Media coverage of the automatic spending cuts commonly known as sequestration has tapered off since the policies went into effect on March 1. This drop in coverage comes as more Americans report having personally felt the effects of the cuts.
The Wall Street Journal called for reform that would lighten the tax burden on corporations without noting that corporate tax revenue has reached historic lows in a time of historically high profits.
Following the May 21 Senate hearing into Apple's strategies to lighten its corporate tax burden, a Wall Street Journal editorial argued that the real issue was not the company's ability to dodge taxes, but the fact that U.S. corporate taxes are "the developed world's highest." The editorial concluded that the U.S. should lower its corporate tax rate to "ideally zero, but 12.5% also works."
The editorial's main argument that U.S. corporate taxes are too high hinges upon pointing to statutory corporate tax rates. In defending Apple's practices, it explains:
The genuine outrage is that Apple's profits in the U.S. are subject to a combined state and federal statutory tax rate of 39.1% that is the developed world's highest. Corporate taxation is so heavy in the U.S. relative to other countries that even while enjoying its near-zero rate in Ireland, Apple ends up with roughly the same overall effective tax rate, 14%, as South Korea's Samsung, its main global competitor.
The editorial cites statutory instead of effective tax rates for a reason. While the U.S. may rank among the world's highest in statutory corporate tax rates, what corporations typically pay is substantially lower. According to Goldman Sachs' David Kostin, in the last 45 years, the median S&P 500 firm has paid a tax rate that is substantially lower than the statutory rate due to special tax preferences, subsidies, and loopholes. Furthermore, most recent data suggest that the median firm pays an effective tax rate of 30 percent -- a full 9 percentage points below the statutory rate:
And according to the Wall Street Journal's own reporting, in FY2011, corporate tax receipts as a share of profits fell to their lowest level in 40 years. Indeed, as ThinkProgress notes, even as corporate profits have hit a 60-year high, the tax burden on U.S. corporations has hit a historic low. Furthermore, in recent years, corporate tax receipts as a percentage of total government revenue have significantly declined:
The Journal's claim that corporate taxation in the U.S. is high because of its statutory rate relative to the rest of the world also doesn't stand up to scrutiny. According to Citizens for Tax Justice, citing U.S. statutory rates in comparison to other countries is inherently misleading:
Many corporate leaders have noted that other OECD countries have lowered their corporate tax rates in recent years, but fail to mention that these countries have also closed corporate tax loopholes while the U.S. has expanded them. As a result, the U.S. collects less corporate taxes as a share of GDP than all but one of the 26 OECD countries for which data are available.
While there is broad bipartisan support for reforming the corporate tax code, The Wall Street Journal's misleading portrayal of corporate taxes stacks the deck in favor of corporations lowering their historically low tax burden.
As the Competitive Enterprise Institute (CEI) prepares to release its annual report on the cost of regulations, the media should be aware of the organization's documented and vested interest in attacking government regulations, as well as the report's flawed methodology and biased analysis.
According to a May 20 Wall Street Journal editorial, CEI plans to release its report on federal regulations for 2012, the cost of which CEI Vice President for Policy Wayne Crews estimates exceeded $1.8 trillion.
Conservative media will undoubtedly use the CEI's most recent report to criticize government regulation at large, and particularly the regulations enacted by President Obama.
Here are a few reasons why media should be wary of touting the CEI report.
Economic media coverage has been heavily focused on advocating for deficit reduction, even as deficits decline and the federal government posts a surplus.
A Media Matters analysis on economic news coverage in the month of April found that media continued their long-established focus on deficit reduction. In 45 of 123 total segments discussing policy impacts on the economy, guests or hosts on network and cable news advocated for deficit reduction as a priority.
Calls for deficit reduction beat out mentions of other economic issues, most notably the need for economic growth and job creation, and economic inequality.
The continued focus on deficit reduction is particularly interesting given the fact that, in the month of April, the federal government posted the largest budget surplus in five years. Furthermore, according to the Congressional Budget Office, current and projected deficits are expected to decline in coming years.
Even conservatives have recently acknowledged that deficit reduction is not the country's most pressing economic issue. House Speaker John Boehner (R-OH) and House Budget Committee Chairman Paul Ryan (R-WI), agreeing with President Obama, stated that the country is not facing an immediate debt crisis, a notion shared by prominent Democrats. And John Makin, a scholar at the conservative American Enterprise Institute, remarked that Congress has already enacted enough deficit reduction.
Meanwhile, economists have expressed concerns over media's focus on deficits, instead calling attention to resolving the very real immediate crisis of unemployment. Economist Jared Bernstein recently began a series on the path to full employment, and numerous other economists have advocated increased short-term spending to bolster economic growth and job creation.
Furthermore, former Labor Secretary Robert Reich has even pointed out that focusing on jobs and growth -- not spending cuts -- provides an effective avenue for deficit reduction.
Media outlets largely ignored economic inequality in discussions about the overall economy, despite mounting evidence suggesting that the problem has increased in recent years.
While media have been quick to highlight ostensibly positive gains for the economy -- notably that the Dow Jones Industrial reached 15,000 for the first time in its history, GDP grew by 2.5 percent in the first quarter of 2013, and unemployment for April edged down to 7.5 percent -- signs of rising income inequality have gone largely unmentioned.
According to a recent Media Matters analysis, economic coverage for the month of April barely mentioned issues of inequality. In 123 total segments discussing policy effects on the macroeconomy, only 12 touched upon the growing disparity in economic gains for the rich and the poor.
The discrepancy in covering economic inequality stretched across all major outlets. ABC, CBS, and NBC provided no mentions of the problem. MSNBC devoted the most coverage, with roughly 25 percent of segments on the economy discussing rising inequality.
While the media have pushed inequality out of the spotlight, mounting evidence suggests that the problem is getting worse.
As for the rising stock market, while any gains should be viewed as a positive for the economy as a whole, the distribution of those gains paints a less than perfect picture. According to a Gallup poll, 52 percent of Americans currently hold stocks, a number that has been consistently declining in recent years.
Other indicators highlight the deep-seated nature of economic inequality. According to Congressional Budget Office data, from 1979 to 2007 the top one percent of income earners have seen their after-tax share of total income rise by more than 120 percent, while the bottom 20 percent of earners have seen that share decline by almost 30 percent.
And according to an analysis by journalist David Cay Johnston, economic gains in recent history show an even darker reality - from 2009 to 2011, 149 percent of increased income was reaped by the top 10 percent of earners.
Meanwhile, the economy is currently suffering from an epidemic of long-term unemployed workers, which, as noted in a Bloomberg editorial, could create a permanent underclass of workers unable to reenter the labor force.
Some of the media's attention -- albeit very little -- has focused on the inequitable impact of sequestration on low-income individuals. The overwhelming majority of discussion of inequality in April, most notably on MSNBC, focused on Congress' unwillingness to mitigate the impacts of sequestration of the poor, while members were seemingly enthusiastic to correct inconveniences for those at the upper end of the income scale.
While some attention has been given to economic inequality, the broader trend in media is to ignore the issue, preferring instead to focus on the widely recognized non-issue of short-term deficit and debt reduction.
Evening news coverage throughout April touched upon several economic issues, including income inequality, deficit reduction, and entitlement cuts. A Media Matters analysis of this coverage reveals that many of these segments lacked proper context or necessary input from economists, while some networks ignored certain issues entirely.
Fox News' coverage of the April unemployment report was largely negative, despite the fact that economists largely agree that the report shows positive gains in the labor market.
Fox News claimed that federal government policy was failing to lower unemployment by citing recent decisions made by the Federal Reserve. However, economists note that Federal Reserve action alone cannot increase employment, and federal spending must be increased to improve the economy.
Reacting to the May 2 weekly jobless claims report, Fox Business anchor Stuart Varney dismissed the 18,000 drop in initial claims to the lowest level in five years, stating that "it's a better number, but it's still not a good number." Varney went on to claim that the Federal Reserve's recent decision to continue its bond buying program was not producing expected drops in unemployment, claiming "unemployment rates are not falling the way they should when you're printing all this money." From America's Newsroom:
While Varney was quick to dismiss the government's role in strengthening the labor market by citing the Federal Reserve and the effect of current monetary policy on job creation, he completely ignored the fact that decreases in government spending have negatively impacted the economy, overlooking statements made by the Federal Reserve and the warnings of experts.
In the statement released by the Federal Reserve on May 1 outlining its future decisions regarding monetary policy, the board specifically cited that "fiscal policy is restraining economic growth."
Indeed, many analysts have been claiming that actions by the Fed are not enough to bolster economic growth, and that increased government spending -- that is, expansionary fiscal policy -- is necessary to improve current conditions.
In The Washington Post's Wonkblog, Roosevelt Institute fellow Mike Konczal explained how actions taken by the Federal Reserve have failed to counteract the negative effects of decreased government spending:
But the most important lesson to draw is that fiscal policy is incredibly important at this moment. In normal times, the broader effect of government spending, or the fiscal multiplier, is low because the central bank can offset it. But these are not normal times. It's not clear why the Federal Reserve's actions haven't balanced out fiscal austerity. But since they haven't, we should be even more confident that, as the IMF put it, "fiscal multipliers are currently high in many advanced economies."
The main point here is that while the Federal Reserve is attempting to spur economic gains through monetary policy, it simply can't do enough to counteract recent contractions in government spending. Former Labor Secretary Robert Reich echoed Konczal, stating "easy money from the Fed can't get the economy out of first gear when the rest of government is in reverse."
By only focusing monetary policy as the government's way to bolster employment and economic growth, Fox is only telling half the story -- the negative effects of decreased government spending are far too damaging to be mitigated elsewhere -- and continuing its trend of downplaying positive economic news.
The Wall Street Journal reinforced its call for spending cuts, seemingly undeterred by recently discredited research and overwhelming evidence showing that fiscal tightening negatively impacts economic growth.
Reacting to recent research that has questioned austerity proponents' most cited figure -- the 90 percent debt-to-GDP threshold as identified by Camen Reinhart and Kenneth Rogoff -- an April 30 Wall Street Journal editorial claimed that the new revelations are being used to "revive the spending machine."
Instead of addressing the fact that the discrediting of Reinhart-Rogoff took, as The Washington Post's Neil Irwin puts it, a "great deal of wind out of the sails from those who argue that high government debt is, anywhere and everywhere, a bad thing," the WSJ instead used this event to attack government spending in all forms and reinforce calls for austerity. From the editorial:
The Keynesians are now using a false choice between "austerity" and growth to justify more of the government spending they think drives economic prosperity. The brawl over Reinhart-Rogoff is thus less a serious economic debate than it is a political exercise to turn more of the private economy over to government hands.
After five years of trying, we should know this doesn't work. The real way to promote a stronger economy is more austerity and reform in government, and fewer restraints on private investment and risk taking.
Arriving at such a conclusion requires not only obscuring the importance of the Reinhart-Rogoff debt threshold and its importance in pushing global austerity measures, but also ignoring a few key economic realities.
First, the editorial uncritically dismisses the impact of previous economic stimulus in order to bring into question any future government spending:
[Former White House economist Larry] Summers says governments should borrow more now at near-zero interest rates to invest in future growth. But this is what we were told in 2009-2010, when Mr. Summers was in the White House, and the $830 billion stimulus was used to finance not primarily roads or bridges but more unionized teachers, higher transfer payments, and green-energy projects that have since failed. Why will it be different this time?
The WSJ fails to note that the economic stimulus that was enacted in 2009 is widely regarded as a success. According to a WSJ forecasting survey conducted in 2010, 70 percent of economists agree that the stimulus helped the economy, and a May 2012 Congressional Budget Office report noted that it created between 900,000 and 4.7 million full-time-equivalent jobs in 2010 and between 600,000 and 3.6 million in 2011.
Second, and perhaps more notably, the editorial completely ignores the mounting evidence that too little government spending is already hurting the U.S. economy. When individual contributors to GDP growth are isolated, it becomes clear that in the majority of recent quarters, cuts in government spending have pulled down overall economic growth. In fact, the negative contribution of too little government spending has compromised growth even in the face of strong private contributions.
And while editorial board member Stephen Moore may feel that recently enacted across-the-board spending cuts have helped economic growth, economists and even Fox News personalities recognize that they have and will continue to negatively impact GDP growth.
WSJ's call for ever elusive "pro-growth" spending cuts stands in stark contrast to observations made by former pro-austerity advocates. The International Monetary Fund, which previously called for austerity measures throughout Europe, recently noted that fiscal tightening has failed to deliver a reduction in debt due to declines in output. Even John Makin of the conservative American Enterprise Institute now claims that the U.S. has cut federal spending enough to substantially reduce the debt-to-GDP ratio.
Fox News glossed over an important aspect in its reporting on lower than expected GDP growth -- the government contribution to GDP has been negative in the majority of recent reports.
Following the April 26 release of first quarter GDP growth estimates, Fox Business anchor Stuart Varney dismissed the 2.5 percent increase as "not good numbers," claiming that the increase was not indicative of a robust recovery. From Fox News' America's Newsroom:
Varney provided a laundry list of reasons why GDP growth has failed to live up to expectations, including recent federal and state tax increases and, notably, cuts from sequestration - a reversal from previous right-wing assertions that sequestration was too small to harm the economy. Varney failed to explain, however, that too little government spending has been holding back economic growth, as indicated by many of quarterly reports from the past two years.
The Bureau of Economic Analysis provides data on individual contributions to GDP, including government spending's contribution. When the government's contribution to GDP growth is separated from total growth, it becomes apparent that it has been a drag on the economy for much of the past two years.
In the previous 13 quarters, government spending has only added to GDP growth twice - once in the second quarter of 2010, and again in the third quarter of 2012.
This observation has been recognized by others, causing The Washington Post's Ezra Klein to boldly state that "government is hurting the economy - by spending too little." Of course, any recognition of this fact from Fox News would require the network to abandon its longtime stance that increased government spending can only hurt the economy.