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July 29, 2011 - 4:47 pm
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Sometimes the big media outlets do something right — or at least clever and thought-provoking. In this case it was the New York Times, which today unveiled a very well-programmed interactive poll-graph which allows readers to voice their opinions about the debt crisis on a dual-axis Cartesian graph. The result is an instantly updated “spread” of reader opinions which show at a glance where the public — or at least the liberal-leaning public which reads the NY Times — stands on the debt crisis issue.

In case they eventually take down the poll, and in case not everybody has an up-to-date browser capable of displaying the graph, I took a screenshot of the results (click to enlarge):

The up-and-down axis is about spending: dots near the top of the chart represent people who want to cut spending, while those at the bottom don’t want to cut spending. The left-right axis represents tax revenue — those who clicked near the right edge of the screen want to raise revenue through higher taxes, and those on the left don’t (more on this later).

Thus the cluster of dots at the upper left corner represent hardcore libertarians and Tea Partiers — people who want a lot less spending and no new taxes. The cluster at the lower right are the socialists and welfare-staters — people who want more spending and more taxes to pay for it.

The tiny cluster at the lower left are the crazy people — people who want more spending, but don’t want to pay for it in any way. We can safely ignore them.

But as the chart instantly reveals, the vast majority of respondents are in the upper right — people who want less spending and more revenue. In other words, the mid-point between the two extremes: the Tea Party position of cutting runaway spending is now the mainstream position; but the liberal Democrat call for higher taxes is also now the mainstream position.

This is why no one can figure out who’s “winning” the debt battle. Both political factions have a monopoly on only one of the two favored positions, while their opponents lay claim to the other.

This being the New York Times, with its “progressive” readership, the overwhelming cluster in the upper right is slightly sagging toward the “Don’t reduce spending” direction, but only barely. Considering the demographic of the readership, this is to be expected, and a similar poll in a different publication might skew slightly upward. But overall, it’s solidly “Cut spending/raise revenue.”

But here’s where the glitch becomes manifest. And it’s the same glitch that partisan economists have been arguing about for decades.

The chart presumes that “increase tax revenue” is the same thing as “increase revenue.” Or more simply, it relies on the false premise that raising taxes will also increase revenue.

That may be true in the immediate months after a tax increase, but study after study (and real-world examples) have shown that raising taxes will in the long run stifle economic activity, and over time serves to decrease revenue. Or, seen from the other angle, as has happened at various times in U.S. history: lowering taxes helps to spur an economic boom, which stimulates wealth creation and as a result higher revenue for the government, counter-intuitive as that may seem at first. But choking 70% of gross income from a stifled economy ends up producing less revenue than skimming 20% of gross income from a robust economy.

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