Yesterday the Associated Press fielded its entry in the classics in bad reporting on economic policy contest: a profile it did of David Walker, the former head of the Government Accountability Office and also former president of the Peter G. Peterson Foundation. The piece presented everything that Walker said at face value, making no effort to put his scare story in any context nor to verify his assertions.
The AP entry starts out strong with the third paragraph telling readers:
"Next month, he will present a major report for the nonprofit he founded, the Comeback America Initiative, whose purpose is to raise awareness about the federal government’s swelling debt. It’s a chasm that isn’t top of mind for most Americans, he knows. But Walker, 61, wants it to be."
Note the use of "swelling" instead of a more neutral term or maybe no adjective at all. Then we get the term "chasm" as opposed to a term like "issue."
Then we are told that Walker passes around fake trillion bills because, quoting Walker:
“Washington spends a trillion dollars like it’s nothing.”
Is that true? I recall big debates in the last few weeks over spending $40 billion on food stamps over the next decade. We've had big debates over the $250 million (1/4,000th of a trillion) [number corrected] spent each year on public broadcasting. In fact, John McCain made a big issue in his 2008 presidential campaign over spending $1 million (one millionth of a trillion) on a Woodstock museum. There seem to be lots of very big debates in Washington on spending sums that are way smaller than $1 trillion.
Next AP tells readers:
"The government estimates the national debt at about $17 trillion, but Walker argues it is closer to $73 trillion, once all the unfunded promises for future Social Security benefits and other obligations are added in. And he envisions a bleak future if the U.S. does not stem the financial sinkhole...."
Okay boys and girls, does anyone have any idea what the $73 trillion refers to and how big a problem it poses? Yes, $73 trillion is a really big number. Are you scared?
News reporting is supposed to inform people. It's difficult to see much information being provided here.
For anyone who cares, Walker's number is the national debt, plus projections of what must be paid in Social Security and Medicare taxes by people who are not currently part of the system to provide the benefits for those who are. Will this be a huge burden? National income over the relevant time horizon is projected to be well over $1000 trillion. And the vast majority of this $73 trillion will be paid through taxes being kept at their current level.
The piece then gives the bad outcomes that Walker says we can get from this situation:
"painful inflation, larger gaps between the rich and the poor, even threats to national security."
It's not clear why we would be faced with the first or third problem, but we have been seeing a growing gap between rich and poor for the last three decades for reasons that have nothing to do with the debt. It is a bit bizarre that Walker would include this on his list of bad things that could happen when it has been going on in such a big way for so long. It sort of like warning someone whose house is burning down that the proximity of a wood pile to their house could pose a fire hazard.
Then we have Walker complaining about the quality of the U.S. education system:
"So the answer is not to spend more money. The answer is you’ve got to dramatically reform the system.'
Walker must have missed it, but our presidents have been committed to dramatically reforming the school system without spending money for more than two decades. If he has some secret plan, there is a huge audience of people in government and private foundations who would love to hear it.
Then we get a line that leaves arithmetic fans baffled:
"In 1950, we had about 16 people working for every person drawing Social Security. Today, it’s 3 to 1, and by 2035, it’s going down to 2 to 1. Every couple will have their own retiree to take care of."
Let's see, we saw the ratio of workers to retires fall from 16 to 1 in 1950 to just 3 to 1 today (actually it's 2.8 to 1), yet both workers and retirees enjoy far higher living standards today than they did in 1950. Why should we be worried about the further drop in this ratio from 2.8 to 1 to 2.0 to 1? Any remotely plausible projection of productivity growth will lead to increases in living standards that will on average swamp the impact of the drop in the ratio of workers to retirees. There is a problem that the gains from productivity growth will not be broadly shared, but that is a different discussion, and one from which Walker is trying to distract us with his scary stories about demographics.
Then we get a last couple of shots at scary numbers:
"That’s (Walker's $73 trillion debt calculation) over $250,000 per person. People have a second or third mortgage that they didn’t know they had, and no house to back it.
"Now the biggest risk that we have fiscally is interest. We’re spending (more than $200 billion) a year on interest. The president’s own budget projections say we’ll be spending (almost) $800 billion on interest (per year) in 10 years. And what do you get for interest? Nothing. I say shinola. I’m from the South."
Okay, both these numbers could use a little context. Most homeowners know the period of time over which they have to pay their mortgages. Walker's $250,000 will be paid out over roughly 75 years. As noted before, most of the mortgage payments are in form of the social security and payroll taxes that people are already having deducted from their paychecks every month. Average income per person over this period will be more than $3 million.
The $200 billion a year on interest comes to about 1.3 percent of GDP. If that sounds scary then people better not look back. The interest burden on the national debt was over 3.0 percent of GDP in the early 1990s.
So AP clearly has a solid entry in the classics of bad reporting on economic policy contest. It will be hard to top this one.