Beat the Press

Beat the press por Dean Baker

Beat the Press is Dean Baker's commentary on economic reporting. He is a Senior Economist at the Center for Economic and Policy Research (CEPR). To never miss a post, subscribe to a weekly email roundup of Beat the Press. Please also consider supporting the blog on Patreon.

One not so good item in the package of retirement fund provisions in the omnibus funding bill raises the age for mandatory distributions from retirement accounts from 72 to 75. This is phased in over a decade, but it does go up immediately to 73 in 2023. It had already been raised from 70.5 years to 72 years in 2019.

The mandatory distribution requirement is based on life expectancy at your current age. This means, for example, if your life expectancy at 72 is ten years, then you have to withdraw (and pay taxes) on roughly 10 percent of the money in your IRA or 401(k). The actual calculations are somewhat more complicated, but this is the basic story.

Anyhow, the ostensible justification for raising the age for mandatory withdrawals was that people are worried about outliving their retirement funds. It is important to realize that this is not really the issue with mandatory withdrawals.

The mandate doesn’t require that people spend the money from their accounts, it just requires they pay taxes on them. This means, for example, if someone had $70,000 in their retirement account (roughly the median for account holders in their sixties, which is a bit more than half the population), and their required distribution was 10 percent, they would have to pull $7,000 out of their account.

They could put this $7,000 into another investment account, they would just have to pay taxes on this money as though it were normal income. The vast majority of retirees would be paying a tax rate of 10 or 12 percent, which means they would owe $700 to $840 in taxes. The rest of the money could be invested for their later years.

Since they would have to pay taxes on their money when they pulled it out in any case, the only loss is the potential investment income from their tax payments. That is not likely to be a major factor in determining whether they will outlive their retirement savings.

There are of course people in higher tax brackets, especially among those in a position to defer withdrawals from their retirement accounts. For someone in the top 37 percent tax bracket, deferring withdrawals can mean large savings. But it is unlikely that these people are actually worried about outliving their retirement accounts.

For these higher income people, this provision is simply one more way to reduce their tax obligations, as were provisions in the bill that raised caps on contributions. Since very few people were contributing at the current caps, raising the caps is simply a way for high income people to shelter more of their income from taxation.

These giveaways to high income people may have been a price worth paying for the other changes in retirement provisions, such as making the savers credit fully refundable so that low income people can benefit, and also requiring most employers to contribute to their workers’ retirement. However, we should be clear that these provisions are designed so that they will only benefit a small group of people at the top of the income distribution. They are not about making it less likely that middle income people will outlive their retirement savings.  

One not so good item in the package of retirement fund provisions in the omnibus funding bill raises the age for mandatory distributions from retirement accounts from 72 to 75. This is phased in over a decade, but it does go up immediately to 73 in 2023. It had already been raised from 70.5 years to 72 years in 2019.

The mandatory distribution requirement is based on life expectancy at your current age. This means, for example, if your life expectancy at 72 is ten years, then you have to withdraw (and pay taxes) on roughly 10 percent of the money in your IRA or 401(k). The actual calculations are somewhat more complicated, but this is the basic story.

Anyhow, the ostensible justification for raising the age for mandatory withdrawals was that people are worried about outliving their retirement funds. It is important to realize that this is not really the issue with mandatory withdrawals.

The mandate doesn’t require that people spend the money from their accounts, it just requires they pay taxes on them. This means, for example, if someone had $70,000 in their retirement account (roughly the median for account holders in their sixties, which is a bit more than half the population), and their required distribution was 10 percent, they would have to pull $7,000 out of their account.

They could put this $7,000 into another investment account, they would just have to pay taxes on this money as though it were normal income. The vast majority of retirees would be paying a tax rate of 10 or 12 percent, which means they would owe $700 to $840 in taxes. The rest of the money could be invested for their later years.

Since they would have to pay taxes on their money when they pulled it out in any case, the only loss is the potential investment income from their tax payments. That is not likely to be a major factor in determining whether they will outlive their retirement savings.

There are of course people in higher tax brackets, especially among those in a position to defer withdrawals from their retirement accounts. For someone in the top 37 percent tax bracket, deferring withdrawals can mean large savings. But it is unlikely that these people are actually worried about outliving their retirement accounts.

For these higher income people, this provision is simply one more way to reduce their tax obligations, as were provisions in the bill that raised caps on contributions. Since very few people were contributing at the current caps, raising the caps is simply a way for high income people to shelter more of their income from taxation.

These giveaways to high income people may have been a price worth paying for the other changes in retirement provisions, such as making the savers credit fully refundable so that low income people can benefit, and also requiring most employers to contribute to their workers’ retirement. However, we should be clear that these provisions are designed so that they will only benefit a small group of people at the top of the income distribution. They are not about making it less likely that middle income people will outlive their retirement savings.  

It’s great that we are finally getting some honest discussion of the role of trade in increasing inequality, but we still need to get recognition of the impact of our policies on intellectual property.
It’s great that we are finally getting some honest discussion of the role of trade in increasing inequality, but we still need to get recognition of the impact of our policies on intellectual property.

I have been seeing various posts on Twitter from Republican politicians saying how Joe Biden’s inflation is devastating families as we approach the holidays. Of course, it would be amazing if we didn’t have some discomfort given a worldwide pandemic and a major war in Europe, but we can’t expect that Republican politicians would know about such things.

In any case, it is worth seeing the extent to which the data support the Republicans’ tale of hardship. It doesn’t look like the consumption data from the National Income and Product Accounts agree with them. Here’s the picture for real per capita non-health care consumption through the third quarter of 2022.

 

Source: Bureau of Economic Analysis and author’s calculations.

 

 

As can be seen, non-health care consumption, after falling during the worst period of the pandemic, jumped up in 2021, putting it well above its pre-pandemic trend. In the third quarter of this year, real per capita non-health care consumption was 2.3 percent above its pre-pandemic trend. That doesn’t look like a story of hardship.

We do have to ask about distribution, but it doesn’t seem this is simply a story of the Elon Musks of the world living even higher on the hog. As Arin Dube and David Autor have documented, wage growth since the pandemic has been most rapid for those at the bottom end of the wage distribution, and has outpaced inflation for roughly the bottom 40 percent of the distribution.

It is worth commenting on my use of non-health care consumption. Health care is tricky as a category of consumption. What we care about is health, not the number of doctors visits or medical tests we receive.

Spending on health care has slowed sharply since the pandemic. It is not clear why this is the case. If people are substituting telemedicine and home diagnostics for in-person visits and laboratory tests, this could lead to substantial savings. Whether or not it means worse outcomes remains to be seen.

In any case, it is unambiguously the case that people are consuming  more non-health care items this holiday season than they would have reason to expect before the pandemic. The Republicans’ grinch routine is just play acting.  

I have been seeing various posts on Twitter from Republican politicians saying how Joe Biden’s inflation is devastating families as we approach the holidays. Of course, it would be amazing if we didn’t have some discomfort given a worldwide pandemic and a major war in Europe, but we can’t expect that Republican politicians would know about such things.

In any case, it is worth seeing the extent to which the data support the Republicans’ tale of hardship. It doesn’t look like the consumption data from the National Income and Product Accounts agree with them. Here’s the picture for real per capita non-health care consumption through the third quarter of 2022.

 

Source: Bureau of Economic Analysis and author’s calculations.

 

 

As can be seen, non-health care consumption, after falling during the worst period of the pandemic, jumped up in 2021, putting it well above its pre-pandemic trend. In the third quarter of this year, real per capita non-health care consumption was 2.3 percent above its pre-pandemic trend. That doesn’t look like a story of hardship.

We do have to ask about distribution, but it doesn’t seem this is simply a story of the Elon Musks of the world living even higher on the hog. As Arin Dube and David Autor have documented, wage growth since the pandemic has been most rapid for those at the bottom end of the wage distribution, and has outpaced inflation for roughly the bottom 40 percent of the distribution.

It is worth commenting on my use of non-health care consumption. Health care is tricky as a category of consumption. What we care about is health, not the number of doctors visits or medical tests we receive.

Spending on health care has slowed sharply since the pandemic. It is not clear why this is the case. If people are substituting telemedicine and home diagnostics for in-person visits and laboratory tests, this could lead to substantial savings. Whether or not it means worse outcomes remains to be seen.

In any case, it is unambiguously the case that people are consuming  more non-health care items this holiday season than they would have reason to expect before the pandemic. The Republicans’ grinch routine is just play acting.  

I was having an exchange with an old friend on Mastodon (yes, I’m there now @[email protected]), in which I was arguing that the best way to get alternatives to the current patent system was to have examples of successful drugs developed without relying on patent monopolies. Of course, there are great historical examples, like the development of insulin as a treatment for diabetes or the polio vaccine, but it would be good to have one from the current century.

The most obvious example, that really deserves a hell of a lot more attention than it is getting, is the Covid vaccine developed by Peter Hotez and Maria Elena Botazzi at the Center for Vaccine Development at Texas Children’s Hospital. This vaccine was developed using grants in the single digit millions. Unlike the mRNA vaccines developed by Pfizer and Moderna, it uses a long-established technology. It is also completely open-sourced; the technology is fully public and there are no patents or other restrictions preventing its manufacture anywhere in the world.

The vaccine, called Corbevax, is cheap and easy to produce, costing less than $2 per shot. By contrast Pfizer and Moderna charged close to $20 a shot for the initial round of inoculations. They are looking to charge considerably more for subsequent booster rounds. This is in spite of the fact that the U.S. government paid close to $900 million for the development and testing of Moderna’s vaccine, in addition to supporting the development of mRNA technology for decades.

Like the mRNA vaccines, Corbevax is highly effective in preventing serious illness and death. It has been administered to more than 70 million people in India and also is being used in several other developing countries.

Corbevax is an important example of a vaccine being developed without needing government-granted patent monopolies. To be clear, medical researchers need to be compensated for their work. We can’t count of all researchers being as dedicated as doctors Hotez and Botazzi in their commitment to protecting the public’s health.

However, it is absurd to imagine that we cannot get effective research without the allure of great riches promised by the current system. (Moderna’s vaccine created at least five billionaires.) We already have the National Institutes of Health (NIH), which produces great research by paying people decent salaries, but not minting billionaires.

Most of NIH’s funding goes to more basic research rather than actually developing drugs or vaccines, but there is no reason in principle that public money could not be used for downstream research as well as basic research. We might structure a system differently for downstream research. I have argued for long-term contracts, similar to what the Defense Department uses for developing weapon systems, which would be subject to review/renewal periodically (see Rigged, chapter 5 [it’s free].)

While the specific structure is important (we want to make sure a publicly funded system is operating as efficiently as possible), the key issue is establishing the possibility of an alternative to patent monopoly financing of drug development. Towards this end, we need more facts on the ground. We need, one, two, many Corbevaxes.

Sam Bankman-Fried made “effective philanthropy” famous, as giving away money to good causes was the ostensible rationale for the multi-billion dollar crypto scam he was operating. It’s not clear if there are actually any effective philanthropists among the billionaire class. But, if such a creature exists, there could hardly be a better use of their money then demonstrating the feasibility of directly funded open-source drug development. If the next great cancer drug sells for a few hundred dollars, instead of a few hundred thousand, it will be hard to ignore.

At the end of the day, we do of course need governments to pick up the tab, but the potential savings are enormous, perhaps as much as $400 billion a year ($3,000 per family). Getting rid of patent monopolies for drugs would also be a huge factor reducing inequality, as we would not be draining the pockets of ordinary workers to create more Moderna billionaires.

But most importantly, new drugs would be cheap. People in the United States and around the world would be able to afford drugs sold at free market prices, rather than patent monopoly prices. And, that would be great.   

I was having an exchange with an old friend on Mastodon (yes, I’m there now @[email protected]), in which I was arguing that the best way to get alternatives to the current patent system was to have examples of successful drugs developed without relying on patent monopolies. Of course, there are great historical examples, like the development of insulin as a treatment for diabetes or the polio vaccine, but it would be good to have one from the current century.

The most obvious example, that really deserves a hell of a lot more attention than it is getting, is the Covid vaccine developed by Peter Hotez and Maria Elena Botazzi at the Center for Vaccine Development at Texas Children’s Hospital. This vaccine was developed using grants in the single digit millions. Unlike the mRNA vaccines developed by Pfizer and Moderna, it uses a long-established technology. It is also completely open-sourced; the technology is fully public and there are no patents or other restrictions preventing its manufacture anywhere in the world.

The vaccine, called Corbevax, is cheap and easy to produce, costing less than $2 per shot. By contrast Pfizer and Moderna charged close to $20 a shot for the initial round of inoculations. They are looking to charge considerably more for subsequent booster rounds. This is in spite of the fact that the U.S. government paid close to $900 million for the development and testing of Moderna’s vaccine, in addition to supporting the development of mRNA technology for decades.

Like the mRNA vaccines, Corbevax is highly effective in preventing serious illness and death. It has been administered to more than 70 million people in India and also is being used in several other developing countries.

Corbevax is an important example of a vaccine being developed without needing government-granted patent monopolies. To be clear, medical researchers need to be compensated for their work. We can’t count of all researchers being as dedicated as doctors Hotez and Botazzi in their commitment to protecting the public’s health.

However, it is absurd to imagine that we cannot get effective research without the allure of great riches promised by the current system. (Moderna’s vaccine created at least five billionaires.) We already have the National Institutes of Health (NIH), which produces great research by paying people decent salaries, but not minting billionaires.

Most of NIH’s funding goes to more basic research rather than actually developing drugs or vaccines, but there is no reason in principle that public money could not be used for downstream research as well as basic research. We might structure a system differently for downstream research. I have argued for long-term contracts, similar to what the Defense Department uses for developing weapon systems, which would be subject to review/renewal periodically (see Rigged, chapter 5 [it’s free].)

While the specific structure is important (we want to make sure a publicly funded system is operating as efficiently as possible), the key issue is establishing the possibility of an alternative to patent monopoly financing of drug development. Towards this end, we need more facts on the ground. We need, one, two, many Corbevaxes.

Sam Bankman-Fried made “effective philanthropy” famous, as giving away money to good causes was the ostensible rationale for the multi-billion dollar crypto scam he was operating. It’s not clear if there are actually any effective philanthropists among the billionaire class. But, if such a creature exists, there could hardly be a better use of their money then demonstrating the feasibility of directly funded open-source drug development. If the next great cancer drug sells for a few hundred dollars, instead of a few hundred thousand, it will be hard to ignore.

At the end of the day, we do of course need governments to pick up the tab, but the potential savings are enormous, perhaps as much as $400 billion a year ($3,000 per family). Getting rid of patent monopolies for drugs would also be a huge factor reducing inequality, as we would not be draining the pockets of ordinary workers to create more Moderna billionaires.

But most importantly, new drugs would be cheap. People in the United States and around the world would be able to afford drugs sold at free market prices, rather than patent monopoly prices. And, that would be great.   

While it is undoubtedly true that the savings rate has fallen by any measure, a large part of the decline is due to people paying taxes on capital gains.
While it is undoubtedly true that the savings rate has fallen by any measure, a large part of the decline is due to people paying taxes on capital gains.
Taken together, the stronger than expected job growth, coupled with the big jump in wages, seems to indicate that we have a serious problem with inflation. The consensus seems to be that the Fed may have to keep the rate hikes in overdrive.
Taken together, the stronger than expected job growth, coupled with the big jump in wages, seems to indicate that we have a serious problem with inflation. The consensus seems to be that the Fed may have to keep the rate hikes in overdrive.

It is getting almost as bad as propaganda from an authoritarian regime. We keep hearing major news outlets tell us that inflation is whacking lower-income families. The Washington Post did it yesterday in an editorial demanding more rate hikes from the Fed to throw people out of work.

Lower-income people, like everyone else, are paying more for food, gas, and rent. The argument is that these items are a larger share of the budget of lower-income people, so they are hit harder by inflation than higher-income households.

The problem with telling this simple story is that wages have been growing most rapidly at the bottom end of the wage distribution, substantially outpacing inflation since the start of the pandemic. Also, in a tight labor market, more people are likely working in many households. They are also more likely to be able to find a job that has lower commuting costs or might allow them to work part-time to deal with child care or family needs.

One way to assess how these things balance out is to look at what has happened to homeownership rates. More homeownership is not always better, as some of us warned during the housing bubble years, but people who have the option to buy a home generally choose to do so.

Contrary to the propaganda coming from the media, homeownership rates have actually risen rapidly since the pandemic for households with incomes below the median, as shown below. (The big jump in 2020, which was partially reversed, is likely due to a skewing in responses, as the pandemic sent response rates plummeting.)

 

Source: Census Bureau (Table 8).

 

Homeownership rates have also risen for Black and Hispanic households and those headed by someone under age 35. It is more than a bit bizarre that the media have been almost uniformly insisting that these are horrible times for lower-income people despite data that say the opposite.

 

It is getting almost as bad as propaganda from an authoritarian regime. We keep hearing major news outlets tell us that inflation is whacking lower-income families. The Washington Post did it yesterday in an editorial demanding more rate hikes from the Fed to throw people out of work.

Lower-income people, like everyone else, are paying more for food, gas, and rent. The argument is that these items are a larger share of the budget of lower-income people, so they are hit harder by inflation than higher-income households.

The problem with telling this simple story is that wages have been growing most rapidly at the bottom end of the wage distribution, substantially outpacing inflation since the start of the pandemic. Also, in a tight labor market, more people are likely working in many households. They are also more likely to be able to find a job that has lower commuting costs or might allow them to work part-time to deal with child care or family needs.

One way to assess how these things balance out is to look at what has happened to homeownership rates. More homeownership is not always better, as some of us warned during the housing bubble years, but people who have the option to buy a home generally choose to do so.

Contrary to the propaganda coming from the media, homeownership rates have actually risen rapidly since the pandemic for households with incomes below the median, as shown below. (The big jump in 2020, which was partially reversed, is likely due to a skewing in responses, as the pandemic sent response rates plummeting.)

 

Source: Census Bureau (Table 8).

 

Homeownership rates have also risen for Black and Hispanic households and those headed by someone under age 35. It is more than a bit bizarre that the media have been almost uniformly insisting that these are horrible times for lower-income people despite data that say the opposite.

 

It’s more than a bit bizarre that until Elon Musk bought Twitter, most policy types apparently did not see a risk that huge platforms like Facebook and Twitter could be controlled by people with a clear political agenda. While just about everyone had some complaints about the moderation of these and other commonly used platforms, they clearly were not pushing Fox News-style nonsense.

With Elon Musk in charge, that may no longer be true. Musk has indicated his fondness for racists and anti-Semites, and made it clear that they are welcome on his new toy. He also is apparently good with right-wing kooks making up stories about everything from Paul Pelosi to Covid vaccines. (Remember, with Section 230 protection, Musk cannot be sued for defaming individuals and companies by mass-marketing lies, only the originators face any legal liability.)

If the hate and lies aren’t enough to make Twitter unattractive to the reality-based community, the right-wing crazies are putting together their lists of people to be purged. We don’t know who they will come up with, and what qualifies in their mind for banishment. We also don’t know whether the self-proclaimed free-speech absolutist Elon Musk will go along, but there certainly is a risk that Musk will want to keep his friends happy.

In that case, Twitter may go the way of Truth Social and Parlor, which would be unfortunate, but probably better than having a massive social media platform subject to Elon Musk’s whims. But we should still be asking how we can get in a situation where one right-wing jerk can have so much power?

The Problem of Media Concentration Is Not New

The Musk problem is hardly new. After all, Rupert Murdoch has been broadcasting his imaginary world to the country for decades, highlighting pressing national issues like the War on Christmas and President Obama’s tan suit.  

But the problem goes well beyond Murdoch. Media outlets are owned and controlled by rich people and/or large corporations. They exist first and foremost to make money. While there are some cases where owners may genuinely have a commitment to using their news outlet to serve the public, for example, the Sulzberger family, which has controlled the New York Times for more than a century, these are the exceptions.

And, even with the exceptions, their perception of the public good is an extremely wealthy person’s perception of the public good. That may not be the same as the perception of an average working person struggling to get by.   

As far as for-profit enterprises, news outlets have to be concerned about getting advertising. That may make them less likely to report news that will reflect poorly on major advertisers. That means things like both siding the role of the fossil fuel industry in global warming, or downplaying the windfall that corporations got from Trump’s 2017 tax cut.

This ownership structure could reasonably cause us to question the neutrality of news from outlets like CNN (owned by AT&T), ABC (owned by Disney), or NBC (owned by GE). But Musk’s takeover of Twitter takes the problem a step further. The viewership of each of the networks’ news shows numbers in the single digit millions. Twitter has almost 80 million active users in the United States. This means it matters much more if Twitter is taken over by a right-wing jerk than your average television network.

Alternatives to Corporate Control

Even though the media are incredibly important in shaping people’s view of the world, there has been remarkably little attention to the issue from most liberals or progressives. There are some small, and poorly funded, organizations, like Fairness and Accuracy in Reporting and Media Matters, which do focus on the issue. And there are a few prominent intellectuals who have written on the topic, like Rick McChesney, Dan Froomkin, and Jay Rosen, but for the most part, the issue of media control gets little attention from the left of center.

Ironically, campaign finance reform, which is almost certainly an exercise in futility given recent Supreme Court rulings, gets far more attention. The absurdity of the focus on campaign finance reform should be apparent to anyone who gives the issue a moment’s thought.

Suppose through some miracle Congress passed, and the Supreme Court upheld, a bill that limited billionaires’ abilities to buy political ads for their favorite candidate. Is anything going to stop these billionaires from buying up newspapers and television stations and running the ads supporting their favored candidates as news stories?

There is no remotely satisfying answer to that question, and it is ridiculous that campaign finance reformers haven’t recognized this fact. Limiting campaign spending by rich people will do nothing if we don’t do something to limit their ability to influence public opinion through the media.

Fortunately, there are some ideas for challenging the control the rich have over the media. The basic story is that we are not going to be able to prevent the rich from buying and owning media outlets. Instead, we will have to go the other way and allow the non-rich to have a voice.[1]

The idea is that we can give every person some amount of money (e.g. $100 to $200) to support the media outlet(s), or possibly a broader category of creative workers, of their choice. This system could be modeled along the lines of the charitable contribution tax deduction, where the government draws out general conditions for being eligible to receive the funds.

This means that the government specifies the types of organizations that can qualify to receive the funds. In the case of the charitable deduction, an organization has to indicate that it’s a church, it provides food for the poor, or does something else that qualifies it to be a charitable organization.

The government doesn’t try to determine whether it’s a good church or whether the food it provides is high quality, the only question is whether the organization does what it claims. A similar policy could be applied to the recipients of funds allocated through this system. (In my view, I would make not getting copyright protection a condition of getting funding – the government gives you one subsidy, not two – but that is the sort of issue that could be resolved down the road.)   

This sort of system could provide a large amount of money to sustain media organizations that are not owned by rich people. For example, if the credit were $200, and 10 million people chose to support a specific television network with their full credit, the organization would have $2 billion a year to cover its operating expenses. That is roughly equal to CNN’s annual operating revenue.    

This credit could create enormous opportunities for the non-rich to finance newspapers/websites, television stations, and other outlets that could compete with the current ones owned and controlled by billionaires. This path also has the great benefit that it could put adopted piecemeal, with states and even local governments, giving their residents the opportunity to support new types of news outlets.

If enough people could gain support for this type of program, they could get a more progressive state, like California or Massachusetts to pave the way, or a city like San Francisco or Seattle. Just as the movement for a higher minimum wage has spread from successes in these places, the same could happen with a tax credit system to support alternative media.

Fun with Elon Musk and Twitter

Even if it proves to be possible to advance a tax credit system to support alternatives to the billionaires’ media, we still have the problem of massive platforms like Facebook and Twitter being owned by rich people, who can essentially do what they want in accordance with their whims. The big problem here is the issue of network effects.

The idea of network effects is that people benefit from being part of a massive network since they want to be able to see what a large number of other people are posting, and they may hope that a large number of people will see what they post. These effects can be exaggerated. For example, the overwhelming majority of users will never have their Facebook pages or Twitter posts viewed by more than a small number of people. Nonetheless, they are real. This makes it hard to dislodge a Facebook or Twitter, once it has become dominant.  

One route to go is to make the playing field less hospitable to large platforms. This can be done by removing Section 230 protections for websites that either sell advertising or personal information. This means that the big platforms could be held liable for defamatory material that they circulated over their platform.

In this scenario, if election deniers wrote posts on Twitter saying that Dominion voting machines had switched votes from Trump to Biden, Elon Musk could be sued by Dominion for defamation, just as Fox News is now being sued. The same would apply to the vaccine deniers claiming that Pfizer and Moderna vaccines have killed huge numbers of people.

Taking away Section 230 protection from these platforms would not just help large actors. As it stands now, if some racist asshole started posting on their Facebook page that a restaurant owned by Blacks or Asians had poisoned their family and sent them to the hospital, the restaurant owner would have no legal recourse against Facebook. They could sue the racist, who may not have much money, but they could not even force Facebook to take down the post.

By contrast, if a television station or newspaper had allowed the person to speak or printed a letter to the editor along the same lines, they would face liability. They could be forced to issue a correction to avoid being named in a defamation suit.

There are clearly complications with going this route. A platform with billions of posts daily could not be expected to monitor posts in advance for potentially defamatory material. This problem has been solved (imperfectly) with copyright, under the Digital Millennium Copyright Act (DMCA), by requiring platforms to remove violating material in a timely manner after being notified by the copyright holder.

There could be a similar requirement for Internet sites. The evidence from the DMCA is that websites are overly cautious and err on the side of removing material even when the claim of violation is extremely weak. That may also prove to be the case with Internet platforms like Facebook and Twitter when it comes to allegedly defamatory material, but that is in part the point.

Part of the point of removing Section 230 protection from sites that rely on advertising or selling personal information is to put them at a disadvantage relative to sites that rely on subscriptions or donations to stay in business. In that case, people could count on posting material on a smaller site that might be removed by Facebook or Twitter. This would give sites operating on an alternative model a large advantage relative to the current Internet giants.

In any case, taking away Section 230 protection would clearly raise costs for the major Internet platforms. Given that Twitter was already struggling even before Elon Musk took it over, this sort of increase in costs would clearly be a serious blow.

Undoubtedly, changing the law on Section 230 protection would hurt some other sites as well. While some could probably switch over to a subscription model relatively easily, others may find it difficult. Sites will of course develop new modes of operation. For example, a site like Airbnb could require users to sign away their right to sue for defamation as a condition of usage.

As a practical matter, it is impossible to guarantee that there will be no negative outcomes from this change, just as is true of every policy that actually does anything in the world. The question is whether some number of sites either being seriously downsized, or going out of business altogether, is a price worth paying to prevent rich jerks from being able to operate huge platforms according to their whims.

To my view, it would be worth the price, but your mileage may vary. In any case, it is distressing to see we are now in a situation where this is the reality, not just a hypothetical one. It speaks volumes about the quality of intellectual debate in this country, that this possibility apparently caught so many of our leading policy types by surprise.       

[1] I also discuss this in chapter 5 of Rigged (it’s free).

It’s more than a bit bizarre that until Elon Musk bought Twitter, most policy types apparently did not see a risk that huge platforms like Facebook and Twitter could be controlled by people with a clear political agenda. While just about everyone had some complaints about the moderation of these and other commonly used platforms, they clearly were not pushing Fox News-style nonsense.

With Elon Musk in charge, that may no longer be true. Musk has indicated his fondness for racists and anti-Semites, and made it clear that they are welcome on his new toy. He also is apparently good with right-wing kooks making up stories about everything from Paul Pelosi to Covid vaccines. (Remember, with Section 230 protection, Musk cannot be sued for defaming individuals and companies by mass-marketing lies, only the originators face any legal liability.)

If the hate and lies aren’t enough to make Twitter unattractive to the reality-based community, the right-wing crazies are putting together their lists of people to be purged. We don’t know who they will come up with, and what qualifies in their mind for banishment. We also don’t know whether the self-proclaimed free-speech absolutist Elon Musk will go along, but there certainly is a risk that Musk will want to keep his friends happy.

In that case, Twitter may go the way of Truth Social and Parlor, which would be unfortunate, but probably better than having a massive social media platform subject to Elon Musk’s whims. But we should still be asking how we can get in a situation where one right-wing jerk can have so much power?

The Problem of Media Concentration Is Not New

The Musk problem is hardly new. After all, Rupert Murdoch has been broadcasting his imaginary world to the country for decades, highlighting pressing national issues like the War on Christmas and President Obama’s tan suit.  

But the problem goes well beyond Murdoch. Media outlets are owned and controlled by rich people and/or large corporations. They exist first and foremost to make money. While there are some cases where owners may genuinely have a commitment to using their news outlet to serve the public, for example, the Sulzberger family, which has controlled the New York Times for more than a century, these are the exceptions.

And, even with the exceptions, their perception of the public good is an extremely wealthy person’s perception of the public good. That may not be the same as the perception of an average working person struggling to get by.   

As far as for-profit enterprises, news outlets have to be concerned about getting advertising. That may make them less likely to report news that will reflect poorly on major advertisers. That means things like both siding the role of the fossil fuel industry in global warming, or downplaying the windfall that corporations got from Trump’s 2017 tax cut.

This ownership structure could reasonably cause us to question the neutrality of news from outlets like CNN (owned by AT&T), ABC (owned by Disney), or NBC (owned by GE). But Musk’s takeover of Twitter takes the problem a step further. The viewership of each of the networks’ news shows numbers in the single digit millions. Twitter has almost 80 million active users in the United States. This means it matters much more if Twitter is taken over by a right-wing jerk than your average television network.

Alternatives to Corporate Control

Even though the media are incredibly important in shaping people’s view of the world, there has been remarkably little attention to the issue from most liberals or progressives. There are some small, and poorly funded, organizations, like Fairness and Accuracy in Reporting and Media Matters, which do focus on the issue. And there are a few prominent intellectuals who have written on the topic, like Rick McChesney, Dan Froomkin, and Jay Rosen, but for the most part, the issue of media control gets little attention from the left of center.

Ironically, campaign finance reform, which is almost certainly an exercise in futility given recent Supreme Court rulings, gets far more attention. The absurdity of the focus on campaign finance reform should be apparent to anyone who gives the issue a moment’s thought.

Suppose through some miracle Congress passed, and the Supreme Court upheld, a bill that limited billionaires’ abilities to buy political ads for their favorite candidate. Is anything going to stop these billionaires from buying up newspapers and television stations and running the ads supporting their favored candidates as news stories?

There is no remotely satisfying answer to that question, and it is ridiculous that campaign finance reformers haven’t recognized this fact. Limiting campaign spending by rich people will do nothing if we don’t do something to limit their ability to influence public opinion through the media.

Fortunately, there are some ideas for challenging the control the rich have over the media. The basic story is that we are not going to be able to prevent the rich from buying and owning media outlets. Instead, we will have to go the other way and allow the non-rich to have a voice.[1]

The idea is that we can give every person some amount of money (e.g. $100 to $200) to support the media outlet(s), or possibly a broader category of creative workers, of their choice. This system could be modeled along the lines of the charitable contribution tax deduction, where the government draws out general conditions for being eligible to receive the funds.

This means that the government specifies the types of organizations that can qualify to receive the funds. In the case of the charitable deduction, an organization has to indicate that it’s a church, it provides food for the poor, or does something else that qualifies it to be a charitable organization.

The government doesn’t try to determine whether it’s a good church or whether the food it provides is high quality, the only question is whether the organization does what it claims. A similar policy could be applied to the recipients of funds allocated through this system. (In my view, I would make not getting copyright protection a condition of getting funding – the government gives you one subsidy, not two – but that is the sort of issue that could be resolved down the road.)   

This sort of system could provide a large amount of money to sustain media organizations that are not owned by rich people. For example, if the credit were $200, and 10 million people chose to support a specific television network with their full credit, the organization would have $2 billion a year to cover its operating expenses. That is roughly equal to CNN’s annual operating revenue.    

This credit could create enormous opportunities for the non-rich to finance newspapers/websites, television stations, and other outlets that could compete with the current ones owned and controlled by billionaires. This path also has the great benefit that it could put adopted piecemeal, with states and even local governments, giving their residents the opportunity to support new types of news outlets.

If enough people could gain support for this type of program, they could get a more progressive state, like California or Massachusetts to pave the way, or a city like San Francisco or Seattle. Just as the movement for a higher minimum wage has spread from successes in these places, the same could happen with a tax credit system to support alternative media.

Fun with Elon Musk and Twitter

Even if it proves to be possible to advance a tax credit system to support alternatives to the billionaires’ media, we still have the problem of massive platforms like Facebook and Twitter being owned by rich people, who can essentially do what they want in accordance with their whims. The big problem here is the issue of network effects.

The idea of network effects is that people benefit from being part of a massive network since they want to be able to see what a large number of other people are posting, and they may hope that a large number of people will see what they post. These effects can be exaggerated. For example, the overwhelming majority of users will never have their Facebook pages or Twitter posts viewed by more than a small number of people. Nonetheless, they are real. This makes it hard to dislodge a Facebook or Twitter, once it has become dominant.  

One route to go is to make the playing field less hospitable to large platforms. This can be done by removing Section 230 protections for websites that either sell advertising or personal information. This means that the big platforms could be held liable for defamatory material that they circulated over their platform.

In this scenario, if election deniers wrote posts on Twitter saying that Dominion voting machines had switched votes from Trump to Biden, Elon Musk could be sued by Dominion for defamation, just as Fox News is now being sued. The same would apply to the vaccine deniers claiming that Pfizer and Moderna vaccines have killed huge numbers of people.

Taking away Section 230 protection from these platforms would not just help large actors. As it stands now, if some racist asshole started posting on their Facebook page that a restaurant owned by Blacks or Asians had poisoned their family and sent them to the hospital, the restaurant owner would have no legal recourse against Facebook. They could sue the racist, who may not have much money, but they could not even force Facebook to take down the post.

By contrast, if a television station or newspaper had allowed the person to speak or printed a letter to the editor along the same lines, they would face liability. They could be forced to issue a correction to avoid being named in a defamation suit.

There are clearly complications with going this route. A platform with billions of posts daily could not be expected to monitor posts in advance for potentially defamatory material. This problem has been solved (imperfectly) with copyright, under the Digital Millennium Copyright Act (DMCA), by requiring platforms to remove violating material in a timely manner after being notified by the copyright holder.

There could be a similar requirement for Internet sites. The evidence from the DMCA is that websites are overly cautious and err on the side of removing material even when the claim of violation is extremely weak. That may also prove to be the case with Internet platforms like Facebook and Twitter when it comes to allegedly defamatory material, but that is in part the point.

Part of the point of removing Section 230 protection from sites that rely on advertising or selling personal information is to put them at a disadvantage relative to sites that rely on subscriptions or donations to stay in business. In that case, people could count on posting material on a smaller site that might be removed by Facebook or Twitter. This would give sites operating on an alternative model a large advantage relative to the current Internet giants.

In any case, taking away Section 230 protection would clearly raise costs for the major Internet platforms. Given that Twitter was already struggling even before Elon Musk took it over, this sort of increase in costs would clearly be a serious blow.

Undoubtedly, changing the law on Section 230 protection would hurt some other sites as well. While some could probably switch over to a subscription model relatively easily, others may find it difficult. Sites will of course develop new modes of operation. For example, a site like Airbnb could require users to sign away their right to sue for defamation as a condition of usage.

As a practical matter, it is impossible to guarantee that there will be no negative outcomes from this change, just as is true of every policy that actually does anything in the world. The question is whether some number of sites either being seriously downsized, or going out of business altogether, is a price worth paying to prevent rich jerks from being able to operate huge platforms according to their whims.

To my view, it would be worth the price, but your mileage may vary. In any case, it is distressing to see we are now in a situation where this is the reality, not just a hypothetical one. It speaks volumes about the quality of intellectual debate in this country, that this possibility apparently caught so many of our leading policy types by surprise.       

[1] I also discuss this in chapter 5 of Rigged (it’s free).

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We should all recognize that Sam Bankman-Fried is much smarter than the rest of us. After all, outwardly he looks to be one of the biggest frauds of all time. By the age of 30 he amassed a fortune that dwarfs that of your average billionaire. He did it by
The media’s coverage of the economy in the last year and a half has inflation playing a starring, and almost exclusive, role. Items like the 50-year low in unemployment reached earlier this year have barely been mentioned.
The media’s coverage of the economy in the last year and a half has inflation playing a starring, and almost exclusive, role. Items like the 50-year low in unemployment reached earlier this year have barely been mentioned.

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