It’s that time of the year again when employees receive their W2
forms from their employers detailing their total earnings in 2008.
For those expecting a refund, document gathering and tax filing
starts almost immediately.
It’s that time of the year again when employees receive their W2 forms from their employers detailing their total earnings in 2008.
For those expecting a refund, document gathering and tax filing starts almost immediately.
For those of us who plan to pay, we’ll probably wait until close to April 15th to file. The extra time will give me an opportunity to do a little bit of research. This might be the year I put away the note pad, pencil, take the digital plunge and file my taxes electronically.
Why haven’t I done it sooner? My hesitation stems from our ever-growing reliance on technology that reminds me of one of the earliest acronyms in computer science – GIGO (garbage in garbage out.) Basically, it goes like this. If erroneous data is entered into any electronic device, the data that comes out the other side is also erroneous. Electronic devices are everywhere in our society and are used in a wide range of applications from simple transactions to very complex computations.
I was recently at a fast food restaurant and my meal totaled $5.15. I took out a 10 dollar bill, a nickel and a dime. However, before I could say anything, the cashier had already punched in some numbers and the readout on the cash register read $4.85 change. I handed the cashier my coins, and the cashier stood there perplexed, not knowing what to do. I explained to him, “My total came out to $5.15. I’m giving you 15 cents, which brings it to $5 even. I’ll give you this 10-dollar bill, and you give me back a 5-dollar bill in change.” He looked at me as if I were trying to short change him. “Let me get my manager,” he insisted. Luckily, the manager understood, and the transaction was completed. I’m sure this young man could do basic math, but in the moment, he was confused because he relied on the readout of his machine to dictate giving change. Error in – error out. In this circumstance, he was not ready to think on his own.
Sometimes the data that goes in and comes out of electronic devices is so complex that it’s difficult if not impossible to understand. This paralysis by complexity was evident last September when we faced what many called the 9-11 of the U.S. financial system – the burst of the housing market bubble that froze banks’ credit and their ability to lend to one another.
Banks, too big to fail, were getting billions of dollars of capital from the federal government, others were allowed to go bankrupt, some merged, and stocks continued to drop sometimes by triple digits. Finally, the government passed a bailout plan totaling more than $800 billion. Still, financial experts couldn’t agree on the cause, much less on the solution, of the problem and many question if the government’s bailout plan would even work.
A month later, former-Fed Chairman Alan Greenspan addressed Congress on his view of the source of the financial crisis.
He testified, “In recent decades, a vast risk management and pricing system has evolved, combining the best insights of mathematicians and finance experts supported by major advances in computer and communications technology. A Nobel Prize was awarded for the discovery of the pricing model that underpins much of the advance in derivatives markets. This modern risk management paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria.” Hmmmm … Garbage in garbage out?
Greenspan went on to explain that we would be better off today financially if the information input into the models had included historical data of conditions during economic downturns like previous recessions.
No one is immune from GIGO. With a new administration, let’s hope there is plenty of data gathering that can be used in our current economic crisis that will enable us to learn and to avoid repeating the same mistakes. If the data going in is good, then the outcome will be … well, if not good, at least solid and reliable.
This past week, the Senate confirmed President Obama’s treasury secretary nominee, Timothy Geithner, the man in charge of spearheading the government response to the financial crisis. Eyebrows were raised during the vetting process when it was revealed that Geithner owed $43,000 in back taxes to the IRS.
In his own defense during the confirmation hearing, he claimed it was an honest mistake. I wonder if he filed his taxes electronically.
