What is this? Journalists can't understand statistics day?

What is this? Journalists can't understand statistics day?

In my usual morning radar sweep of the different information sources I monitor, there is story after story of Mandarin Class academics and journalists stumbling over basic reading skills in terms of survey questions/other sources. There was Naomi Wolfe's misunderstanding of "death recorded". There was Paul Dolan's misunderstanding of "spouse absent". And now this, Americans May Be Strapped, But the Go-To Statistic Is False by Michael R. Strain.

Indeed. I simultaneously believe that Mandarin Class policy makers in Washington, D.C. and in the mainstream media do not understand the precariousness of household finances for the bottom 40%, maybe even 60%, and also believe that 40% of American households could not absorb a $400 dollar unexpected expense claim is a lie.

Strain does the basic research on this decades old, and oft refuted claim.

Others have been equally skeptical of the $400 story, and published convincing rebuttals. Nevertheless, it has become the conventional wisdom. So when this issue flared up again last month, I decided to look into it. It turns out the claim that nearly half of Americans are a flat tire away from financial crisis is largely based on an inaccurate reading of one survey question.

The question comes from the annual “Report on the Economic Well-Being of U.S. Households” by the Federal Reserve. The report finds, in 2018, that 61% of adults would cover a $400 unexpected expense using cash (or its equivalent). Politicians and many in the media seem to be subtracting 61 from 100, and concluding that 39% of people, to use Warren’s phrase, “can’t come up with” the money they’d need to handle this situation.

Instead, as the Fed report makes clear, though “the remaining 4 in 10 adults” “would have more difficulty covering such an expense,” many of them would be able to make it work by carrying a credit card balance or borrowing from friends and family. (Presumably some of these adults are 18-year-olds borrowing from their parents, but I’m not sure about that.)

The report states: “Twelve percent of adults would be unable to pay the expense by any means.” I’m dubious about that as well. In any event, 12% is a lot less than 39%.

The report also goes out of its way to make clear that some of the 39% who wouldn’t use cash might still have $400 in the bank: “It is possible that some would choose to borrow even if they had $400 available, preserving their cash as a buffer for other expenses.” In a footnote, the report even cites a 2016 study finding that 76 percent of households had $400 in liquid assets, even after taking into account monthly expenses.

A number of people with healthy finances carry some credit-card debt while also holding cash. A financial adviser might counsel against this, but it is not necessarily a sign that the borrower’s life is, to use Harris’s phrase, in “complete upheaval.”

The common misinterpretation of this finding in the study is particularly strange in light of two other questions on the same survey. The Fed asks respondents whether they are able to pay all of their bills in full. Only 17% say they can’t pay some bills. Again, 17%, not 39%.

The Fed also asks respondents how a $400 emergency expense that they had to pay would affect their ability to pay their other bills. Eighty-five percent report that they would still be able to pay all their bills. Only 14% say that the emergency expense would result in their not being able to pay some bills.

I am troubled that 12% say they couldn’t cover the $400 expense, and that 14% claim it would stop them from paying some of their other bills. But even if respondents are accurately reporting on their finances, these numbers suggest their situation is relatively uncommon. By making the problem seem so widespread, politicians and journalists are making it harder to identify how to help people who really are suffering financial hardship.

So again, the Mandarin Class misreading survey questions and then making dramatic claims inconsistent with lived reality.

There is an old adage known as the Sagan Standard.

Extraordinary claims require extraordinary evidence.

The Mandarin Class, being largely science-denying anti-empiricists, seem comfortable with making extraordinary claims and also comfortable with ignoring the mandate to provide extraordinary evidence to support the extraordinary claim.