Wednesday, August 22, 2012

Doesn't anyone study math anymore?

According to the Census Bureau (government agency), the 2010 census enumerated 7.2 million teachers earning a national average of $50,758 annually (total cost, not adjusted for inflation: $365,457,600,000).  This is money coming directly from government coffers - money we are spending on quality education, right?  Huffington Post (liberal leaning electronic publication) reported that the Organization for Economic Co-operation and Development (OECD) ranked the United States 14th out of 34 OECD countries for reading skills, 17th for science and a below-average 25th for mathematics.”  These figures are available directly from the OECD, but I have no reason to dispute the rankings presented by Huffington Post.  If you asked every teacher to take a 20% pay cut, it would yield an annual savings of $73,091,520,000.  That’s $73.1 billion per year.  Unintended consequences would likely include reduced tax revenues (fewer teachers, employed at lower salaries) from this sector, higher unemployment, and a likely decrease in the quality of an already inferior product.  I’m aware that there are some excellent teachers out there, but the evidence indicates that the system, as a whole, is expensive and ineffective.

Implementing the Buffett Rule (That’s the Millionaire’s Tax) at 6% (not 3% as suggested in this picture) would only raise $37 billion per year, as demonstrated by the Atlantic Magazine (Left leaning print publication).  So, at 3% that would be half, or $18.5 billion per year.  That’s not money the government is spending, but rather money coming out of company coffers and individual wallets.  A survey of wealthy people conducted by PNC Wealth Management in 2008 indicates that of those who have investable income of $500,000 or more, 89% acquired that wealth through their own labor, while only 11% inherited their wealth. From that same report, of those who earned their wealth, 37% of their wealth was directly attributable to investment in or ownership of business (vice salary). So 37% of 89%, or 33%, of the wealth of wealthy people is driven directly by business.  If we multiply the additional $18.5 billion in tax by the percent that was derived directly from doing business, we find that there would be $6.1 billion fewer dollars participating in business, on top of what is already the highest corporate tax of any country in the world, as reported by the Tax Foundation (right leaning think tank)  from OECD data.  Unintended consequences of implementing the Buffet Tax would likely include greater unemployment (some portion of that $6.1 billion is used to employ people), reduced investment in American companies, and movement of money and jobs off-shore.

Both solutions are likely to increase unemployment, and neither solution will increase revenues as much as projected, since both will reduce revenues through other mechanisms.  Reducing teacher salaries by 20% has a much greater effect on the individual taxpayer than does the 3% increase in taxes on individuals subject to the Buffet rule, but also has a much greater (though still insignificant) effect on federal budget deficits.  In short, neither solution is sufficient or effective, unless included in a much larger budget reduction/revenue increasing measure.  Combine them... increase the millionaire tax by 6% instead of 3%, even - and you come up with an additional $110 billion in the first year.  Collect that for ten years and you an almost pay for a single year of budget deficit... you know, the amount we borrow each year to pay for more entitlements.

This picture is about spinning people up emotionally, for a political purpose. Oh... and it's about demonstrating why we're 25th of 34 in mathematics.


  1. I wholeheartedly agree. When you are out of money at home, you start cutting out the expenses. It is time to tighten the belt and say some programs and funding have to go and the bills have to get paid first. In truth, It really doesn't even need to be about Medicare or Defense. If we just cut all of these little PORK items off of the budget from BOTH sides of the ticket, we could save billions a year. It is time for the States to pay their way and let the government run the bare essentials like it should.

  2. As an aside, that $6.1B reduction in business funds represents 120,000 jobs at the national average teacher salary.