Wednesday, August 22, 2012

Fiscal thrill seeking

I'm sure I'll have more to say about the Fiscal Cliff, as the kids are calling it, in the weeks to come. First I'd like to point out a prediction that is itself a logic puzzle. For the moment I am considering only the tax policy possibilities.

  1. I believe that the most likely outcome is that no legislative changes occur (the tax increases, resets, etc. are allowed to transpire). 
  2. I believe that it is most likely that there is legislative action that alters or avoids the tax increases, resets, etc. in some fashion. 
These two statements may seem to the casual observer to be contradictory. They are not. Re-read them and then check below the fold for my reasoning.
Allow me to fill in the gaps which should illuminate the subtle distinctions between the statements necessary for them to both be simultaneously true.
  1. I believe that the most likely outcome is that no legislative changes occur (the tax increases, resets, etc. are allowed to transpire).  I believe this is 25% likely.
  2. I believe that it is most likely that there is legislative action that alters or avoids the tax increases, resets, etc. in some fashion. I believe there are basically four general categories in which most all compromises fall. The most likely of these has a likelihood of 20%. In aggregate they represent 75% of possible outcomes in which legislative change does occur. 
As everyone with a microphone in front of their face is tasked to answer a question about this topic, pay close attention to which question is actually being asked and compare it to which type of answer is actually being given. I'll be surprised if more than half the time the answer matches the question and more surprised if more than half the time commentators give consistent answers when asked both questions. The questions would be:
  1. What do you think is the most likely outcome for the tax portion of the Fiscal Cliff? (a relatively specific question)
  2. Do you believe that it is most likely that there is no legislative action regarding the tax portion of the Fiscal Cliff? (a relatively general question)
Bonus: a good politician (someone who is good at politics, there is no such thing as a normatively good politician) is adept at avoiding the first type of question or altering it in response to make it the second type of question.