Sunday, August 12, 2012

An Economics/Budget IQ Test

A couple of times in the last few months, I've talked about putting together a simple quiz about economics to see how much people know.  Sort of a "federal budget IQ test".  It might be useful, might be interesting.  Might be.  I see this as something to talk about with friends, so you can see if they understand the realities of the economy. 

My goal is to make it only things that are facts I have researched answers and URL links to scattered about in the history of this blog.  One might say, "I don't trust that source", but at least it's not based on my opinions.  Here's a first cut at the quiz.  I'm thinking of barraging some friends and family with this, just to see how good they think it is.  The answers are all provided at the bottom, and are "closest guess wins".

1.  What percent of the total federal income tax revenue does the top 1% of earners pay?
a - None.  They don't pay tax.
b - 20%
c - 40%
d - 60%

2.  About what percentage of the total national income do the top 1% earn?
a - 10%
b - 20%
c - 40%
d - 60%

3.  Over the last century, when tax rates went up, what happened to tax revenues, as a percentage of GDP?
a - go up
b - stay the same
c - go down

4.  The annual US budget shortfall, the deficit, rolls up every year into the debt.  How does the debt compare to the total US economic output, the Gross Domestic Product?  (not counting social security and medicare)
a - debt is much less than GDP
b - debt is less than as GDP
c - debt is the same as GDP
d - debt is more than as GDP

5.  On the current economic trajectory, the (non-partisan) Congressional Budget Office predicts:
a - smooth sailing.  Things get better and better.
b - potential trouble by the time all "boomers" are long retired (2050)
c - economic collapse before all the "boomers" have retired
d - potential trouble but Obamacare saves the budget from getting into trouble

6.  It has recently been proposed that we have a maximum wage - that no one should be allowed to make more than $5 Million a year (indexed to inflation).  If the government seized every penny of individual income over $5 Million per year, how long could we run the government without adding budget deficit?
a - forever - we have a minimum wage; a maximum wage makes as much sense. 
b - six months
c - one month

7.  What percentage of "discretionary spending" (for example, Defense, NASA, Department of Education, DHS, and more) would we need to cut to balance the budget?
a - about 40%
b - all of it
c - cutting all of it isn't enough to balance the budget
d - about 25%

8.  Who benefited more, as a percentage, from the "Bush Tax Cuts"
a - the top tax bracket
b - the bottom tax bracket 

9.  What percentage of the US population actually makes money off federal income tax?
a - none
b - about a third
c - about half
d - more than two thirds

10.  The US constitutes about 5% of the world's population, but consumes 25 to 30% of the world's energy.  What's the biggest explanation?
a - lavish lifestyle and big fat slob population
b - the US produces about 25 - 30% of the world's wealth
c - the US refuses to mandate high mileage cars and hybrids or electric cars
d - the US threatens to militarily squash other countries who compete with us for energy

11.  For the last two years, who has been the biggest financer of the US deficit? 
a - China
b - Japan
c - the European Union
d - the Federal Reserve Bank makes money up out of nothing. 

12.  If social security and medicare commitments ("unfunded liabilities") are included with the national debt, how does that compare to the total economic output of the world (the "Gross World Product" or GWP): that is, "all the money in the world".
a - less than one year's Gross World Product
b - about one year's GWP
c - more than one year's GWP

Answers - 1 (c), 2 (b), 3 (b), 4 accept either (c) or (d), 5 (c), 6 (b), 7 (c), 8 (b), 9 (b), 10 (b), 11 (d), 12 (c)
EDIT 1850 EDT question 8 after chat with commenter Xenocles. 
EDIT 1725 EDT 13-Aug-12 to clarify question 3

6 comments:

Xenocles said...

I don't understand 8. Who are the rich / the poor? What does it mean to benefit? Percentage of what?

Graybeard said...

What that was intended to say was who got the biggest decrease in their tax burden. The lowest income bracket got the biggest decrease in their tax as a percentage of taxes paid. I tend to think in percentages here because it seems the most mathematically honest. I'll have to try to think of a better way to say that.


The reference is this, from an article on what happens if those tax rates go back to pre-2002 levels:

The current six rate brackets of 10%, 15%, 25%, 28%, 33% and 35% will be replaced by five new brackets with the higher rates of 15%, 28%, 31%, 36% and 39.6%

Note that the lowest bracket tax rate goes from 10% to 15%, or a 50% increase in their taxes. The highest bracket goes from 35 to 36.9%, or 5.4%. The lowest income people will be hit the hardest. In this analysis from the Tax Foundation, you can see how the share of tax liability went up for the top quintile, and down for all of the others under the Bush cuts.

Xenocles said...

Looks like the second bracket got it the best, having their rate cut by ~46%. Bottom bracket only went down by 33%. The potential increases (referenced to current rate) are 50% (bottom) and 87% (second).

That explanation does make more sense, thanks.

Graybeard said...

I re-worded the question to say top and bottom tax bracket. My point, of course, is that the "tax cuts for the rich" benefited the lower income brackets the most. In terms of absolute dollars, which is the way some tend to talk, of course the rich had the biggest reduction in dollars. They had to - they had the most dollars in the game. In terms of the percentages, you were able to keep more of your check if you're on the bottom of the income distribution. The US has the most progressive tax system in the world, that is the upper brackets pay the highest burden, as of the date that was written (last year, IIRC).

Reg T said...

#3: I was under the impression that tax revenues actually increase when taxes are cut, by some small percentage. That isn't true?

Anonymous said...

You are absolutely right!

That's supposed to say "tax revenues as a percentage of GDP" - to see if folks are aware of Hauser's Law.

I'll correct it when I get home. I'll get it right, yet!

SiGraybeard @ work