What will be President Obama’s biggest challenge? Iraq? The Mideast?
No, statistics.
Consider the U.S. birth rate: 1940 - 19.4, 1945 - 20.4, 1946 - 24.1, 1947 - 26.6. Add 65 to 1947, and you get 2012.
In that year, the Social Security Trust Fund will begin to decline in value, eventually reaching zero. Do not confuse this forecast with the End of the World in 2012 prophesy by Nostradamus. The Obama administration will have to either raise payroll taxes or reduce Social Security benefits. A one-time bailout will not solve the problem.
The Medicare program faces the same budget issue as Social Security, along with another statistical challenge. The proportion of American adults who smoke cigarettes: 1965 - 42 percent, 1985 - 32 percent, 2005 - 22 percent.
If you quit smoking, your health will likely improve – but this is bad news for Medicare. Smokers who die before 65 do not drain the Medicare fund. Nonsmokers live longer, so they make claims on Medicare. Moreover, people who quit smoking often replace the cigarette with candy. Diabetes is a major Medicare expense.
Staying with health statistics, advocates of socialized medicine cite statistics on life expectancy: U.S. - 78, Germany - 79, France - 80. They argue that Americans spend more per person on health care, but do not see any benefit. But life expectancy is based on the mean (often called the average), which is affected by extreme values.
Consider hypothetical samples from two countries, with three people in each sample. The number is age at death: A: 85, 90, 16, versus B: 72, 76, 74.If you calculate averages, the life expectancies are A - 64 and B - 74. Perhaps A has better health care than B, so the sample for A had people living until 85 and 90. But A also includes a person who died at 16, possibly a teen driver who died in a crash. Another cause might be a drive-by-shooting between two gangs, killing an innocent bystander. In country B, 16-year-olds ride the bus, and there is little gang violence.
We can get homicide statistics about this issue, measured as number murdered per 100,000: L.A. - 23, Berlin - 4, Paris - 3. One explanation might be that there are no poor people in Berlin or Paris, but the U.S. homicide rate actually decreased during the Great Depression. That could be explained by the end of Prohibition in 1933. During Prohibition people bought alcohol from gang members, so rival gang members killed each other over territory. When Prohibition ended, people bought alcohol at liquor stores, which competed without violence.
Do you still think statistics is a boring subject?
Gordon Johnson is the chairman of the Systems and Operations Management department at California State University, Northridge.