "of the U.S. population"? Really? What about children? Stay-at-home parents or spouses? Unemployed workers living on savings? Retirees living on private pensions? I'm pretty sure that these categories are being constructed in something other than the usual way. Just by itself, the idea that "private workers" as a percentage of the U.S. population has fallen by almost half over the decades that women have roughly doubled their labor force participation rates doesn't pass the laugh test.

My guess? What we're looking at has a categories of "government beneficiaries" that was cobbled together by counting all prisoners, all government employees including military personnel, and all persons receiving Social Security, Medicare, any farm subsidy, any welfare program, or unemployment insurance. The category "private workers" was defined as (100%- that quantity). As the population ages, the number of people getting some combination of Social Security, Medicare, and VA benefits or military pensions has risen dramatically-- which tells us nothing about what proportion of their income comes from those sources. The prison population has steadily risen; but so has the number of different federal programs that some people get some bit of their income from. One doesn't cease to be a "private worker" because one also got an SBA loan, or unemployment benefits for a few weeks, or an interest subsidy on the student loans being repaid from the college degree several years ago. One can argue against all those programs, but not like this.

This graph is almost certainly a net subtraction from the knowledge in the world, and an uninteresting foundation for discussion about the role of the state in the economy.