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Home Publications Blogs Beat the Press Washington Post Gives Up News Space to Publicize Another Business Financed Study-- Taxes This Time

Washington Post Gives Up News Space to Publicize Another Business Financed Study-- Taxes This Time

Wednesday, 18 July 2012 08:11

A couple of weeks ago the Washington Post (a.k.a. "Fox on 15th Street") gained notoriety for running a major news article based on a study funding by military contractors that warned of large job losses from cuts in military spending. Of course folks who know economics realize that in a downturn cuts in any type of government spending will lead to job loss. In fact, cuts in most forms of government spending will lead to larger job losses than cuts in military spending. In other words, there was no real news in this study, except that the numbers were likely exaggerated.

In keeping with this spirit, the Post published a news article today that warned that allowing the Bush tax cuts to expire for the richest 2 percent would be "placing an enormous strain on the already sluggish economic recovery" according to another business financed study. This assertion badly misrepresented the study's findings.

The projections from the study are long-run effects. They are not effects that would be felt in an "already sluggish economic recovery," unless the assumption is that the recovery will be sluggish for 5-10 years in the future. The reporter and/or editor should have noticed the difference between the long-run impact and the immediate effect. The projections discussed in the article are long-run projections, not effects that would be felt in the next year or two.

The other major failing of this piece is that it never accurately described what the study analyzed. It calculated the impact of a tax increase that is used for higher government consumption spending. It does not measure the impact of a tax increase that is used either for deficit reduction or investment in infrastructure and education. The model used in this analysis would likely to show that either of these two uses of higher tax revenue would lead to increases in output, jobs, and wages, not decreases.

Comments (6)Add Comment
written by Last Mover, July 18, 2012 9:16
Let's see, the Bush tax cuts were supposed to pay for themselves then by expanding output. They're supposed to pay for themselves now by ... expanding output. Nothing to do with upward redistribution. Nothing at all.

Got it.
the economy
written by mel in oregon, July 18, 2012 1:15
the very best case scenario for the economy is that it will be sluggish for a decade & possibly for many decades. why? there are no fundamental changes on the horizon now or in the future. obama muddles along with a foreign policy exactly like bushes, which means accelerating military spending forever. the corporate media & even almost all the enlightened media never dwell on the probablity of nuclear war. it's a subject that's as verboten as discussing civil rights at a country club in the 1950s. let's just pretend there's no danger. there are also no fundamental changes to get the economy moving even if the tax cuts for the wealthy are by some miracle allowed to expire. that's not going to change all the millions of outsourced jobs americans have lost. that won't change all the foreclosed homes or homes that are underwater or close to it. that won't change the trillions of dollars of credit card & student loan debt. & most of all, it will not change the stupidity of americans for allowing such a wingnut congress & supreme court to go on ruining america.
Very best case scenario revisited
written by david, July 18, 2012 2:07
The best case scenario is that BO gets re-elected, with a 60+ majority in the Senate and a weakened TP presence in Congress, and the reasonable members of the FOMC take heart in this fact to take action on their second mandate (and perhaps noticing that the beginning of income stagnation came along with an overly strong hand on maintaining inflation).

I don't expect all, or much of, this to happen, but a nudge in that direction is a definite possibility, as long as we don't just sit there and hope for it, but take definite actions toward it.
Fiscal Cliff is over blown hyperbole.
written by jumpinjezebel, July 18, 2012 11:28
So if we go over the cliff the effect will NOT be disasterous nor immediate. Most people won't notice for a few weeks and depending on the price of gas may not adjust any spending because of it. The rich won't feel anything and remember that they PAY THESE AMOUNTS WITH THEIR TAX RETURNS IN APRIL OF 2014. Military spending plans go on over years and will have NO discernable effect in 2013 or probably 2014. Any truth to this thought process.????
written by patsfaninpittsburgh, July 19, 2012 8:12

A lower tax that allows an individual to keep their income is "wealth redistribution".

How brain dead does one have to be to think this?

Liberalism is a severe mental disease.
pats fan
written by mel in oregon, July 19, 2012 4:28
i think you mean is not wealth redistribution. what we are talking about is the walton family has more money in one family that the bottom 50 million families put together. it doesn't seem too brain dead to understand this is bullshit. oh & good luck with not signing wes welker to a better contract. that to me seems brain dead.

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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.