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Home Publications Blogs Beat the Press Putting Big Numbers in Context: It's Not Hard

Putting Big Numbers in Context: It's Not Hard

Monday, 23 June 2014 04:38

The Washington Post had a piece discussing a proposal to increase access to child care. The piece told readers the proposal would cost $20 billion a year. It then added this could:

"be financed through a 0.2 percentage-point increase in payroll taxes, which advocates say equals $72.04 a year for the average female worker."

While the $20 billion figure likely would mean little to most Post readers since few have much sense of how large this is relative to the budget or their tax bill, most readers likely have a clear idea of what a 0.2 percentage point increase in the payroll tax means. This simple addition to the article conveyed essential information to readers that would have been missed if the article had only reported the $20 billion figure.

Now why can't news stories do this all the time?


Addendum: I see from comments that the calculation here almost certainly refers to the earnings of the median female worker and not the average. Thanks for catching this.

Comments (9)Add Comment
Mean or median?
written by Frank Lynch, June 23, 2014 5:10
I hate to ask, but when they say "average" is that the mean or the median? I remember well how the Bush tax cuts were described in terms of their benefit to the "average" family and used the much higher mean instead of the median.
written by Hattie Nuff, June 23, 2014 6:57
Good question, Frank. The figures quoted imply an "average" (woman's) salary of $36,000 per year, so it must be the median. (The Bureau of Labor Services issues an annual reporton salaries across gender etc boundaries).

What also was not clear is which of the proposals discussed is this so-called leading proposal nor what benefits those taxes are paying for. Obama might not have signed on because the proposal is too chintzy. My European friends have always been shocked by the lack of support for parents (leaves for bonding with newborns, extended to both parents) and for families (stingy 2 week versus 4-6 week vacations for family bonding). And the prime obstructors of these family supporting policies is the supposed party of family values, the GOP.
Typo: 'child care' should be 'paid leave'. Doesn't affect Baker's point on context.
written by jaaaaayceeeee, June 23, 2014 7:58

Typo: 'child care' should be 'paid leave'. Doesn't affect Baker's point that it's good reporting to provide context, so big numbers are useful, instead of nonsense.

Some non-economics incoherence reporting: Democrats should propose more policies, while Republicans only have to keep calling paid-for proposals unfunded, interventionist, and top down.
I think this use of "average" is not that bad.
written by Mike B., June 23, 2014 8:58
It doesn't say that the average tax would be $72.04 per female worker (are only females to be taxed?), it says that the tax would be $72.04 for the average female worker, which could mean the worker with the median income (average is an imprecise term). Also, the WP is quoting what "advocates say" - maybe that is what they said. They could have used "typical" instead - the problem with "median" is that not everyone understands it.
median v mean
written by Kat, June 23, 2014 9:46
I think since we are talking about payroll taxes, the distinction between average and median may not be so important.
written by PeonInChief, June 23, 2014 9:52
I too (Mike B. already noted this) that only women should subject to taxes for child care. It's most often the case, an occasional immaculate conception aside, that women do not conceive by ourselves.
written by Mike B., June 23, 2014 12:02
I don't actually think the proposed payroll tax would apply only to women. I just thought it was weird that they put the tax in terms of the amount the typical working woman, not worker, would pay. It was probably because the "advocates" wanted to make it seem as low as possible (although in that case, they probably should have used $6/month or $1.40/week).
Federal Taxes Don't Pay For Anything
written by Robert Bostick, June 23, 2014 4:17
You reported, "The Washington Post had a piece discussing a proposal to increase access to child care. The piece told readers the proposal would cost $20 billion a year. It then added this could:

"be financed through a 0.2 percentage-point increase in payroll taxes, which advocates say equals $72.04 a year for the average female worker.""

The Wa-Po and most Americans remain ignorant of the fact that since 1971, the Federal Government has not needed revenue per se to spend. When we became monetarily sovereign and free from gold standard rubrics we became the sole issuer of the non-convertible dollar functioning in a flexible exchange rate regime.

That means there is no need to tax or buy Treasury securities to fund Federal government expenditures, because the domestic value of the dollar is not determined relative to other currencies. Taxes function to manage inflation, income distribution, market entry, and force acceptance of the currency. They do not contribute to spending or the money supply.

Since the Federal government issues all the currency and only needs an appropriation to complete the act of spending, there is no need to finance Federal spending.

Our erstwhile "elected officials" their agents, advisors and the MSM are totally unaware of this nation's 43 year old status as a monetarily sovereign system like Canada, Britain, Australia, China, Japan and many others. Why do you think Japan survives, with its GDP/Debt ratio of 200+? All of its debt is in Yen, just like all of ours is in dollars. Our debt denoted by Treasury securities is also our national savings. That's what Treasury securities are savings.

So, when anyone says we must finance program (a) or program (b) or we're running out of money you must know they are just silly because the issuer of its own currency never involuntarily faces default or insolvency. As Greenspan said, "The U.S. can afford to pay any obligation denominated in dollars. That part of the benefit for being monetarily sovereign.

1. The dollar is an I.O. U. and therefore never recirculated once the tax is paid. Part 1 & Part 2.



3. Deficits are necessary to maintain net financial assets in the private sector. Otherwise we fall into recession and depression


Understanding Monetary Sovereignty (MS) is one of the most critical, if not the most critical, concepts toward an understanding of Modern Money.
written by MMF WTF?, June 23, 2014 9:26
Mr. Bostick: yes, well, it's complicated. It's pretty obvious that everyone designed Fed notes as IOUs.

12 U.S. Code § 411 - Issuance to reserve banks; nature of obligation; redemption

Federal reserve notes, to be issued at the discretion of the Board of Governors of the Federal Reserve System for the purpose of making advances to Federal reserve banks through the Federal reserve agents as hereinafter set forth and for no other purpose, are authorized. The said notes shall be obligations of the United States and shall be receivable by all national and member banks and Federal reserve banks and for all taxes, customs, and other public dues. They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank.

Do treasuries reflect national saving? I don't see it.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.