Right-wing media figures have repeatedly criticized Obama administration officials for claiming that the U.S. will default if the debt ceiling is not raised by October 17, instead claiming the U.S. could prioritize payments to bondholders as a way to avoid default. But economists note that the threat of default is real and that the prioritization alternative proposed by Republicans is not a long-term solution.
From the October 3 edition of Fox News' Happening Now:
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From the September 27 edition of Fox News' Your World with Neil Cavuto:
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Fox News' Neil Cavuto trotted out well-worn falsehoods about the successful auto rescue, casting doubt on claims made by Ford CEO Alan Mulally on Cavuto's own show a year earlier.
On September 20, President Obama delivered a speech on the economy at a Ford Motors plant in Liberty, Missouri. During the speech, he noted that while Ford did not accept a bailout in the wake of the financial crisis, if General Motors (GM) and Chrysler had not accepted federal funds, it "would have had a profound impact on Ford."
Discussing the president's speech on Fox News' Your World, host Neil Cavuto was joined by Fox Business contributor Charles Payne and Wall Street Journal editorial board member Stephen Moore. Cavuto criticized the President's remarks about Ford being affected by GM and Chrysler's decision to accept federal funds. Cavuto acknowledged that Obama's remarks were similar to Mulally's, who credited the auto rescue for preserving the industry, but dismissed the statement, asking "how do you know that? It was my question then, it remains my question now."
While Cavuto cast doubt over whether or not Ford would have gone under, the fact that Ford would have been imperiled by the disintegration of the other "Big Three" automakers is not only well-established, Cavuto was told as much by Mr. Mulally himself on an edition of Your World taped one year previously.
During their interview, Mulally stated, "if GM and Chrysler, who were completely bankrupt, went into free fall they could have taken down the industry and the U.S. economy from a recession into a depression." He went on to state that all of the remaining automakers "would have been in real trouble."
In addition to downplaying the necessity of the auto rescue, the panelists hypothesized that private capital could have been raised to shore up teetering automakers. This opinion, voiced by Charles Payne stating, "I honestly believe that the private sector would have stepped up and funded General Motors the way that bankruptcies have been funded in the past," also does not comport with the facts.
When the auto rescues were first designed in late-2008 the financial industry was in the midst of a free fall of its own, which Fox has also recently downplayed. There was very little private capital available in the United States for any large-scale bankruptcy and American automakers, unlike the subsidiaries of Toyota, Honda, and other auto transplants, could not draw credit from foreign governments or headquarters.
The auto bailouts, which were initially extremely unpopular, are now widely lauded as successful government responses to the myriad crises facing the economy in 2008 and 2009. Despite Fox's attempts to undermine the administration's handling of the auto industry, the rescues are popular in areas heavily reliant on the auto-industry and often credited for swinging key states toward Obama in the 2012 Election.
On Fox News, Wall Street Journal editorial board member Stephen Moore defended the GOP plan to cut billions from the food stamp program by falsely claiming the cuts wouldn't hurt children, that the program suffers from "immense" fraud, and that millionaires could qualify for benefits. But studies show fraud is extremely rare and millions of families will be negatively affected by the cuts.
On the September 20 edition of Fox's America's Newsroom, Moore downplayed the proposed $40 billion cuts to the program, claiming the benefits weren't "slashed" but "trimmed" and justified the move by saying there is an "immense amount of fraud" in the program that "you could live in a million-dollar mansion and still get food stamps," and that "families with children would not be affected by any of this":
Contrary to Moore's claim that children would not be impacted by the cuts, the Center on Budget and Policy Priorities found that the proposal would leave 3.8 million people without benefits, many of whom are in low-income families. The bill would also limit schools meals for hundreds of thousands of children:
- 1.7 million unemployed, childless adults in 2014 who live in areas of high unemployment -- a group that has average income of only 22 percent of the poverty line (about $2,500 a year for a single individual) and for whom SNAP is, in most cases, the only government assistance they receive (this number will average 1 million a year over the coming decade);
- 2.1 million people in 2014, mostly low-income working families and low-income seniors, who have gross incomes or assets modestly above the federal SNAP limits but disposable income -- the income that a family actually has available to spend on food and other needs -- below the poverty line in most cases often because of high rent or child care costs. (This number will average 1.8 million a year over the coming decade.) In addition, 210,000 children in these families would also lose free school meals;
- Other poor, unemployed parents who want to work but cannot find a job or an opening in a training program -- along with their children, other than infants.
CBPP included a table explaining how American households would be hurt by the cuts:
From the September 1 edition of Fox News' America's News HQ:
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The Wall Street Journal's Stephen Moore attacked striking fast-food workers' demands to increase the minimum wage by falsely claiming that such a raise would result in less teenage employment and more workplace automation.
Moore, a senior economics writer for the Journal, appeared on the August 29 edition of Fox News' Your World with Neil Cavuto to discuss the fast-food protests that are underway across the country. Moore claimed that strikers' demands, if met, would result in "a lot less teenagers hired for those kinds of jobs" and fast-food restaurants deciding to "substitute workers with machines and automated things":
Moore's claim that a higher minimum wage would negatively affect teenage employment is baseless. The Huffington Post quoted University of California, Berkeley economist Sylvia Allegretto, who was the lead author of a 2011 study on minimum wage and teen employment, explaining that those who "fight such [minimum wage] hikes, arguing that higher wages discourage growth, particularly in down economies" are not supported by her research:
The Wall Street Journal editorial board's Stephen Moore falsely claimed that the drastic budget cuts known as sequestration have had "none of the anticipated negative consequences," when in reality economists have explained that the cuts have had devastating effects on economic growth, jobs, and programs for low-income Americans.
In an August 11 op-ed, Moore called the automatic budget cuts enacted March 1 -- which were designed to be so severe they would force Congress to adopt a more balanced approach to spending reduction -- an "underappreciated success" because they had resulted in "amazing progress" in reducing the deficit. Moore applauded the further deficit reduction that would come from "any normal acceleration of economic growth," and concluded by claiming that cuts to "military, education, transportation and other discretionary programs have also been an underappreciated success, with none of the anticipated negative consequences."
But economists were predicting major economic consequences, as The American Prospect noted on March 6:
Private forecasting firm Macroeconomic Advisers estimates "sequestration would cost roughly 700,000 jobs (including reductions in armed forces)," while Moody's Analytics predicts a hit to real gross domestic product of 0.5 percent, just a hair below Fed Chairman Ben Bernanke's prediction 0.6 percent fiscal drag.
And as predicted, the cuts are harming the economy. Sequestration is having a negative effect on GDP growth and causing job losses. According to a new analysis by the non-partisan Congressional Budget Office, canceling the sequestration cuts would raise GDP by 0.7 percent and increase employment by 900,000 new jobs by 2014, and would lead to greater output and higher employment in the next few years.
Furthermore, tens of thousands of individuals have already seen federal unemployment benefits cut by as much as 10.7 percent, Meals On Wheels programs have had to cut hundreds of meals from their regular service to low-income seniors, and Head Start programs have had to cancel sessions for at-risk children. According to the Department of Education, sequestration further cut $60 million from federal funding for schools that educate children who live on Indian reservations, military bases, or in low-income housing. In some cases, districts will be forced to close schools and reduce the number of courses offered.
Economist Jared Bernstein, former economic adviser to Vice President Biden, has tracked and documented the drastic effects that the cuts are having on everything from Medicare-funded cancer treatments and public safety, to scientific and medical research. Finally, Secretary of Defense Chuck Hagel announced on August 6 that furloughs to civilian defense workers caused by sequestration have created "a military whose readiness remains seriously degraded."
From the August 12 edition of Fox News' America's Newsroom:
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The Wall Street Journal's Steve Moore falsely claimed that there's adequate funding for infrastructure, ignoring sharp declines in infrastructure and construction spending.
On Fox News' America's Newsroom, guest host Rick Folbaum interviewed the Wall Street Journal's senior economics writer Steve Moore on the state of infrastructure spending and regulation. During the segment, Folbaum acknowledged successful efforts by Republican lawmakers to block funding for "highways, rail, transit, airports" and questioned whether current spending levels, as opposed to regulation alone, might be a problem for national infrastructure projects.
Moore ignored the claim of Republican obstruction altogether, dismissing "this idea that there's not enough money for infrastructure," and quickly returning to the question of regulation:
Moore's dismissal of infrastructure underfunding, however, ignores a number of economic realities.
A new review of the infamous Reinhart-Rogoff debt-to-GDP study further undermines the right-wing claim that high sovereign debt leads to low economic growth.
In their paper, "Growth in a Time of Debt," Harvard economists Carmen Reinhart and Kenneth Rogoff supported the notion that high levels of sovereign debt carry disastrous consequences -- particularly when debt reaches 90 percent of GDP -- that was promoted throughout the media.
Even though that premise was thoroughly debunked in April, members of the right-wing media have clung to the notion that while the 90 percent debt-to-GDP threshold in the Reinhart-Rogoff study was inaccurate, its conclusion that high debt slows economic growth remained unchanged.
When faced with the discredited research, Wall Street Journal editorial board member Stephen Moore claimed as debt mounts, "the negative effects of that become more pronounced." Fox Business' Lou Dobbs dismissed the critique of the Reinhart-Rogoff study as focusing too heavily on "a small mistake." Douglas Holtz-Eakin of the American Action Forum claimed that "the simple fact that debt ultimately hinders growth is unchanged." And editorials in both The Washington Post and The Wall Street Journal responded to the critique of the study by renewing calls for debt reduction in fear of negative economic outcomes.
New research further undermines this right-wing narrative. University of Michigan economist Miles Kimball and undergraduate researcher Yichuan Wang, examining the Reinhart-Rogoff data, conclude that high levels of debt have no link to slow, much less reverse, long term economic growth:
Based on economic theory, it would be surprising indeed if high levels of national debt didn't have at least some slow, corrosive negative effect on economic growth. And we still worry about the effects of debt. But the two of us could not find even a shred of evidence in the Reinhart and Rogoff data for a negative effect of government debt on growth.
Kimball and Wang's findings provide yet another blow to right-wing media's academic defense of austerity.
The Wall Street Journal's Stephen Moore cited figures that independent analysts have called misleading to hype Florida Gov. Rick Scott's claims about his administration's job creation record.
In a post on the Journal's Political Diary blog titled "The Florida Phenom," Moore wrote that Scott's job creation record may "save him from defeat" in the upcoming gubernatorial race. Moore touted Scott's claim that his administration had already completed half his campaign promise to create 700,000 jobs by 2017, concluding "The thing most likely to save him from defeat is, as Joe Biden once put it, that three letter word: J-O-B-S":
Now the needles are all pointed in a northward direction, and the man in charge during the turnaround is Republican Gov. Rick Scott. He promised 700,000 new jobs in seven years, and in an interview last weekend he said, "we're half-way there." The state has seen employment rise by just over 350,000 since 2010. A new analysis by the nonpartisan Florida Economic Estimating Conference is expecting 900,000 new jobs by 2018.
Sure, there's a national recovery, but the unemployment rate in Florida "has fallen almost twice as much as the national average," the governor noted. Mr. Scott credits pro-growth policies. "We cut taxes 24 times," he said, including business and property taxes by $200 per homeowner. The budget deficit has been tamed. The housing oversupply has been cut by one-third.
Despite Moore's endorsement, Scott's job creation claims have been criticized by independent analysts. PolitiFact Florida pointed out that Scott's campaign promise was actually to create 700,000 jobs on top of the 1 million the state was already expected to add - in essence promising to create 1.7 million jobs by 2017:
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 covered Democratic criticism of harmful and unnecessary spending cuts as a purely political maneuver, without acknowledging that those criticisms are reflected in actual economic data, and echoed by economists and even by House GOP leadership.
On the April 29 edition of America's Newsroom, host Bill Hemmer set up an interview with Wall Street Journal editorial board member Stephen Moore by suggesting that only Democrats argue that America is not in a "debt crisis," and hinted that the raw total of U.S. debt belies that claim. Moore proceeded to divert the conversation far away from economic reality, first citing a Fox News poll on public concerns about the debt, then accusing anti-austerity Democrats of merely seeking to protect "the favored programs that they care about," before finally misleading viewers on the relationship between economic growth and spending cuts. From America's Newsroom:
There are a few layers of deception to unpack here:
These sorts of facts in the U.S., and related ones from other economies, are threatening to upend the entire austerity movement, as Irwin observes. But while that debate proceeds and evolves elsewhere, Fox News continues to offer conservatives a venue to avoid reconciling ideology and fact.
Fox News figures accused the Obama administration of trying to "maximize" sequestration pain on the American people through the Federal Aviation Administration's furloughs of air traffic controllers, despite the fact that federal agencies are required by law to cut their programs evenly.
On April 22, the automatic spending cuts known as sequestration forced the F.A.A. to begin furloughs for air traffic controllers. The unpaid leaves delayed more than 1,200 flights that day, according to the F.A.A.
Although the legislation provides little to no room for agencies to decide how to implement the budget cuts, Fox figures used the furloughs to argue that the administration is trying to inflict maximum pain from sequestration. On his radio show, Fox News host Sean Hannity claimed that administration is furloughing air traffic controllers "because they want to maximize the amount of pain that you the American people are feeling."
In fact, as a New York Times editorial explained, "the sequester law is clear in requiring the F.A.A. and most other agencies to cut their programs by an even amount." This provision prevents agencies from deciding how and where to implement the budget cuts:
As it happens, the sequester law is clear in requiring the F.A.A. and most other agencies to cut their programs by an even amount. That law was foisted on the public after Republicans demanded spending cuts in exchange for raising the debt ceiling in 2011. Since then, the party has rejected every offer to replace the sequester with a more sensible mix of cuts and revenue increases.
As Forbes explained, the F.A.A. and other federal agencies "have little or no discretion to target spending cuts":
The across-the-board nature of the spending cuts has been well-noted. Federal agencies have little or no discretion to target spending cuts by, say, getting rid of obsolete or poorly-run programs. They have to cut them all, the good ones and the bad ones alike. They can't lay off poorly performing workers, they must furlough everyone.
But the fact that the legislation prevents the Obama administration from targeting the cuts has not prevented Fox figures from parroting Hannity's claim.