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Republicans Plan to Lie on Tax Policy in the 2012 Election Print
Monday, 21 November 2011 06:02

That should have been the headline of a Washington Post piece on the future of the Bush tax cuts. The piece quotes Grover Norquist as saying:

"And GOP strategists say the White House’s position makes the president vulnerable to charges that he would impose what many Republicans are already calling the 'biggest tax increase in American history' if reelected. 'We’ll run against their tax increase,' said GOP anti-tax activist Grover Norquist, 'and we’ll crush them.'"

President Obama is not proposing the biggest tax increase in history. He is proposing ending the Bush tax cuts for the richest 2 percent of the population. This is not even close to the biggest tax increase in history.

If the Republicans make the charge that it is the biggest tax increase in history then they are not telling the truth. They apparently believe that the media will allow them to get away with making a lie the centerpiece of their campaign.

Representative Jeb Hensarling Doesn't Know About the Recession Print
Monday, 21 November 2011 05:47

This should have been the headline of a front page Washington Post piece on the likely failure of the supercommittee. At one point the piece quotes Hensarling:

“It wasn’t so much of a failure as it was a failure to seize an opportunity. . . . This nation better seize another one or we will be in big economic trouble.”

This comment seems to imply that Mr. Hensarling does not realize that we are already in big economic trouble. The unemployment rate has been above 9 percent for most of the last two and a half years and there are no projections showing it coming down any time soon. Tens of million of baby boomers have seen most of their life savings disappear with the collapse of the housing bubble and are reaching retirement with little other than their Social Security and Medicare to support them. Millions of people are underwater in their mortgage and are likely to lose their homes in the next few years.

This is big economic trouble. Apparently, Mr. Hensarling has not noticed these economic developments. This is newsworthy.

This piece is written largely like an editorial. It misrepresents recent events to imply that there was a great urgency for the supercommittee to reach an agreement. For example, it asserts:

"The trigger of automatic cuts should assuage jittery financial markets, which have been on a roller-coaster ride since the summer’s debt standoff in the United States and the struggle to tame even greater fiscal quagmires in Europe. But lawmakers fear that the sentiment of a dysfunctional federal government could solidify and prompt new fear in the global markets."

Actually, there is little evidence that financial markets were jittery because of concerns about the deficit. The asset most immediately affected by concerns about U.S. government debt is U.S. government bonds (i.e. U.S. government debt). Bond prices have been very high through the last five months, with interest rates hovering near post-depression lows. Stocks have taken a hit, but this is most likely from concerns about a double dip recession in the United States caused by weak demand and the risk of a meltdown in the euro zone. In other words, the markets have acted in exactly the opposite way as would be predicted by deficit hawks.

The Supercommittee Was Considering "Cuts" to Social Security and Medicare, not "Changes" Print
Monday, 21 November 2011 05:22

A NYT piece on the failure of the supercommittee repeatedly referred to plans to "change" Social Security and Medicare. The supercommittee was not considering random changes to these programs, they were proposing cuts. The purpose was to save money, not make the programs better.

These programs are incredibly popular across the political spectrum as even large majorities of conservatives and Republicans oppose cuts to them. It is therefore understandable that politicians would use euphemisms to conceal their intentions. However, there is no reason for a newspaper, which has the responsibility of informing readers, to adopt the same euphemism.

Laying Off Government Workers in the Middle of a Recession Costs Jobs Print
Monday, 21 November 2011 05:11

A NYT piece on the likely failure of the supercommittee included a quote from Senator John Kyl:

"You can’t grow if you raise taxes in the middle of a recession.”

It would have been worth pointing out that according to the Congressional Budget Office and most standard economic models, it also hurts growth to have budget cuts in the middle of a recession. In fact, these models generally show that a dollar of spending cuts is considerably more harmful to growth than a dollar of tax increases. If Senator Kyl is primarily concerned about ensuring growth until we are out of the recession, then he would be resisting spending cuts right now rather than pushing them.

This piece includes a quote from Erskine Bowles. It would have been helpful to remind readers that Mr. Bowles is a director of Morgan Stanley, the Wall Street investment bank.

When it Comes to Doctors and the Health Care Industry, the NYT is Staunchly Protectionist Print
Monday, 21 November 2011 05:02

The NYT is generally a strong supporter of more open trade. However, for some reason its editorial on constraining costs in Medicare never mentioned an increased role for trade. This is peculiar since the fact that the health care system in the United States is so much more costly than health care systems elsewhere in the world (we pay more than twice as much per person for our care as people in other wealthy countries) means that there are large opportunities of gains from trade.

People who prefer freer trade to protectionism should be looking in this direction. The potential gains are several orders of magnitude larger than the potential gains from various trade deals over the last two decades.

Does the NYT Find It Stimulating to Hear Politicians Talk About "Job-Killing" Regulations and Taxes? Print
Sunday, 20 November 2011 06:52

That's what readers of the Sunday Magazine piece on Elizabeth Warren might conclude. At one point it tells readers:

"When pressed on what kind of formidable legislation she would actually pursue in the Senate, Warren’s organization served up a snoozy list of the priorities that Democrats have been talking about for years: she will push for spending on infrastructure, education and renewable energy. She will work to strengthen labor unions and advocate for the reregulation of the big banks while easing regulations that make it difficult for small businesses and community banks to compete with giants." (emphasis added)

There are few politicians that come out with ideas that are not already common in the public debate. Certainly none of the presidential contenders, with the exception of Ron Paul and Herman Cain, have presented ideas that have not been pushed by Republicans for decades. Nonetheless, the NYT has not suggested that these ideas are sleep inducing.

[Thanks to Greg Wilson.]

Supercommittee Democrats Insist on Not Giving Republicans Everything Print
Saturday, 19 November 2011 10:33

In much of the media it is the rule that both parties are equally to blame regardless of what the facts of the situation are. Hence the lead sentence in the Post's article on the supercommittee's deadlock tells readers:

"Congressional negotiators made a yet another push Friday to carve $1.2 trillion in savings from the federal debt, but remained stuck in their entrenched positions on tax policy even as the clock was running down on their efforts to reach a deal."

It would be interesting to know how the Post decided that the Democrats have an entrenched position. They have offered dozens of plans, many of which would not involve having the rates return to their pre-Bush level, as is specified in current law. By contrast, the Republicans have consistently put forward proposals that would keep the taxes on the wealthy at their current level or lower them further.

Even though the Democrats have shown every willingness to cave, the Post refuses to give them credit for it.

David Brooks Confuses the United States with Greece Print
Saturday, 19 November 2011 10:16

It is easy to get Greece and the United States confused, after all they are both in the northern hemisphere. Okay, this is a case where someone making the comparison puts their ignorance and/or dishonesty in full public view. The three reasons why we are not Greece, in reverse order of importance are:

1) Greece had chronic budget deficits, with a rising debt to GDP ratio even in the upturn. Its government has great difficulty collecting revenue as tax evasion is the major national sport. The United States actually had relatively modest deficits, prior to economic collapse in 2008. The debt to GDP ratio was actually falling. It was the economic collapse that gave us huge budget deficits.

If the economy recovers, ALL projections show that the deficit will return to relatively modest levels. In the longer term we are projected to have serious budget problems, but this is entirely due to our broken health care system. We pay more than twice as much per person as people in other wealthy countries. If we paid a comparable amount for our health care then we would be projecting budget surpluses, not deficits.

2) The United States has a huge diversified economy. If there was a run on the dollar then our goods would suddenly be hyper-competitive in the world economy. For example, if the dollar fell by 20 percent, then it would be equivalent to giving a 20 percent subsidy to all our exports and imposing a 20 percent tariff on all imports. Since the rest of the world would not tolerate this situation, they would have no choice but to support the dollar even in a worst case scenario. (In this respect, our productivity continues to grow by about 2.5 percent annually, so the economy is not going down the drain. We just need demand.)

3) We have our own currency. The ECB could buy Greek bonds and prevent the disaster it is facing. It is choosing not to. In the United States, this decision would be up to us. In a worst case scenario, we could have the Fed buy absolutely as many bonds as we want. There could be problems of inflation at some point, but we are very very far from that world.

In short, the comparison with Greece is utterly baseless. People are making this comparison to advance their agenda for cutting Social Security and Medicare. It absolutely should not be taken seriously.

Washington Post Has a Reasonable Piece on Supercommittee Print
Friday, 18 November 2011 06:22

This is worth mentioning amidst the near hysteria in the media over the prospect of a failed supercommittee. The Post piece began:

"If the congressional 'supercommittee' cannot agree on a plan to tame the federal debt by next week’s deadline, as now appears likely, here’s what will happen: nothing."

NYT Puts Editorial on Deficit Reduction in News Pages Print
Friday, 18 November 2011 05:44

Taking a cue from the Washington Post, the NYT ran an editorial on the budget deficit in its news pages. It told readers:

"At stake is not simply the country’s fiscal health, but also what remains of the government’s credibility. Without an agreement in sight, investors, business leaders and consumers, already worried about the deepening crisis in Europe, have begun to brace for the possibility of yet another blow to a fragile recovery, this time from Washington."

Is this a fact? The country's fiscal health is at stake? If the NYT reporters had access to the bond yields printed in their own newspaper they would discover that the yield on 10-year Treasury bonds fell by almost 1 percent on Thursday to 1.96 percent.

It seems pretty hard to maintain that investors are terrified about the fiscal health of the U.S. government if they are prepared to lend the government money long-term at less than 2.0 percent interest. They demanded 6.0 percent interest back in 2000 when we had budget surpluses and ostensibly serious people thought we would pay off the government debt in a decade.

This is not a news article. It is an opinion piece, and in fact a bad one. The writers/editors responsible obviously do not like the budget deficit and are trying to scare readers about its risks. This belongs on the opinion pages, not the news section.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.