Conservative author Niall Ferguson used discredited research to overstate the negative impact of regulations on the economy.
In an op-ed for The Wall Street Journal titled "The Regulated States of America," Ferguson, a Daily Beast contributor, claimed that the increase of regulations is holding back economic growth.
Ferguson's argument hinges upon the promotion of statistics compiled by the oil and pharmaceutical industry funded Competitive Enterprise Institute's (CEI) annual report on the cost of regulations. According to Ferguson, the report shows:
Excluding blank pages, the 2012 Federal Register - the official directory of regulation - today runs to 78,961 pages. Back in 1986 it was 44,812 pages. In 1936 it was just 2,620.
The cost of all this, [CEI's Cyde Wayne] Crews estimates, is $1.8 trillion annual - that's on top of the federal government's $3.5 trillion in outlays, so it is equivalent to an invisible 65% surcharge on your federal taxes, or nearly 12% of GDP.
The research that Ferguson cites, however, is inherently misleading and has been criticized by experts.
The way in which CEI tallies the overall burden of regulations -- counting the number of pages in the Federal Register -- is more focused on shock value than sound analysis. In an email correspondence with Media Matters, James Goodwin, a policy analyst at the Center for Progressive Reform, noted that CEI's focus on the pages in the Federal Register overstates regulatory burden:
Bad case law, "filter failure," and the explosion of analytical requirements have more to do with those numbers than do some alleged "overreaching and unaccountable bureaucracy."
Furthermore, Ferguson, like the CEI report, completely ignores any potential benefits that regulations contribute to the economy. According to the Office of Management and Budget (OMB), which calculates the costs and benefits of regulations, over the past 10 years major rules have provided a net positive benefit to the economy.
Ferguson's focus on the CEI report ultimately leads him to "wonder if all this could have anything to do with the fact that we still have nearly 12 million people out of work," a conclusion that is in direct contrast to economic evidence. Many economists have consistently cited lack of demand in the economy as the main contributor to slow growth - demand that is held back by reduced government spending.
Indeed, independent surveys support this position. According to an Economic Policy Institute (EPI) analysis, during the Obama presidency, businesses have reported poor sales as the single most important problem facing their business, while a smaller percentage of businesses named regulations as their most important issue. EPI's results are confirmed by surveys that find lack of customer demand to be the main hindrance to business growth and employment.
Fox News contradicted a wealth of economic evidence to claim that a near five-year low in weekly jobless claims indicates that the economy has entered a "new normal."
Following the release of the Bureau of Labor Statistics' report on initial weekly jobless claims, which showed the number falling by 12,000 to 334,000, Fox Business host Stuart Varney claimed that while there was a significant drop in those filing for unemployment benefits, the number was still "relatively high." From Fox News' America's Newsroom:
After co-host Martha MacCallum correctly noted that the number of weekly jobless claims neared a five-year low, Varney insisted that the number was too high and that it indicated the economy is entering a "new normal" of sluggish economic growth.
But Varney's assertions about weekly claims don't match the data. Since 1967 -- the earliest data available -- initial jobless claims have averaged about 363 thousand per week. This week's number is about 30 thousand lower than the historical average - hardly a "relatively high" figure.
The suggestion that this week's numbers show signs of a "new normal" also doesn't stand up to scrutiny. Since peaking in 2009, weekly jobless claims have maintained a consistent downward trend, and the current numbers mirror those experienced in previous decades.
According to a Reuters report, the drop in jobless claims experienced in recent weeks signals a slowdown in layoffs:
Many economists believe growing confidence in America's economic recovery has led U.S. employers to exit a long cycle of elevated layoffs.
The continued insistence that the economy is entering a "new normal" is particularly strange given that in recent weeks, there have been signs that the economy is slowly improving, ranging from a surge in housing prices to a five-year high in consumer confidence.
While economic gains have not been rapid in recent years, Varney and MacCallum failed to note that many economists have pointed to deep and unnecessary spending cuts as holding back growth. Indeed, reductions in government spending have reduced potential GDP growth, and public sector job cuts are holding back labor market gains, a deviation from previous recoveries.
While the five largest network and cable Sunday shows underreported economic developments in the past month, MSNBC's Melissa Harris-Perry provided ample discussion of the economy.
A Media Matters analysis of Sunday show coverage from May 12 to June 9 found that ABC, CBS, CNN, FOX and NBC devoted less than 36 total minutes to the economy. This lapse in coverage occurred despite multiple economic developments emerging over that period.
Of the Sunday shows analyzed, MSNBC's Melissa Harris-Perry stood out for its economic coverage. In five weeks, the show dedicated almost three hours to discussion on the economy -- by far the most coverage of the seven shows Media Matters analyzed. Melissa Harris-Perry was almost five times more likely to discuss the economy than CNN and network Sunday shows combined.
The show's discussion of the economy was diverse, touching on a range of topics including poverty in America, food insecurity, student loan reform, and the recent rebound of the housing market.
The show's ample and diverse economic coverage comes at a critical time -- according to a May 7 Gallup poll, a majority of Americans view an array of economic issues as high priorities.
In recent weeks, Sunday morning network news programs have virtually ignored economic issues, instead devoting hours of coverage to the September attacks on U.S. diplomatic facilities in Benghazi, Libya; improper targeting of conservative nonprofits by the Internal Revenue Service; controversial federal investigations of national security leaks; and new revelations about National Security Agency surveillance programs.
Cable and network news outlets barely covered the announcement that General Motors will return to the Standard & Poor's 500, a landmark achievement for the company that was booted from the index after filing for bankruptcy four years ago.
Is the media's heavy focus on Washington "scandals" pushing positive economic developments to the wayside?
CNN correspondent Christine Romans observed that focus on Washington "scandals" may be knocking positive economic news off the agenda, claiming "now the economy is slowly healing, all the conversation is about controversies though."
Romans isn't alone in her observation. On the May 29 edition of MSNBC Live, Talking Points Memo's Igor Bobic highlighted the fact that "scandal-mania" in Washington is taking all the oxygen out of positive economic developments, prompting host Thomas Roberts to note, "There really is this obsession we have in D.C. right now talking about the IRS or Benghazi or even the DOJ scandal, but we're not talking about where we're moving economically as a country, but it is in a positive direction."
Indeed, media has been largely silent on economic gains, most recently demonstrated by an underreporting of the housing price surge.
On May 28, Standard & Poor's released its Case-Shiller index of home prices. The report showed that in March, housing prices rose at an annual rate above 10 percent, posting the largest gain in the housing market since April 2006.
This positive news, however, did not garner any significant attention from cable news networks. According to a Media Matters analysis, in the day following the release of the Case-Shiller report, Fox News, MSNBC, and CNN spent a total of nine minutes and 32 seconds discussing the surge in housing prices.
Housing prices in March rose at the highest annual level since April 2006, a sign of positive economic development that went largely underreported by cable news networks.
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.