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NOM Gets Economics Wrong. Again.

Rob Tisinai

May 30th, 2013

Feeling wonkish?

The UCLA Williams Institute (I’ll call them “WI”)  is predicting an economic boost of $54-103 million in new spending for Illinois if the state legalizes same-sex marriage.

NOM’s Dr. Jennifer Roback Morse does not agree:

The people and legislators of Illinois should not count on extra revenue as a benefit from redefining marriage. These forecasts are based on an elementary economic error as well as highly dubious forecasts. That is why the “Gay Marriage Economic Miracle!!!” predictions have not worked out so well in the past.

I’ve learned Dr. Morse doesn’t have strong analytical skills, but this is her field, so I hoped for more this time. She did not deliver.

Dr. Morse describes the “elementary economic error”:

The same-sex couples of Illinois would have spent that money on other things: vacations, theater tickets, home decorating, pets, cars, doctor bills. Every dollar spent on weddings is a dollar taken away from some other industry!!

Not…exactly. Despite the italics and double exclamation.

Morse’s point is based on simple economics — simplistic economics, rather. The idea is that when people receive income, they either spend it or they save it, and if they save it, then banks lend those savings out to businesses and other consumers to spend. So every dollar is spent one way or another, and every dollar of income spent one way is just a dollar that can’t be spent some other way.

But consider this: What if the economy’s not so great? In a climate of fear and uncertainty, households usually try to cut back their spending. And businesses have little incentive to invest or expand. Dollars go unspent. You end up with usable but shuttered storefronts, functional but empty factories, and qualified but unemployed workers.

Economists call this the liquidity trap. A perfectly sensible decision by consumers and and businesses to spend less and save more (be more “liquid”) results in lower spending overall, “trapping” the economy in a recession unless we somehow find a way to boost spending back up.

A few signs can tell you if you’re in a liquidity trap. When interest rates plummet, it means businesses must not be competing hard for bank loans to finance expansion. That’s the situation now. Also, it’s not a good sign if businesses are sitting on mountains of cash rather than putting it to productive and profitable use. That, too, is our situation now.

The experts at the Williams Institute, however, do understand the liquidity trap. First, they estimated the number of same-sex couples likely to marry, factored in the average cost per wedding in Illinois, and then made this adjustment:

Also, only spending that comes from couples’ savings would truly be “new spending” for the State’s businesses, rather than money diverted from some other expenditure. To take these factors into account, as in previous studies by the Williams Institute, we estimate here that same-sex couples spend one-quarter of the amount that different-sex couples spend on wedding arrangements.

Emphasis added. In other words, they figured same-sex couples would use savings to pay for about a quarter of their wedding costs, and this is the only spending they counted.

[Note to Dr. Morse: When you’re rebutting someone, and they’ve already preemptively struck down your primary objection, then you need to deal with that instead of pretending it’s not there. Failing to do so is either dishonest or sloppy.]

Dr. Morse does score a few hits by pointing out the gap in WI’s 2008 prediction for the state of Iowa, and its 2011 follow-up report.

  • In 2008, WI predicted 2917 Iowa same-sex couples would marry in the first three years after it became legal, but in 2011 reported that only 866 had done so in the first year.
  • In 2008, WI predicted sales tax revenue of $2.7 million per year for the first three years, but in 2011 reported it was only in the range of $850,000 to $930,000 for the first year.

As Dr. Morse says:

In addition, the gross but unacknowledged discrepancy between the inflated prediction of 2008 and the ecstatic report of success in 2011 cries out for explanation.

Fair enough. I’m disturbed that WI didn’t explain or even acknowledge the discrepancy, too. But Dr. Morse continues:

That explanation is simple: the Williams Institute seriously over-estimated the number of same-sex couples who would marry.

Well, it’s not quite that simple, especially if you’re trying to discredit the Illinois predictions.

First, as Dr. Morse should recall, the economy tanked a few months after WI issued its 2008 report. Marriage rates fell across the country (from 7.3% in 2007 to 6.8% in 2009), and it’s not unreasonable to think long-established couples delayed their ceremonies until the world settled down. In addition, the average spent per wedding dropped in Iowa, too.

I suppose it’s possible we’ll have another once-in-a-lifetime meltdown next year, but unless Dr. Morse is counting on it, those factors don’t apply to Illinois.

What WI really got wrong in 2008, though, was wedding tourism — the number of non-Iowans who would come to the state to marry. WI thought 54,723 out-of-state couples would do that, and this number was so far wrong it’s almost comical.

With some trepidation, then, I checked to see how much wedding tourism WI had factored into its Illinois forecast, and the answer is…

0.

That’s right, zero. WI learned from its mistake, and this year when it predicted a $54-103 million boost from legalizing same-sex marriage in Illinois, it didn’t factor out-of-state couples into its calculations.

That’s a huge correction from the Iowa analysis. Now, you’re free to remain skeptical of these estimates (as a former Ph.D. candidate in economics, I’m skeptical as hell!) but at least be an informed skeptic. Who knows whether Dr. Morse doesn’t understand that this correction occurred, or she understands but is ignoring it to buttress a false case against the Illinois forecast. It’s the standard NOM question: incompetence or deception? All we can know for sure is that if you want a rigorous, well-informed analysis…don’t go to Dr. Jennifer Roback Morse.

Comments

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Chris McCoy
May 30th, 2013 | LINK

In 2008, WI predicted 2917 Iowa same-sex couples would marry in the first three years after it became legal, but in 2011 reported that only 866 had done so in the first year.

In the first year.

So take a prediction of a 3-year estimate, and then complain that, in the 1st year, the figure for the 3-year estimate was not obtained.

So 1/3rd of the 3-year goal would be 972. Iowa had 866. That’s a difference of 106, which is only 10%.

Lastly, when did the economic benefit of marriage equality become part of the equation? When did the recognition of Civil Rights depend on said Right making anyone a dime?

If that were the case, one could argue that Freedom of Religion should be taken away, because the Tax Exempt status of Religious organizations costs the State money.

james
May 30th, 2013 | LINK

“The same-sex couples of Illinois would have spent that money on other things: vacations, theater tickets, home decorating, pets, cars, doctor bills. Every dollar spent on weddings is a dollar taken away from some other industry!!”

Well, then, Dr. Morse, wouldn’t that mean that all weddings are bad for the economy?? Opposite gender couples getting married must mean they are spending money on that wedding they would be spending on other things, too, doesn’t it?? Does this mean NOM is now opposed to all weddings?? You didn’t qualify the word “weddings” with “gay,” now did you Dr. Morse?? So you must mean all weddings, then, don’t you??

HAH!! We caught you NOMites being stupid!! Again!!

CPT_Doom
May 30th, 2013 | LINK

One small note on your analysis Rob, it is also the case that saving and spending $$ do not have the same impact on the economy. Savings may be loaned out to business and individuals by banks, but only part of that money, and banks are not the only repositories of savings. When people buy stocks and bonds, that may give companies more liquidity, but does not impact the liquidity trap you discuss. People spending money has immediate impacts on goods sold, which leads to more goods produced, and eventually more jobs, much faster than does merely saving. That is why the best use of stimulus money, if your goals is immediate impact, is replacing lost income through unemployment insurance.

Mark F.
May 30th, 2013 | LINK

I’m not sure why the “economic impact” should make any difference as to why you should or should not support same sex marriage. Even if it is a wash in some sense, SO WHAT?

Rob Tisinai
May 30th, 2013 | LINK

Hey everybody. While I’m certainly a harsh critic of Dr. Morse (see above), she’s actually just responding to those on our side who are trumpeting the economic impact as a reason to support marriage equality. I imagine she’d agree you that the economic impact should not determine marriage policy.

Jonathan
May 30th, 2013 | LINK

@chris McCoy

The first year numbers are expected to be significantly higher than ensuing years due to pent up demand (long time couples with a first shot at legal marriage).

jutta
May 31st, 2013 | LINK

> In 2008, WI predicted 2917 Iowa same-sex couples would marry in the first three years after it became legal, but in 2011 reported that only 866 had done so in the first year.

The charts presently available at the websiste of Iowa Department of Public Health talks say, there were 1,783 ss couples married in 2009 (no more recent data available yet). And remember: Marriages started on April 27th, so the frist quarter of the year was over already.
http://www.idph.state.ia.us/apl/common/pdf/health_statistics/2009/html/table_33d.html
http://www.idph.state.ia.us/apl/common/pdf/health_statistics/2009/html/table_34.html

Rob Tisinai
May 31st, 2013 | LINK

jutta, be careful of the distinction between in-state couples and out-of-state couples.

jutta
May 31st, 2013 | LINK

I was looking for some hint on the IDPH website to find out, if out-of-state couples are included in the statistics. I found none. All the other population-statistics seem to be about Iowa residents.

BTW I have just found more recent data (but they are inclued in *huge* pdf files, so only klick if your internet connection allows it http://www.idph.state.ia.us/apl/health_statistics.asp )

Dave H
May 31st, 2013 | LINK

Another factor is that some states and countries that offer marriage equality are more popular destinations for weddings than others. I intend no offense or disrespect whatsoever to our friends in Iowa, but that state isn’t generally near the top of most people’s lists of “destinations.” People from a non-marriage equality state who decide to travel to a marriage equality state to get married are more likely to choose Boston, New York, etc.

Canada got a LOT of business from U.S. couples wanting to get married back when Massachusetts was our only other choice. Lots of out-of-state couples went to California to get married back in 2008 while that window was open.

In the case of Illinois, it’s reasonable to assume that Chicago might be a destination of choice for out-of-state couples more than anywhere in Iowa.

As marriage equality comes to more states, the economic impact of out-of-state weddings will diminish. There will still be an impact from in-state weddings. But even that will diminish in the future, because as other states jump on the bandwagon later, some of their citizens will already have been married elsewhere.

Ben in Oakland
May 31st, 2013 | LINK

Just another note from a now retired wedding professional, 30 years in the business.

People spend a lot of money on weddings. Frequently, they would budget X for photography, which was my business, only to spend 2x or 3x becuase they wanted me badly. They might balk at spending $6000 for photography for any other occasion, or even for a new driveway, when it comes to their weddings, it’s first class all of the way.

So morse is wrong in more ways than she can count. But that’s why I didn’t do too many baptist AoG, JW, or Mormon weddings. How shall I put it delicately?

Too cheap.

Jeffrey
June 1st, 2013 | LINK

NOM is grasping at straws- they are truly desperate now! Hopefully- when all of their old white bigot supporters are dead, NOM will die too. Can’t be soon enough.

Nathaniel
June 8th, 2013 | LINK

It’s very easy to explain why they are grasping at the economic straw. They are trying to maintain a relationship with a party that is beginning to grasp how detrimental being socially conservative is to their bigger causes of fiscal conservation and smaller government (indeed, social conservatism usually involves expanding government). By pointing out how social liberalism (like marriage equality) could potentially hurt the economy and/or expand government spending, NOM and their ilk are most likely trying to keep their stranglehold on the Republican party, hoping to convince them that social and fiscal conservatism go hand in hand.

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