The Washington Post continued its practice of ignoring journalistic standards in trying to push its line on the necessity of a budget deal. An article referred to the end of the year deadline before higher tax rates and spending cuts kick in, then told readers:
“That deadline, now called the fiscal cliff, is widely believed capable of causing another recession.”
It’s actually not clear that any economists think that missing the deadline will cause the economy to fall into a recession. The Congressional Budget Office and others have projected that if higher tax rates and the legislated spending cuts stay in effect all year that the economy might fall into another recession. However, they did not project that a recession would result if we went a week or two into 2013 without a deal, especially if any tax cuts put in place were made retroactive, which would almost certainly be the case.
The Washington Post continued its practice of ignoring journalistic standards in trying to push its line on the necessity of a budget deal. An article referred to the end of the year deadline before higher tax rates and spending cuts kick in, then told readers:
“That deadline, now called the fiscal cliff, is widely believed capable of causing another recession.”
It’s actually not clear that any economists think that missing the deadline will cause the economy to fall into a recession. The Congressional Budget Office and others have projected that if higher tax rates and the legislated spending cuts stay in effect all year that the economy might fall into another recession. However, they did not project that a recession would result if we went a week or two into 2013 without a deal, especially if any tax cuts put in place were made retroactive, which would almost certainly be the case.
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One should always take second hand accounts from secret meetings with more than a grain of salt, but the Wall Street Journal’s account of President Obama’s position in his negotiations with Speaker Boehner should raise some concern. The WSJ told readers:
“The president told him [Boehner] he could choose one of two doors. The first represented a big deal. If Mr. Boehner chose it, the president said, the country and financial markets would cheer. Door No. 2 represented a spike in interest rates and a global recession.”
Huh, a spike in interest rates and a global recession? What exactly could President Obama mean if he really said this? If there is no deal over the course of 2013 [not by January 1, that is a fairy tale told for children and Washington pundits] then it is likely that we will see a recession, as the Congressional Budget Office and others have projected. But a recession is associated with lower interest rates, not higher interest rates.
If President Obama really thinks interest rates will spike because of a big tax increase coupled with the cuts in the sequester then he badly needs some new economic advisers. I’m always open to new economic theories, but it’s hard to see how you can get from standard economics to this sort of story.
If the WSJ is confident in the reliability of its sources it should be running a news piece on President Obama’s loony economics.
One should always take second hand accounts from secret meetings with more than a grain of salt, but the Wall Street Journal’s account of President Obama’s position in his negotiations with Speaker Boehner should raise some concern. The WSJ told readers:
“The president told him [Boehner] he could choose one of two doors. The first represented a big deal. If Mr. Boehner chose it, the president said, the country and financial markets would cheer. Door No. 2 represented a spike in interest rates and a global recession.”
Huh, a spike in interest rates and a global recession? What exactly could President Obama mean if he really said this? If there is no deal over the course of 2013 [not by January 1, that is a fairy tale told for children and Washington pundits] then it is likely that we will see a recession, as the Congressional Budget Office and others have projected. But a recession is associated with lower interest rates, not higher interest rates.
If President Obama really thinks interest rates will spike because of a big tax increase coupled with the cuts in the sequester then he badly needs some new economic advisers. I’m always open to new economic theories, but it’s hard to see how you can get from standard economics to this sort of story.
If the WSJ is confident in the reliability of its sources it should be running a news piece on President Obama’s loony economics.
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For those of you BTP readers playing a drinking game out there in blogland, take another swig, the Washington Post used the phrase “tame the debt” in yet another budget article. Here it is:
“If there was going to be a deal to tame the nation’s debt, it had to happen now.”
Not much to add here. I just will note for those tiring of my deficit projection chart showing the silliness of this out of control debt story, there is also the addition approach that Paul Krugman used in his Monday column. But as the deficit hawks say, “don’t bother me with your stinkin numbers!”
For those of you BTP readers playing a drinking game out there in blogland, take another swig, the Washington Post used the phrase “tame the debt” in yet another budget article. Here it is:
“If there was going to be a deal to tame the nation’s debt, it had to happen now.”
Not much to add here. I just will note for those tiring of my deficit projection chart showing the silliness of this out of control debt story, there is also the addition approach that Paul Krugman used in his Monday column. But as the deficit hawks say, “don’t bother me with your stinkin numbers!”
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Towards the end of an article that discussed efforts by Japan’s government to boost the demand for workers by generating inflation the NYT told readers:
“The country has an aging, shrinking population. It needs more workers.”
Umm, no. It does not make sense to say that Japan is suffering from inadequate demand, which means that it has more supply of workers than demand for workers, and then to say it needs more workers. Up is not down.
There is a well-funded effort in the United States to try to place demographics at the center of economic policy debates. Countries are growing older. This is not new, they have been growing older for many decades. Fans of arithmetic know that the increase in living standards that result from even modest growth in productivity swamps the impact of demographics in lowering living standards. Here’s the story for the United States over the next 23 years — the peak pressure associated with the retirement of the baby boomers.
Source: Author’s calculations.
And remember after 2035, the demographnics change little for the rest of the century, but productivity keeps growing. In short, the aging story is a joke.
Towards the end of an article that discussed efforts by Japan’s government to boost the demand for workers by generating inflation the NYT told readers:
“The country has an aging, shrinking population. It needs more workers.”
Umm, no. It does not make sense to say that Japan is suffering from inadequate demand, which means that it has more supply of workers than demand for workers, and then to say it needs more workers. Up is not down.
There is a well-funded effort in the United States to try to place demographics at the center of economic policy debates. Countries are growing older. This is not new, they have been growing older for many decades. Fans of arithmetic know that the increase in living standards that result from even modest growth in productivity swamps the impact of demographics in lowering living standards. Here’s the story for the United States over the next 23 years — the peak pressure associated with the retirement of the baby boomers.
Source: Author’s calculations.
And remember after 2035, the demographnics change little for the rest of the century, but productivity keeps growing. In short, the aging story is a joke.
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A Washington Post article on a report by the IMF’s Independent Evaluation Office criticizing political influence by the United States on the Fund’s policy may have misled readers on how countries accumulate foreign exchange reserves. The article told readers:
“A steady rise in foreign reserves — a country’s holdings of dollars, yen or other major world currencies — can be the result of large trade surpluses. But it can also stem from an undervalued exchange rate, something that the United States has long accused China of maintaining to give its products a more attractive price on world markets.”
A rise in foreign exchange reserves can only result from a decision by a central bank to buy reserves. Its access to reserves is affected by the country’s trade balance, but a central bank only ends up with reserves because it has decided to buy them. If the central bank of a country with large trade surpluses decided not to buy reserves, then its currency would rise in international markets as holders of foreign exchange (mostly dollars) dumped them on international markets to obtain more of their own country’s currency.
This would cause the price of their own country’s currency to rise and the foreign country’s currency to fall. There is no real dispute that central bank intervention keeps the dollar high against the yuan and other currencies. The only questions can be the motivation and the implications of this intervention.
A Washington Post article on a report by the IMF’s Independent Evaluation Office criticizing political influence by the United States on the Fund’s policy may have misled readers on how countries accumulate foreign exchange reserves. The article told readers:
“A steady rise in foreign reserves — a country’s holdings of dollars, yen or other major world currencies — can be the result of large trade surpluses. But it can also stem from an undervalued exchange rate, something that the United States has long accused China of maintaining to give its products a more attractive price on world markets.”
A rise in foreign exchange reserves can only result from a decision by a central bank to buy reserves. Its access to reserves is affected by the country’s trade balance, but a central bank only ends up with reserves because it has decided to buy them. If the central bank of a country with large trade surpluses decided not to buy reserves, then its currency would rise in international markets as holders of foreign exchange (mostly dollars) dumped them on international markets to obtain more of their own country’s currency.
This would cause the price of their own country’s currency to rise and the foreign country’s currency to fall. There is no real dispute that central bank intervention keeps the dollar high against the yuan and other currencies. The only questions can be the motivation and the implications of this intervention.
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Ever since the election the Wall Street gang has been trying to build up scare stories around the budget standoff between the President and the Republican House. The term “fiscal cliff” is a central part of this campaign since it implies that something ominous happens if there is no deal by the end of the year.
As every economist and budget analyst knows, it makes virtually no difference whatsoever if there is a deal 10 days before the end of the year or 10 days after. However if the Wall Street gang can build up enough fear then it will lead to more pressure to get a deal before the end of the year. Since President Obama will be on much better negotiating turf after the end of the year and the tax cuts have already expired, a deal struck this year will likely be more favorable to the Republicans.
The NYT seems to have joined in this effort, telling readers that we may “careen off the so-called fiscal cliff” if there is no deal. This sort of silly and inaccurate metaphor is best left for fiction. It has no place in a serious newspaper.
Ever since the election the Wall Street gang has been trying to build up scare stories around the budget standoff between the President and the Republican House. The term “fiscal cliff” is a central part of this campaign since it implies that something ominous happens if there is no deal by the end of the year.
As every economist and budget analyst knows, it makes virtually no difference whatsoever if there is a deal 10 days before the end of the year or 10 days after. However if the Wall Street gang can build up enough fear then it will lead to more pressure to get a deal before the end of the year. Since President Obama will be on much better negotiating turf after the end of the year and the tax cuts have already expired, a deal struck this year will likely be more favorable to the Republicans.
The NYT seems to have joined in this effort, telling readers that we may “careen off the so-called fiscal cliff” if there is no deal. This sort of silly and inaccurate metaphor is best left for fiction. It has no place in a serious newspaper.
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That’s undoubtedly what readers are asking after seeing this strange and inaccurate phrase appear yet again in an article about the latest tax plan Speaker Boehner put forward. Of course it is inaccurate since it implies that debt and deficits have been out of control.
As every budget analyst knows, deficits were actually quite modest until the economy plummeted in 2008 following the collapse of the housing bubble. The deficit in 2007 was just 1.2 percent of GDP. The economy can run deficits of this size forever, since the debt to GDP ratio was actually falling. The deficit was projected to remain low for the next several years until the projected expiration of the Bush tax cuts pushed the budget into surplus in 2012.
Source: Congressional Budget Office.
There have been no large unfunded increases in spending nor permanent tax cuts since these projections were made. The sole reason that the deficits came in much higher than projected was the impact of the recession on tax and spending and the stimulus measures taken to counter the downturn.
The Post has consistently misrepresented the nature of current deficits. This helps to promote its agenda of cutting Social Security and Medicare.
The Post also misrepresented the risks of missing the December 31 deadline of reaching a budget deal. It told readers:
“If no action is taken before the end of the year, taxes will rise for nearly 90 percent of taxpayers in January, potentially sparking a new recession, according to many economists.”
In fact it is not clear that any economists say that missing the deadline will cause a recession. The Congressional Budget Office and others have projected that if the higher tax rates and spending cuts remain in place all year that the economy will likely fall into a recession. They did not say that this would be the result of waiting one or two weeks into January to work out a deal.
Most analysts think that President Obama’s negotiating position will improve after the tax cuts expire. If this is the case then trying to maintain pressure on President Obama to reach a deal before the end of the year would also advance the Post’s agenda for cutting Social Security and Medicare.
That’s undoubtedly what readers are asking after seeing this strange and inaccurate phrase appear yet again in an article about the latest tax plan Speaker Boehner put forward. Of course it is inaccurate since it implies that debt and deficits have been out of control.
As every budget analyst knows, deficits were actually quite modest until the economy plummeted in 2008 following the collapse of the housing bubble. The deficit in 2007 was just 1.2 percent of GDP. The economy can run deficits of this size forever, since the debt to GDP ratio was actually falling. The deficit was projected to remain low for the next several years until the projected expiration of the Bush tax cuts pushed the budget into surplus in 2012.
Source: Congressional Budget Office.
There have been no large unfunded increases in spending nor permanent tax cuts since these projections were made. The sole reason that the deficits came in much higher than projected was the impact of the recession on tax and spending and the stimulus measures taken to counter the downturn.
The Post has consistently misrepresented the nature of current deficits. This helps to promote its agenda of cutting Social Security and Medicare.
The Post also misrepresented the risks of missing the December 31 deadline of reaching a budget deal. It told readers:
“If no action is taken before the end of the year, taxes will rise for nearly 90 percent of taxpayers in January, potentially sparking a new recession, according to many economists.”
In fact it is not clear that any economists say that missing the deadline will cause a recession. The Congressional Budget Office and others have projected that if the higher tax rates and spending cuts remain in place all year that the economy will likely fall into a recession. They did not say that this would be the result of waiting one or two weeks into January to work out a deal.
Most analysts think that President Obama’s negotiating position will improve after the tax cuts expire. If this is the case then trying to maintain pressure on President Obama to reach a deal before the end of the year would also advance the Post’s agenda for cutting Social Security and Medicare.
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The top of the hour news segment on Morning Edition told listeners that forecasters have predicted that failing to meet the December 31st cutoff on budget negotiations would throw the economy back into recession (sorry, no link). This is not true. The projections for a recession assume that there is no deal on taxes and spending throughout 2013. They did not predict what would happen if it takes a few days or weeks in 2013 to come to an agreement that reversed most of the tax increases and spending cuts that go into effect at the end of the year.
This is a simple and important distinction. It is incredible that NPR could not find news writers who could get it right.
The top of the hour news segment on Morning Edition told listeners that forecasters have predicted that failing to meet the December 31st cutoff on budget negotiations would throw the economy back into recession (sorry, no link). This is not true. The projections for a recession assume that there is no deal on taxes and spending throughout 2013. They did not predict what would happen if it takes a few days or weeks in 2013 to come to an agreement that reversed most of the tax increases and spending cuts that go into effect at the end of the year.
This is a simple and important distinction. It is incredible that NPR could not find news writers who could get it right.
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The Washington Post is having trouble with numbers again. It told readers that the bill passed by the Senate in the summer would restore the Clinton era tax rates on households with incomes over $1 million. Actually the bill would restore Clinton era tax rates on households with incomes over $250,000.
Thanks to Robert Salzberg for calling this to my attention.
The Washington Post is having trouble with numbers again. It told readers that the bill passed by the Senate in the summer would restore the Clinton era tax rates on households with incomes over $1 million. Actually the bill would restore Clinton era tax rates on households with incomes over $250,000.
Thanks to Robert Salzberg for calling this to my attention.
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For some reason the media routinely bring up philosophy in discussions of politicians’ actions. This is utterly bizarre. There is no one in national office who got their position based on their philosophical treatises. They gained their positions by appealing to important political constituencies.
The NYT again committed this sin, telling readers in an article on the budget standoff that:
“The two sides are now dickering over price, not philosophical differences, and the numbers are very close.”
Does anyone think that President Obama and Speaker Boehner had been debating points of philosophy in their discussions?
This piece also raises the possibility that the government will use different inflation indexes for different programs in order to accomplish political ends telling readers:
“The new inflation calculations, for instance, would probably not affect wounded veterans and disabled people on Supplemental Security Income.”
This sort of political manipulation of government statistics is unusual in the United States. It would have been worth highlighting this part of the tentative agreement.
For some reason the media routinely bring up philosophy in discussions of politicians’ actions. This is utterly bizarre. There is no one in national office who got their position based on their philosophical treatises. They gained their positions by appealing to important political constituencies.
The NYT again committed this sin, telling readers in an article on the budget standoff that:
“The two sides are now dickering over price, not philosophical differences, and the numbers are very close.”
Does anyone think that President Obama and Speaker Boehner had been debating points of philosophy in their discussions?
This piece also raises the possibility that the government will use different inflation indexes for different programs in order to accomplish political ends telling readers:
“The new inflation calculations, for instance, would probably not affect wounded veterans and disabled people on Supplemental Security Income.”
This sort of political manipulation of government statistics is unusual in the United States. It would have been worth highlighting this part of the tentative agreement.
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