Fox News host Neil Cavuto forcefully accused his guest, Democratic strategist Chris Hahn, of lying when Hahn said of the Bush tax cuts, “For every dollar you spend in tax cuts, you get back 30 cents to the economy.” In fact, the figure Hahn cited is both accurate and well documented.
Cavuto shouted down guest for reporting figure confirmed by independent economists
Cavuto claimed Hahn's numbers are a “little fib.” During the November 19 edition of Fox News' Your World with Neil Cavuto, Democratic strategist Chris Hahn said of the Bush tax cuts for upper-earners: “The tax cuts cost us $700 billion and for every dollar you spend in tax cuts, you get back 30 cents to the economy.” Cavuto responded by accusing Hahn of fabricating the statistic, calling Hahn's figure, “the most bogus number I've ever heard.” Cavuto then repeatedly denied that the Congressional Budget Office had come to that same conclusion:
CAVUTO: Chris, love you dearly, but you're inconsistent here. You said the tax cuts shouldn't happen because we can't pay for them and they're going to worsen the deficit. Now you're saying the jobless benefits are OK, even if they worsen the deficit. Which is it?
HAHN: Well, you know, let me put it to you this way: The tax cuts cost us $700 billion and for every dollar you spend in tax cuts, you get back 30 cents to the economy. The unemployment benefits --
CAVUTO: You just made that up, Chris. You just made that up. That --
HAHN: No, I did not.
CAVUTO: That is the most bogus number I've ever heard.
HAHN: The Congressional Budget Office made that up --
CAVUTO: No, they didn't.
HAHN: -- not me.
CAVUTO: No, they didn't.
HAHN: And these are numbers that have been around for a very long time.
CAVUTO: No, they didn't.
In fact, Hahn's statement is backed up by CBO analysis and Mark Zandi
Hahn's numbers correspond to the findings of a CBO report. In January 2010, the nonpartisan CBO released a report estimating the economic effects of several policy options, including extending the Bush tax cuts for one year. CBO found that the tax cuts would boost GDP by between 10 cents and 40 cents per dollar spent, providing the smallest amount of stimulus of all the policy options considered.
From the report:
CBO: Allowing Bush tax cuts for the top brackets to expire is “more cost-effective” than extending all of the cuts. In the report, CBO stated that extending most of the Bush tax cuts for one year but allowing the cuts for the top brackets to expire would “cost less than would deferring all of the scheduled tax increases, and it would be more cost-effective because the higher-income households that would be excluded would probably save a larger fraction of their increase in after-tax income.” However, CBO said the difference “would be small.” From the CBO report:
CBO estimates that a two-year AMT patch and one-year deferral of the EGTRRA and JGTRRA tax increases would raise output cumulatively between 2010 and 2015 by $0.10 to $0.40 per dollar of total budgetary cost. CBO also estimates that the policy would add 1 to 3 cumulative years of full-time-equivalent employment in 2010 and 2011 per million dollars of total budgetary cost. Although the effects of this policy per dollar of budgetary cost are smaller than the effects of extending ARRA's tax credits, the dollar amount of tax cuts under this option is substantially larger, so the total effects on output and employment also would be larger.
One variant on this option is to defer most of the tax increases in EGTRRA and JGTRRA for one year but allow the rate increases for the top brackets to go into effect. This option would cost less than would deferring all of the scheduled tax increases, and it would be more cost-effective because the higher-income households that would be excluded would probably save a larger fraction of their increase in after-tax income. However, the difference relative to the option analyzed here would be small, because much of the remaining tax reduction would still go to higher-income taxpayers--largely because of the changes in the AMT and other income tax changes.
A related option is to permanently eliminate the scheduled tax increases in EGTRRA and JGTRRA. A permanent extension would have a bigger effect on demand in 2011 than would a temporary extension, because households that expected higher after-tax income in subsequent years would spend a larger share of the additional income they receive in 2011. However, a permanent extension would entail large revenue losses after the recovery is over, so its effects on output and employment in the next few years per dollar of total budgetary cost would be much lower than those of the one-year deferral analyzed here.
Economist Mark Zandi also corroborates these numbers. On April 14, 2010, Mark Zandi, the chief economist for Moody's Analytics and a former economic adviser to John McCain's presidential campaign, testified before the Senate Finance Committee on the virtues of extending unemployment insurance. His testimony stated that the “Bang for the Buck” of making the Bush income tax cuts permanent was only $0.32 per dollar spent. Conversely, the “Bang for the Buck” of extending unemployment insurance benefits was $1.61 per dollar spent. From Zandi's testimony:
Cavuto dubiously claimed extending high-end Bush tax cuts would cause businesses to increase hiring
Cavuto: "[S]houldn't businesses be the ones who see their taxes cut so that they can hire these same folks for whom we keep extending their jobless benefits?" During the discussion of the relative merits of extending the Bush tax cuts for high-earners and extending unemployment insurance benefits, Cavuto said:
CAVUTO: Chris, then let's assume you're right. Let's assume you're right. You're not, but you're -- let's assume you are. That these jobless benefits, every time we pay for them we're not worsening the deficit, it's improving. Last time I checked, the deficit is getting worse, far worse. And every time we extend them -- and I'm not callous about this, I think we should do something to help those in hard times --
HAHN: Absolutely, we should.
CAVUTO: -- we got to find a way to pay for it, because your magic elixir here that this is somehow paying for itself and then some, it ain't panning out.
HAHN: Well, you know, it's putting money back into the economy, putting money back into our economy right now where people are actually spending the dollars. Tax cuts, people don't necessarily spend them. That's the problem.
CAVUTO: How do you know? Let them decide what they do.
HAHN: That's why I say we must pay for tax cuts.
CAVUTO: Let businesses decide what they do with it. I mean, shouldn't businesses be the ones who see their taxes cut so that they can hire these same folks for whom we keep extending their jobless benefits?
CBO: "[I]ncreasing the after-tax income of businesses typically does not create much incentive" for them to hire. From the CBO report:
Deferring the scheduled increases in tax rates in 2011 would help some businesses as well as households. In particular, it would keep lower tax rates in place in that year for businesses that do not pay the corporate income tax (the pass-through entities such as sole proprietorships, partnerships, S corporations, and limited liability companies). However, increasing the after-tax income of businesses typically does not create much incentive for them to hire more workers in order to produce more, because production depends principally on their ability to sell their products.
Vast majority of small businesses would not be affected by allowing Bush tax cuts for the wealthiest expire. According to the Tax Policy Center, 2.5 percent of taxpayers who report business income on their individual tax returns would pay higher rates under the Democrats' plan to extend all of the Bush tax cuts except for the top two income tax brackets. The Joint Committee on Taxation similarly stated that “three percent of all taxpayers with net positive income” would see higher taxes under the Democrats plan. Both TPC and JCT added that even among that small percentage, it is not clear how many of those affected are entities that we would consider “small businesses” and how many represent enterprises like law partnerships and real estate investments.
Cavuto's disbelief of expert analysis fits into a pattern of Fox News economic know-nothingism
Fox anchor purported to debunk an accurate claim about the income of small business owners. On Fox News' America's Newsroom, anchor Martha MacCallum disputed Democratic strategist Maria Cardona's assertion that "[n]inety-nine percent of small businesses do not fall into the top one percent of income earners in this country." MacCallum responded that “half of the people who make over $250,000 a year in this country are running a small business.” Not only was Cardona's statement accurate, but MacCallum's seems unverifiable.
Ignoring CBO analysis, Fox has repeatedly claimed that ending Bush tax cuts for wealthy would hurt small businesses. Fox & Friends advanced several dubious claims to suggest that ending the Bush tax cuts for the wealthy would hurt “many small businesses” and hinder job growth. In fact, TPC has stated that only 2.5 percent of taxpayers who report business income on their individual tax returns would pay higher rates, and CBO has stated that extending tax cuts “does not create much incentive ... to hire more workers.”
Despite evidence, Fox denied that aid to the poor is stimulative. Fox News hosts and contributors have dismissed estimates of food stamp programs' stimulative effect on the economy as “some strange multiplier effect study,” “liberal math,” and a “complicated economic multiplier theory.” In fact, economists agree that food stamps are one of “the most effective ways to prime the economy's pump.”
Fox absurdly claimed Reagan and Bush tax cuts caused “gigantic increase in revenues.” Fox News' purported business expert Stuart Varney falsely claimed that tax cuts enacted under Presidents Reagan and George W. Bush caused “a gigantic increase in revenues to the federal treasury, reducing deficits. That's historically accurate.” In fact, virtually no economist believes the evidence supports this notion.
Several Fox figures disputed fact of Obama tax cuts. Varney, as well as Fox News contributors Stephen Moore, Peter Roff, and S.E. Cupp all separately claimed or suggested that President Obama has not cut taxes, when in fact, the Recovery Act contained $288 billion in tax relief for individuals, families, and businesses.