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Home Publications Blogs Beat the Press A Heaping Helping of Ridicule for Ruth Marcus

A Heaping Helping of Ridicule for Ruth Marcus

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Friday, 28 September 2012 04:33

Ruth Marcus commits just about every major error in budget analysis in her Washington Post column this morning. To start with, she warns of the fiscal cliff at the end of the year:

"A fiscal cliff looms at year’s end, when a cornucopia of tax cuts is set to expire and a $1.2 trillion spending sequester kicks in. Like Wile E. Coyote, we are about to suddenly look down at a gaping void."

Wow, that sounds really scary. Of course this is the sort of nonsense that can only appear in the Washington Post and similar publications. Contrary to what Marcus wants us to believe, there is no Wile E. Coyote moment waiting at year-end. On the tax side, beginning in January we would start to see more money deducted from our paychecks. Since most of us are not paid in advance, we would first begin to see any effect on the tax side when we get our paychecks at the middle or end of the month. If there is an expectation that Congress and the President are likely to work out a deal that preserves most of the current tax cuts, then the impact on consumer spending and the economy in January will be close to zero.

On the spending side, the $1.2 trillion figure is one that makes sense if we assume that Congress will never revisit spending policy over the next decade. That's right, it has nothing to do with January of 2013, it refers to spending over the next decade. (Hey, this is the Washington Post.) The actual impact on spending in January is likely to be minimal, unless President Obama wants to slow spending to make a point. (The president has enormous control over the timing of spending.)

In short, there is nothing resembling a cliff or a Wile E. Coyote moment, these are fictions that only exist in the Washington Post and similar locations. The purpose of this fabrication is to advance their agenda for their preferred plan for spending cuts and tax increases. As Marcus tells us in the next paragraph:

"Behind the scenes, serious people in the administration and Congress, of both parties, are discussing ways to avert the economic shock of suddenly hiking taxes and throttling back spending. But there can be no pathway to success unless enough partisans on both sides give up on their foundational myths: for Republicans, that the fiscal challenge can be solved through spending cuts alone; for Democrats, that tax increases on the wealthy will suffice (emphasis added)."

Yes, thank God for serious people. You would recognize these serious people as the folks that were too thick to recognize the $8 trillion housing bubble, the collapse of which wrecked the economy; oh, and by the way, also gave us trillion dollar annual deficits. They were too busy yelling about budget deficits. (I'm not kidding, they were screaming about budget deficits even when the deficit was less than 2.0 percent of GDP.)

Contrary to what Marcus and the Serious People want people to believe, there is no spending problem, there is a problem of out of control health care costs. The United States pays more than twice as much per person for its health care as the average for people in other wealthy countries, with little to show in the way of health outcomes. If we paid the same amount as any other wealthy country we would be looking at huge budget surpluses, not deficits.

The deception here is simple and extremely important. Honest people would talk about the need to reform the health care system. That addresses the health care cost problem that the country really does face. Marcus and the Serious People would instead want to leave the broken system intact and just have the government pick up less of the tab.

This difference has enormous implications not only for access to health care but also for the distribution of income. Fixing the health care system means whacking the bloated incomes received by the drug industry, the insurance industry, the medical equipment industry and doctors (especially highly paid medical specialists). The route chosen by Marcus and the Serious People protects the income of these people. It instead will force lower and middle income people to get by without adequate care. This is the choice that the Post is doing its best to conceal from its readers.

Comments (15)Add Comment
Straw Man
written by Bart, September 28, 2012 7:11

Marcus: "But there can be no pathway to success unless enough partisans on both sides give up on their foundational myths:... for Democrats, that tax increases on the wealthy will suffice."

She needs to name some of her serious Democratic friends who believe that.
Marcus Creates False Equivalency
written by Robert Salzberg, September 28, 2012 8:30
Ruth Marcus creates a false equivalency between Republicans who will never raise taxes and Democrats who only want to increase taxes as a way to mend our economy.

I sent a correction request to WaPo for Marcus to either produce a single elected Democrat who has stated that the debt can be dealt with just by raising taxes on the rich or retract her statement:

"for Democrats, that tax increases on the wealthy will suffice "

I expect the chance of a correction for Marcus's piece to be about the same as Marcus finding an elected Democrat who says we can fix the deficit by just raising taxes on the rich.
Washington Area Water Linked with Delusional Analysis
written by Robert Salzberg, September 28, 2012 8:50
It isn't just Marcus, The Hill purports to be a place where you can find out what's really going on in Congress but the obsession with debt has short circuited their rationality. Just consider this headline:

"Report: Carbon tax could halve the deficit."

Sounds too good to be true doesn't it? That's because it's based on:

"The report finds that imposing an escalating fee that starts at $20 per metric ton could reduce the projected 10-year budget deficit by more than 50 percent, from $2.3 trillion to $1.1 trillion.That estimate relies on the Congressional Budget Office’s (CBO) “baseline” deficit projection.

But the report notes that the same carbon tax would have a much smaller impact on the deficit — cutting it about 12 percent — under CBO’s “alternative” scenario that forecasts a much bigger shortfall."

BTP readers along with The Hill writers and editors should know that the chances of the CBO's baseline deficit projection holding for 10 years has as much chance of becoming reality as winning the lottery.

A little thinking would lead a rational person to realize that if the baseline scenario did hold, we wouldn't have a deficit problem so why would we use the revenues to lower the debt when they could go to helping lower income Americans compensate for higher fuel prices and for investing in cleaner energy sources?


http://thehill.com/blogs/e2-wire/e2-wire/258773-report-carbon-tax-could-halve-the-deficit-
Timing of spending
written by Mike, September 28, 2012 8:53
"The actual impact on spending in January is likely to be minimal, unless President Obama wants to slow spending to make a point. (The president has enormous control over the timing of spending.)"
Can you explain this a bit? Are you saying, for example, the cuts could be backloaded all the way to the end of FY2013 or even, say, FY2022 with the idea that a deal would be reached by then?
...
written by George Lantos, September 28, 2012 11:32
I stopped reading Ruth Marcus when Democrat Kathy Hochul won the 2010 election for New York's 26th congressional district. Hochul won by pointing out that Ryan's plan would end Medicare, replacing it with a voucher program. Hochul was successful, according to Marcus, because "mediscare works." No, Ruth. It shows that sometimes telling the truth works.
More loser liberalism
written by joe, September 28, 2012 3:58
There Dean goes again mentioning surpluses, which of course has a positive connotation in everyone's mind. Does anyone here realize the federal govt CANNOT run a perpetual surplus in US dollars? For the federal govt to run a surplus(in dollars) then the non-govt sector(domestic private and foreign sector) MUST run a deficit. The private sector obviously can't run deficits for very long, but the federal govt obviously can, it creates the money, and it obviously should (on average). The deficit adds net financial assets to the private sector. It has ran deficits for 200-and-some years of it's 230-and-some years of existence. Historically the private sector has take a net-surplus position, so the govt must match it with deficits to enable the accumulation of net financial assets.

I've seen absolutely no indication that dean really understand this. He's still responds to talk of debts and deficits by referring to interest rates, and he brings up wild-eyed dreams of surpluses if we reformed health care, as if the surpluses would be a good thing. It's playing right into the neo-liberal fantasy that at some point we must 'get the deficit under control' and 'pay back the debt', which is utter nonsense. There is no more 'loser liberalism' than that, as it completely ignores the nature of money and the real economy.
Missing the point
written by David, September 28, 2012 5:30
Interesting, Joe. But the point about surpluses its just to provide a counterfactual to the debt/deficit hawks who would leave the broken healthcare system intact -- one point being that those claiming worry about the debt aren't in the slightest worried about the debt. The actual point is that the health care system is broken and abused.
Taxes go up, spending goes down. What cliff?
written by RepubAnon, September 28, 2012 9:10
Maybe I'm confused, but why is it a "cliff" if government spending falls and taxes rise? Yes, Congress chose to play the Sheriff of Rock Ridge by holding a gun to their own heads - but they can always choose to holster the gun.

Here, Congress could take action - especially if all voters choose only Democrats. As many Democrats are Rockefeller Republicans, this would give us a "bipartisan" set of negotiators.
Chuckle
written by John Q, September 28, 2012 10:12
"Behind the scenes, serious people in the administration..."

Ah, yes, the Very Serious People so often mocked and derided by Paul Krugman, but still venerated by Ms. Marcus and her colleagues at Fox on 15th.
Gotta be careful about 'broken health care'
written by Calgacus, September 29, 2012 1:06
If we paid the same amount as any other wealthy country we would be looking at huge budget surpluses, not deficits.

One has to be careful with this. As Dean says, Our healthcare system aside, we would have a these huge budget surpluses. But which are a huge problem, a catastrophic danger, not a Good Thing, as Joe says.

So one good way to read this, especially now, in high unemployment depressionland is: Aside from our "broken healthcare system", the US government grossly overtaxes & underspends. It is running an insane austerity program. So the "broken healthcare system" is keeping the economy & a lot of people in it from drowning, very quickly. Replacing it with a superior, efficient Eurosystem but not replacing the spending
(& even its soaking-of-the-rich)
would ceteris paribus create a Great Depression II fiscal cliff.

See James Galbraith's 2003 WHAT IS THE AMERICAN MODEL REALLY ABOUT?: Soft Budgets and the Keynesian Devolution http://www. levy.org/pubs/ppb72.pdf . Also some work of the always exceedingly perceptive Alain Parguez.
...
written by Procopius, September 29, 2012 4:46
I think you typed too fast in one sentence: "The purpose of this fabrication is to advance their agenda for their preferred plan for spending cuts and tax increases. As Marcus tells us in the next paragraph:..." I think you meant to say "...their preferred plan for tax cuts..." As I understand it the Post (and Marcus) do not want to see tax increases, although they give lip service to the recommendations from dotard former senator Alan Simpson and Morgan Stanley director Erskine Bowles. The "chairmen's write-up" which they published and most of the MSM refers to as the Catfood Commission's recommendations did call for some tax increases but mostly for spending cuts, many of which were not specified. The policy of both spending cuts and tax increases is from President Obama and the Democrats, although I realize the President is obsessed with cutting Social Security in hopes of a Grand Bargain with Satan.
Calgacus
written by RL, September 29, 2012 10:08
Calgacus, your link doesn't work. I love everything I've ehard from James Galbraith, so I'm interested in reading that

Also, I'm not at all certain, but you are being facetious in that post, correct? It's becoming harder and harder these days to tell when people are joking and when they're serious.
I blame Steffie Woolhandler and the PNHP
written by Rachel, September 29, 2012 12:05

Why can't we cope with the huge overspending on health care? A big reason, in my opinion, is a lobbying group, the Physicians for a National Health Plan. They don't want doctors to be any less rich (neither to Obama's advisors). They want to form medical oligopolies, so as to be able to war with insurance companies. So they make great efforts topersuade the unsophisticated (like the Occupy folks) that there's only one reason our health care system costs too much: administrative costs. And there's only one way to solve this problem: a single payer, whom they, with their political clout, can manipulate.

In fact, there are many reasons our health care is too expensive, and many ways we could try to bring costs down. And in particular, Single Payer is not the only way to lower administrative costs. It's just the only one that PNHP wants to talk about.
Sorry RL & No, not joking.
written by Calgacus, September 29, 2012 1:53
Yeah, sorry RL, I realized it didn't work after I posted it - had a space in it that shouldn't have been there. Try:

http://www.levy.org/pubs/ppb72.pdf

No, I'm not being facetious at all. Dean's observation about surpluses implies our broken, inefficient healthcare system is supporting the economy in a kind of medical Keynesianism. As Galbraith observes, decades past, only military Keynesianism existed; but the success of the USA relative to Europe is because it has had government-led socialistic Keynesian devolution!

During the Keynesian era, people understood that when there is unemployment, efficiency & frugality are destructive and inefficient for the economy as a whole. Just throws people out of work. While waste & profligacy are beneficial & efficient. Y'know, Keynes on burying banknotes, building pyramids etc. Not the best thing to do, but (a) gets something done & (b) the multiplier effect of the spending gets all the good capitalistic free market stuff working right.

I'd thought & written about this about healthcare meself. Was happy to recently dig up some old papers & see it confirmed by Galbraith (& Parguez, perhaps others).
consistency issue?
written by Brian Dell, October 01, 2012 1:54
"... the $8 trillion housing bubble... gave us trillion dollar annual deficits" is promptly followed with the objection that "they were screaming about budget deficits even when the deficit was less than 2.0 percent of GDP."

Either percentage of GDP is the appropriate metric or it isn't, I would think. Apparently it was appropriate prior to 2008. But wasn't that unrepresentative because GDP was getting an unsustainable boost from unsustainable increases in home prices?

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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.

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