Tuesday, May 17, 2011

The Relationship between Taxes, Income, Social Benefits, Spending, and Debt with the Trade Deficit (Part III)

Starting posting some of my blogs from my other site at Townhall at http://patrickbohan.blogtownhall.com/

A new linear error model was created similar to the one used in Part I of this series of blogs except a new column of data was added – the annual national trade deficit (adjusted for oil imports). Once again to understand how a linear error model is created and analyzed please refer to my blog post: Creating an Election Model (Part I, Part II, and Part III) posted on October 4, 5, and 6 2010. Below is the result of the first linear regression analysis using this new linear error model.

n 20

R2 0.98
Adjusted R2 0.96
SE 4.785E+04

Term Coefficient 95% CI SE t statistic DF p
Intercept 1213554 -267292 to 2694400 679657 1.79 12 0.0994
STAX 1.091 -0.224 to 2.406 0.6036 1.81 12 0.0959
SCS -0.175 -0.341 to -0.009 0.0761 -2.30 12 0.0402
TaxSB 0.2228 -1.0321 to 1.4778 0.57598 0.39 12 0.7056
Debt 0.007289 -0.010171 to 0.024748 0.0080134 0.91 12 0.3810
E Tax -52214 -187754 to 83326 62208 -0.84 12 0.4177
Q1 ISB -16.86 -75.02 to 41.30 26.693 -0.63 12 0.5394
Q5 ISB -18.37 -48.60 to 11.86 13.874 -1.32 12 0.2102



Source of variation Sum squares DF Mean square F statistic p
Model 1.097E+12 7 1.567E+11 68.43 <0.0001
Residual 2.748E+10 12 2.290E+09
Total 1.124E+12 19


Coefficients Coefficient Value Value Trade Deficit (Oil) Ave Trade Deficit (Oil)
Intercept 1213554 1 1.21E+06 1 1213554
Q5 ISB -1.84E+01 5.08E+04 -9.33E+05 4.68E+04 -859716
SCS -1.75E-01 1.25E+07 -2.19E+06 1.25E+07 -2187500
Stax 1.091 1.15E+06 1.25E+06 1.15E+06 1254650
Etax -52214 8 -4.18E+05 11 -574354
Q1 ISB -16.86 1.78E+04 -3.00E+05 2.18E+04 -367548
TaxSB 0.2228 6.97E+05 1.55E+05 6.97E+05 155291.6
Debt 0.007289 1.00E+08 7.29E+05 1.00E+08 728900
-4.86E+05 -636722.4
Result -4.86E+11 -6.36722E+11


The above model has a very good correlation as shown by the R² variable equal to .98. The results indicate that the annual national trade deficit would increase from a loss of 486 billion to 637 billion dollars (remember this is based on data through 2008) by raising the effective tax rate (Etax) from 8 to 11%. I also varied the first quintile’s income (Q1 ISB – takes government entitlement income into account) from 17,800 dollars to 21,800 dollars. On the other hand, I reduced income earned by the fifth quintile from 50,800 dollars to 46,800 dollars. Tomorrow I will post a similar analysis that shows a different trend. The bottom line: higher taxes means U.S. businesses will be less productive and therefore; export fewer goods and services increasing the national trade deficit.

My Book: Is America Dying? (Amazon.com, Barnes and Noble)

No comments:

Post a Comment