Just Because Everyone's Freaking Out Over This Chart...

tax compromise comparisonOk, everyone chill out.  Everybody on the etherwebs seems to be freaking out at the return of Ezra Klein's "snowman" chart, complete with the compromise tax deal that President Obama made with the Republicans.  Ezra's chart is on the right; click to enlarge.  Even John Cole is "sold."

See the millionaires' portion at the bottom that's huge?  Yeah, Obama's compromise looks a lot like the Republican plan - so, everybody freak out!  Actually, don't freak out.  There are a few things you have to understand about this snowman graph.  First, there's a time differential.  The compromise only extends the tax rates for the rich for two years, not, as the GOP would have it, in perpetuity.  With the Republican plan, that big bubble would stay forever.  So first of all, the chart should have come with a disclaimer that would read something like: "Average tax cut under each plan, for the next two years only."  Because it's an unfair comparison.  The two on the left are permanent proposals, the one in black (the compromise) is temporary in nature.  See, the new proposal under the compromise looks a lot like what's on the left (the Democratic plan) starting in 2013.  And the President has personally committed to continue to make that case to in the national debate over our broken tax system over the next two years.

As an observation, there is also something inherently distorting about this sort of graph, since income is skewed right.  Meaning, that for all the other income levels, it's averaging the tax cuts for a specific range of income, whereas the last one, $1M+ averages everyone above that level.  That means it averages the tax cut received by those making $1,000,001 and those making $1 billion or more.  That range is much larger, lending itself to that big bubble at the end.  The point is taken that Democrats would give tax breaks to the first $250K of income, and that there are relatively few millionaires and billionaires.  But this is not a weighted average.  This is a plain average.  The number of people in the group is irrelevant to the size of the bubble, but the highly skewed and limitless income possibility is not.

Secondly, if we are doing such a comparison between temporary and permanent proposals, we also need to not skip all the way to the bottom and ignore everything else.  What if we look at just the poor and middle class (including upper middle class) portions of this chart?  Here's what that would look like:

Obama tax deal - breaks for poor and middle class

Let me put that in a table form and do the comparison for how much better Obama did as compared to the original Republican plan for the middle class:
Income levelDemocraticRepublicanObama CompromiseObama Compromise
percent difference
with Republican plan
Less than $10,000$53$52$234Obama +350%
$10,000-20,000387387558Obama +44%
$20,000-30,0007717691050Obama +36%
$30,000-40,0008968941431Obama +60%
$40,000-$50,0009169091679Obama +85%
$50,000-75,000113211192305Obama +106%
$75,000-100,000190018713486Obama +86%
$100,000-200,000376636906224Obama +69%
Look at this - even just on the tax cut front (not taking into account the unemployment benefits that will help 7 million people over the next year) President Obama got a much better deal for the poor and the middle class - in some cases nearly doubling the tax break both the Democrats and Republicans in Congress were proposing.  This is the effect of the Obama tax cuts for the middle class: the Earned Income Tax Credit, the Child Tax Credit, the tax credit for students to help pay for college and the payroll tax cut.  And for the people having the hardest time getting by, thanks to the payroll tax cut, those at the very bottom of the economic ladder get four and a half times the tax cut of either the Republican or the Democratic proposal.  Just to reiterate, under the Obama deal, the poor and the middle class get a much bigger tax cut (sometimes twice as much and for the poorest, four-and-a-half-times as much) they would under either party's proposal, and the really poor get four-and-a-half times.  Got it?  Good.

Next, the whole bruhaha over the chart has left behind its context, namely Ezra Klein's excellent article.  In it, Ezra presents another chart, prepared by Micheal Linden of the Center for American Progress, proving positively that Barack Obama got more money in this deal for progressive priorities than Republicans got for conservative ones.

tax deal benefits

As you can see, even though the per person benefit is much larger for the Republican side, the overall balance of the benefits flow to the Democratic priorities.  Ezra Klein also schools the childish Left on the reality of the political world, namely that without a deal, everything falls apart, unemployment benefits don't get extended, affecting over 7 million Americans over the next year, everyone's taxes go up, families with children lose out, college gets harder to afford, and there's no payroll tax break to help the working class and the working poor.
An individual billionaire is getting a far better deal than an individual unemployed American. And that's galling. The problem is that to take the money from the billionaire means to also take the money from the unemployed individual. Actually, taking the money from the billionaire means taking the money from a lot of unemployed Americans.
Duh.  The truth is pretty simple, huh?  And finally, Ezra's take on the deal, boiling it down as only he can, before he puts up the snowman graph; his view of the deal is, surprise surprise, to take the deal.
All groups are getting more under this framework, but on an individual level, the wealthy are getting much, much more.  The question, at the end of the day, is whether stopping them from getting it is worth cutting benefits for the unemployed, and tax cuts for middle-income Americans, and the Earned Income Tax Credit. I don't think it is, and that's particularly true because it's not, to me, about the size of the transfer so much as the possibility for stimulus.
So that's the context and the analysis of the "snowman" chart that has everyone's panties in a bunch.  Actually, the graph shows that under the compromise, the poor and the middle class get twice the breaks as under either Democratic or Republican plans, and the maker of the graph doesn't think the deal should be killed.  How's that for something to chew on?