The great David Cay Johnston published a really useful article last week, Don’t Be Duped by Misleading Economic Terms. It even includes a helpful glossary. One thing I learned from my time as an actual scientist was that nothing is all that hard to understand. Scientists love to make their work seem very impressive with a lot of mathematical jargon, but the concepts are always simple. The complicated stuff is usually important to the scientists themselves, however; and that’s how it is distinct from politics and the non-science of economics. When people are making these these things sound complicated, it is usually because they are hiding something.
I want to focus on the issue that Johnston did in the first half of his article: compensation. There is an overwhelming tendency on the part of politicians and journalists to talk about compensation as though it were charity. And this is especially true when it comes to people who work for the government. I’ve never been too clear on why this is, but people seem to think that when the government hires someone to do a job, it isn’t real and the worker shouldn’t be paid the same as if she were hired by a private institution. When stated explicitly, people claim government workers shouldn’t make as much as comparable workers elsewhere. That’s bad enough.
But as Johnston noted, the bigger issue is on benefits. There is a constant war on the retirement benefits of public employees. And by referring to them “government contributions,” it is implied that they are some kind of charity rather than part of the compensation package the government and the employees worked out long ago. Dean Baker has written about this a lot by contrasting it to bond holders. When a state is having financial problems, the CNBC crowd is all about reneging on these work related promises to pay. The idea that bond holders would get screwed is outrageous to these people. But they are exactly the same things. If I work for you in exchange for money to be paid to me in the future, you owe me money just as surely as if I loan you money to be paid back to me in the future. This isn’t hard to understand, but the use of words like “contributions” are designed to obscure the truth.
Related to this is the payroll tax. Most people think that they pay 7.65% of their income toward their future Social Security and Medicare benefits. But that’s not true. The employer also pays 7.65% toward this. But this is simply part of workers’ pay that is taken away. So why don’t our checks just have 15.3% in payroll taxes removed? Johnston has a good answer for that, “The other half of the tax does not show up on paychecks because it is part of a deception by Congress to make the tax seem less onerous than it is.” You can see why this is so. If everyone saw 15.3% come out of every paycheck they got, they might wonder why it is that they are paying more in that one tax than Mitt Romney pays in total federal taxes on the tens of millions he “earns” every year.
This is just one example of how the language is distorted to keep us from seeing the truth. And I suspect that even having written this, a lot of readers are still confused about how they are actually paying 15.3% (actually, it’s 14.2%[1]) when it doesn’t say that on their check. But do you know who isn’t confused about this kind of thing? The rich. They know what they are doing, and they love the fact the vast majority of people just accept the linguistic frame that allows them to stay rich at our expense.
[1] If your employer didn’t have to make its “contribution,” your pay would be 107.65% of what it is now. You would then pay 15.3% of your income: 15.3/107.65 = 14.2%.
