I’m not kidding, it’s right here. The piece expresses great disappointment that markets have not plummeted in response to the budget deadlock telling readers:
“Despite daily warnings about the effects of the fiscal cliff — tax increases and budget cuts that could cripple the economy — the markets seem supremely convinced that all will be fixed before the Dec. 31 deadline.”
Of course it is bizarre that the article would connect the “Dec. 31 deadline” with the markets’ calm since in fact almost nothing happens if this deadline is missed. The economic consequences of waiting until the first weeks in January to get a deal are virtually zero. The markets likely know this, even if no one has told the folks at USA Today.
I’m not kidding, it’s right here. The piece expresses great disappointment that markets have not plummeted in response to the budget deadlock telling readers:
“Despite daily warnings about the effects of the fiscal cliff — tax increases and budget cuts that could cripple the economy — the markets seem supremely convinced that all will be fixed before the Dec. 31 deadline.”
Of course it is bizarre that the article would connect the “Dec. 31 deadline” with the markets’ calm since in fact almost nothing happens if this deadline is missed. The economic consequences of waiting until the first weeks in January to get a deal are virtually zero. The markets likely know this, even if no one has told the folks at USA Today.
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That seems unlikely as it ran another shrill front page piece warning about the need to “tame” the national debt. Newspapers would ordinarily use a word like “reduce” in their news section, saving phrases like “tame the national debt” for the opinion pages.
The piece is also highly misleading by insisting there is an urgency to arriving at a deal before the end of the year. There is no obvious reason that it is important to have a deal by December 31 rather than the first or second week in January. While the Post includes the comments from politicians who say a deal is “vital” and even asserts this as a fact in the headline to the jump page, it excludes the views of members of Congress who think it would be perfectly reasonable to allow the deadline to pass and put together a deal with the new Congress.
It is worth noting in this context that President Obama’s bargaining position would be substantially improved after January 1. For this reason it is understandable that Republicans and people who want to see large cuts to Social Security and Medicare would want to force a deal before the end of the year.
That seems unlikely as it ran another shrill front page piece warning about the need to “tame” the national debt. Newspapers would ordinarily use a word like “reduce” in their news section, saving phrases like “tame the national debt” for the opinion pages.
The piece is also highly misleading by insisting there is an urgency to arriving at a deal before the end of the year. There is no obvious reason that it is important to have a deal by December 31 rather than the first or second week in January. While the Post includes the comments from politicians who say a deal is “vital” and even asserts this as a fact in the headline to the jump page, it excludes the views of members of Congress who think it would be perfectly reasonable to allow the deadline to pass and put together a deal with the new Congress.
It is worth noting in this context that President Obama’s bargaining position would be substantially improved after January 1. For this reason it is understandable that Republicans and people who want to see large cuts to Social Security and Medicare would want to force a deal before the end of the year.
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The fact that the United States can borrow long-term at very low interest rates indicates that actors in financial markets are not concerned about large U.S. budget deficits. Odds are that these people recognize that the large current deficits are the result of the economic collapse that followed in the wake of the bursting of the housing bubble. They probably also know that if the deficit were smaller it would just mean slower growth and higher unemployment.
Given this reality, it is interesting how the Post could know that:
“$4 trillion in deficit reduction over the next decade [is what] both sides believe is necessary.”
We all know what the politicians in both parties are saying, but of course politicians often do not say what they actually believe. It would be interesting to know how the Post has determined what the leadership of the two parties actually believe about the economy.
The fact that the United States can borrow long-term at very low interest rates indicates that actors in financial markets are not concerned about large U.S. budget deficits. Odds are that these people recognize that the large current deficits are the result of the economic collapse that followed in the wake of the bursting of the housing bubble. They probably also know that if the deficit were smaller it would just mean slower growth and higher unemployment.
Given this reality, it is interesting how the Post could know that:
“$4 trillion in deficit reduction over the next decade [is what] both sides believe is necessary.”
We all know what the politicians in both parties are saying, but of course politicians often do not say what they actually believe. It would be interesting to know how the Post has determined what the leadership of the two parties actually believe about the economy.
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Newspapers are supposed to be in the business of informing readers. It’s hard to see what information was provided when an article on the tax increases associated with the Affordable Care Act (ACA) told readers:
“Among the most affluent fifth of households, those affected will see tax increases averaging $6,000 next year, economists estimate.”
It’s difficult to know what this is supposed to mean. The most affluent fifth of households would be around 26 million households. If the tax increases amounted to an average of $6,000 per household that would come to $156 billion a year. However the next paragraph tells us that the projected tax take is $318 billion over ten years. This implies a tax hit on these families that is less than one-fifth as large. (The same tax would produce considerably more revenue ten years out than next year.)
Presumably the piece means that the tax will affect a narrow subset of the top quintile and that this narrow subset (mostly people with income over $200,000 a year), will see an average increase in taxes of $6,000 a year. The Tax Policy Center puts the number of tax filing units (roughly households) affected as 2.8 million. It should have been possible to more clearly describe the impact of the tax increases associated with the ACA.
[Thanks to David Maynard for calling this to my attention.]
[Correction: An earlier version said “26,000 million households,” which several readers called to my attention. Robert Salzberg provided the Tax Policy Center number.]
Newspapers are supposed to be in the business of informing readers. It’s hard to see what information was provided when an article on the tax increases associated with the Affordable Care Act (ACA) told readers:
“Among the most affluent fifth of households, those affected will see tax increases averaging $6,000 next year, economists estimate.”
It’s difficult to know what this is supposed to mean. The most affluent fifth of households would be around 26 million households. If the tax increases amounted to an average of $6,000 per household that would come to $156 billion a year. However the next paragraph tells us that the projected tax take is $318 billion over ten years. This implies a tax hit on these families that is less than one-fifth as large. (The same tax would produce considerably more revenue ten years out than next year.)
Presumably the piece means that the tax will affect a narrow subset of the top quintile and that this narrow subset (mostly people with income over $200,000 a year), will see an average increase in taxes of $6,000 a year. The Tax Policy Center puts the number of tax filing units (roughly households) affected as 2.8 million. It should have been possible to more clearly describe the impact of the tax increases associated with the ACA.
[Thanks to David Maynard for calling this to my attention.]
[Correction: An earlier version said “26,000 million households,” which several readers called to my attention. Robert Salzberg provided the Tax Policy Center number.]
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The Washington Post used a headline to help conceal the efforts of Republicans to cut Social Security and Medicare, telling readers that:
“some in GOP urge lawmakers to back tax hikes for changes in safety-net programs.”
Of course the Republicans actually want cuts to these programs, not random changes. The piece itself also refers to “changes” in these programs. Newspapers are supposed to be trying to inform readers of what politicians are doing, not helping them advance an unpopular agenda (polls consistently show that cuts to these programs are even opposed by the vast majority of Republicans) by concealing its impact from readers.
The piece also failed to point out that several of the statements from Republicans quoted in the article did not make sense. For example, it quotes David Camp, the chairman of the Ways and Means Committee telling readers:
“But House Ways and Means Committee Chairman Dave Camp (R-Mich.) said he was reluctant to draft such a plan unless the White House agreed to a tax-revenue target well below the $1.6 trillion Obama has demanded over the next decade.
“‘Despite dancing in the end zone, which he’s doing, he keeps moving the goal posts. His revenue number keeps changing,’ Camp said. ‘There is a point that the economy can only sustain so much revenue being taken out of it.'”
It would have been worth pointing out to readers that President Obama has not moved the goal post one iota. The deficit reduction proposal put forward by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson, the co-chairs of President Obama’s deficit commission, called for $1.8 trillion in additional revenue. (It assumes a return to the Clinton era tax rates as part of its baseline and then added on $1 trillion in revenue over a decade.)
This report was widely praised by many Republicans at the time and continues to be praised by many Republicans even now. This means that when Mr. Camp accuses President Obama of moving the goal posts, the chairman of the Ways and Means committee is either completely ignorant of the budget debate that has taken place over the last two years or is not being honest. Since many readers may be less familiar with the history of the budget debate it would have been useful to point out this fact in the article.
The piece also includes a misleading quote from Rep. Thomas J. Rooney (R-Fla.):
“If there are truly real entitlement reforms that are going to preserve Social Security and Medicare for generations to come, it’s going to be very difficult for me to oppose” higher rates for the rich.”
Actually, if nothing is done the Congressional Budget Office projects that Social Security can pay full scheduled benefits through the year 2034 and close to 80 percent of scheduled benefits for the rest of the century. Most Republican plans would cut Social Security payments by a comparable or larger amount so it is difficult to know what Mr. Rooney means by “preserve” in this context.
In the case of Medicare, the program is projected to be able to pay full benefits through the year 2024. The cost controls put in place by the Affordable Care Act pushed this date out from 2016 and reduced the long-term projected shortfall by more than two-thirds. This would have been helpful information to provide to readers.
Correction: An earlier version put the date when CBO projects that Social Security will first face a shortfall as 2035. Thanks to Robert Salzberg for calling this to my attention.
The Washington Post used a headline to help conceal the efforts of Republicans to cut Social Security and Medicare, telling readers that:
“some in GOP urge lawmakers to back tax hikes for changes in safety-net programs.”
Of course the Republicans actually want cuts to these programs, not random changes. The piece itself also refers to “changes” in these programs. Newspapers are supposed to be trying to inform readers of what politicians are doing, not helping them advance an unpopular agenda (polls consistently show that cuts to these programs are even opposed by the vast majority of Republicans) by concealing its impact from readers.
The piece also failed to point out that several of the statements from Republicans quoted in the article did not make sense. For example, it quotes David Camp, the chairman of the Ways and Means Committee telling readers:
“But House Ways and Means Committee Chairman Dave Camp (R-Mich.) said he was reluctant to draft such a plan unless the White House agreed to a tax-revenue target well below the $1.6 trillion Obama has demanded over the next decade.
“‘Despite dancing in the end zone, which he’s doing, he keeps moving the goal posts. His revenue number keeps changing,’ Camp said. ‘There is a point that the economy can only sustain so much revenue being taken out of it.'”
It would have been worth pointing out to readers that President Obama has not moved the goal post one iota. The deficit reduction proposal put forward by Morgan Stanley director Erskine Bowles and former Senator Alan Simpson, the co-chairs of President Obama’s deficit commission, called for $1.8 trillion in additional revenue. (It assumes a return to the Clinton era tax rates as part of its baseline and then added on $1 trillion in revenue over a decade.)
This report was widely praised by many Republicans at the time and continues to be praised by many Republicans even now. This means that when Mr. Camp accuses President Obama of moving the goal posts, the chairman of the Ways and Means committee is either completely ignorant of the budget debate that has taken place over the last two years or is not being honest. Since many readers may be less familiar with the history of the budget debate it would have been useful to point out this fact in the article.
The piece also includes a misleading quote from Rep. Thomas J. Rooney (R-Fla.):
“If there are truly real entitlement reforms that are going to preserve Social Security and Medicare for generations to come, it’s going to be very difficult for me to oppose” higher rates for the rich.”
Actually, if nothing is done the Congressional Budget Office projects that Social Security can pay full scheduled benefits through the year 2034 and close to 80 percent of scheduled benefits for the rest of the century. Most Republican plans would cut Social Security payments by a comparable or larger amount so it is difficult to know what Mr. Rooney means by “preserve” in this context.
In the case of Medicare, the program is projected to be able to pay full benefits through the year 2024. The cost controls put in place by the Affordable Care Act pushed this date out from 2016 and reduced the long-term projected shortfall by more than two-thirds. This would have been helpful information to provide to readers.
Correction: An earlier version put the date when CBO projects that Social Security will first face a shortfall as 2035. Thanks to Robert Salzberg for calling this to my attention.
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Fans of reality will note that the immediate threat to the economy is the prospect of a sharp increase in taxes and cut in spending that will begin in the new year. How does this look like a “debt crisis?”A debt crisis is when no investors will buy your debt.
The Post has to tone down the scare tactics in its push to cut Social Security and Medicare. It’s slipping behind Fox News and the National Inquirer in the credibility category.
[Thanks to Michael Cushman for calling my attention to this one.]
Fans of reality will note that the immediate threat to the economy is the prospect of a sharp increase in taxes and cut in spending that will begin in the new year. How does this look like a “debt crisis?”A debt crisis is when no investors will buy your debt.
The Post has to tone down the scare tactics in its push to cut Social Security and Medicare. It’s slipping behind Fox News and the National Inquirer in the credibility category.
[Thanks to Michael Cushman for calling my attention to this one.]
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The Washington Post is notorious for getting numbers terribly wrong when it comes to trade. It once ran a lead editorial touting the wonders of NAFTA that claimed Mexico’s GDP had quadrupled from 1987 to 2007. According to the IMF the number was 83 percent. But the Post is willing to toss numbers, logic, and arithmetic to the wind when it comes to pushing the trade agreements that have been on the political agenda in recent years.
Hence we have Post columnist David Ignatius telling us this morning that:
“What’s appealing in particular about the trans-Atlantic initiative [a Europe-U.S. trade agreement] is that it could be a big job creator for economies on both continents that are still recovering from the effects of the recession. …
“I like the idea of an “economic NATO” because it addresses fiscal problems through growth and expansion. The alternative “austerity pill” advocated by conservative Germans (and some American budget-cutters) is doomed to fail. Big, new spending initiatives are not a realistic growth strategy, either, given debt worries on both continents. To many economists, it’s a no-brainer: Expanded trade offers the best path to new jobs, markets and investment opportunities.”
There we go, we can cut the deficit and still produce jobs because of the wonders of increased trade.
Sounds great, let’s check the numbers.
Later in the piece Ignatius tells us about a study that projects that a 50 percent reduction in non-tariff barriers (an ambitious target) would produce gains for the U.S. of $53 billion annually. Abolishing all tariffs would increase annual GDP by $82 billion. This gives us a total gain in GDP of $135 billion, a bit less than 0.9 percent of GDP. Note that this is likely an overstatement of actual gains because we will probably not reach these targets. Also the spending on adjustment measures, which accompany almost every trade agreement, would subtract from these projected gains.
But let’s just take Igantius’ gain of 0.9 percent of GDP at face value. If there is good progress and a deal is concluded relatively quickly, the changes will likely be phased in over a period of time, with the projected gains lagging the reduction in tariff and non-tariff barriers as the economy takes time to respond. Let’s assume the whole process takes ten years. This means that Ignatius’ trade deal will increase growth over the next decade by an average of 0.09 percent a year.
While it would be nice to see this boost to growth, that is not really important enough to change anyone’s forecasts. In fact, even in retrospect we can’t even estimate GDP growth to this degree of accuracy. By comparison, the Congressional Budget Office’s projections show that the tax increases and spending cuts associated with the end of year fiscal dispute will reduce GDP by close to 4.0 percent, or roughly 40 times the impact of Ignatius’s trade deal.
In short, the potential gains from these sorts of trade deals are swamped by the macroeconomic impact of the budget. It is unfortunate that Ignatius and his friends at the Post may not like budget deficits as a way of boosting demand, but they are not even in the right ballpark when they are talking about their latest trade deal.
Of course this does not mean that a Europe-U.S. trade deal would be a bad idea. If trade could bring the pay of U.S. doctors down to European levels (@$100,000 a year as opposed to $250,000 a year) it would save us close to $100 billion annually on our health care bill. The gains might be 2 or 3 times as large if lawyers, dentists and other highly paid professionals were also subjected to international competition. Unfortunately, our trade policy is so dominated by protectionists that it is unlikely that reducing protection for these professionals will even be on the agenda.
Anyhow, if the editors at the Post had any knowledge of arithmetic they would not allow a column that suggested that the modest potential gains from a trade agreement were a substitute for macroeconomic stimulus. But hey, it’s the Post.
The Washington Post is notorious for getting numbers terribly wrong when it comes to trade. It once ran a lead editorial touting the wonders of NAFTA that claimed Mexico’s GDP had quadrupled from 1987 to 2007. According to the IMF the number was 83 percent. But the Post is willing to toss numbers, logic, and arithmetic to the wind when it comes to pushing the trade agreements that have been on the political agenda in recent years.
Hence we have Post columnist David Ignatius telling us this morning that:
“What’s appealing in particular about the trans-Atlantic initiative [a Europe-U.S. trade agreement] is that it could be a big job creator for economies on both continents that are still recovering from the effects of the recession. …
“I like the idea of an “economic NATO” because it addresses fiscal problems through growth and expansion. The alternative “austerity pill” advocated by conservative Germans (and some American budget-cutters) is doomed to fail. Big, new spending initiatives are not a realistic growth strategy, either, given debt worries on both continents. To many economists, it’s a no-brainer: Expanded trade offers the best path to new jobs, markets and investment opportunities.”
There we go, we can cut the deficit and still produce jobs because of the wonders of increased trade.
Sounds great, let’s check the numbers.
Later in the piece Ignatius tells us about a study that projects that a 50 percent reduction in non-tariff barriers (an ambitious target) would produce gains for the U.S. of $53 billion annually. Abolishing all tariffs would increase annual GDP by $82 billion. This gives us a total gain in GDP of $135 billion, a bit less than 0.9 percent of GDP. Note that this is likely an overstatement of actual gains because we will probably not reach these targets. Also the spending on adjustment measures, which accompany almost every trade agreement, would subtract from these projected gains.
But let’s just take Igantius’ gain of 0.9 percent of GDP at face value. If there is good progress and a deal is concluded relatively quickly, the changes will likely be phased in over a period of time, with the projected gains lagging the reduction in tariff and non-tariff barriers as the economy takes time to respond. Let’s assume the whole process takes ten years. This means that Ignatius’ trade deal will increase growth over the next decade by an average of 0.09 percent a year.
While it would be nice to see this boost to growth, that is not really important enough to change anyone’s forecasts. In fact, even in retrospect we can’t even estimate GDP growth to this degree of accuracy. By comparison, the Congressional Budget Office’s projections show that the tax increases and spending cuts associated with the end of year fiscal dispute will reduce GDP by close to 4.0 percent, or roughly 40 times the impact of Ignatius’s trade deal.
In short, the potential gains from these sorts of trade deals are swamped by the macroeconomic impact of the budget. It is unfortunate that Ignatius and his friends at the Post may not like budget deficits as a way of boosting demand, but they are not even in the right ballpark when they are talking about their latest trade deal.
Of course this does not mean that a Europe-U.S. trade deal would be a bad idea. If trade could bring the pay of U.S. doctors down to European levels (@$100,000 a year as opposed to $250,000 a year) it would save us close to $100 billion annually on our health care bill. The gains might be 2 or 3 times as large if lawyers, dentists and other highly paid professionals were also subjected to international competition. Unfortunately, our trade policy is so dominated by protectionists that it is unlikely that reducing protection for these professionals will even be on the agenda.
Anyhow, if the editors at the Post had any knowledge of arithmetic they would not allow a column that suggested that the modest potential gains from a trade agreement were a substitute for macroeconomic stimulus. But hey, it’s the Post.
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Politicians often try to obscure unpopular proposals in euphemisms. Reporters are not supposed to help them in this effort.
The NYT failed badly in this respect when it told readers:
“Republicans would demand deep concessions on spending and changes to Medicare and Social Security as a price to raise the debt ceiling a few weeks later.”
Of course the Republicans are pushing for cuts to Medicare and Social Security, not generic “changes.” They want the government to pay less money and for beneficiaries to get less money. The NYT should be pointing out this fact, not helping Republicans to conceal an agenda that polls consistently show is hugely unpopular even among Republican voters.
The piece also likely confused readers when it told readers that if Congress takes no action on the estate tax:
“estate taxes would rise to Clinton-era levels, with inheritances over $1 million taxed at 55 percent.”
The 55 percent tax rate would only apply to the portion of the estate over $1 million. The vast majority of estates that would be subject to this tax would only be slightly over $1 million, which would mean that even if nothing is done, the amount of tax liability they would face would be quite limited. Since most people have difficulty understanding the concept of a marginal tax rate, it is likely that many readers would think that the whole estate would be taxed at this 55 percent rate if they exceeded $1 million.
Politicians often try to obscure unpopular proposals in euphemisms. Reporters are not supposed to help them in this effort.
The NYT failed badly in this respect when it told readers:
“Republicans would demand deep concessions on spending and changes to Medicare and Social Security as a price to raise the debt ceiling a few weeks later.”
Of course the Republicans are pushing for cuts to Medicare and Social Security, not generic “changes.” They want the government to pay less money and for beneficiaries to get less money. The NYT should be pointing out this fact, not helping Republicans to conceal an agenda that polls consistently show is hugely unpopular even among Republican voters.
The piece also likely confused readers when it told readers that if Congress takes no action on the estate tax:
“estate taxes would rise to Clinton-era levels, with inheritances over $1 million taxed at 55 percent.”
The 55 percent tax rate would only apply to the portion of the estate over $1 million. The vast majority of estates that would be subject to this tax would only be slightly over $1 million, which would mean that even if nothing is done, the amount of tax liability they would face would be quite limited. Since most people have difficulty understanding the concept of a marginal tax rate, it is likely that many readers would think that the whole estate would be taxed at this 55 percent rate if they exceeded $1 million.
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The NYT’s reporting on the finances of public pensions has been extremely partisan, giving extensive coverage to those who want to exaggerate the funds’ liabilities (e.g. here and here). It continued in this vein today when it made a big issue of an alleged conflict of interest of a Rhode Island judge in a case involving Rhode Island’s pension systems.
The alleged conflict is that the judge has several close relatives including her mother and son, who would potentially be affected by cuts to the state’s pensions. While it is understandable that opponents of public sector pensions would make such arguments, it is routine for judges to rule in cases where they have comparable or larger conflicts of interests. For example, if a judge was ruling on eminent domain (the ability of the government to seize property without the consent of the property owner) or on the issue of uncompensated takings (measures that reduce the value of property, such as building restrictions), any judge who owned property would have a direct stake in the outcome.
According to the standard that makes the headline in this article, the conflict would be an issue if the judge had close family members who were property owners. Such alleged conflicts are usually not cause for major articles in the NYT.
The NYT’s reporting on the finances of public pensions has been extremely partisan, giving extensive coverage to those who want to exaggerate the funds’ liabilities (e.g. here and here). It continued in this vein today when it made a big issue of an alleged conflict of interest of a Rhode Island judge in a case involving Rhode Island’s pension systems.
The alleged conflict is that the judge has several close relatives including her mother and son, who would potentially be affected by cuts to the state’s pensions. While it is understandable that opponents of public sector pensions would make such arguments, it is routine for judges to rule in cases where they have comparable or larger conflicts of interests. For example, if a judge was ruling on eminent domain (the ability of the government to seize property without the consent of the property owner) or on the issue of uncompensated takings (measures that reduce the value of property, such as building restrictions), any judge who owned property would have a direct stake in the outcome.
According to the standard that makes the headline in this article, the conflict would be an issue if the judge had close family members who were property owners. Such alleged conflicts are usually not cause for major articles in the NYT.
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Eduardo Porter had a good piece on the plight of low-wage workers and their efforts to organize with unions. He points out that these workers now receive substantial subsidies from the government (e.g. food stamps) because their pay is low.
Eduardo Porter had a good piece on the plight of low-wage workers and their efforts to organize with unions. He points out that these workers now receive substantial subsidies from the government (e.g. food stamps) because their pay is low.
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