CEPR - Center for Economic and Policy Research


En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press Washington Post Pushes Mayan End of the World Story on Fiscal Cliff

Washington Post Pushes Mayan End of the World Story on Fiscal Cliff

Thursday, 27 December 2012 06:01

Yes, the Washington Post is getting very worried that it will have egg all over its face if January 1 comes with no budget deal and we don't get its promised recession. The paper pushed this line yet again, telling readers:

"Unless the House and the Senate can agree on a way to avoid the “fiscal cliff,” more than $500 billion in tax increases and spending cuts will take effect next year, potentially sparking a new recession."

Of course the potential for a new recession does not refer to missing the January 1 deadline. It is the risk the country faces if we continue well into 2013 paying higher tax rates and with large cuts in spending. This is an enormously important distinction.

This is not the only important distinction missed in this piece. It told readers that President Obama and Speaker Boehner were very close to a deal:

"Boehner offered to raise $1 trillion in fresh revenue, and he wanted spending cuts of equal size. By that measure, Obama’s tax offer was $300 billion too high and his cuts $150 billion too low, for a net difference between the two men of about $450 billion — less than 1 percent of projected federal spending over the next decade.

In the end, however, the gap proved to be much wider politically than it was numerically."

Actually, Boehner never specified the tax increases that raised $1 trillion in fresh revenue. ( If he did, the Post did not bother to report them.) So it is not clear how far apart they were. It is also likely that one of Boehner's big revenue raisers would have been a cap on deductions, including the deduction for state and local taxes. This would make it far more difficult for states like New York and California to maintain their current level of taxation. President Obama would find considerable resistance among Democrats to this sort of deal.

The piece also refered to Senator Lindsey Graham's warnings that the country could end up like Greece. It should have pointed out that Graham is either ignorant of economics or was trying to needlessly scare his audience since there is no way the United States can end up like Greece.

The United States borrows in its own currency, which means that it will always be able to pay its debt. Its worst risk would be inflation, which is a very remote risk at the moment. Greece, on the other hand is like Ohio. It cannot borrow in its own currency. The Post should have pointed out this distinction to its readers since some might have taken Lindsey's scare story seriously.

The piece also tells readers that Starbucks decision to make employees write "come together" on cups is a "'sign of mounting anxiety over Washington gridlock." While anxiety may explain the motivation of Starbucks CEO Howard Schultz, he may also just want to curry favor of the powerful executives in the Campaign to Fix the Debt and win praise from their allies in elite media outlets like the Washington Post. Since Schultz's motives are not known, a serious newspaper would just report his actions without implying that it knew his motives. 


Comments (3)Add Comment
WaPo Takes Speaker's Side On Interest Savings
written by Robert Salzberg, December 27, 2012 6:12
The President counts savings on interest in his total while the Speaker does not even though the Republicans included interest costs when talking about the costs of the ARA.

Here's a link to a Wonkblog post with the interest savings that get the President's plan to 1:1 if you don't count stimulus as spending as the President proposes:

Speaker and President Agree: Not all tax hikes are created equal
written by Robert Salzberg, December 27, 2012 6:18
Neither the Speaker nor the President count the expiration of the payroll tax cut as a tax increase. If they did, we'd have over a trillion dollars in additional tax increases over the 10 year budget window.

The taxes that are going up on dead people count but not the taxes on working Americans.
schultz's motives
written by mel in oregon, December 27, 2012 1:43
schultz is like any modern day ceo in america, he wants to control his employees & make them think the way he wants them to. howie would be very happy if they all became tea party robots. oh, & by the way we will have a recession regardless of whatever goofy "grand bargain" comes about. also don't be too sure that we will always be able to pay our debts. if the dollar eventually is no longer the world currency, then inflation is no longer "a very remote risk".

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.


Support this blog, donate
Combined Federal Campaign #79613

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.