December, 2014, Part 3, By The Numbers: Millenials Getting Poorer, Tax Code Getting More Inefficient, and Politicians Still Out Of Step With America

On a semi-regular basis we do a series of posts with the theme: “by the numbers.” As we all know, we can really never trust any politician to tell us the truth, especially if it does not fit their selfish needs and strategies. However, while they can lie, deceive, and skew their message, the realities of actual numbers always give us the truth of the situation. 

I used to work for a boss whose favorite saying was: “There is nothing more devastating to an opinion than the right number.” By looking at the raw numbers of a situation, we can look past the political spin and other BS that politicians constantly rain down us to divide us, trick, us, and insure their continued time in office. We try to dispel these myths and travesties by looking at the reality numbers to devastate the politicians’ opinions.

We thought yesterday would be our last update to the "by the numbers" stream but we uncovered enough numbers to add one final post to the “by the numbers” series.

1) In our first update to this series we quoted a recent President Obama quote on how well he has managed the economy during his tenure: "Since I have come into office, there's almost no economic metric by which you couldn't say that the U.S. economy is better," as quoted in a recent interview with the Economist. 

We have debunked that boast over the past two days and today we debunk it further. According to an article written by Ali meter for the website, cnsnews.com on December 15, 2014, one out of every five so-called millennials, young Americans aged 18 to 34 years old, live in poverty in this country, according to Census Bureau data. 

The Census data analysis and numbers found that: “More millennials are living in poverty today, and they have lower rates of employment, compared with their counterparts in 1980. One in five young adults lives in poverty (13.5 million people), up from one in seven (8.4 million people) in 1980.”

According to Census analysis, in 1980 14.1% of those Americans aged 18 to 34 were living in poverty while in 1990, the percentage of millennials in poverty increased slightly to 14.3%. In 2000, it climbed to 15.3 percent but by 2013 it reached the highest level ever recorded, jumping up significantly to 19.7%.

A lot of this poverty increase is due to the fact that today’s millenials have found it more difficult to find work. 1980, 69% of millennial were employee while that levels has decrease to 65% in 2013, the lowest level ever recorded by the Census Bureau.

So, two days ago we found out that the numbers told us that Obama administration economic policies have been bad for African-Americans and Hispanics. Today we learned that those same policies were bad for millennials. Does not seem that the President’s boast is working well for major segments of the population.

2) David Allen, recently writing for the Heritage Foundation, found some interesting numbers analyses to identify the hidden costs of our complex and ineffective tax code. The cost of our tax system is not just the taxes we pay via the Federal income tax, there are some hidden costs that end up taxing us in other, hidden ways and which inhibit economic growth.

Mr. Allen showed how analysis by Pete Sepp, president of the National Taxpayers Union; Jason Fichtner, a senior research fellow at the Mercatus Center at George Mason University; and Dan Mastromarco, a partner at the Mastromarco Firm quantified these additional economic burdens:

- Accounting Costs. Since the Federal tax system requires Americans to compile, write, and submit their tax returns, there are additional costs beyond the bottom line tax payment. These additional costs in time come out to about 6.1 billion hours every year for the nation to fill out their tax forms, as estimated by a 2013 study by the Mercatus Center. 

These are 6.1 billion hours that cannot be spent on starting or expanding a business, finding a second job, working extra hours at a current job, etc., all of which impose an economic costs on every American who files a tax return. The monetary costs of these 6.1 billion hours according to the Mercatus study range from $67 billion to $378 billion, depending on what the assumption set is. These are billions of dollars that cannot be used to spike economic growth and expand the economy, it is stranded effort and costs just to feed an antiquated tax system. 

- Tax Gap (revenue loss). Talk about complex. According to the Taxpayer Advocate Servicer report, the Federal tax code is nearly 4 million words long. When printed, the IRS’ guidance explaining the income tax stands more than 1 foot tall.

The complexity of the tax code leads to predictable results: American taxpayers often fail to file returns on time, fail to pay reported taxes on time, or underreport the amount of tax they owe. This causes a major disconnect between taxes owed and taxes paid on time, creating a form of revenue loss known as the tax gap. The size of the net tax gap is roughly $452 billion (in 2012 dollars).

- Deadweight loss (economic cost). I will let Mr. Allen explain what deadwieght loss is: “Taxes further impose costs by distorting economic decision making, namely how individuals choose to spend and save. Economists call this deadweight loss. It can be thought of as all of the foregone economic transactions that would have occurred in the absence of the tax. This includes all of the products and services not purchased and investments not made. 

Deadweight loss is an implicit cost of taxation that slows economic growth. Although it is more difficult to calculate, estimates of this lost economic growth range from $148 billion to $609 billion.” 

The article goes on to estimate the combined cost to the country of these hidden tax system burdens. Using the lower end estimates from the three burdens above, the total burden from these three sources is still a whopping $667 billion. This is almost an additional $6,000 tax burden on every American household every year.

Since the IRS collected $2.855 trillion in taxes in 2013, this number analysis indicates for every $100 the IRS collected, over $23 was lost. If the higher end estimates of the three burdens above are used, the higher-end estimates, the additional total burden jumps to an incredible $1.439 trillion, or about $50 being lost for every $100 collected, an incredibly inefficient tax process. Additionally, this $1.439 trillion burden comes out to over $12,000 for every U.S. household.

The bottom line: our tax system is complex, expensive to operate, inefficient, and contrary to sound economic theory, resulting in numbers that are onerous to say the least on every American.

3) Often the numbers from reputable polling organizations such as Gallup and Pew show that the political class is often out of step with what Americans want done. For example:

• The majority of Americans have long disapproved of the entire Obama Care legislation and mess but it still lives on. 
• The majority of Americans have long indicated that Congress and the entire political class is broken and ineffective but the political process continues to become even more broken over time.
• The majority of Americans want government’s wasteful spending to be brought under control but the wasteful spending grows unimpeded, reaching a devastating level of $18 TRILLION at the Federal levels.

Americans want this and the politicians in Washington want to deliver that. The latest example of such a disconnect is when the Democrats in the Senate recently released a report that was critical of the CIA interrogation tactics that were used immediately after the 9-11 attacks.

But while the Democrats in the Senate were critical of the methods, the majority of Americans were not, according to Pew Research:

• Only 29% of those Americans polled said the interrogation methods were unjustified.
• A majority of 51% say those methods were justified.
• 56% of those polled feel that the intelligence gathered on terrorists’ plans stopped future attacks while only 28% disagreed that future attacks were thwarted.

Another issue and another example where the numbers show that the politicians in their constant need to satisfy their objectives are out of touch with what America thinks and wants. 

Now, some of you in the 29% might want to claim the high ground and believe that America should never resort to torture. I actually believe that also but that view is not consistent with what the majority of Americans believe. Plus, releasing the report now, more than ten years after the fact serves no purpose whatsoever:

• No one is going to be prosecuted for the methods so there is not a criminal reason for releasing the report.
• Our terrorist enemies will use the report as propaganda even though it is a highly skewed, highly politicized, and incomplete view of what happened.
• The report is taken out of context and the situation at the time. Much like when FDR locked up Japanese nationals in Word War II, the actions have to be considered in the context of the situation. Immediately after 9-11, it was unknown if other terror attacks were imminent. That question had to be answered as soon as possible in the context of the situation and the time frame.
• And one other thing to keep in mind. Those terrorists that were subject to the interrogation methods are still alive. How does a supporter of this report reconcile the fact that the Obama administration actually kills terrorists, with hundreds if not thousands of collateral deaths including hundreds of children, with its drone program? At least no one died with the CIA program, unlike the indiscriminant drone program of Obama.

That will do it for this update to the “by the numbers” series. Today we found out that millennials are getting poorer according to the numbers, taxpayers are paying a much higher burden for the antiquated IRS and tax code processes in place as the numbers show, and the country generally supports the fact that the CIA used unconventional interrogation methods to avoid a 9-11 follow up attack, as the numbers show. 

Too bad politicians do not understand what the numbers mean or choose to ignore the numbers for their own selfish gains and objectives.

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