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.
The research consistently cited by media figures to support cutting government spending has recently been invalidated, raising questions about how mainstream coverage of economic policy promoted incorrect data.
In January 2010, economists Carmen Reinhart and Ken Rogoff released a study that suggested when countries reach debt levels of 90 percent relative to GDP, economic growth would be compromised. Conservatives in politics and media alike repeatedly cited the figure in discussions about the economy.
A study released on April 16, however, found that the conclusions reached by Reinhart and Rogoff were based on data that was riddled with errors. Reinhart and Rogoff's response to the critique -- in which they maintain they never implied that rising debt caused lower growth, just that the two were associated -- shows that media's handling of the figure was wrong all along.
These new developments show that media consistently used an apparently incorrect figure for the past few years to call for austerity measures. Here's a look back at how major cable networks cited the figure in its coverage of the budget and economic policy:
Video by Alan Pyke.
Fox News buried Louisiana Governor Bobby Jindal's (R) decision to back down on his plan to eliminate the state's income tax, praising the now-dead proposal just days after Jindal acknowledged Louisianans reject the scheme.
While the network has not covered* Jindal's April 8 speech rescinding the proposal, Fox News' America's Newsroom dedicated a segment on April 10 to the idea of repealing Louisiana's income tax. Before introducing Stephen Moore of the Wall Street Journal editorial board, guest host Gregg Jarrett framed the topic, saying: "Creating jobs and helping put more money in your wallet--the state of Louisiana wants to scrap its state income taxes." As Jarrett continued, Fox displayed a graphical summary of the plan Jindal withdrew two days earlier:
In his speech to state lawmakers, Jindal explained his decision to withdraw that plan as a recognition of fierce opposition to it. From The Times-Picayune:
The speech is a major concession that Jindal's proposal, a complicated plan contained in a total of 11 bills, is unpopular both within and outside the Legislature. The proposal has come under increasingly heavy fire in recent weeks as business groups and advocates for the poor have assailed its effects and think tanks have questioned whether the math in the proposal adds up.
Jindal acknowledges the strong opposition to the proposal in his prepared remarks.
"I realize that some of you think I haven't been listening. But you'll be surprised to learn I have been," according to the text of the speech. "And here is what I've heard from you and from the people of Louisiana -- yes, we do want to get rid of the income tax, but governor you're moving too fast and we aren't sure that your plan is the best way to do it.
"So I've thought about that. And it certainly wasn't the reaction I was hoping to hear. And now I'm going to give you my response and it's not the response people are accustomed to hearing from politicians.
"Here is my response: 'Ok, I hear you,' " according to the text of the speech. "So I am going to park my tax plan."
The governor went on to request that lawmakers write an income tax repeal bill of their own, and his administration has reportedly signaled interest in repealing the income tax even without any accompanying plan to make up the lost revenue.
Numerous major news outlets reported on Jindal's speech as both a setback for his political career and a victory for the poor. MaddowBlog's Steve Benen noticed this is the second such rebuke Jindal's suffered so far this year, after his plan to end hospice care for Medicaid beneficiaries went down in the face of stiff criticism. But on Fox, Jarrett and Moore didn't just ignore Jindal's reversal. They praised Jindal's stillborn plan as a near-heroic effort to boost economic growth in his state. "The real story here is that Bobby Jindal is trying to take on the special interests in Louisiana, trying to make the case that Louisiana could be a really high-flying state if they could get rid of their income tax," Moore said.
Beyond their attempt to recast Jindal's efforts in a more positive light, Moore and Jarrett continued Fox's pattern of misrepresenting the relationship between state income taxes and growth. Fox had previously ignored the regressive nature of Jindal's plan, and the April 10 segment featured the false claim that eliminating income taxes boosts state economic growth. Media Matters has previously shown Moore's work on that subject to be dishonest, and as the Center on Budget and Policy Priorities has shown, cuts in state income taxes are correlated with weaker economic growth except in oil-rich states. Furthermore, the Institute on Taxation and Economic Policy reported in February that the nine states with no income tax have shown substantially weaker economic growth than those with high income taxes.
*A review of transcripts found that no Fox News Channel shows covered the Louisiana governor's speech from April 8. Fox Business's Stuart Varney interviewed Grover Norquist of Americans for Tax Reform about Jindal's reversal on the April 9 edition of Varney & Co.
On the April 5th edition of Real Time with Bill Maher, science education activist Zack Kopplin confronted The Wall Street Journal's Stephen Moore over myths about science funding, pointing out that Moore, who questioned the need for funding research on "snail mating habits," is "not a scientist":
As it turns out, the reason actual scientists are conducting this type of research is because snails carry parasitic worms that kill children:
The Wall Street Journal has repeatedly supported the conservative call for states to cut income taxes in order to foster economic growth, ignoring a large body of evidence that shows cutting or eliminating income taxes is economically damaging.
In recent months, The Wall Street Journal has published opinion pieces in support of Republican governors' push to reduce or eliminate state income taxes.
A January 30 editorial claimed that eliminating state incomes taxes "makes sense," arguing that it would spur economic growth and bolster state revenues. Economist Art Laffer and Wall Street Journal editorial board member Stephen Moore reiterated that thinking in a March 28 opinion piece titled "The Red-State Path to Prosperity," which argues for - among other measures - "pro-growth tax reform" that hinges upon a reduced reliance on income taxes.
Both pieces ostensibly rely on research conducted by the corporate-funded, right-wing American Legislative Exchange Council (ALEC). Both Laffer and Moore have published research jointly with ALEC, and the January 30 editorial directly references Laffer's ALEC research. According to the Center on Budget and Policy Priorities (CBPP), ALEC's studies on state-based tax reform are heavily biased toward states with low taxes and often do not comport with broader research findings:
ALEC's studies and reports claim that its agenda would boost economic growth and create jobs, but they are disconnected from a wide body of peer-reviewed academic research on public finance.
In addition, the preponderance of mainstream research refutes core elements of ALEC's argument, showing that state tax cuts or lower state taxes generally do not boost the economy, state tax cuts do not pay for themselves in the form of higher economic growth that generates more revenues, progressive taxes and corporate taxes do not inherently damage the economy, and taxes generally do not cause people to flee a state. (emphasis added)
Indeed, a recent review conducted by CBPP reinforces the lack of validity in ALEC and WSJ's claims -- of the eight peer-reviewed studies on the effect of state-level personal income taxes on the economy since 2000, six have found insignificant effects, and one had internally inconsistent results. CBPP also found that in states that cut taxes the most in the 1990s, average annual job growth fell far below the national average in the following economic cycle.
Media figures have repeatedly forwarded the notion that the United States is currently facing a debt crisis. However, leaders of both parties agree there is no immediate crisis, and by focusing attention too heavily on deficit and debt reduction, the media distract from the more imminent problem of growth and jobs.
Throughout news coverage of recent budget negotiations, media figures have consistently framed discussions around the notion that the country faces a debt crisis, an assertion that is often presented uncritically and accepted as an indisputable fact. Since discussions are predicated on the assumption that a debt crisis exists, ensuing analysis of budget proposals is often solely focused on how far they go in reducing short term deficits and debt.
While media are convinced that a debt crisis exists, leaders of both parties have made explicit statements to the contrary. In a March 12 interview with ABC's George Stephanopoulos, President Obama claimed that "we don't have an immediate crisis in terms of debt," a statement that was immediately criticized by conservative media. When asked if he agreed with Obama's statement regarding debt on the March 17 edition of ABC's This Week, House Speaker John Boehner (R-OH) conceded that there is no immediate crisis. Rep. Paul Ryan (R-WI) made a similar admission on CBS' Face the Nation, saying "we do not have a debt crisis right now."
Furthermore, the media's focus on a "debt crisis" has necessarily steered the debate about budgets toward how the parties will sufficiently address short term deficits. Economists, meanwhile, have repeatedly argued that undue focus on deficits and debt distracts from the more pressing need for economic growth and reduced unemployment.
The bipartisan admission that there is no immediate debt crisis provides media with an opportunity to reframe their budget negotiations coverage around economic growth.
Video by Alan Pyke.
Right-wing media outlets have advanced a number of myths regarding automatic across-the-board spending cuts -- commonly called the sequester -- in order to hide the facts behind an inherently harmful economic policy.
Conservative media voices have insisted that an increase of the federal minimum hourly wage from $7.25 to $9 would harm the economy. However, a wealth of economic evidence disputes the claims that minimum wage hikes are job killers, that the minimum wage is already high, and that it only applies to jobs held by relatively young workers.
Right-wing media figures have responded to immigration reform by invoking the oft-repeated conservative argument that legalizing immigrants will enlarge the "welfare state." In fact, the announced immigration reform proposal would prevent newly legalized immigrants from receiving federal benefits for an extended period of time; moreover, immigrants in general are less likely to receive welfare benefits.
Media coverage of the debt ceiling frequently claims that raising the limit without simultaneous spending cuts would give President Obama a "blank check," repeating a pattern of promoting this false narrative -- or failing to correct it -- that occurred during the unprecedented brinkmanship of 2011. The phrase implies that the debt ceiling governs additional spending desired by the White House, when in fact it is a restriction on the executive branch's ability to borrow money to pay for spending measures already enacted by Congress.
Fox News promoted a proposal by Louisiana Gov. Bobby Jindal to eliminate the state income tax and increase sales tax by a corresponding amount, saying that with such a plan, "everybody wins." In fact, the plan would seriously harm middle and lower income tax voters while providing little or no benefit to the economy.
Fox News host Neil Cavuto and Fox guest Stephen Moore agreed that President Obama is wrong to suggest that federal spending growth is driven by health care costs, when in fact Obama is right. Health care spending is the only category of federal spending projected to grow substantially over the next two decades, and government health insurance is actually more efficient than private sector insurance. And the president's Patient Protection and Affordable Care Act contains provisions that aims to contain and reduce national health care costs.
CNN guest and Wall Street Journal editorial board member Stephen Moore misrepresented House Minority Leader Nancy Pelosi's comments on taxes, falsely claiming that she said "we've got to tax the middle class." In fact, Pelosi said that while tax increases for upper-income Americans are "not off the table," she does not want to bring in more revenue "at the expense of the middle class."
CNN's Erin Burnett Outfront played a clip of Pelosi appearing Sunday on CBS' Face the Nation and saying that tax increases for upper-income earners are "not off the table" in future spending negotiations. Moore then claimed that "we've only had this tax increase on the rich for what, 72 hours, and already people like Nancy Pelosi are saying, well, we've got to tax the middle class."
However, the full context of Pelosi's remarks reveal that Pelosi, during her appearance on Face the Nation, clearly stated that she is not interested in raising taxes on the middle class:
BOB SCHIEFFER (host): People who are listening to you this morning are going to say she's talking about more taxes, she's talking about bringing in more, in one way or another, by increasing taxes.
PELOSI: One thing I'm not talking about is bringing in more at the expense of the middle class, at the expense of the middle class. That is not something -- and that was what we were fighting all along in this because, to the extent that you diminished the tax cut, the tax change at the high end, you would have to claw down into the middle class to get more revenue.
SCHIEFFER: Are you then saying to the upper classes, get ready, you're going to have to pay some more, this is not the end of it?
PELOSI: Well, I'm saying that's not off the table.
SCHIEFFER: That's not off the table?
PELOSI: That's not off the table. But not in terms of tax rates but in terms of other considerations.
SCHIEFFER: You're talking about deductions and other things.
PELOSI: And the rest.
SCHIEFFER: What would be some of the things that you think, on the upper-income people, what kind of deductions are you talking about?
PELOSI: As I said, I'm not going into particulars.
SCHIEFFER: You're not going into --
PELOSI: Put it all -- put it all on the table and see what is working.
She concluded that any further tax increases should "not ... reach down to the middle class."