Journalistic Malpractice at the New York Times?

I don’t like Joe Biden’s economic policies, though that’s hardly a surprise since I haven’t liked the policies of any president this century (I’ve referred to Bush, Obama, and Trump as the “three stooges of big government“).

Other people have a more sympathetic perspective on the President’s performance.

David Leonhardt of the New York Times wrote an analysis of Joe Biden’s economic record and he lists two failures.

1. Inflation
2. Failure to get approval of the so-called Build Back Better plan

And he lists three supposed successes.

1. Economic recovery
2. Infrastructure and tech subsidies
3. Green subsidies

I disagree with much of Leonhardt’s analysis. For instance, his section on inflation does not mention the Federal Reserve. That’s sort of like writing about World War II and not mentioning Germany (other journalists have made the same mistake).

Moreover, I also think the failure of Build Back Better was good for the nation. And also good for Biden’s political prospects since it is less likely the economy will be sluggish as we approach the 2024 election.

Switching to the so-called successes, I don’t think the passage of the boondoggle infrastructure bill will have a positive effect. The same is true for the handouts to the semiconductor industry or the green lobby.

But I want to focus mostly on what Leonhardt wrote about the economy.

His main contention is that Biden is a success because the unemployment rate is low. Yet that overlooks the fact that labor force participation is weak, so I don’t view that as a Biden “success” (and I have been raising this concern since way before Biden took office).

But a far bigger problem with Leonhardt’s analysis about the economy is that he wrote nothing about living standards. I don’t know if that was a deliberate omission, but almost everything his readers should have learned is captured by this chart from the Department of Labor.

In the interest of full disclosure, I highlighted the “0.0” line in orange because I wanted to emphasize that inflation-adjusted worker compensation has been negative for the entirety of the Biden presidency.

By the way, it would be perfectly reasonable for a Biden defender to point out that worker compensation was already dropping when he took office. And it also would be reasonable for a Biden defender (or even a Trump defender) to blame that drop on the pandemic.

A Biden defender also could claim that the trend in recent months has been positive and that we might actually see rising living standards in the future.

However, those caveats don’t change the fact the Leonhardt’s article fails to mention the economic data that arguably matters most to people. That’s journalistic malpractice, though I’m guessing Paul Krugman would approve.

P.S. Leonhardt’s failure to mention living standards is not the worst example of journalistic malpractice at the New York Times. That award goes to the three reporters who wrote a big story about Venezuela’s economic failure and never once mentioned socialism.

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Defending the (Prudent Understanding of the) Laffer Curve

I’ve written dozens of articles about the Laffer Curve and most of that verbiage can be summarized in these five points.

• The Laffer Curve helps to illustrate that excessive tax rates result in less taxable activity.
• All public finance economists – even those on the left – agree there is a Laffer Curve.
• The Laffer Curve does not mean tax cuts are self-financing or that tax increases lose revenue.
• Different types of taxes produce different responses, so there is more than one Laffer Curve.
• There is a real debate about the shape of the Laffer Curve and the ideal point on the curve.

The fifth point recognizes that well-meaning and knowledgeable people can vigorously disagree.

Do changes in tax policy have big effects or small effects on the economy? How much revenue feedback will occur if there is a change in tax rates?

Just a couple of examples of questions that I have endlessly debated with reasonable folks on the left.

But let’s focus today on the unreasonable left. Or, to be more specific, let’s look at an editorial from the St. Louis Post-Dispatch.

Here are some portions of that newspaper’s simplistic screed.

…the deficit explosion…effectively disproved his theory that cutting taxes on the rich would increase government tax revenue. …Laffer continues to be unchastened…, even as Britain reels from a leadership shuffle caused by the catastrophic application of his very theories. Hand it to Laffer: Seldom does someone who is so often proven wrong have the gumption to maintain he’s right… His famous “Laffer curve” presumes to prove that tax cuts for the rich will spur economic investment, causing such strong economic growth that the government’s tax revenue would actually rise instead of falling. …Yes, the economy was robust in the 1980s after Reagan’s historic tax cuts. But that’s also when the era of big budget deficits began. …congressional Republicans and President Donald Trump in 2017 slashed corporate taxes in what they claimed was a necessary economy-booster… Then-Treasury Secretary Stephen Mnuchin’s famous vow that the tax-cut plan would “pay for itself” in growth — the very definition of Laffer’s theory — has since been exposed as the voodoo it always was.

Almost every sentence in the above excerpt cries out for correction.

For instance, Reagan and his team never claimed that the 1981 tax cuts would be self-financing (though IRS data shows that lower tax rates on the rich did produce more revenue).

There were big deficits because of the 1980-1982 double-dip recession, and that spike in red ink mostly took place before Reagan’s tax cuts went into effect.

And it’s absurd to blame the United Kingdom’s political instability on tax cuts that never occurred.

If Secretary Mnunchin claimed the entire tax cut would pay for itself, he clearly deserves to be mocked, but it’s worth noting that the lower corporate tax rate from the 2017 reform is very close to being self-financing.

Not that we should be surprised. Both the IMF and OECD have research showing that lower corporate tax rates do not necessarily lead to lower corporate tax revenues.

The bottom line is that the editorial board of the St. Louis Post-Dispatch obviously puts ideology above accuracy.

P.S. I can’t resist sharing one other excerpt from the editorial.

“The Kansas Experiment,” was a debacle. The state’s economy didn’t skyrocket, but the deficit did, forcing deep cuts to education before the legislature finally acknowledged defeat and reversed the tax cuts.

Once again, the editors are showing that ideology trumps accuracy. Here’s what really happened in Kansas. I hope we can have more defeats like that! Though I’ll be the first to admit that North Carolina is a much better role model.

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Sloppy Economics from the New York Times

Some of my Republican friends get irked when I point out that President Biden should not be blamed for surging prices.

As I explained in March, we should instead blame the Federal Reserve for inflation.

Moreover, the Fed’s big mistake started in early 2020 when the central bank dramatically expanded its balance sheet (see chart). And that error took place well before Joe Biden entered the White House.

Unfortunately, instead of pointing a finger of blame at the Fed, some of our friends on the left have decided to assert that inflation is caused by greedy companies.

A recent New York Times column by German Lopez addressed this claim.

The good news is that Mr. Lopez’s column pours cold water on the “greedflation” theory.

The bad news is that the column completely overlooks the role of the Federal Reserve.

As prices have increased faster than at any other point in four decades, lawmakers have scrambled for explanations. In recent months, some Democrats have landed on a new culprit: price gouging. …”greedflation.” For Democrats, it is a convenient explanation as inflation turns voters against President Biden. …And it lets them recast inflation as the fault of monopolistic corporations — which progressives have long railed against. …there are other, more widely accepted explanations… Covid disrupted supply chains globally. Russia’s invasion of Ukraine caused another wave of disruptions, particularly in food and energy. The stimulus bills left people with a lot of extra cash, and many Americans spent it. That prompted too much demand for too little supply, so prices increased.

Just in case you suspect I’m not being fair, the words “federal reserve” or “central bank” do not appear in the article. Anywhere.

Needless to say, writing a column about rising price levels without mentioning the Fed is like writing the history of World War II and not mentioning Germany.

Why did the reporter make this mistake? If I had to guess, he probably noticed there was a debate inside the Democratic Party between the “crazy left” and the “rational left.” So he wrote about that conflict without noting (or perhaps even realizing) that there are other points of view.

Such as the late, great Milton Friedman.

P.S. For those who want more background, the crazy left are economic illiterates such as Robert Reich, Bernie Sanders, and Elizabeth Warren (and some guy named Lindsay Owens, who was cited in the article).

The rational left are people like Larry Summers, Bill Clinton, and Arthur Okun (and Jason Furman, who also was cited in the article).

I disagree with folks who are part of rational left, but at least they are tethered to reality.

P.P.S. Biden did not cause inflation, but (unlike a former president) he does not seem to understand how to solve the problem.

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Anti-Economics from the Economist

Since I just landed in London, it appropriate that today’s column will be based on an article in the U.K.-based Economist.

A recent issue of the magazine included an article lauding the Internal Revenue Service.

Why?

What could the bureaucrats have done to earn praise?

You’ll be amazed to learn that the Economist believes the IRS helped the economy by becoming a vehicle for income redistribution.

I’m not joking. Here are some excerpts from the article.

Despite its awful backlog, the irs has, from another perspective, had a very good pandemic. It has played a critical role in delivering support to Americans. And it has been surprisingly efficient at it. For each of the three rounds of stimulus payments, the irs was the conduit. Within two weeks of Mr Biden’s signing of the stimulus bill in March 2021, for instance, it sent out $325bn via 127m separate payments, mainly by direct bank deposit. Some people fell through the cracks and cheques took longer. But most got the money quickly. The irs operated at even greater frequency in making child-tax-credit payments every month. …It also expanded the earned-income tax credit, a subsidy given to low earners, one of America’s biggest anti-poverty programmes. Putting it together, a poor family with two young children could expect $20,000 from the irs last year, double what they would normally receive.

The Economist seems to think it’s wonderful that the IRS now plays a big role in distributing goodies.

In all, the agency paid out more than $600bn in pandemic-related support in 2021, equivalent to about two-thirds of Social Security spending in the federal government’s budget. “We have seen a substantial share of what used to be the social safety-net migrate from the public-expenditure side of the federal ledger to being run through the tax code,” points out Gordon Gray of the American Action Forum, a think-tank. …the irs…stands as one of the few federal agencies that would generate a large and nearly immediate return on investment were the government to spend more on it. The hope for the harried tax agents is that…irs performance during the pandemic will have earned it grudging support in Washington, demonstrating that it is both overstretched and indispensable.

Needless to say, “delivering support to Americans” should not be an “indispensable” function of the a bureaucracy that was created to collect tax revenue.

Even more problematic, giving out record amounts of money is not what “has kept the economy going.” This is a Keynesian view of the world.

In reality, the borrow-and-spend approach is akin to thinking you are richer after taking money out of the right pocket and putting it in the left pocket.

Sort of the economic version of a perpetual motion machine, all based on the broken-window theory of economics.

P.S. The article also cites the bogus estimate of a $1 trillion tax gap. If the Economist now is in the business of uncritically regurgitating make-believe numbers, I’m also willing to play that game. I encourage that magazine’s reporters to call me and I’ll blindly claim that all tax cuts pay for themselves and that we can have entitlement reform without transition costs.

Actually, I have ethics, so I won’t make those over-the-top claims.

P.P.S. Amazingly (but predictably), the Economist never mentioned past or present IRS scandals.

P.P.P.S. This isn’t the first time the Economist has engaged in anti-economics journalism. The magazine also has been guilty of dishonest journalism.

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What Should Be Done about Media Bias?

I recently wrote about academic bias.

Today, let’s analyze whether there is a similar problem with journalists. And we’ll start with this video from Prager U.

Just as with the column on academic bias, we’ll start by looking at evidence about whether members of the press actually do lean to the left.

Since I’ve shared may examples of media bias (see here, here, here, here, here, here, here, and here), I think the answer is yes.

But don’t believe me, Journalists openly admit their orientation.

And this isn’t a recent thing. A Roper Center report back in the 1990s included this table showing the leftist tilt was especially pronounced among D.C.-based journalists.

And the profession seems to have drifted more to the left over the past couple of decades.

A couple of years ago, David Rutz of the Washington Free-Beacon reported on a survey of financial journalists.

A survey of financial journalists revealed a stark political contrast, with 58 percent of respondents describing themselves as liberal against just 4 percent calling themselves conservative. The study, conducted by professors at Arizona State University and Texas A&M University, sought to “provide new insights into the inputs, incentives, and beliefs that shape their reporting” by interviewing 462 financial reporters about their jobs. …The findings of the reporters’ political leanings mirrors that of Politico surveys of the White House press corps in 2016 (zero Republicans among 72 reporters surveyed) and 2017 (three Republicans out of 63 surveyed).

Given some of the awful analysis one now finds in the Economist, I’m not surprised that financial journalists are just as bad as political journalists.

Here’s some more data.

Paul Bedard of the Washington Examiner summarized a report on political giving by members of the media.

Reporters and other members of the media have donated at least $110,000 to candidates and parties…, with over 90% going to Democrats including, Joe Biden, Sen. Bernie Sanders, and Rep. Alexandria Ocasio Cortez, according to a new deep-dive report. …”Journalists at The New York Times, Washington Post, Boston Globe, and Houston Chronicle are among dozens of reporters, editors, and other newspeople who’ve given tens of thousands of dollars to political candidates and causes,” said the report… Those were just for large amounts. Contributions of $200 or less do not require detailed FEC reporting. …according to the report, though, …the vast majority of reporters and staffers do not make any contributions.

Probably the most shocking data comes from a study on media bias, written by Hans Hassell, John Holbein, and Matthew Miles. Based on Twitter patterns, they found that journalists tend to be on the far left, perhaps even further to the left than Bernie Sanders.

Interestingly, the authors then proceed to claim that the media’s left-wing orientation does not impact the stories that get written.

To run our correspondence experiment, we created an artificial campaign email address for a fictitious candidate for the state legislature. We emailed the journalists on our list, asking them to cover the potential candidate. …this story appears to be something that is generally considered newsworthy but is subject to journalist discretion and is exactly the type of story where gatekeeping biases could be manifest. Our email appeared to be from a campaign staffer, indicating that the candidate was about to announce his candidacy within the next week and asking whether the journalist would be interested in sitting down with the candidate sometime in the following week to discuss his candidacy and vision for state government. The text in each of the emails was identical except for the bio of the candidate that we included at the end of the message. In the brief bio, we randomly varied the candidate’s ideological description. …there is no statistical or substantive difference in the probability of a journalist responding to the email based solely on the treatment conditions. Comparing the two poles, strong conservative candidates are, on average, a mere 0.4 percentage points less likely to get a response than strong progressive candidates.

For what it’s worth, I think this study is misleading. Why? Because it looks for bias in one of the few places where it’s unlikely to exist.

It’s not surprising that journalists (especially ones who write for local outlets) are equally likely to cover campaign announcements, regardless of the partisan or ideological orientation of candidates.

Based on my decades of experience in Washington, however, I can state with near certainty that there would not be equal coverage if the study tested how journalists respond to new research on, say, fiscal policy.

To be blunt, a study from a right-leaning source on the benefits of smaller government would receive far less attention than a study from a left-leaning source that asserted the opposite.

I wrote about a specific instance of this kind of bias last year.

Now let’s consider another real-world example. Jason DeParle of the New York Times recently wrote about a “study” that purported to show that Biden’s per-child handouts boosted brain activity in young children.

All sorts of social scientists (see here, here, here, here, here, and here) pointed out that it was – at best – a very weak study.

This isn’t my field of expertise, so I don’t have anything to add to their criticisms.

But I will note that the New York Times and other major establishment voices don’t give prominent coverage to much stronger and more rigorous studies showing the various social pathologies (unemployment, dependency, single-parent households, poverty, loss of societal capital, etc) associated with redistribution.

Instead, research that doesn’t match with the preferred narrative gets little or no attention.

Now that we’ve established that a bias exists and that it affects news coverage, let’s close by considering the implications.

In a column for the Wall Street Journal, Van Gordon Sauter, the former head of CBS News, acknowledges the media’s bias and says it won’t change.

The highly influential daily newspapers in New York, Washington, Los Angeles and Boston are now decidedly liberal. On the home screen, the three broadcast network divisions still have their liberal tilt. Two of the three leading cable news sources are unrelentingly liberal… The news media is catching up with the liberalism of the professoriate, the entertainment industry, upscale magazines and the literary world. …To many journalists, objectivity, balance and fairness—once the gold standard of reporting—are not mandatory in a divided political era and in a country they believe to be severely flawed. …The media seems uninterested in these issues of bias. But wouldn’t a softening of its editorial orientation bring new readers or viewers? Probably not. The growth of new customers would be more than offset by the defection of outraged members of the current audience. The news media seems very comfortable with its product and ability to sell it. …There is no personal, professional or financial reason to change.

But the unwillingness to change probably isn’t good for the nation. Or the media.

In a 2018 editorial, Investor’s Business Daily speculated that increasing bias was bad news for the press.

Ask journalists, and they’ll likely tell you they play things right down the middle. They strive to be “fair.” They’re “centrists.” Sorry, not true. …Journalists, besotted with their own ideology, are no longer able to recognize their own bias. …journalism is one of the most left-wing of all professions. …This is an enormous problem for the media — perhaps bigger than they realize. A Rasmussen Reports survey in late October found that 45% of all likely voters in the midterm elections believed “that when most reporters write about a congressional race, they are trying to help the Democratic candidate.” Just 11% said the media would try to help the Republican. …A post-election survey of 1,000 voters by McLaughlin & Associates found that “a forceful plurality (48%) of respondents believe the media coverage is unfair and biased”… It wasn’t always this way. …In 1971, Republicans made up 25.7% of all journalists. Democrats were 35.5%… By 2014, the year of the last survey, the share of journalists identifying as Republican had shrunk to 7.1%, an 18.6 percentage point drop. …Democrats today outnumber Republicans today by four to one.

One takeaway is that bias on the part of the establishment press has paved the way for ideological bifurcation.

The major networks, most cable stations, and newspapers are now much more brazen about siding with the left. And this has encouraged the creation of a parallel media universe on the right, featuring Fox, talk radio, and alternative media.

So are there any policy implications, at least for those of us with a libertarian orientation?

Nope. Media companies should be free to be biased. Or free to be neutral. The market can then reward or punish firms based on their choices.

But I’ll close by warning that some folks on the left want to subsidize journalists. Here are some excerpts from a column in Reason by Christian Britschgi about the tax bill being pushed by House Democrats.

House Democrats are keen to raise taxes…to pay for their $3.5 trillion spending bill. But they’re cutting local newspapers some slack by slipping a special subsidy for publishers into their latest tax proposal. …local publishers would get annual tax credits of up to $25,000 for each journalist they employ …if the value of the tax credit exceeds the Medicare taxes a publisher pays, the publisher would receive the difference in the form of a check from the IRS. This transforms the policy from a targeted tax break to a direct subsidy. …there are two serious problems with the idea. The first is that taxpayers are being forced to pay for local journalism they wouldn’t otherwise choose to support. Giving struggling outlets government checks only weakens their need to reach readers, or to convince donors of their value. …The second, more serious problem is that it puts the federal government in charge of deciding what counts as a legitimate newspaper and who counts as a legitimate journalist under the tax code. …Imagine IRS agents poring over a newspaper (or Substack) to see if it qualifies for special tax treatment. Not exactly an image consistent with the First Amendment.

This definitely isn’t the biggest reason to oppose Biden’s so-called Build Back Better, but ethical people of all persuasions should be nauseated by this effort to create a lapdog press living off government handouts.

P.S. You can see a couple of good cartoons about media bias in this post, and another good one at the bottom of this post.

P.P.S. And left-leaning readers will appreciate these cartoons about Fox.

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Two Sensible Observations on Tax Policy from the Washington Post (Mixed with Typical Bad Analysis)

It’s presumably not controversial to point out that the Washington Post (like much of the media) leans to the left. Indeed, the paper’s bias has given me plenty of material over the years.

As you can see, what really irks me is when the bias translates into sloppy, inaccurate, or misleading statements.

• In 2011,the Post asserted that a plan to trim the budget by less than 2/10ths of 1 percent would “slash” spending.
• Later that year, the Post claimed that the German government was “fiscally conservative.”
• In 2013, the Post launched an inaccurate attack on the Heritage Foundation.
• In 2017, the Post described a $71 budget increase as a $770 billion cut.
• Later that year, the Post claimed a spending cut was a tax increase.
• In 2018, the Post made the same type of mistake, asserting that a $500 billion increase was a $537 billion cut.
• This year, the Post claimed Bush and Obama copied Reagan’s fiscal conservatism.
• Also this year, the Post blamed smugglers for an energy crisis caused by Lebanese price controls.

But, to be fair, the Washington Post occasionally winds up on the right side of an issue.

It’s editorialized in favor of school choice, for instance, and also has opined in favor of privatizing the Postal Service.

And sometimes it has editorials that are both right and wrong. Which is a good description of the Post‘s new editorial on tax policy.

We’ll start with the good news. The Washington Post appears to understand that a wealth tax would be a bad idea, both because it can lead to very high effective tax rates and because it would be a nightmare to administer.

Ms. Warren’s version of the wealth tax, which calls for 2 percent annual levies on net wealth above $50 million, and 3 percent above $1 billion, very rich people would face large tax bills even when they had little or negative net income, forcing them to sell assets to pay their taxes. …huge chunks of private wealth tied up in real estate, rare art and closely held businesses are more difficult — sometimes impossible — to assess consistently. …Such problems help explain why national wealth taxes yielded only modest revenue in the 11 European countries that levied them as of 1995, and why most of those countries subsequently repealed them.

I’m disappointed that the Post overlooked the biggest argument, which is that wealth taxation would reduce saving and investment and thus lead to lower wages.

But I suppose I should be happy with modest steps on the road to economic literacy.

The Post‘s editorial also echoed my argument by pointing out that ProPublica was very dishonest in the way it presented data illegally obtained from the IRS.

ProPublica muddied a basic distinction, which, properly understood, actually fortifies the case against a wealth tax. The story likened on-paper asset price appreciation with actual cash income, then lamented that the two aren’t taxed at the same rate. …ProPublica’s logic implies that, when the stock market goes down, Elon Musk, whose billions are tied up in shares of Tesla, should get a tax cut.

Amen (this argument also applies to the left’s argument for taxing unrealized capital gains).

Now that I’ve presented the sensible portions of the Post‘s editorial, let’s shift to the bad parts.

First and foremost, the entire purpose of the editorial was to support more class-warfare taxation.

But instead of wealth taxes, the Post wants much-higher capital gains taxes – including Biden’s hybrid capital gains tax/death tax.

Fortunately, legitimate goals of a wealth tax can be achieved through other means… This would require undoing not only some of the 2017 GOP tax cuts, but much previous tax policy as well… The higher capital gains rate should be applied to a broader base of investment income… President Biden’s American Families Plan calls for reform of this so-called “stepped-up basis” loophole that would yield an estimated $322.5 billion over 10 years.

The editorial also calls for an expanded death tax, one that would raise six times as much money as the current approach.

…simply reverting to estate tax rules in place as recently as 2004 could yield $98 billion per year, far more than the $16 billion the government raised in 2020.

Last but not least, it argues for these tax increases because it wants us to believe that politicians will wisely use any additional revenue in ways that will increase economic opportunity.

The public sector could use new revenue from stiffer capital gains and estate taxes to expand opportunity.

This is the “fairy dust” or “magic beans” theory of economic development.

Proponents argue that if we give politicians more money, we’ll somehow get more prosperity.

At the risk of understatement, this theory isn’t based on empirical evidence.

Which is the message of a 2017 video from the Center for Freedom and Prosperity. And it’s also the reason I repeatedly ask the never-answered question.

P.S. To make the argument that capital gains taxes and death taxes are better than wealth taxation, the Post editorial cites research from the Paris-based Organization for Economic Cooperation and Development. Too bad the Post didn’t read the OECD study showing that class-warfare taxes reduce overall prosperity. Or the OECD study showing that more government spending reduces prosperity.

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Were Hitler’s National Socialists Really Socialists?

How should Nazism be classified, particularly when compared to socialism? Are these ideologies at opposite ends of a spectrum, or are they simply different sides of the same collectivist coin?

In my humble opinion, both views are correct, which is why I think this triangle is the best way to classify various ideologies.

Nazis are motivated by race hatred and the socialists are motivated by class hatred, so they basically are at opposite ends at the bottom of the triangle.

But both ideologies are against free markets and both put the state over the individual, so they are far away from libertarianism (or classical liberalism) when looking from top to bottom.

These different ways of looking at the issue explain why Glenn Kessler of the Washington Post created a controversy when he decided to “fact check” this statement from gadfly Congresswoman Marjorie Taylor Greene.

According to Kessler, Greene deserved “four Pinocchios” for asserting that Hitler and the Nazis were socialists.

The full name of Hitler’s party was Nationalsozialistische Deutsche Arbeiterpartei. In English, that translates to National Socialist German Workers’ Party. But it was not a socialist party; it was a right-wing, ultranationalist party dedicated to racial purity, territorial expansion and anti-Semitism — and total political control. …the 1920 Nazi party platform…there are…passages denouncing banks, department stores and “interest slavery.” That could be seen as “a quasi-Marxist rejection of free markets. But these were also typical criticisms in the anti-Semitic playbook …Hitler adamantly rejected socialist ideas, dismantled or banned left-leaning parties and disapproved of trade unions. …We suggest Greene brush up on her history… She earns Four Pinocchios.

This is remarkable. The Nazis called themselves socialists, yet Kessler says Greene is lying for saying the same thing.

I’m not the only one to notice this bizarre example of media bias.

Professor Hannes Gissurarson from Iceland debunked Kessler’s hack analysis.

A ‘fact-checker’ at Washington Post, Glenn Kessler, asserts that a Republican Member of the House of Representatives is wrong in a recent comment on Hitler’s national socialism. It is not, as she had said, a branch of socialism. Kessler writes that the German Nazi Party, despite its name (the National-Socialist Workers’ Party), ‘was not a socialist party…’ In support of his case, Kessler quotes the first eight of the 25 points in the 1920 Nazi political programme… He lukewarmly concedes that in the Nazi programme there were also passages denouncing capitalism. But why does he not quote them as well? …It is hard not to discern the socialist overtones in these points. Why did the Washington Post fact-checker not quote them in full like the first eight? …according to Hayek national socialism could be considered to be the rebellious socialism of the lower middle class… Traditional socialists, democrats as well as communists, shared with Hitler’s national socialists the belief that conscious organisation had to replace the spontaneous order… Hayek is certainly right that there are strong family resemblances between traditional socialism and national socialism. Both are totalitarian creeds.

Professor David Henderson also eviscerated Kessler’s sloppy column.

Glenn Kessler, the Post‘s official fact checker, …analyzes various statements and claims to determine whether they are true. If he finds them false, he awards them Pinocchios, with the number of Pinocchios depending on the degree of falsehood. The highest number of Pinocchios he awards is 4. On May 29, Glenn Kessler earned his own Pinocchios. …Nazis…really were a socialist party. …Kessler attempts to buttress his case by listing the first 8 of 25 planks in the 1920 Nazi Party platform. Those planks do help his case that the Nazis were anti-Semitic (duh) and nationalists (ditto duh). But what about the other 17 planks? …pretty socialistic.

Here are some of those planks that Kessler conveniently omitted.

11. Abolition of unearned (work and labour) incomes. Breaking of rent-slavery. …

13. We demand the nationalization of all (previous) associated industries (trusts).

14. We demand a division of profits of all heavy industries.

15. We demand an expansion on a large scale of old age welfare. …

17. We demand a land reform suitable to our needs, provision of a law for the free expropriation of land for the purposes of public utility, abolition of taxes on land and prevention of all speculation in land.

Henderson also zings Kessler for using a misleading quote from Martin Niemoller.

By the way, the Nazis didn’t merely advocate for socialism in an early platform. They also implemented statist policies once they took power.

Back in 2007, Michael Moynihan wrote about the Nazi welfare state in a book review for Reason.

…the Nazis maintained popular support—a necessary precondition for the “final solution”—not because of terror or ideological affinity but through a simple system of “plunder,” “bribery,” and a generous welfare state. …Requisitioned Jewish property, resources stolen from the conquered, and punitive taxes levied on local businesses insulated citizens from shortages and allowed the regime to create a “racist-totalitarian welfare state.” …To understand Hitler’s popularity, …”it is necessary to focus on the socialist aspect of National Socialism.” …Adolf Eichmann viewed National Socialism and communism as “quasi-siblings,” explaining in his memoirs that he “inclined towards the left and emphasized socialist aspects every bit as much as nationalist ones.” As late as 1944, Propaganda Minister Josef Goebbels publicly celebrated “our socialism,” reminding his war-weary subjects that Germany “alone [has] the best social welfare measures.” Contrast this, he advised, with the Jews, who were the very “incarnation of capitalism.” …Hitler implemented a variety of interventionist economic policies, including price and rent controls, exorbitant corporate taxes, frequent “polemics against landlords,” subsidies to German farmers…and harsh taxes on capital gains, which Hitler himself had denounced as “effortless income.”

The bottom line is that the Nazis are justifiably hated for reasons that have nothing to do with economic policy.

But it’s also true that their economic policy was a version of socialism (fascism involves government control rather than government ownership, but the result is the same).

Here are two videos from Prager University for those who want more information. First, we can learn about communism and Nazism.

Second, we can learn about the history of fascism.

Let’s wrap up by quoting George Will on the interrelated ideas of fascism, Nazism, and socialism.

Fascism…was a recoil against Enlightenment individualism: the idea that good societies allow reasoning, rights-bearing people to define for themselves the worthy life. …Mussolini, a fervent socialist until his politics mutated into a rival collectivism, distilled fascism to this: “Everything within the state, nothing outside the state, nothing against the state.” The Nazi Party — the National Socialist German Workers’ Party — effected a broad expansion of socialism’s agenda…

Last, but not least, here’s a reminder that we should be very wary of demagogues who promise goodies.

P.S. Kessler should have “fact checked” the last part of Rep. Greene’s statement. As much as I dislike “democratic socialism,” today’s Democrats are not trying to impose a totalitarian system.

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Dishonest Tax Analysis from the New York Times

There are two big policy debates about business profits.

The first is whether profits are good or evil. I pick the former. Profits are something to applaud, assuming they are earned honestly (i.e., not the result of subsidies, industrial policy, protectionism, or other forms of cronyism).

The second is how profits should be taxed, and that’s the focus of today’s column.

My perfect-world answer is that there should be no tax on profits because we have a government that is so small that there’s no need for any type of income tax. But I’m in the United States rather than a fiscal paradise such as Bermuda, Monaco, or the Cayman Islands. So if we start with the assumption that a corporate income tax is going to exist, how should it operate?

To answer that question, let’s start with this simple example of a kid’s lemonade stand. Here’s how much money it spent and how much revenue it generated (before it was shut down by overzealous bureaucrats).

How much profit did our budding entrepreneur make?

The correct answer, of course, is that the business didn’t earn any profits. Indeed, it lost $2. So there obviously should not be any tax.

But some people don’t understand the difference between taxable income (which is largely based on cash flow in one year) and “book income” (which is largely a backward-looking, accrual-based estimate of profits to help inform shareholders about the overall financial condition of a corporation).

Or, maybe they do understand and simply prefer to engage in dishonest demagoguery. For instance, let’s look at a recent report by Patricia Cohen in the New York Times.

…a new study finds that at least 55 of America’s largest paid no taxes last year on billions of dollars in profits…thanks to a range of legal deductions and exemptions that have become staples of the tax code, according to the analysis. Salesforce, Archer-Daniels-Midland and Consolidated Edison were among those named in the report, which was done by the Institute on Taxation and Economic Policy, a left-leaning research group in Washington. …Twenty-six of the companies listed, including FedEx, Duke Energy and Nike, were able to avoid paying any federal income tax for the last three years even though they reported a combined income of $77 billion. Many also received millions of dollars in tax rebates.

Sounds terrible, right.

Except if you read the fine print, in which case you’ll find out the report discussed in the article isn’t based on company tax returns. Instead, the leftist group, the Institute on Taxation and Economic Policy (ITEP), used financial statements to make up some numbers.

And ITEP’s use of book income meant it didn’t properly measure things such as business investment expenditures and net operating losses, which are necessary to determine whether a company has an actual cash-flow profit.

Ms. Cohen never should have written a story about ITEP’s shoddy and dishonest report, though at least she acknowledged that there are reasons to question the findings.

A provision in the 2017 tax bill allowed businesses to immediately write off the cost of any new equipment and machinery. The $2.2 trillion CARES Act…included a provision that temporarily allowed businesses to use losses in 2020 to offset profits earned in previous years, according to the institute. …many deductions and credits are there for good reason — to encourage research and development, to promote expansion and to smooth the ups and downs of the business cycle, taking a longer view of profit and loss than can be calculated in a single year.

The bottom line is that the ITEP report is garbage.

There’s no reason to expect taxable income to match up with financial statements or “book income.”

Indeed, the differences between those measures is why there are also companies that – according to ITEP’s sloppy methodology – pay tax when they supposedly have losses.

For those who actually care about the truth, the top half of this visual shows how a proper business tax system should work (i.e., one that taxes profits when they actually occur).

P.S. The issue of “depreciation” is probably the main reason why we get all sorts of silly tax controversies, involving everything from corporate jets to ABBA’s stage outfits.

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A Case Study of Sloppy Research and Media Bias

I periodically criticize pro-statism stories and columns in outlets such as the New York Times and Washington Post.

But I’ve only written one column specifically on the topic of whether the press is slanted. In that article, I pointed out that media bias rarely is based on lies.

Even when stories are overtly misleading (as is often the case with reports about poverty, for instance), journalists almost always are clever enough to avoid crossing a line to outright dishonesty.

In practice, media bias is largely about what gets covered and what doesn’t.

Media bias very rarely involves dishonesty. Deception yes, but not inaccuracies. It’s almost always about story selection and what gets emphasized.

Today, I want to share an example of this phenomenon.

A left-leaning group called the International Equalities Institute recently published a report claiming that lower tax rates on upper-income taxpayers don’t lead to faster growth.

The London-based group isn’t well known and neither are the two authors (David Hope and Julian Limberg), yet this study received a massive amount of attention.

To cite just a few examples, it got major coverage from the Washington Post.

It received a fawning write-up from CBS.

It was featured by Bloomberg.

Bloomberg liked it so much that there was a second story.

Many other news outlets also publicized the story, in many cases by simply republishing the stories from the above outlets.

Here’s the report from Al Jazeera.

Esquire even ran a puff piece on the study.

Here’s the headline from MSN.

Various CBS local stations recycled the network report.

Here’s an example from Oklahoma.

And an example from North Carolina.

The Gulf News wrote about the study.

And Business Insider also gave it lots of attention.

Even the New York Post featured the study.

The reason this report got so all this attention, in my humble opinion, is that it gave reporters an excuse to advance a pro-statism message.

And that meant writing press releases about the report rather than practicing real journalism. They praised the study as “comprehensive” and “sophisticated,” though presumably none of them know anything about its methodology.

And they certainly didn’t seek out any contrary views.

So allow me to point out a few problems with the Hope-Limberg report. Feel free to read the entire study, but I think these passages fairly summarize the two main arguments (tax cuts help the rich and tax cuts don’t help the economy) in the publication.

…it remains an open empirical question how cutting taxes on the rich affects economic outcomes. In this paper, we use data from 18 OECD countries covering the last fifty years to investigate the effects of major tax cuts for the rich on income inequality, economic growth, and unemployment. …Our results show that…major tax cuts for the rich increase the top 1% share of pre-tax national income in the years following the reform… The magnitude of the effect is sizeable; on average, each major reform leads to a rise in top 1% share of pre-tax national income of 0.8 percentage points. The results also show that economic performance, as measured by real GDP per capita and the unemployment rate, is not significantly affected by major tax cuts for the rich.

Regarding the two arguments, I’m not sure what point Hope and Limberg think they’re making with their first point about lower tax rates leading the rich to earn more income.

At the risk of stating the obvious, that’s one of the main selling points for better tax policy. Supporters of lower tax rates explicitly want entrepreneurs, investors, business owners, and other successful people to have better incentives to earn and report taxable income.

So the Hope-Limberg data actually confirm that lower tax rates on upper-income taxpayers are a great way of getting them to be more productive. Art Laffer would give them an A+ if they were students.

But what about the second argument? Is it true that there’s no positive impact when tax rates are reduced on work, saving, investment, risk-taking, and entrepreneurship?

Let’s examine their conclusions. Here’s the chart showing when selected nations reduced tax rates (in red). Hope and Limberg then calculated whether those countries enjoyed a bump in jobs and growth over the following five years and want us to accept their argument that there was no positive impact.

Since the report doesn’t include the underlying data or the model used to generate the results, we’re supposed to accept their results at face value.

At the risk of being the skunk at the garden party, I’m unconvinced. Hope and Limberg are political scientists rather than economists, but it seems like they overlooked some very important issues.

Most important, why didn’t they factor in the impact of other government policies (trade, regulation, government spending, monetary policy, etc)? Taxation is just one small piece of the economic policy puzzle. Maybe they covered these concerns in their undisclosed model and data, but estimating economic performance by looking solely at tax policy is like trying to figure out the score of a baseball game by just comparing the performance of shortstops.

And there are a couple of other concerns I have, such as why did they pick these 18 countries and ignore other nations? And why not examine economic performance beyond five years?

I’ll conclude by also noting that their study doesn’t pass the smell test.

• Are we really supposed to believe Thatcher’s tax-rate reductions played no role in the U.K.’s impressive recovery?
• Are we really supposed to believe the Reagan tax cuts played no role in America’s economic renaissance?
• Are we really supposed to believe that Ireland’s lower tax rates didn’t help turn the “Sick man of Europe” into the Celtic Tiger?
• Are we really supposed to believe that New Zealand’s tax cuts didn’t contribute to that nation’s remarkable turnaround?
• Are we really supposed to believe that countries such as Italy, Finland, Belgium, etc, are examples of supply-side reform?

The bottom line is that better tax policy isn’t some sort of elixir that guarantees prosperity. Especially if other policies in a nation are misguided.

That being said, lower tax rates are better for prosperity than higher tax rates (as illustrated by academic studies from economists). And since even small differences in economic performance can lead to big long-run benefits, the main takeaway is that it’s a good idea to enact policies to expand the economic pie.

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Blacks, Trump, and Media Bias

I rarely write about media bias, but I sometimes come across stories that cry out for correction because of blatant inaccuracies.

• The New York Times asserting that government schools are “starved of funding” when taxpayer subsidies actually have skyrocketed.
• The Washington Post claiming a GOP budget included “large cuts” when spending actually would grow 3.3 percent annually.
• The Economist writing about poverty in the United States, but then citing numbers that have nothing to do with poverty.
• The New York Times asserting that U.S. multinationals pay little tax on foreign-source income, but forgetting to include the taxes paid to foreign governments.
• A Washington Post column blaming problems in France on “austerity” when the nation has the biggest spending burden in Europe.
• The Atlantic reporting about “steady defunding” in Washington when the federal budget has tripled (adjusted for inflation) since 1980.
• A New York Times column that blames capitalism for the shortcomings of China’s government-run health system.

We’re going to add to the list today.

In a story for the Washington Post, Tracy Jan (aided by Seung Min Kim and Emily Guskin) argue that the Trump’s policies were bad news for African Americans.

Black voters overwhelmingly chose Biden, with 87 percent casting their ballots for him… Trump presided over the most unequal recession in modern American history because of his mismanagement of the coronavirus pandemic. …Economists say that rather than champion economic policies targeting average Black Americans, who are more likely to work low-wage jobs without health and retirement benefits, Trump’s annual budgets proposed eviscerating the social safety net, with cuts to housing, food stamps and health care.

I have two minor comments and one major comment.

The first minor comment is that Trump never proposed to eviscerate the so-called social safety net. Indeed, he increased domestic spending faster than Obama.

The second minor comment is that the recession was caused by the coronavirus, not by Trump’s policies.

The major comment is that Ms. Jan and her two colleagues wrote a lengthy story (more than 2,000 words) and never once mentioned or acknowledged that the black poverty rate fell to a record low during the Trump years.

Or that median household income for blacks rose to a record high.

This is a shocking level of journalistic malpractice. Sort of like writing about the Cold War without ever mentioning the Soviet Union.

By the way, I’m not saying that a pro-Trump spin was needed. They could have written about the poverty and income data and offered alternative explanations for why there were good numbers.

Heck, that’s what I did.

To be fair, the article does acknowledge that unemployment rate for African Americans fell to a record low during the Trump years.

…the Black unemployment rate’s record low average of 6.1 percent over 2019 — a steady improvement that had begun during the Obama administration — remained double that of Whites.

Though the obvious implication is that Trump doesn’t deserve any credit for a trend that started under Obama.

Which is certainly a legitimate argument, though honest journalists would have cited some people making the counter argument that his policies did make a difference (for what it’s worth, I think it’s a combination of both).

P.S. I’ll add another minor comment. The story quotes several people (all on the left side of the political spectrum) on how African Americans ostensibly will benefit if there is a bigger welfare state and more redistribution.

It’s certainly appropriate to write about that perspective, but why didn’t the three journalists bother to cite at least one person who could have pointed out the inverse relationship between social-welfare spending and the poverty rate?

Or cite at least one person who could have pointed out that low-income people in the United States enjoy higher living standards than middle class people in nations with bigger welfare states?

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How Can the New York Times Write about the Failure of Venezuela and not Mention Socialism?

Every so often, I’ll grouse about media sloppiness/media bias, most often from the Washington Post or New York Times, but also from other outlets (Reuters, Time, ABC, the Associated Press, etc).

Let’s add to the collection today by perusing an interesting – but frustrating – article in the New York Times about Venezuela’s near-decimated oil industry.

Authored by Sheyla Urdaneta, Anatoly Kurmanaev and Isayen Herrera, it provides a thorough description of how the energy sector in oil-rich Venezuela has collapsed.

For the first time in a century, there are no rigs searching for oil in Venezuela. Wells that once tapped the world’s largest crude reserves are abandoned… Refineries that once processed oil for export are rusting hulks… Fuel shortages have brought the country to a standstill. At gas stations, lines go on for miles. …The country that a decade ago was the largest producer in Latin America, earning about $90 billion a year from oil exports, is expected to net about $2.3 billion by this year’s end… More than five million Venezuelans, or one in six residents, have fled the country since 2015, creating one of the world’s greatest refugee crises, according to the United Nations. The country now has the highest poverty rate in Latin America, overtaking Haiti.

But here’s what shocked me. The article never once mentions socialism. Or statism. Or leftist economic policy.

Instead, there is one allusion to “mismanagement” and one sentence that refers to government policy.

…years of gross mismanagement… Hugo Chávez, appeared on the national stage in the 1990s promising a revolution that would put Venezuela’s oil to work for its poor majority, he captivated the nation. …Mr. Chávez commandeered the country’s respected state oil company for his radical development program. He fired nearly 20,000 oil professionals, nationalized foreign-owned oil assets and allowed allies to plunder the oil revenues.

Almost 1800 words in the article, yet virtually no discussion of how maybe, just maybe, Venezuela’s hard shift to the left (as illustrated by the chart, economic freedom has steadily declined this century) may have contributed to the collapse of the country’s major industry.

This is journalistic malpractice. Sort of like writing about 2020 and not mentioning coronavirus or writing about 1944 and not mentioning World War II.

For those of you who do care about facts, it’s worth knowing that Venezuela has the world’s lowest level of economic liberty according to Economic Freedom of the World and second-to-lowest level of economic liberty according to the Index of Economic Freedom.

In a column for USA Today, Daniel di Martino writes about the awful consequences of his nation’s drift to socialism.

All my life, I lived under socialism in Venezuela until I left and came to the United States as a student in 2016. Because the regime in charge imposed price controls and nationalized the most important private industries, production plummeted. No wonder I had to wait hours in lines to buy simple products such as toothpaste or flour. …My family and I suffered from blackouts and lack of water. The regime nationalized electricity in 2007 in an effort to make electricity “free.” Unsurprisingly, this resulted in underinvestment in the electrical grid. By 2016, my home lost power roughly once a week. …The real reason my family went without water and electricity was the socialist economy instituted by dictators Hugo Chavez and Nicolas Maduro. The welfare programs, many minimum-wage hikes and nationalizations implemented by their regimes resulted in a colossal government deficit that the central bank covered by simply printing more money — leading to rampant inflation. …I watched what was once one of the richest countries in Latin America gradually fall apart under the weight of big government.

And he issues a warning about what could happen to the United States.

…neither Medicare for All nor a wealth tax alone would turn the United States into Venezuela overnight. No single radical proposal would do that. However, if all or most of these measures are implemented, they could have the same catastrophic consequences for the American people that they had for Venezuela.

The good news, so to speak, is that it would take many decades of bad policy to turn the U.S. into an economic basket case. There’s even a somewhat famous quote from Adam Smith (“there is a great deal of ruin in a nation“) about the ability of a country to survive and withstand lots of bad public policy.

But that doesn’t mean it would be a good idea to see how quickly the U.S. could become Venezuela. As I pointed out when writing about Argentina, it’s possible for a rich country to tax, spend, and regulate itself into economic crisis.

P.S. If you like gallows humor, you can find Venezuela-themed jokes here, here, here, here, here, and here.

P.P.S. I speculated about the looming collapse of Venezuela in both 2018 and 2019. Sadly, it looks like the regime will last at least until 2021.

 

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Government Size, Government Effectiveness, and Coronavirus

A couple of weeks ago, I debunked a remarkably anti-empirical column by Dana Milbank of the Washington Post.

He claimed that America’s response to the coronavirus was hampered because government is too small, yet the nations he cited as successful role models actually have much smaller public sectors than the United States.

I congratulated him for accidentally making a strong case for libertarianism and providing evidence for my Seventh Theorem of Government.

Unfortunately, other journalists share Mr. Milbank’s ignorance with regards to easily accessible data on fiscal policy.

Writing for the Atlantic, George Packer asserts that the U.S. response to the coronavirus has been a miserable failure because government is too small.

Every morning in the endless month of March, Americans woke up to find themselves citizens of a failed state. …a federal government crippled by years of right-wing ideological assault, politicization by both parties, and steady defunding. …tests for the virus were almost impossible to find… years of attacking government, squeezing it dry and draining its morale, inflict a heavy cost that the public has to pay in lives. All the programs defunded, stockpiles depleted, and plans scrapped meant that we had become a second-rate nation.

Michael Brendan Dougherty of National Review takes apart Packer’s column.

He points out that CDC funding has increased, while also noting that the bureaucracy has squandered the additional money it has received.

…the CDC’s funding has increased — not that it has made good use of the extra money. This is not a lean and mean virus-fighting machine, getting by on starvation-level resources. It maintains a Hollywood liaison to consult on films. In recent years, it has expanded beyond its core mission to promote motorcycle safety and sponsor programs dedicated to fostering “safe, stable, nurturing relationships” in schools. If you’re wondering why there was lots of political and social messaging larding up CDC documents on COVID-19, just realize that when Congress increases an agency’s funding, the result is likely to be more ideological make-work jobs rather than a more effective workforce. …as for public-sector health-care spending, ours is not notably low — it’s roughly equivalent to those of the developed nations of Western Europe.

And he also observes that nations with smaller governments have done a better job than countries with bigger governments.

…The East Asian states that have done best in fighting COVID-19 are not social-democratic but hyper-capitalist. Compared with them — and to America —Western Europe has done much worse at containing the spread of the coronavirus and the holding down the death toll.

Excellent points.

For my contribution to this debate, I’m going to investigate whether Mr. Packer is right about “steady defunding” of the federal government.

To see whether he is correct about “programs defunded,” I went to Table 1.3 of the Historical Tables of the Budget and created the following chart to see what happened to inflation-adjusted spending over the past 40 years.

Lo and behold, it turns out that Mr. Packer is completely wrong. There hasn’t been any defunding. Not even close.

Instead, the inflation-adjusted burden of government is almost three times greater today than it was the year Reagan was elected (and it will be more than three times greater once all the emergency spending is included).

The bottom line is that I can’t figure out whether to be more dismayed that journalists are innumerate or that major publications apparently don’t have fact checkers.

P.S. There were periods when spending grew faster than at other times. There were also times when the private sector grew faster than the government (fulfilling the Golden Rule). And we also can see the how government exploded because of TARP and Obama’s faux stimulus and then was briefly constrained during the Tea Party era (and is now climbing rapidly under Trump).

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The Media’s Pervasively Dishonest Coverage of Trump’s New Budget

I would prefer not to write about President Trump’s new budget, largely because I know it’s not a serious proposal.

Even before he was elected, I pointed out that Trump was a big-government Republican who had no intention of dealing with serious fiscal issues such as the rising burden of entitlement spending.

So I wasn’t surprised that he capitulated to swamp-friendly budget deals in 2017, 2018, and 2019. And I’m depressingly confident that the same thing will happen this year.

That being said, I want to comment on how the media is covering his latest budget.

Take a look at some of the headlines that are dominating the news this morning.

From Reuters.

From New York magazine.

From the Washington Times.

From NBC.

From the Associated Press.

From Bloomberg.

From International Business Times.

From Fox.

From the Wall Street Journal.

All of these headlines make is seem like Trump is proposing a Reagan-style budget with lots of cuts, especially with regards to domestic programs.

All of that would be great news…if it was true.

In reality, here’s what Trump is projecting for total spending over the next 10 years.

Can you find the spending cuts?

And here’s what’s happening with domestic spending (mandatory outlays plus domestic discretionary) according to Trump’s budget.

Can you find the spending cuts?

Last but not least, here’s Trump’s plan for domestic discretionary spending.

Can you find the spending cuts?

So why is there such a big disconnect in the media? Why are there headlines about cutting and slashing when government is growing by every possible measure?

For the simple reason that the budget process in Washington is pervasively dishonest, as I’ve explained in interviews with John Stossel and Judge Napolitano. Here are the three things you need to know.

1. The politicians created a system that automatically assumes big increases in annual spending, called a baseline.
2. When there’s a proposal to have spending grow slower than the baseline, the gap between the proposal and the baseline is called a cut.
3. It’s like being on a diet and claiming progress because you’re gaining two pounds each month rather than five pounds.

Defenders of this system argue that programs should get built-in increases because of things such as inflation, or because of more old people, which leads to more spending for programs such as Social Security and Medicare.

It’s certainly reasonable for them to argue that budgets should increase for these reasons.

But they should be honest. Be forthright and assert that “Spending should climb X percent because…”

Needless to say, that won’t happen. The pro-spending politicians and interest groups like the current approach because it allows them to scare voters by warning about “savage” and “draconian” spending cuts.

Remember how Obama said the sequester would wreak havoc because of massive cuts? Except there weren’t any cuts, massive or otherwise. As Thomas Sowell pointed out, Obama was trying to deceive voters.

P.S. The British also use dishonest budgeting.

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Government Schools, the New York Times, and the Butterfield Effect

To help me follow policy developments, I get 30-plus daily emails from various news outlets and institutions, and I scroll through these messages to see what I should be reading.

Given my interest in fiscal policy, I’m always on the lookout for articles on tax reform and the burden of government spending.

But since I just wrote about the dismal performance of government schools as part of my series for National Education Week, I obviously noticed this story (highlighted in red) in an email from the New York Times.

My immediate reaction, given the wealth of evidence, was to scoff at the discredited notion that more spending is a key to better educational outcomes.

We have plenty of data showing that pouring more money into government schools doesn’t produce good results.

Anyhow, I clicked on the story and read that supposed experts are puzzled about stagnant academic performance.

The performance of American teenagers in reading and math has been stagnant since 2000, according to the latest results of a rigorous international exam, despite a decades-long effort to raise standards and help students compete with peers across the globe. …The disappointing results from the exam, the Program for International Student Assessment, …follow those from the National Assessment of Educational Progress, an American test that recently showed that two-thirds of children were not proficient readers. …Low-performing students have been the focus of decades of bipartisan education overhaul efforts, costing many billions of dollars, that have resulted in a string of national programs — No Child Left Behind, Race to the Top, the Common Core State Standards, the Every Student Succeeds Act — but uneven results.

By the way, we haven’t had a “decades-long effort to raise standards.”

What we really had is a decades-long effort to appease teacher unions by pouring more money into the existing school monopoly.

That was the real purpose of failed schemes like Bush’s No Child Left Behind (I call it No Bureaucrat Left Behind) and Obama’s Common Core.

I briefly thought how much fun I would have if I was an editor at the New York Times. Then the email summary would have looked like this.

To be fair, I don’t think spending (either a lot or a little) is the issue.

The real problem is the structure of our education system. We have a very inefficient monopoly that has been captured by the teacher unions, which means mediocre results.

It doesn’t matter that most teachers are well meaning and it doesn’t matter that most parents are well meaning. Until we replace the monopoly with school choice, things won’t get any better.

Let’s close with some speculation about whether the above story is an example of media bias?

Perhaps, but I think it’s most likely that it’s an an example of the “Butterfield Effect.” As I explained back in 2010, this is a term used to mock journalists for being blind to the real story.

A former reporter for the New York Times, Fox Butterfield, became a bit of a laughingstock in the 1990s for publishing a series of articles addressing the supposed quandary of how crime rates could be falling during periods when prison populations were expanding. A number of critics sarcastically explained that crimes rates were falling because bad guys were behind bars and invented the term “Butterfield Effect” to describe the failure of leftists to put 2 + 2 together.

In other words, the journalist who wrote the aforementioned story may not be biased. Or even a leftist.

But such people inhabit a world where government is universally perceived as a means of solving problems.

P.S. Here are some of my favorite examples of the “Butterfield Effect,” all of which presumably were caused by some combination of media bias and economic ignorance.

• A newspaper article that was so blind to the Laffer Curve that it actually included a passage saying, “receipts are falling dramatically short of targets, even though taxes have increased.”
• Another article was entitled, “Few Places to Hide as Taxes Trend Higher Worldwide,” because the reporter apparently was clueless that tax havens were attacked precisely so governments could raise tax burdens.
• In another example of laughable Laffer Curve ignorance, the Washington Post had a story about tax revenues dropping in Detroit “despite some of the highest tax rates in the state.”
• Likewise, another news report had a surprised tone when reporting on the fully predictable news that rich people reported more taxable income when their tax rates were lower.
• A New York Times article was headlined, “Trillions Spent, but Crises like Greece’s Persist,” indicating nobody realized spending was the problem rather than solution.
• The news staff of the Wall Street Journal also demonstrated their ignorance of the Laffer Curve with a story headlined: “Despite Top-Property Tax Rate in Connecticut, the State’s Capital Teeters on Bankruptcy.”

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More Sloppy Analysis from the New York Times

The New York Times is going overboard with disingenuous columns.

A few days ago, I pointed out the many errors in David Leonhardt’s column extolling the wealth tax.

I also explained back in August how Steven Greenhouse butchered the data when he condemned the American economy.

And Paul Krugman is infamous for his creative writing.

But Mr. Leonhardt is on a roll. He has a new column promoting class warfare tax policy.

Almost a decade ago, Warren Buffett made a claim that would become famous. He said that he paid a lower tax rate than his secretary, thanks to the many loopholes and deductions that benefit the wealthy. …“Is it the norm?” the fact-checking outfit Politifact asked. “No.” Time for an update: It’s the norm now. …the 400 wealthiest Americans last year paid a lower total tax rate — spanning federal, state and local taxes — than any other income group, according to newly released data. …That’s a sharp change from the 1950s and 1960s, when the wealthy paid vastly higher tax rates than the middle class or poor.

Here’s the supposed proof for Leonhardt’s claim, which is based on a new book from two professors at the University of California at Berkeley, Emmanuel Saez and Gabriel Zucman.

Here are the tax rates from 1950.

And here are the tax rates from last year, showing the combined effect of the Kennedy tax cut, the Reagan tax cuts, the Bush tax cuts, and the Trump tax cut (as well as the Nixon tax increase, the Clinton tax increase, and the Obama tax increase).

So is Leonhardt (channeling Saez and Zucman) correct?

Are these charts evidence of a horrid and unfair system?

Nope, not in the slightest.

But this data is evidence of dodgy analysis by Leonhardt and the people he cites.

First and foremost, the charts conveniently omit the fact that dividends and capital gains earned by high-income taxpayers also are subject to the corporate income tax.

Even the left-leaning Organization for Economic Cooperation and Development acknowledges that both layers of tax should be included when measuring the effective tax rate on households.

Indeed, this is why Warren Buffett was grossly wrong when claiming he paid a lower tax rate than his secretary.

But there’s also another big problem. There’s a huge difference between high tax rates and high tax revenues.

Simply stated, the rich didn’t pay a lot of tax when rates were extortionary because they can choose not to earn and declare much income.

Indeed, there were only eight taxpayers in 1960 who paid the top tax rates of 91 percent.

Today, by contrast, upper-income taxpayers are paying an overwhelming share of the tax burden.

It’s especially worth noting that tax collections from the rich skyrocketed when Reagan slashed the top tax rate in the 1980s.

Let’s close by pointing out that Saez and Zucman are promoting a very radical tax agenda.

Saez and Zucman sketch out a modern progressive tax code. The overall tax rate on the richest 1 percent would roughly double, to about 60 percent. The tax increases would bring in about $750 billion a year, or 4 percent of G.D.P…. One crucial part of the agenda is a minimum global corporate tax of at least 25 percent. …Saez and Zucman also favor a wealth tax

Punitive income tax rates, higher corporate tax rates, and a confiscatory wealth tax.

Does anybody think copying France is a recipe for success?

P.S. I pointed out that Zucman and Saez make some untenable assumptions when trying to justify how a wealth tax won’t hurt the economy.

P.P.S. It’s also worth remembering that the income of rich taxpayers will be subject to the death tax as well, which means Leonhardt’s charts are doubly misleading.

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Economic Illiteracy from the New York Times

I periodically mock the New York Times when editors, reporters, and columnists engage in sloppy and biased analysis.

• Claiming Medicaid cuts in a piece that shows rising outlays for the program.
• Asserting that government schools are “starved of funding” when taxpayer subsidies actually have skyrocketed.
• Claiming that budget-cutting austerity nations are doing worse than “stimulus” nations, but getting the numbers backwards.
• Writing that the sequester will mean “deep automatic spending cuts” when the budget actually would climb by $2.4 trillion.
• Claiming that Italy is more prosperous than the United States and that there is less poverty.
• Asserting that U.S. multinationals pay little tax on foreign-source income, but forgetting to include the taxes paid to foreign governments.
• Cherry-picking income data to hide the fact that pro-market policies produce broadly shared prosperity.
• Attacking the fairness of America’s economy by using poverty data that doesn’t actually measure poverty.
• A column that blames capitalism for the shortcomings of China’s government-run health system.

Now we have another example.

Check out these excerpts from a New York Times column by Steven Greenhouse.

The United States is the only advanced industrial nation that doesn’t have national laws guaranteeing paid maternity leave. It is also the only advanced economy that doesn’t guarantee workers any vacation, paid or unpaid, and the only highly developed country (other than South Korea) that doesn’t guarantee paid sick days. …Among the three dozen industrial countries in the Organization for Economic Cooperation and Development, the United States has the lowest minimum wage as a percentage of the median wage — just 34 percent of the typical wage, compared with 62 percent in France and 54 percent in Britain. It also has the second-highest percentage of low-wage workers among that group… All this means the United States suffers from what I call “anti-worker exceptionalism.” …America’s workers have for decades been losing out: year after year of wage stagnation.

Sounds like the United States is some sort of Dystopian nightmare for workers, right?

Well, if there’s oppression of labor in America, workers in other nations should hope and pray for something similar.

Here’s a chart showing per-capita “actual individual consumption” for various nations that are part of the Organization for Economic Cooperation and Development. As you can see, people in the United States have much higher living standards.

By the way, I can’t resist pointing out another big flow in Greenhouse’s NYT column.

He wrote that the U.S. has “the second-highest percentage of low-wage workers.” That sounds like there’s lots of poverty in America. Especially since the U.S. is being compared to a group of nations that includes decrepit economies such as Mexico, Turkey, Italy, and Greece.

But this statement is nonsense because it is based on OECD numbers that merely measure the percent of workers in each nation that earn less than two-thirds of the national median level. Yet since median income generally is much higher in the United States, it’s absurd to use this data for international comparisons.

In other words, Greenhouse is relying on data that deliberately confuse absolute living standards and relative living standards. Why? Presumably to try to make the United States look bad and/or to advance a pro-redistribution agenda.

P.S. You can find similarly dishonest ways of measuring poverty from the United Nations, the Equal Welfare Association, Germany’s Institute of Labor Economics, the Obama Administration, and the European Commission.

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Keynesian Economics and Journalistic Malpractice

Given the repeated failures of Keynesian economic policy, both in America and around the world, you would think the theory would be discredited.

Or at least be treated with considerable skepticism by anyone with rudimentary knowledge of economic affairs.

Apparently financial journalists aren’t very familiar with real-world evidence.

Here are some excerpts from a news report in the Wall Street Journal.

The economy was supposed to get a lift this year from higher government spending enacted in 2018, but so far much of that stimulus hasn’t shown up, puzzling economists. Federal dollars contributed significantly less to gross domestic product in early 2019 than what economic forecasters had predicted after Congress reached a two-year budget deal to boost government spending. …Spending by consumers and businesses are the most important drivers of economic growth, but in recent years, government outlays have played a bigger role in supporting the economy.

The lack of “stimulus” wasn’t puzzling to all economists, just the ones who still believe in the perpetual motion machine of Keynesian economics.

Maybe the reporter, Kate Davidson, should have made a few more phone calls.

Especially, for instance, to the people who correctly analyzed the failure of Obama’s so-called stimulus.

With any luck, she would have learned not to put the cart before the horse. Spending by consumers and businesses is a consequence of a strong economy, not a “driver.”

Another problem with the article is that she also falls for the fallacy of GDP statistics.

Economists are now wondering whether government spending will catch up to boost the economy later in the year… If government spending were to catch up in the second quarter, it would add 1.6 percentage points to GDP growth that quarter. …The 2018 bipartisan budget deal provided nearly $300 billion more for federal spending in fiscal years 2018 and 2019 above spending limits set in 2011.

The government’s numbers for gross domestic product are a measure of how national income is allocated.

If more of our income is diverted to Washington, that doesn’t mean there’s more of it. It simply means that less of our income is available for private uses.

That’s why gross domestic income is a preferable number. It shows the ways – wages and salaries, small business income, corporate profits, etc – that we earn our national income.

Last but not least, I can’t resist commenting on these two additional sentences, both of which cry out for correction.

Most economists expect separate stimulus provided by the 2017 tax cuts to continue fading this year. …And they must raise the federal borrowing limit this fall to avoid defaulting on the government’s debt.

Sigh.

Ms. Davidson applied misguided Keynesian analysis to the 2017 tax cut.

The accurate way to analyze changes in tax policy is to measure changes in marginal tax rates on productive behavior. Using that correct approach, the pro-growth impact grows over time rather than dissipating.

And she also applied misguided analysis to the upcoming vote over the debt limit.

If the limit isn’t increased, the government is forced to immediately operate on a money-in/money-out basis (i.e. a balanced budget requirement). But since revenues are far greater than interest payments on the debt, there would be plenty of revenue available to fulfill obligations to bondholders. A default would only occur if the Treasury Department deliberately made that choice.

Needless to say, that ain’t gonna happen.

The bottom line is that – at best – Keynesian spending can temporarily boost a nation’s level of consumption, but economic policy should instead focus on increasing production and income.

P.S. If you want to enjoy some Keynesian-themed humor, click here.

P.P.S. If you’re a glutton for punishment, you can watch my 11-year old video on Keynesian economics.

P.P.P.S. Sadly, the article was completely correct about the huge spending increases that Trump and Congress approved when the spending caps were busted (again) in 2018.

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Another “Useful Idiot” Seeks to Prop Up Cuba’s Thuggish Regime by Regurgitating Propaganda

There’s a long and sordid history of people in Western nations acting as dupes and apologists for communism.

This is especially the case with the wretchedly impoverished totalitarian outpost 90 miles south of Florida.

• President Obama lauded aspects of Cuba’s totalitarian regime when he visited in 2016.
• Jeffrey Sachs ranked Cuba higher on development goals than the United States.
• Jimmy Carter (and Jeremy Corbyn, Justin Trudeau, etc) gushed about Fidel Castro when the long-time dictator died.
• Numerous vapid celebrities have helped turn the thuggish and racist Che Guevera into a pop icon.

Based on what he wrote for the opinion pages of the New York Times, Nicholas Kristof belongs on that list of “useful idiots.”

Cuba…in health care…does an impressive job that the United States could learn from. …an American infant is, by official statistics, almost 50 percent more likely to die than a Cuban infant. By my calculations, that means that 7,500 American kids die each year because we don’t have as good an infant mortality rate as Cuba reports. …a major strength of the Cuban system is that it assures universal access. Cuba has the Medicare for All that many Americans dream about. …It’s also notable that Cuba achieves excellent health outcomes even though the American trade and financial embargo… Cuba overflows with doctors — it has three times as many per capita as the United States… Outsiders mostly say they admire the Cuban health system. The World Health Organization has praised it, and Ban Ki-moon, the former United Nations secretary general, described it as “a model for many countries.”

Kristof admits in his piece that there are critics who don’t believe the regime’s data, but it’s clear he doesn’t take their concerns seriously.

And he definitely doesn’t share their data. So lets take a close look at the facts that didn’t appear in Kristof’s column.

My first recommendation is to watch Johan Norberg’s video on the real truth about Cuba’s infant mortality.

But there’s so much more.

Jay Nordlinger authored the most comprehensive takedown of Cuba’s decrepit system back in 2007. Here are some of the highlights.

The Left has always had a deep psychological need to believe in the myth of Cuban health care. On that island, as everywhere else, Communism has turned out to be a disaster: economic, physical, and moral. Not only have persecution, torture, and murder been routine, there is nothing material to show for it. The Leninist rationalization was, “You have to break some eggs to make an omelet.” Orwell memorably replied, “Where’s the omelet?” There is never an omelet. …there is excellent health care on Cuba — just not for ordinary Cubans. …there is not just one system, or even two: There are three. The first is for foreigners who come to Cuba specifically for medical care. This is known as “medical tourism.” The tourists pay in hard currency… The second health-care system is for Cuban elites — the Party, the military, official artists and writers, and so on. In the Soviet Union, these people were called the “nomenklatura.” And their system, like the one for medical tourists, is top-notch. Then there is the real Cuban system, the one that ordinary people must use — and it is wretched. Testimony and documentation on the subject are vast. Hospitals and clinics are crumbling. Conditions are so unsanitary, patients may be better off at home, whatever home is. If they do have to go to the hospital, they must bring their own bedsheets, soap, towels, food, light bulbs — even toilet paper. And basic medications are scarce. …The equipment that doctors have to work with is either antiquated or nonexistent. Doctors have been known to reuse latex gloves — there is no choice. …So deplorable is the state of health care in Cuba that old-fashioned diseases are back with a vengeance. These include tuberculosis, leprosy, and typhoid fever. And dengue, another fever, is a particular menace.

Wow, I guess shortages extend well beyond toilet paper.

Next we have some very sobering data from a 2004 article in Canada’s National Post.

…a small bottle of tetracycline costs US$5 and a tube of cortisone cream will set you back as much as US$25. But neither are available at the local pharmacy, which is neat and spotless, but stocks almost nothing. Even the most common pharmaceutical items, such as Aspirin and rubbing alcohol, are conspicuously absent. …Antibiotics, one of the most valuable commodities on the cash-strapped Communist island, are in extremely short supply and available only on the black market. Aspirin can be purchased only at government-run dollar stores, which carry common medications at a huge markup in U.S. dollars. This puts them out of reach of most Cubans, who are paid little and in pesos. Their average wage is 300 pesos per month, about $12. …tourist hospitals in Cuba are well-stocked with the latest equipment and imported medicines, said a Cuban pediatrician, who did not want to be identified. …”Tourists have everything they need,… But for Cubans, it’s different. Unless you work with tourists or have a relative in Miami sending you money, you will not be able to get what you need if you are sick in Cuba. As a doctor, I find it disgusting.”

And here’s some scholarly research from Katherine Hirschfeld at the University of Oklahoma (h/t: Scott Johnson).

…the Cuban government continues to respond to international criticism of its human rights record by citing…praise for its achievements in health and medicine…the unequivocally positive descriptions of the Cuban health care system in the social science literature are somewhat misleading. In the late 1990s, I conducted over nine months of qualitative ethnographic and archival research in Cuba. During that time I shadowed physicians in family health clinics, conducted formal and informal interviews with a number of health professionals, lived in local communities, and sought to participate in everyday life as much as possible. Throughout the course of this research, I found a number of discrepancies between the way the Cuban health care system has been described in the scholarly literature, and the way it appears to be described and experienced by Cubans themselves. …After just a few months of research, …it became increasingly obvious that many Cubans did not appear to have a very positive view of the health care system themselves. A number of people complained to me informally that their doctors were unhelpful, that the best clinics and hospitals only served political elites and that scarce medical supplies were often stolen from hospitals and sold on the black market. Further criticisms were leveled at the politicization of medical care… Public criticism of the government is a crime in Cuba, and penalties are severe. Formally eliciting critical narratives about health care would be viewed as a criminal act both for me as a researcher, and for people who spoke openly with me. …One of the most readily apparent problems with the health care system in Cuba is the severe shortage of medicines, equipment, and other supplies. …Many Cubans (including a number of health professionals) also had serious complaints about the intrusion of politics into medical treatment and health care decision-making.

Three academics at Texas Tech University also found very troubling data when they investigated the nation’s health system (h/t: David Henderson).

With 11.1% of GDP dedicated to health care and 0.8% of the population working as physicians, a substantial amount of resources is directed towards reducing infant mortality and increasing longevity. An economy with centralized economic planning by government like that of Cuba can force more resources into an industry than its population might desire in order to achieve improved outcomes in that industry at the expense of other goods and services the population might more highly desire. …Physicians are given health outcome targets to meet or face penalties. This provides incentives to manipulate data. Take Cuba’s much praised infant mortality rate for example. In most countries, the ratio of the numbers of neonatal deaths and late fetal deaths stay within a certain range of each other as they have many common causes and determinants. …Cuba, with a ratio of 6, was a clear outlier. This skewed ratio is evidence that physicians likely reclassified early neonatal deaths as late fetal deaths, thus deflating the infant mortality statistics and propping up life expectancy. Cuban doctors were re-categorizing neonatal deaths as late fetal deaths in order for doctors to meet government targets for infant mortality. …Physicians often perform abortions without clear consent of the mother, raising serious issues of medical ethics, when ultrasound reveals fetal abnormalities because ‘otherwise it might raise the infant mortality rate’. …The role of Cuban economic and political oppression in coercing ‘good’ health outcomes merits further study.

The bottom line is that Cuba is a hellhole and statistics from a repressive regime can’t be trusted.

Though the real message of today’s column is that we should be revolted by people who are willing to be dupes for totalitarianism.

And I can understand why people willing to debase themselves in that way are so sensitive to criticism.

P.S. The New York Times has a pathetic history of covering up for the crimes of communism, most notably Walter Duranty, who was given a Pulitzer Prize in 1932 even though he despicably lied in his reports to promote Stalin’s horrid regime. He even covered up Stalin’s holocaust of the Ukrainian people. Even though Duranty’s evil actions are now public knowledge, the Pulitzer Prize Board has not revoked the award. The New York Times, to its credit, at least has acknowledged that Duranty lied to promote Stalin’s brutal dictatorship. One wonders if the newspaper eventually will apologize for Kristof.

P.P.S. I’m also not impressed that a former Secretary General of the U.N. endorsed Cuba’s health care system. After all, it was an official from the U.N. who praised the lack of obesity among the starving people of North Korea.

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Sloppy and Malignant Bias from the New York Times

I periodically mock the New York Times when editors, reporters, and columnists engage in sloppy and biased analysis.

• Claiming Medicaid cuts in a piece that shows rising outlays for the program.
• Asserting that government schools are “starved of funding” when taxpayer subsidies actually have skyrocketed.
• Claiming that budget-cutting austerity nations are doing worse than “stimulus” nations, but getting the numbers backwards.
• Writing that the sequester will mean “deep automatic spending cuts” when the budget actually would climb by $2.4 trillion.
• Claiming that Italy is more prosperous than the United States and that there is less poverty.
• Asserting that U.S. multinationals pay little tax on foreign-source income, but forgetting to include the taxes paid to foreign governments.
• Cherry-picking income data to hide the fact that pro-market policies produce broadly shared prosperity.
• Attacking the fairness of America’s economy by using poverty data that doesn’t actually measure poverty.

But all these instances of intentional and unintentional bias are trivial compared to our next example.

The New York Times has gone above and beyond conventional media bias with a video entitled, “How Capitalism Ruined China’s Health Care System.”

Here’s the part that caused my jaw to drop.

After the sad opening story about the guy with the sick mother, there’s a section from 1:33-2:27 that makes two observations that basically show the premise of the video is totally wrong.

• First, it points out (from 1:33-1:42) that there is a universal, government-run health system that ostensibly covers the guy’s mother, so her unfortunate status is yet another example that coverage in a government-run healthcare system is not the same as treatment.
• Second, it points out (from 2:05-2:27) that life expectancy soared once the communist party relaxed its grip on the economy and allowed some liberalization, which would seem to be powerful evidence that capitalism leads to better health outcomes.

These are astounding mistakes.

But it gets worse. Sarah Lilly, who lives in China, debunked the rest of the video in a column for FEE.

The New York Times…attempts to blame capitalism for the many problems in China’s health care system. …As a resident of China and a recipient of outstanding private health care here, I was confused as to why the Times would show us the horrors of a capitalist system without actually visiting a private health care facility. …All of the horrors depicted in the high-quality video—the long lines, the scalping, and the hospital fights—occurred at government-run health care facilities. …At the very least, failing to feature a single private medical facility while blaming capitalism for the dysfunction of China’s public health system is intellectually dishonest.

She points out that the big-picture analysis in the video is wrong.

In the video, the Times praises Chairman Mao’s introduction of “free” health care and claims that when capitalism was introduced into the country, the state retreated and care was no longer free. Neither statement is true. First, health care was never free; it was paid for by tax revenues. Second, the state never retreated; rather, its regulatory apparatus became vaster and even more invasive. Out of sheer necessity, China allowed for the creation of private hospitals to ease the burden of the country’s heavily bureaucratic and deteriorating health care system.

And she also explains that the details of the video are wrong.

The Times video depicts the ungodly long line most Chinese face to see a physician. …It’s an appalling scene. …There’s just one problem. The Shanghai Cancer Center is a public hospital, not a private one. The long lines, scalpers, bribes, and physical fights with hospital staff—all of these exclusively happen in the public, communist, government-run hospitals. …In an egregious bit of sleight-of-hand, the Grey Lady asserts that capitalism is ruining Chinese health care while presenting us with a hospital where capitalism is not practiced.

To be fair, we get the same type of mistake when journalists look at the flaws in the American health system. They blame capitalism when the problems of ever-higher prices and uneven coverage are the consequences of government intervention.

P.S. My columns about sloppy bias at the New York Times don’t include Paul Krugman’s writings. Debunking those mistakes requires several different collections.

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Journalistic Alchemy: Washington Post Magically Transforms a Spending Cut into a Tax Increase

I don’t focus much on media bias because journalists generally aren’t dishonest. Instead, they choose which stories to highlight or downplay based on what advances their political agenda. Though every so often I’ll highlight an example of where bias leads to an egregious (maybe even deliberately dishonest) mistake.

• Like the time a column in the New York Times argued that “austerity” kills people, but the examples cited were countries where the burden of government spending was higher.
• Or the time that the Washington Post said that a $71 billion increase in Medicaid spending was a 25 percent cut?
• And how about when the New York Times published a story about schools being “starved of funding” when even a cursory look at the data would confirm outlays have climbed substantially.

Now we have an addition to that collection from a WonkBlog column in the Washington Post. The piece starts with an accurate observation that the tax plan on Capitol Hill isn’t a long-run tax cut.

Senate rules require the Tax Cuts and Jobs Act not to add to the federal deficit after 10 years. …The bill aims to cut corporate taxes in perpetuity…but they actually need to raise money to offset the permanent corporate tax reduction.

Yes, as I wrote two weeks ago, the long-run tax cuts have to be offset by long-run revenue increases. So that part of the column is fine.

We then get this rather dubious assertion.

Republicans are paying for a permanent cut for corporations with an under-the-radar tax increase on individuals.

In part, it’s a dodgy claim because there are provisions in the bill that collect more revenue from companies, such as the partial loss of interest deductibility and various base erosion rules. So if he wanted to be accurate, the author should have begun that sentence with “Republicans are partially paying for…”

But that’s only part of the problem. As you can see from this next excerpt, he cites a former Democrat staffer and doubles down on the allegation that individual taxpayers will be coughing up more money to Uncle Sam because of the legislation.

This chart, playing off what the Senate’s former top tax aide and New York University professor Lily Batchelder pointed out on Twitter on Friday evening, makes vividly clear where Republicans ultimately raise that money. …we know it’s individual taxpayers who ultimately bear the cost of the tax bill.

And here’s the chart that ostensibly shows that you and me are going to pay more money so evil corporations can enjoy a tax cut.

Notice, however, the part I circled in green. It shows that Republicans are repealing Obamacare’s individual mandate as part of their tax reform plan, and it also shows that repeal has budgetary effects.

So how is this a tax increase (the pink portion of the bar chart), as the Washington Post wants us to believe?

Needless to say, the honest answer is that it isn’t a tax hike. Getting rid of the mandate means people won’t get “fined” by the IRS if they choose not to buy health insurance. If anything, that should count as a tax cut.

But that’s not what’s represented by the pink part of the bar chart. Instead, it shows that when you get rid of the mandate and consumers choose not to get Obamacare policies, that automatically means that insurance companies will get fewer subsidies from Uncle Sam (getting access to that cash was one of the reasons the big insurance companies lobbied for Obamacare).

In other words, the chart actually is showing that corporate rate reduction is partially financed by a reduction in spending, which is a win-win from my perspective.

By the way, you don’t have to believe me. On page 9 of the Joint Committee on Taxation’s revenue estimate (which presumably will be posted on the JCT website at some point), you find this footnote about the “outlay effect” of repealing the mandate.

At the risk of stating the obvious, an “outlay effect” is when a change in law causes a shift in government spending. That’s what’s happening, not a tax increase on individuals.

By the way, the author sort of admits this is true in a passage buried near the bottom of the column.

…a number of analysts argue that it’s wrong to consider the loss of insurance related to the end of the ACA mandate a tax increase, because it reflects individuals’ choice not to get insurance.

That’s a pathetic attempt at justifying a dishonest article.

Here’s the bottom line.

1. Individuals will be paying less money to the IRS because of this provision, not more.
2. The fiscal impact of the provision is less spending, not more tax revenue.

Sadly, most readers will have no idea that they were deliberately misled.

P.S. The “alternative inflation measure” in the bill (the red portion of the bar chart) arguably is a tax increase. Or, for those who persuasively argue that it’s a more accurate measure, it’s a provision that will result in individual taxpayers sending more money to Uncle Sam compared to current law since the new measure (chained CPI) will result in smaller inflation adjustments to tax brackets and the standard deduction.

P.P.S. If repealing just one small piece of Obamacare will save about $300 billion over the next decade, imagine how much money we could save if the entire law was repealed.

P.P.P.S. Since I’ve previously explained how politicians use alchemy to turn spending increases into tax cuts, I guess it’s not surprising that some folks are using the same magic to turn spending cuts into tax increases.

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Egregious Media Dishonesty Overshadows Important Economic Observation

While it’s quite clear that the establishment media leans to the left, I don’t get too agitated about bias. Though every so often I can’t resist the temptation to comment when I come across egregious examples on issues such as poverty, guns, Greece, jobs, taxes, and education.

The bias extends to politics, of course, though the only time I felt compelled to comment was when ABC News rushed to imply that the Tea Party somehow was connected to a mass shooting in Colorado.

Well, I now feel compelled to comment again. But this example goes beyond bias and should be characterized as blatant and disgusting dishonesty. The hacks at Time took a quote from Charles Koch and then used selective editing to completely misrepresent what he actually said.

In a just world, the person who engaged in this bit of mendacity would lose his or her job and never again work in journalism. But I would hold my breath waiting for that to happen.

But let’s set aside the issue of media bias and dishonesty.

I want to highlight what Mr. Koch said about GDP. He expressed skepticism of that measure because it doesn’t distinguish between good expenditures and bad expenditures.

That’s one of the reasons why I prefer gross domestic income instead of gross domestic product. In simple terms, GDI measures how our national income is generated and GDP measures how it is allocated.

As the Bureau of Economic Analysis explains, the two numbers are basically different sides of the same coin.

In national economic accounting, GDP and GDI are conceptually equal. GDP measures overall economic activity by final expenditures, and GDI measures it by the incomes generated from producing GDP. In practice, GDP and GDI differ because they are constructed using different sources of information. …when one looks at annual data – where the timing differences are less important, the correlation between GDP and GDI is 0.97.

That correlation shouldn’t be a surprise. Indeed, over a longer period of time, the two numbers should be identical.

Both go up when the economy is doing well, and both go down when there is a recession.

But I want to make a more subtle point.

The reason I like GDI over GDP is because one the former is more likely to lead people to support good policy while the latter is more likely to lead people in the direction of bad policy.

Here’s some of what I wrote on the topic back in 2013.

GDP numbers only measure how we spend or allocate our national income. It’s a very indirect way of measuring economic health. Sort of like assessing the status of your household finances by adding together how much you spend on everything from mortgage and groceries to your cable bill and your tab at the local pub. Wouldn’t it make much more sense to directly measure income? Isn’t the amount of money going into our bank accounts the key variable? The same principle is true – or should be true – for a country. That’s why the better variable is gross domestic income (GDI). It measures things such as employee compensation, corporate profits, and small business income. …We should be focusing on how to increase national income, not what share of it is being redistributed by politicians.

And, on a related note, you can back to 2009 for a column I wrote explaining that consumer spending is a reflection of a strong economy, not the cause of a  strong economy.

And this video ties everything together by debunking the Keynesian argument that politicians should focus on goosing consumer spending.

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Story about German “Poverty” Features World’s Most Dishonest Headline or World’s Most Clueless Headline

As I peruse the news, I periodically see headlines that are misleading in some fashion.

And if the headline is sufficiently off-key or bizarre, I feel compelled to grouse.

• A disappointingly inaccurate headline about the capital sinking into the sea.
• A grossly misleading headline about theft at the IRS.
• A very unsurprising headline about bailouts in Greece.

Now I have a new example, though I’m not sure whether to call it dishonest or clueless.

The EU Observer has a brief report that poverty has reached record levels in Germany.

Despite a booming economy, 12.9 million people in Germany were living below the poverty line in 2015, the Equal Welfare Association reported on Thursday. Based on figures from the Federal Statistical Office the alliance found a record high poverty rate of 15.7 percent in 2015.

By the way, I can’t resist pointing out that there is no “booming economy” in Germany. Growth in 2016 was only 1.9 percent.

Yes, that’s decent by European standards of stagnation and decline, but it’s far from impressive in any other context.

But I’m digressing. Let’s get back to the main point of today’s column.

As you can see from the story’s headline, the implication is that lots of people are left behind and mired in deprivation even though the economy is moving forward.

But there’s a problem with both the story and the headline.

If you read carefully, it turns out that both the story (and the study that triggered the story) have nothing to do with poverty.

No link at all. None. Zero. Nada. Zilch.

I’m not joking. There’s no estimate of the number of people below some measure of a German poverty line. There’s no calculation of any sort about living standards. Instead, this story (and the underlying report) are about the distribution of income.

…people [are] defined as poor when living on an income less than 60 percent of that of the median German household.

One might be tempted at this point to dismiss this as a bit of journalistic sloppiness. Indeed, one might even conclude that this is a story about nothing.

After all, noting that some people are below 60 percent of the median income level is about as newsworthy as a report saying that half of people are above average and half are below average.

But there actually is a story here. Though it’s not about poverty. Instead, it’s about an ongoing statist campaign to redefine poverty to mean unequal distribution of income.

I’m not joking. For instance, the bureaucrats at the Paris-based Organization for Economic Cooperation and Development actually put out a study claiming that there was more poverty in the United States than in nations such as Greece, Portugal, and Turkey.

How could they make such a preposterous claim? Easy, the OECD bureaucrats didn’t measure poverty. Instead, they concocted a measure of the degree to which various countries are close to the left-wing dream of equal incomes.

And the Obama Administration also tried to manipulate poverty statistics in the United States in hopes of pushing this statist agenda of coerced equality.

Robert Rector of the Heritage Foundation wrote about what Obama tried to do.

…the Obama administration…measure, which has little or nothing to do with actual poverty, will serve as the propaganda tool in Obama’s endless quest to “spread the wealth.” …The current poverty measure counts absolute purchasing power — how much steak and potatoes you can buy. The new measure will count comparative purchasing power — how much steak and potatoes you can buy relative to other people. …In other words, Obama will employ a statistical trick to ensure that “the poor will always be with you,” no matter how much better off they get in absolute terms. …The weird new poverty measure will produce very odd results. For example, if the real income of every single American were to magically triple over night, the new poverty measure would show there had been no drop in “poverty,” because the poverty income threshold would also triple. …Another paradox of the new poverty measure is that countries such as Bangladesh and Albania will have lower poverty rates than the United States, even though the actual living conditions in those countries are extremely bad.

Even moderates such as Robert Samuelson recognized that Obama’s agenda was absurd. Here is some of what he wrote.

…the new definition has strange consequences. Suppose that all Americans doubled their incomes tomorrow, and suppose that their spending on food, clothing, housing and utilities also doubled. That would seem to signify less poverty — but not by the new poverty measure. It wouldn’t decline, because the poverty threshold would go up as spending went up. Many Americans would find this weird: People get richer but “poverty” stays stuck.

To put this all in context, the left isn’t merely motivated by a desire to exaggerate and misstate poverty. That simply the means to an end.

What they want is more redistribution and higher tax rates. The OECD openly admitted that was the goal in another report. Much as all the fixation about inequality in America is simply a tool to advocate bigger government.

P.S. Germany is an example of a rational welfare state. While the public sector is far too large, the country has enjoyed occasional periods of genuine spending restraint and German politicians wisely avoided a Keynesian spending binge during the last recession.

P.P.S. Though Germany also has its share of crazy government activity, including a big green-energy boondoggle. And lots of goofy actions, such as ticketing a one-armed man for have a bicycle with only one handlebar brake, taxing homeowners today for a street that was built beginning in the 1930s, making streetwalkers pay a tax by using parking meters, and spending 30 times as much to enforce a tax as is collected.

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Trump, Tax Reform, and the Media-Generated Faux Controversy over “Net Operating Losses”

Because of his support for big government, I don’t like Donald Trump. Indeed, I have such disdain for him (as well as Hillary Clinton) that I’ve arranged to be out of the country when the election takes place.

The establishment media, by contrast, is excited about the election and many journalists are doing everything possible to aid the election of Hillary Clinton. In some cases, their bias leads to them to make silly pronouncements on public policy in hopes of undermining Trump. Which irks me since I’m then in the unwanted position of accidentally being on the same side as “The Donald.”

For instance, some of Trump’s private tax data was leaked to the New York Times, which breathlessly reported that he had a huge loss in 1995, and that he presumably used that “net operating loss” (NOL) to offset income in future years.

As I pointed out in this interview, Trump did nothing wrong based on the information we now have. Nothing morally wrong. Nothing legally wrong. Nothing economically wrong.

All that people really need to know is that NOLs exist in the tax code because businesses sometimes lose money (the worst thing that happens to individuals, by contrast, is that we get laid off and have zero income). With NOLs, companies basically get a version of “income averaging” so that they’re taxed on their long-run net income (i.e., total profits minus total losses).

In other words, this is not a controversy. Or it shouldn’t be.

But if you don’t believe me, let’s peruse the pages of The Flat Tax, which was written by Alvin Rabushka and Robert Hall at Stanford University’s Hoover Institution and is considered the Bible for tax reformers.

Here’s what it says about business losses in Chapter 5.

Remember that self-employed persons fill out the business tax form just as a large corporation does. Business losses can be carried forward without limit to offset future profits (assuming your bank or rich relatives will keep lending you money). There is no such thing as a tax loss under the individual wage tax. You can’t reduce your compensation tax by generating business losses. Well-paid individuals who farm as a hobby or engage in other dubious sidelines to shelter their wages from the IRS had better enjoy their costly hobbies; the IRS will not give them any break under the flat tax.

And here’s the business postcard for the flat tax. As you can see, it’s a very simple system based on the common-sense notion that profits equal total receipts minus total expenses.

And it allows “carry-forward” of losses, which is just another term for a company being able to use NOLs in one year to offset profits in a subsequent year.

But it’s not just advocates of the flat tax how hold this view.

A news report for the Wall Street Journal notes that NOLs are very normal in the business world for the simple reason that companies sometimes lose money.

The tax treatment of losses, bound to become a subject of national debate, is a typically uncontroversial feature of the income-tax system. The government doesn’t pay net refunds when business owners lose money, but it lets taxpayers use those losses to smooth their tax payments as they make money. That reflects the fact that “the natural business cycle of a taxpayer may exceed 12 months,” according to a congressional report.

Megan McArdle of Bloomberg also comments on this make-believe controversy.

At issue is the “net operating loss,” an accounting term that means basically what it sounds like: When you net out your expenses against the money you took in, it turns out that you lost a bunch of money. However, in tax law, this has a special meaning, because these NOLs can be offset against money earned in other years. …this struck many people as a nefarious bit of chicanery. And to be fair, they were probably helped along in this belief by the New York Times description of it, which made it sound like some arcane loophole wedged into our tax code at the behest of the United Association of Rich People and Their Lobbyists. …Every tax or financial professional I have heard from about the New York Times piece found this characterization rather bizarre. The Times could have just as truthfully written that the provision was “particularly prized by America’s small businesses, farmers and authors,” many of whom depend on the NOL to ensure that they do not end up paying extraordinary marginal tax rates — possibly exceeding 100 percent — on income that may not fit itself neatly into the regular rotation of the earth around the sun.

I like how she zings the NYT for its biased treatment of the issue.

She also explains why the law allows NOLs and why businesses (including, presumably, Trump’s companies) would prefer to never be in a position to utilize them.

“If someone has a $20 million gain in one year and a $10 million loss in the second year, that person should be treated the same as someone who had $5 million in each of the two years,” says Alan Viard, a tax specialist at the American Enterprise Institute, who like all the other experts, seemed somewhat surprised that this was not obvious. “There are definitely tax provisions narrowly targeted to various industries that you could take issue with,” says Ron Kovacev, a tax partner at Steptoe and Johnson. “The NOL is not one of them.” …Losing $900 million dollars may save you $315 million or so on future or past taxes. But astute readers will have noticed that it is not actually smart financial strategy to lose $900 million in order to get out of paying $315 million to the IRS. Most of us would rather have the other $585 million than a tax bill of $0. …If Trump managed to pay no taxes for years, the most likely way he did this was by losing sums much vaster than the unpaid taxes. This is fair, it is right, it is good tax policy.

In other words, Trump used NOLs, but he would have greatly preferred to avoid the big $916 million loss in the first place.

Ryan Ellis, writing for Forbes, doesn’t suffer fools gladly on this issue.

…political reporters don’t know a damned thing about taxes. …That ignorance was on display in vivid colors over the weekend. We were told that this tricky NOL was some sort of “loophole” that only super-rich bad guys like Donald Trump got to use. We were told that this relieved him of having to pay taxes for 18 years, a laughably arbitrary, made up number that is the tautological output of simple arithmetic and wild assumptions. …It’s not difficult to see how political reporters got played like a fiddle here. Most of them have never actually run a business, much less learned about the tax rules surrounding them.

I especially like that Ryan also nails the NYT for bias, in this case because the reporters used made-up number to imply that he didn’t pay tax for almost two decades.

And Ryan also notes that NOLs are very common (and were even used in 2015 by Trump’s opponent).

…a net operating loss is very common in businesses. As Alan Cole of the Tax Foundation pointed out this morning, about 1 million taxpayers had an NOL in 1995. It results from business deductions exceeding business income in a particular year. …Trump’s not the only presidential candidate this year who once had a big loss on his taxes. In 2015, the Clintons realized a capital loss of nearly $700,000. That will be available in perpetuity to offset capital gains they might incur. Unlike an NOL, a capital loss can slowly be used to offset other income, albeit at a slow $3000 per year net of any other gains offset.

Now that we’ve established that there’s nothing remotely scandalous about NOLs, let’s see whether there are any lessons we can from this kerfuffle.

Let’s return to the Wall Street Journal story cited earlier in this column.

Real-estate developers can generate losses more easily than other taxpayers. …Unlike investors in other businesses, they can use those losses to offset other income. …Bryan Skarlatos, a tax lawyer at Kostelanetz & Fink LLP, said…“Trump appears to have a perfect storm of allowable real-estate losses that can be offset against streams of income from salaries from his companies and royalty fees from the use of his name,” Mr. Skarlatos said. “Most taxpayers who have large real-estate losses don’t have such large steady streams of other ordinary income; they just have losses that may turn into profits in the future when they sell the real estate.”

This doesn’t tell us whether Trump actually did use his NOLs to offset other income, though I’m guessing the answer is yes. And as I speculated in the above interview, I wonder whether the losses were real losses or paper losses.

And others have suggested that Trump actually lost other people’s money and he was able to use their losses to offset some of his income.

I have no idea if that’s even possible, just as I have no idea whether his losses were real.

But I do know that a flat tax would put an end to any possible gamesmanship since it is a cash-flow system (which means it is based on actual transactions that take place, not whether companies use currency).

In a world with a flat tax, Trump would be allowed to “carry forward” losses, but only if they are real. And as explained above, he wouldn’t be able to use those losses to offset income that gets reported on the individual postcard.

So as I argued in the interview, let’s rip up the corrupt and destructive internal revenue code and copy the simple and fair flat tax that is used by Hong Kong.

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Assessing Trump’s Acceptance Speech at the GOP Convention: Fact-Checking the Fact-Checkers

Since I’m not a fan of either Donald Trump or Hillary Clinton, I think that puts me in a good position to fairly assess whether the candidates are being dishonest.

And since several media outlets just produced their “fact-checks” on Donald Trump’s acceptance speech to the Republican convention, this is a perfect opportunity to see not only whether Trump was being dishonest but also whether media fact-checking is honest.

Here’s some of the “fact-checking” from NBC., with each indented example being followed by my two cents.

TRUMP CLAIM: Nearly four in 10 African-American children are living in poverty, while 58 percent of African-American youth are now not employed. Two million more Latinos are in poverty today than when the President took his oath of office less than eight years ago.

THE FACTS: Yes, 38 percent of African American children are living in poverty, according to Census data. But Trump isn’t correct that 58 percent of African American youth are unemployed. The Bureau of Labor Statistics finds that the African American unemployment rate for those ages 16-19 is 28.4 percent (versus 16.9 percent for all youth that age). And Trump is misleading on his claim about Latinos living in poverty. In 2009, 12.3 million Latinos were living in poverty (with a rate of 25.3 percent). In 2014, the number jumped to 13 million — but the rate actually DECLINED to 23.6 percent.

Shame on NBC for pulling a bait-and-switch. Trump didn’t say that there is a 58-percent unemployment rate among black youth. He said that 58 percent of them aren’t employed.

What NBC doesn’t understand (or deliberately chooses to hide) is that the unemployment rate only counts those “actively” looking for work.

Trump was focusing on labor-force participation.

I’m sure he made that choice because it gave him a number that sounded bad, but there are very good reasons to focus on the share of people employed rather than the unemployment rate (though it’s worth noting that a 28.4 percent unemployment rate for young blacks is plenty scandalous, which raises the question of why Trump didn’t point out that African-Americans have been hurt by Obamanomics).

On the other hand, Trump may be factually wrong about the number of Latinos living in poverty, though you’ll notice below that National Public Radio basically said Trump is right on this issue.

TRUMP CLAIM: President Obama has almost doubled our national debt to more than 19 trillion dollars, and growing.

THE FACTS: He’s right. When Obama took office on Jan. 20, 2009, the public debt stood at $10.6 trillion. It is now $19.4 trillion, according to the U.S. Treasury Department.

Since I’ve already explained that George W. Bush deserves the overwhelming share of the blame for the budget numbers in Fiscal Year 2009 (which started on October 1, 2008), I think NBC actually missed a chance to criticize Trump for either being dishonest or for overstating the case against Obama.

Now let’s see what the New York Times wrote about Trump’s accuracy.

• “Nearly four in 10 African-American children are living in poverty, while 58 percent of African-American youth are not employed.”

Fact Check: According to the Bureau of Labor Statistics, the unemployment rate of African Americans ages 16-19 in June was 31.2 percent (among whites of the same age, it was 14.1 percent).

The NYT does the same bait-and-switch as NBC, accusing Trump of saying A when he actually said B.

Is this because of dishonesty or sloppiness? Beats me, though I suspect the former.

• “Household incomes are down more than $4,000 since the year 2000.”

Fact Check: This is mostly true. Median household income in 2000 was $57,724; in 2014, which has the most recent available data, it was $53,657.

My only comment is that I’m surprised the NYT didn’t go after Trump for using 2000 as his starting year, which obviously includes the stagnant big-government Bush years as well as the stagnant big-government Obama years.

• “Our manufacturing trade deficit has reached an all-time high – nearly $800 billion in a single year.”

Fact Check: The goods deficit — more imported goods, less exported goods — was $763 billion last year. But that includes agricultural products and raw materials like coal. Moreover, the total trade deficit last year was only $500 billion because the U.S. runs a trade surplus in services.

I think Trump is wrong about trade. Wildly wrong.

But the NYT is once again doing a bait-and-switch. Trump was talking about the trade is goods, not the overall trade balance.

They could have accurately accused him of selective use of statistics, or even misleading use of statistics. But his claim was accurate (depending whether you think $763 billion is “nearly” $800 billion).

• “President Obama has doubled our national debt to more than $19 trillion, and growing.”

Fact Check: The national debt was $10.6 trillion on the day Obama took office. It was $19.2 trillion in April, so not quite double, but close.

As I explained above, this is an example of the media missing a chance to hit Trump, presumably because journalists don’t understand the budget process.

• “Forty-three million Americans are on food stamps.”

Fact Check: As of October, this figure was largely accurate, according to the United States Department of Agriculture.

At least the New York Times didn’t try to spin this number by claiming food stamps are “stimulus.”

Speaking of spin, here’s the fact-checking from National Public Radio.

Nearly 4 in 10 African-American children are living in poverty, while 58% of African-American youth are now not employed.

[Thirty-six percent of African-Americans under 18 were below the poverty line as of 2014, according to the Census Bureau. It’s not entirely clear what Trump means by “not employed,” which is not technically the same as “unemployed,” which counts people who aren’t working and are looking for work. However, the unemployment rate for black Americans ages 16 to 19 was 38.1 percent as of June. — Danielle Kurtzleben]

It’s actually very clear what Trump meant by “not employed.” As should be obvious, it means the share of the population that is not working.

But NPR presumably is pretending to  be stupid so they can do a bait-and-switch and focus on the unemployment rate.

2 million more Latinos are in poverty today than when President Obama took his oath of office less than eight years ago.

[That’s roughly true, by the latest data available. Around 11 million Hispanic-Americans were in poverty in 2008, compared with 13.1 million in 2014. The poverty rate makes more sense to compare, though — that has grown 0.4 points since 2008, but it has also declined lately, down by nearly 3 points since 2010. As for whether President Obama is responsible for this, we get to that below. — Danielle Kurtzleben]

The fact that NBC and NPR disagree appears to be based on whether one uses the total number of poor Latinos in 2008 or 2009.

Obama took his oath of office in early 2009, so it seems that NPR missed a chance to attack Trump.

Though without knowing how the Census Bureau measures the number of people in poverty in any given year (average for the entire year? the number as of January 1? July 1? December 31?), there’s no way to know whether Trump exaggerated or misspoke.

Another 14 million people have left the workforce entirely.

[There’s a lot going on in this statistic. So here goes: Trump may be talking about the number of adults not in the labor force — that is, neither working nor looking for work (so it includes retirees and students, for example). That figure has climbed by 14 million since January 2009 (importantly, this isn’t people leaving the labor force; it’s just people not in it, period). But while labor force participation is relatively low, the labor force has still been growing — Trump’s 14 million figure might imply that it’s not. And that low labor force participation isn’t entirely about a tough economy — a lot of it is simple demographics. In 2014, the Congressional Budget Office found that half of a recent 3-point drop in the rate had been due to baby boomers retiring. The other half was economic factors. — Danielle Kurtzleben]

That’s a long-winded way of saying that Trump’s number was accurate, but they want to imply his number is inaccurate.

Household incomes are down more than $4,000 since the year 2000. That’s sixteen years ago.

[That’s true, using median household income data, though he is not measuring from the start of the Obama administration as he is for the other stats here. If he measured from 2008, the drop was $1,656. Measuring from 2000 means measuring from the figure’s near-peak.

[A broader point about all of these economic statistics: A lot of them have been true, but the question is whether Obama is to blame. Higher poverty, for example, doesn’t appear to be Obama’s doing, as we wrote in a fact check last year. Moreover, many experts believe a president generally has only very limited ability to affect the economy. — Danielle Kurtzleben]

As suggested from my earlier analysis, I think it’s fair to point out that Trump was being somewhat arbitrary to use 2000 as his base year.

But it’s amusing to see NPR admit that the number is right but then engage in gymnastics in an effort to excuse the weak economic numbers during Obama’s tenure.

Excessive regulation is costing our country as much as $2 trillion a year, and we will end it very, very quickly.

[A few analyses have found that regulation costs around $2 trillion — one of the best-known, from the Competitive Enterprise Institute, estimated it at around $1.9 trillion this year. But as the Washington Post‘s Fact Checker has pointed out, in the past this figure has been characterized as a “back of the envelope” count, and that moreover, it doesn’t make sense to talk about costs without trying to count the benefits of regulation. — Danielle Kurtzleben]

This is another example of Trump making an accurate point, but NPR then blowing smoke in an attempt to imply he was being dodgy.

Last but not least, here are some assertions from Factcheck.org.

Trump claimed Clinton “plans a massive … tax increase,” but tax experts say 95 percent of taxpayers would see “little or no change” in their taxes under Clinton’s plan.

The fact that Clinton targets the top-5 percent doesn’t change the fact that she’s proposing a very large tax hike.

Trump claimed Clinton “illegally” stored emails on her private server while secretary of state, and deleted 33,000 to cover-up “her crime.” But the FBI cleared Clinton of criminal wrongdoing, and found no evidence of a cover-up.

This isn’t an economic issue, but I can’t resist making a correction.

The FBI Director explicitly pointed out that she repeatedly broke the law.

He simply chose not to recommend prosecution.

He said the “trade deficit in goods … is $800 billion last year alone.” It was nearly that, but it discounts the services the U.S. exports. The total trade deficit for goods and services is just over $500 billion.

As I noted above, Trump is wrong on trade, but the media shouldn’t do a bait-and-switch and criticize him for something he didn’t say.

By the way, the fact that media fact-checkers are largely wrong and dishonest is not a reason to be pro-Trump.

People can decide, if they want, to choose between the lesser of two evils.

My only message is that Trump is wrong on lots of issues, but that’s no excuse for hackery from self-styled fact-checkers.

P.S. Here’s my best Trump humor and here’s my best Hillary humor.

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World’s Most Misleading Headlines

When I wrote about the media, it’s generally to criticize sloppy and/or biased reporting

But maybe I need to have a new category that features misleading headlines.

For instance, here’s a report by Fox Business News that grabbed my attention because of the headline. The story is about the arrest of an IRS bureaucrat.

The main reason I was startled by the story is that it didn’t seem at all newsworthy.

To be blunt, isn’t it the job of IRS employees to use our Social Security numbers to steal our money? That’s certainly what goes through my mind as I fill out my tax return.

So why was this bureaucrat arrested?

Was it for being a slacker, I wondered? The federal government confiscates about $3.5 trillion of our money each year, after all, which means the 95,000 IRS bureaucrats generate an average haul of more than $35 million. By contrast, $326 thousand is a mere pittance.

But then I read the story and realized that the story was about a completely different kind of theft. It appears that the bureaucrat was getting in on the nationwide scam of filing false claims to get EIC handouts.

An IRS employee who worked in the agency’s St. Louis, MO., office pled guilty this week to charges of tax fraud. Demetria Brown netted $326,000 in a fraud in which she stole taxpayer identities and created fake tax returns to steal refunds. …The scheme lasted seven years from 2008 to 2001.

So my first instinct was correct. There isn’t really anything newsworthy in that story. After all, nobody should be surprised that income-redistribution programs such as the EIC attract a lot of fraud. Nobody should be surprised that an IRS bureaucrat decided to take other people’s money (above and beyond the excessive salary the rest of us paid for). And nobody should be surprised that the other bureaucrats at the IRS were so incompetent that the scam was successful for seven years.

By the way, this isn’t the first time a thieving IRS bureaucrat generated a story with a misleading headline.

Speaking of which, here’s our second example of a headline that creates a completely false impression. It’s from a story in the Toronto Star.

Needless to say, I was completely shocked at first. After all, France is the nation where the national sport is taxation. It’s the country where taxes are so onerous that even the European Commission warns about over-taxation. It’s the nation where thousands of people have to pay more than 100 percent of their income to the tax authorities. It’s the country where high taxes are equated to patriotism. And it’s the nation that pushes tax policies that are so radical than even the Obama Administration sometimes says no.

So is it true? Is France going to become a Libertopia? The Galt’s Gulch of Europe?

But then my bubble burst. It turns out the story is about a technical shift in how taxes are collected.

The government wants to shift to a system of automatic withholding, similar to that in Canada and much of the rest of the world. Employees in France currently pay taxes a year after their income is earned. Christian Eckert, France’s budget secretary, said Wednesday that the government will not double-tax workers in 2018, the year automatic withholding is to begin. So 2017 incomes could effectively be tax-free for regular salaries. Taxpayers won’t actually feel much of a difference though — they would still spend 2017 paying for the previous year.

Though this might create an interesting social science experiment.

Depending on how rigorously France decides to be with its definition of “regular salaries,” this might be an opportunity for long-suffering French taxpayers to figure out ways of delaying 2016 income until 2017 and accelerating 2018 income so it’s received in 2017.

This could be a particularly useful strategy for investors, entrepreneurs, and small business owners, all of whom (if they’re like their American counterparts) presumably have some control over the timing, level, and composition of their income.

But I suspect the French government already is contemplating ways of making sure that every possible penny is being taxed at the highest possible rate, so I won’t hold my breath.

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Establishment Media Channels Fox Butterfield on Keynesian Policy

Back in 2010, I described the “Butterfield Effect,” which is a term used to mock clueless journalists for being blind to the real story.

A former reporter for the New York Times, Fox Butterfield, became a bit of a laughingstock in the 1990s for publishing a series of articles addressing the supposed quandary of how crime rates could be falling during periods when prison populations were expanding. A number of critics sarcastically explained that crimes rates were falling because bad guys were behind bars and invented the term “Butterfield Effect” to describe the failure of leftists to put 2 + 2 together.

Here are some of my favorite examples, all of which presumably are caused by some combination of media bias and economic ignorance.

• A newspaper article that was so blind to the Laffer Curve that it actually included a passage saying, “receipts are falling dramatically short of targets, even though taxes have increased.”
• Another article was entitled, “Few Places to Hide as Taxes Trend Higher Worldwide,” because the reporter apparently was clueless that tax havens were attacked precisely so governments could raise tax burdens.
• In another example of laughable Laffer Curve ignorance, the Washington Post had a story about tax revenues dropping in Detroit “despite some of the highest tax rates in the state.”
• Likewise, another news report had a surprised tone when reporting on the fully predictable news that rich people reported more taxable income when their tax rates were lower.

Now we have a new example for our collection.

Here are some passages from a very strange economics report in the New York Times.

There are some problems that not even $10 trillion can solve. That gargantuan sum of money is what central banks around the world have spent in recent years as they have tried to stimulate their economies and fight financial crises. …But it has not been able to do away with days like Monday, when fear again coursed through global financial markets.

I’m tempted to immediately ask why the reporter assumed any problem might be solved by having governments spend $10 trillion, but let’s instead ask a more specific question. Why is there unease in financial markets?

The story actually provides the answer, but the reporter apparently isn’t aware that debt is part of the problem instead of the solution.

Stifling debt loads, for instance, continue to weigh on governments around the world. …high borrowing…by…governments…is also bogging down the globally significant economies of Brazil, Turkey, Italy and China.

So if borrowing and spending doesn’t solve anything, is an easy-money policy the right approach?

…central banks like the Federal Reserve and the European Central Bank have printed trillions of dollars and euros… Central banks can make debt less expensive by pushing down interest rates.

The story once again sort of provides the answer about the efficacy of monetary easing and artificially low interest rates.

…they cannot slash debt levels… In fact, lower interest rates can persuade some borrowers to take on more debt. “Rather than just reflecting the current weakness, low rates may in part have contributed to it by fueling costly financial booms and busts,” the Bank for International Settlements, an organization whose members are the world’s central banks, wrote in a recent analysis of the global economy.

This is remarkable. The reporter seems puzzled that deficit spending and easy money don’t help produce growth, even though the story includes information on how such policies retard growth. It must take willful blindness not to make this connection.

Indeed, the story in the New York Times originally was entitled, “Trillions Spent, but Crises like Greece’s Persist.”

Wow, what an example of upside-down analysis. A better title would have been “Crises like Greece’s Persist Because Trillions Spent.”

The reporter/editor/headline writer definitely deserve the Fox Butterfield prize.

Here’s another example from the story that reveals this intellectual inconsistency.

Debt in China has soared since the financial crisis of 2008, in part the result of government stimulus efforts. Yet the Chinese economy is growing much more slowly than it was, say, 10 years ago.

Hmmm…, maybe the Chinese economy is growing slower because of the so-called stimulus schemes.

At some point one might think people would make the connection between economic stagnation and bad policy. But journalists seem remarkably impervious to insight.

The Economist has a story that also starts with the assumption that Keynesian policies are good. It doesn’t explicitly acknowledge the downsides of debt and easy money, but it implicitly shows the shortcomings of that approach because the story focuses on how governments have less “fiscal space” to engage in another 2008-style orgy of Keynesian monetary and fiscal policy

The analysis is misguided, but the accompanying chart is useful since it shows which nations are probably most vulnerable to a fiscal crisis.

If you’re at the top of the chart, because you have oil like Norway, or because you’re semi-sensible like South Korea, Australia, and Switzerland, that’s a good sign. But if you’re a nation like Japan, Italy, Greece, and Portugal, it’s probably just a matter of time before the chickens of excessive spending come home to roost.

P.S. Related to the Fox Butterfield effect, I’ve also suggested that there should be “some sort of “Wrong Way Corrigan” Award for people like Drum who inadvertently help the cause of economic liberty.”

P.P.S. And in the same spirit, I’ve proposed an “own-goal effect” for “accidentally helping the other side.”

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State and Local Governments Have No Fiscal Excuse for Rapacious Revenue-Raising Tactics

I generally focus on the profligate habits and abusive tactics of the federal government in Washington, but that doesn’t mean other levels of government are well behaved.

In a column for the Washington Post, Catherine Rampell outlines some of the reprehensible ways that state and local governments extract money from the citizenry.

Think of recent, infuriating stories on civil asset forfeiture, in which law enforcement seizes cash and other property from people who are never charged with crimes. Often the departments that do the seizing get to keep the proceeds, which leads to terrible incentives. …Onerous traffic fees and court fines — which have been blamed for long-simmering tensions in places like Ferguson, Mo. — often have a similarly mercenary motive.

She’s right to be infuriated.

Policies like asset forfeiture are disgusting ways of stealing money, particularly from the less fortunate. Indeed, it’s worth noting that the two first leaders of the Justice Department’s asset forfeiture office now say the practice should be ended because of rampant abuses.

But other revenue-raising policies also are objectionable.

…states and cities are also increasingly trying to monetize other behaviors seen as sinful or wayward, like marijuana use, strip club patronage, and gambling. Hence the explosion of state-sponsored lotteries, which prey on (mostly poor) people’s mathematical illiteracy… States have also been jockeying to expand casinos and other venues for legalized gambling, which voters seem to see as generating free money. …Then there are the expensive occupational licensure requirements for jobs that don’t seem to require state-level gatekeeping, like hair-braiding.

At this point, after reading various examples of greedy governments pillaging citizens, you may be thinking Ms. Rampell is a good libertarian.

Unfortunately, that doesn’t seem to be the case.

Her anger is misdirected. Instead of holding politicians accountable, she blames voters for their unwillingness to acquiesce to tax hikes as a way of dealing with “widespread budget crunches.”

If the political toxicity of spending and tax hikes encourages obfuscation at the federal level, it has led to far more destructive and distortionary policies at the state and local levels. Voters hate taxes and will punish any politician who threatens to raise them (or, in many cases, does not accede to cutting them). But schools, roads, police forces, garbage collection, firefighters, jails and pensions still cost money, even when you cut them back as much as voters will tolerate. So instead of raising taxes, state and municipal governments have resorted to nickel-and-diming constituents through other kinds of piecemeal, non-tax revenue raisers, an outcome that is less transparent, and likely to worsen the economy, inequality and social injustice. …It’s time to take off the fiscal blinkers and start rewarding politicians who have the courage to advocate raising revenues the old-fashioned way: through taxes.

Reward a politician for raising taxes? Isn’t that like rewarding a mosquito for taking your blood?

But I shouldn’t be snarky. After all, maybe Ms. Rampell is right and that budgets for state and local governments have been cut as much as possible.

That being said, I noticed she didn’t include any figures on the trends in spending by state and local governments.

So I went to the Office of Management and Budget’s historical tables, specifically Table 15-2 which includes state and local government expenditures. And after adjusting the data for inflation, based on the composite deflator in Table 1-3, I put together a graph to determine whether there was a “budget crunch” for state and local government.

Um…not so much.

As you can see, state and local government spending has jumped dramatically, even when looking at inflation-adjusted dollars.

Indeed, the 164 percent increase in outlays since 1980 is four times greater than the 40 percent increase in the nation’s population over the same period.

In other words, the only “budget crunch” is the one being imposed on long-suffering taxpayers by state and local politicians.

Those officials are the folks who deserve Ms. Rampell’s ire.

P.S. Since this column corrects a big oversight in a Washington Post column, I suppose this would be a good time to point out other mistakes or misstatements I’ve noticed in that newspaper.

Such as the time it asserted in a news report that Germany is “fiscally conservative.”

Or the time the newspaper claimed a 0.158 percent cut would “slash” the federal budget.

And how about the time the Post said the tiny sequester would impose a “sledgehammer of budget cuts.”

P.P.S. On the other hand, the Washington Post has produced genuinely good editorials on school choice and postal service privatization, so it isn’t all bad.

P.P.P.S. And it presumably is better than the New York Times, which has a bigger list of preposterous stories (and I’m not even counting Paul Krugman’s mistakes, some of which can be seen here, here, here, here, here, here, here, and here).

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Texas Is Booming…but CNN Doesn’t Want You to Know Why

Much of my writing is focused on the real-world impact of government policy, and this is why I repeatedly look at the relative economic performance of big government jurisdictions and small government jurisdictions.

But I don’t just highlight differences between nations. Yes, it’s educational to look at North Korea vs. South Korea or Chile vs. Venezuela vs. Argentina, but I also think you can learn a lot by looking at what’s happening with different states in America.

So we’ve looked at high-tax states that are languishing, such as California and Illinois, and compared them to zero-income-tax states such as Texas.

With this in mind, you can understand that I was intrigued to see that even the establishment media is noticing that Texas is out-pacing the rest of the nation.

Here are some excerpts from a report by CNN Money on rapid population growth in Texas.

More Americans moved to Texas in recent years than any other state: A net gain of more than 387,000 in the latest Census for 2013. …Five Texas cities — Austin, Houston, San Antonio, Dallas and Fort Worth — were among the top 20 fastest growing large metro areas. Some smaller Texas metro areas grew even faster. In oil-rich Odessa, the population grew 3.3% and nearby Midland recorded a 3% gain.

But why is the population growing?

Well, CNN Money points out that low housing prices and jobs are big reasons.

And on the issue of housing, the article does acknowledge the role of “easy regulations” that enable new home construction.

But on the topic of jobs, the piece contains some good data on employment growth, but no mention of policy.

Jobs is the No. 1 reason for population moves, with affordable housing a close second. …Jobs are plentiful in Austin, where the unemployment rate is just 4.6%. Moody’s Analytics projects job growth to average 4% a year through 2015. Just as important, many jobs there are well paid: The median income of more than $75,000 is nearly 20% higher than the national median.

That’s it. Read the entire article if you don’t believe me, but the reporter was able to write a complete article about the booming economy in Texas without mentioning – not even once – that there’s no state income tax.

But that wasn’t the only omission.

The article doesn’t mention that Texas is the 4th-best state in the Tax Foundation’s ranking of state and local tax burdens.

The article doesn’t mention that Texas was the least oppressive state in the Texas Public Policy Foundation’s Soft Tyranny Index.

The article doesn’t mention that Texas was ranked #20 in a study of the overall fiscal condition of the 50 states.

The article doesn’t mention that Texas is in 4th place in a combined ranking of economic freedom in U.S. state and Canadian provinces.

The article doesn’t mention that Texas was ranked #11 in the Tax Foundation’s State Business Tax Climate Index.

The article doesn’t mention that Texas is in 14th place in the Mercatus ranking of overall freedom for the 50 states (and in 10th place for fiscal freedom).

By the way, I’m not trying to argue that Texas is the best state.

Indeed, it only got the top ranking in one of the measures cited above.

My point, instead, is simply to note that it takes willful blindness to write about the strong population growth and job performance of Texas without making at least a passing reference to the fact that it is a low-tax, pro-market state.

At least compared to other states. And especially compared to the high-tax states that are stagnating.

Such as California, as illustrated by this data and this data, as well as this Lisa Benson cartoon.

Such as Illinois, as illustrated by this data and this Eric Allie cartoon.

And I can’t resist adding this Steve Breen cartoon, if for no other reason that it reminds me of another one of his cartoons that I shared last year.

Speaking of humor, this Chuck Asay cartoon speculates on how future archaeologists will view California. And this joke about Texas, California, and a coyote is among my most-viewed blog posts.

All jokes aside, I want to reiterate what I wrote above. Texas is far from perfect. There’s too much government in the Lone Star state. It’s only a success story when compared to California.

P.S. Paul Krugman has tried to defend California, which has made him an easy target. I debunked him earlier this year, and I also linked to a superb Kevin Williamson takedown of Krugman at the bottom of this post.

P.P.S. Once again, I repeat the two-part challenge I’ve issued to the left. I’ll be happy if any statists can successfully respond to just one of the two questions I posed.

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Corporate Tax, Media Bias, and Gary Becker (with a Cameo Appearance by Warren Buffett)

Perhaps there is an occasional exception, but when someone in a public policy debate mentions a “race to the bottom,” they always seem to favor bigger government and punitive taxation.

Here are a few examples:

The Organization for Economic Cooperation and Development, a bureaucracy based in Paris, wants to rewrite international tax norms for business income because “failure to collaborate … could be damaging in terms of … a race to the bottom with respect to corporate income taxes.”

The International Monetary Fund also prefers cartels over competition. As the UK-based Guardian reported, “Instead of a race to the bottom where countries compete with each other to offer the lowest rate of corporate tax, it urges co-operation.”

Whether the issue is welfare reform of Medicaid block grants, opponents of federalism complain about decentralization “creating a ‘race to the bottom’ as states slashed funding on services for the poor.”

One of the cranks from the Occupy movement was given a platform by the OECD to complain that, “Tax havens and secrecy jurisdictions bring governments into a harmful race to the bottom.”

And Jeffrey Sachs, writing for the Financial Times, hyperventilated about “a runaway social crisis in many high-income countries. …governments are now in a race to the bottom with regard to corporate taxation”

As you can see, “race to the bottom” is a term that statists use when advocating policies to increase the size, scope, and power of government.

They certainly have the right choose their rhetoric, even though I wish (in the case of the OECD and IMF) that they weren’t being subsidized with my money to push their destructive agenda.

And it makes sense for statists to use this strategy. After all, a “race to the bottom” sounds like a bad thing.

So you can understand that I get irked when the establishment press, which is supposed to be neutral, adopts the left’s rhetoric. Consider this headline from a report in the Financial Times.

The article itself is not nearly as bad as the headline, so this may be the bias of an editor rather than the bias of a reporter.

Regardless, it sets the tone and obviously would lead an unwitting reader to think it is a good thing that nations aren’t lowering tax rates as much as they did in previous years.

My main point of today’s column is to complain about media bias, but since our example is about the supposed “race to the bottom,” this is also an opportunity to cite the work of the great Nobel Prize-winning economist, Gary Becker, who just passed away.

…competition among nations tends to produce a race to the top rather than to the bottom by limiting the ability of powerful and voracious groups and politicians in each nation to impose their will at the expense of the interests of the vast majority of their populations.

Amen. Tax competition encourages better policy by reducing the power of government.

With regards to bad policy, I want a race to the bottom. That’s what creates a race to the top for prosperity.

P.S. Since we’re on the topic of tax and whether people should pay more or pay less, remember the “Buffett Rule” from the 2012 campaign?

President Obama said every rich person should cough up at least 30 percent of their income to the IRS.

And Warren Buffett volunteered to be Obama’s prop, even distorting his own tax data to facilitate the President’s class-warfare agenda.

Well, it seems that Mr. Buffett is a bit of a hypocrite. Read some of what the Wall Street Journal opined this morning.

…the Berkshire Hathaway CEO seems to have adapted his famous Buffett Rule of taxation when it applies to his own company. …it was fascinating to hear Mr. Buffett explain that his real tax rule is to pay as little as possible, both personally and at the corporate level. “I will not pay a dime more of individual taxes than I owe, and I won’t pay a dime more of corporate taxes than we owe. And that’s very simple,” Mr. Buffett told Fortune magazine in an interview last week. …The billionaire was even more explicit about his goal of reducing his company’s tax payments. “I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” he said. …Too bad Mr. Buffett didn’t share this rule with voters in 2012.

Tax minimization is both the legal right and the moral responsibility of every citizen.

Unless, of course, you think – ignoring both theory and evidence – that the crowd in Washington spends money more wisely than the private sector.

P.S. Mr. Buffett should be happy he’s an American rather than a Brit. If he lived in London, the supposedly conservative-led government would probably condemn him for legally keeping his taxes as low as possible.

P.P.S. As shown in this clever video, lots of other rich leftists share Mr. Buffett’s hypocrisy.

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Bragging about the Debt Brake…but Failing to Explain What Makes It Successful

What happens when you mix something good with something bad?

To be more specific, what happens when you have a big success story, like the spending cap in Switzerland that has dramatically slowed the growth of government, and then expect intelligent and coherent coverage by a government-run media outfit that presumably wants a bigger public sector?

Well, the answer is that you get a very muddled story.

Here’s some of what Swiss Info, which is part of the Swiss Broadcasting Corporation, wrote about that nation’s “debt brake.”

The mind-boggling…debt racked up by governments…has turned some heads towards Switzerland’s successful track record… Swiss voters approved a so-called ‘debt brake’ on federal public finances in 2001, which was put into operation in 2003. A decade later, the mountain of government debt – that soared to dangerous levels during the 1990s and early 2000s – has been reduced by CHF20 billion ($23 billion) from its 2005 peak. The ratio of debt to annual economic output (gross domestic product or GDP)…fell from 53% to 37% between 2005 and the end of 2012.

There’s nothing wrong with that passage. Indeed, you could almost say that Swiss Info was engaging in boosterism.

Moreover, the story points out that other nations have been going in the wrong direction while Switzerland was enjoying success.

…as Switzerland was chipping away at its mountain of debt, other countries were building theirs up. …Since the middle of 2007 public sector debt alone has soared 80% to $43 trillion, according to the Bank for International Settlements.

And the story even notes that other nations are beginning to copy Switzerland.

The Swiss debt brake is the perfect model for other countries to embrace… Germany applied its own version of the Swiss debt brake in 2009, followed by Spain and other European countries.  …“Switzerland came up with the blueprint for what I am sure will be the standard fiscal model of the future,” said Müller-Jentsch.

So why, then, do I think the story has a muddled message?

The answer is that there is no explanation of how the debt brake works and therefore no explanation of why it is a success.

A reader will have no idea, for instance, that the debt brake is actually a spending cap. Readers also will have no way of knowing that red ink has been controlled because the law properly focuses on limiting the growth of spending.

By the way, it wouldn’t have required much research for Swiss Info to include that relevant data. If you do a Google search for “Swiss debt brake,” the first item that appears is the column I wrote in 2012 for the Wall Street Journal.

In that piece, I explained that “Switzerland’s debt brake limits spending growth to average revenue increases over a multiyear period” and I added that “Before the law went into effect in 2003, government spending was expanding by an average of 4.3% per year. Since then it’s increased by only 2.6% annually.”

So why didn’t Swiss Info mention any of this very relevant information? Is it because it tilts to the left like other government-owned media outfits, and the journalists didn’t want to acknowledge that spending restraint is a successful fiscal policy?

I have no idea whether that’s the case, but there is a definite pattern. When I appear on PBS, the deck is usually stacked in favor of statism. Moreover, you won’t be surprised to learn that I’ve had similar experiences with government-run TV in France. And it goes without saying that the BBC in the United Kingdom also leans left (though at least they seem to believe in fair fights).

This video from Swiss Info is similarly vague. It’s a favorable portrayal, but people who watch the video won’t know how the debt brake works or why it has been successful.

P.S.  I don’t know the details about the German version of the debt brake, but it’s probably having some positive impact. The burden of government spending has not increased in that nation since 2009, at least when measured as a share of GDP. Though the Germans also weren’t as profligate as other nations (including the United States) in the years before they adopted a debt brake, so I’ll have to do more research to ascertain whether the German approach is as good as the Swiss approach.

P.P.S. In any event, the moral of the story is that good fiscal policy should be based on the Golden Rule of having government grow slower than the productive sector of the economy.

P.P.S. The Princess of the Levant and I continued our tour of the French Riviera. This photo is from Les Jardins Exotiques at Chateau d’Eze.

As part of my travels, I’ve learned that the unluckiest people in the world are from Menton and Roquebrune in France. That’s because they were part of Monaco until 1860.

So now, instead of enjoying an income tax of zero under Monegasque rule, they are part of France’s wretched fiscal system.

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