Fox Business' Lou Dobbs cited declining GDP growth from 2010 to 2011 to claim the economy is not getting better, failing to mention that the decline coincided with a steep drop-off in federal stimulus spending.
During a discussion on Friday's GDP report on America Live, host Megyn Kelly explained that while the 2 percent rise in GDP was due to increased federal spending, it is an improvement from previous quarters' figures. Dobbs disagreed, pointing to GDP growth rate decline from 2010 to 2011 to illustrate that the economy is not improving.
While Dobbs is correct that GDP growth did decline in 2011, he fails to recognize that this trend coincided with a slowdown in stimulus spending. Previous Media Matters research shows that the increase in GDP after the recession was a partly attributable to federal stimulus, and that the "fiscal drag" experienced in 2011 was due to a phasing out of stimulus spending. In an August 2011 report, the Congressional Budget Office estimated that 85 percent of stimulus funds had been spent by June 2011. In the same report, the CBO noted that the stimulus directly increased GDP growth by between 0.8 and 2.5 percent. Many economists predicted that the phasing out of stimulus funds would lead to a decline in economic growth. Paul Krugman claimed "when the spending begins to tail off, the effect on growth turns negative," and analysts at Deutsche Bank predicted "the real effect of lost stimulus will start to hit" in the first quarter of 2011.
Fox News' Eric Bolling compared two completely different measures of employment to revive the right-wing myth that the Labor Department is distorting economic data to help re-elect President Obama.
Bolling sought to demonstrate that the unemployment rate has not fallen to 7.8 percent, as reported by the Labor Department this month, by arguing that the number of jobs created in September was not enough to keep up with the number of previously unemployed people that are no longer unemployed. He went on to suggest that the lower unemployment rate is evidence of a conspiracy and urged Congress to investigate.
Bolling's math doesn't add up: his numbers come from two different surveys that measure different aspects of labor market conditions, two surveys that are conducted in different ways, which often leads to large gaps between the two findings.
In multiple segments on Fox News, reporter William La Jeunesse wrongly suggested that top earners in California would face an effective tax rate of 52 percent if plans by Governor Jerry Brown and President Barack Obama were implemented. Fox's calculation is based on a simple addition of top tax rates, which ignores key details of U.S. and California tax codes to provide an inflated rate.
On America's Newsroom, La Jeunesse claimed that if both tax plans were approved, "California's wealthy would pay 52 cents of every dollar earned in income taxes." From America's Newsroom:
Later, on Happening Now, La Jeunesse repeated the figure:
While both President Obama and Governor Brown have proposed increasing the rate on top income earners to 36.9 and 13.3 percent, respectively, Fox's claim that their plans would lead to an effective 52 percent tax on the highest income earners is misleading. It appears that the figure is calculated by simply adding state and federal tax rates. However, this method ignores two key points -- state income tax is deductible from federal taxable income, and both California and federal tax rates are progressive, applying different rates to different income brackets.
To illustrate the extent to which Fox exaggerates these numbers, Media Matters did some calculations of its own. Using progressive tax rates currently in place in California and the federal government, along with the proposed changes made by Brown and Obama, Media Matters constructed a simple effective tax rate for a California resident earning $2 million in income.
Based on the California tax rates, we estimate that under Jerry Brown's proposed tax plan, a $2 million earner would pay approximately $242,856 in state taxes. This amount is deducted from taxable federal income, bringing it down to $1,757,144. Under President Obama's tax plan, total federal taxes would amount to approximately $652,803 for a total state and federal tax bill of $895,659.
Based on these calculations, the effective tax rate for a person who earns $2 million in California is about 44.8 percent, well below Fox's inaccurate figure of 52 percent. The above calculation, of course, is not entirely representative of the tax burden felt by a high income earner, as it does not account for other factors such as local taxes and itemized deductions that could increase or decrease the effective tax rate. However, preliminary analysis suggests that Fox's incorrectly calculated and consistently reported 52 percent is an overestimate.
Fox Business anchor Melissa Francis suggested that the United States should eliminate the corporate tax because "companies don't pay taxes, their customers do" -- a statement of considerable debate among economists -- while overlooking potential revenue losses and negative economic effects if the tax were abolished.
In the Bulls & Bears segment, Francis claims that the burden of taxes levied on corporations is ultimately shifted to consumers. While economists have long realized that tax incidence can fall to other parties as Francis described, they are unable to agree who truly bears the burden for corporate taxes. From a New York Times article explaining the corporate tax debate:
Economists are divided on the issue. Some (including Gregory Mankiw) are persuaded that the corporate income tax ultimately falls mainly on labor, rather than on the presumably wealthier owners of capital. One can actually make a case for cutting the tax in the name of a more progressive income-tax structure, which should appeal to voters and politicians left of center.
Other economists, including the authors of the surveys cited above (Jane Gravelle, Jennifer Gravelle and Thomas Hungerford), are persuaded by the available empirical evidence on the five factors I note that the burden of the corporate tax ultimately rests mainly on the owners of capital. That also appears to be the operative assumption of the Congressional Budget Office, the Treasury and other agencies when they analyze the distributional impact of various forms of taxation. (The New York Times, 7/23/10)
While Francis never acknowledges this reality, more important is the fact that she completely overlooks the potential revenue loss from abolishing corporate taxes, claiming "the government doesn't need any more of your money." According to analysis from the Center on Budget and Policy Priorities, the corporate income tax is the third largest single tax contributor to the federal budget:
(Center on Budget and Policy Priorities, 8/20/12)
Abolishing the corporate income tax, a small percentage compared to revenue raised by income and payroll taxes, would still result in a substantial loss (about $184 billion in 2011 according to the graph above). Francis never addressed how to account for this lost revenue, which could negatively affect economic growth. The Financial Times further elaborates on potential revenue losses and negative economic effects:
But lowering the corporate tax rate is expensive - each percentage point reduction would cut revenues by about $120bn over 10 years. Scaling back the three largest corporate tax expenditures to pay for a cut could increase the cost of capital, thereby reducing investment and growth. (Financial Times, 9/17/12)
The share of federal revenues accounted for by the corporate tax has been on a consistent decline since the 1950s, made up for by increases in payroll tax revenues:
(Center on Budget and Policy Priorities, 8/20/12)
While increasing payroll taxes may help offset corporate tax revenues, the net effect on the economy could be largely negative. As previous Media Matters research points out, many economists believe that low payroll taxes will lead to jobs and economic growth.
Instead, many economists who are in favor of abolishing corporate taxes on efficiency grounds recommend abolishing preferential taxation of capital gains in order to make up for revenue shortfalls. However, given the right-wing media's unabashed defense of low capital gains tax rates, it is unlikely that would enter the discussion.
The right-wing media has claimed President Obama has no plan for the economy if re-elected. In fact, Obama has proposed numerous economic policies, including legislation that economists agree would lower unemployment and grow the economy.
Despite hopeful signs of economic progress, the right-wing media have attempted to downplay positive economic news by using alternative measures to argue that the "real unemployment rate" is much higher than has been reported. In fact, these alternative measures are not appropriate substitutes for the official unemployment rate.
Fox Business anchor Stuart Varney is reviving jobs trutherism in reaction to Labor Department data showing a steep drop in unemployment claims, echoing a conspiracy theory pushed by the right last week accusing the Obama administration of manipulating unemployment data. But the data quirk that Varney highlights - missing numbers from one large state - is not unusual.
The Labor Department released its weekly estimate for first-time unemployment claims on Thursday, reporting that that key economic indicator had dropped to a four-year low of 339,000 first-time claims. The weekly moving average, which adjusts for week-to-week fluctuations, also dropped in the most recent data. Varney appeared on Fox's America's Newsroom to discuss the numbers and dismissed the "rosy results" which he noted were put out "three and a half weeks before the election."
Varney claimed that the drop in initial claims was due to one "large state" not reporting its figures, hinting that this may have been intentional. His suggestion that the Obama administration conspired to deflate jobless claims continued on his Fox Business show, Varney & Co.:
The irregularity in reporting weekly unemployment data that is central to Varney's conspiracy theory is hardly unusual. In fact, MarketWatch explains "the process is so complicated the federal government even has to make estimates for some states when they are tardy in reporting." The article further explained the challenges in collecting unemployment data from every state on a weekly basis
Each state has its own method of processing and calculating jobless claims before they file their reports to a federal data-exchange system.
Yet states rarely submit their reports at a uniform time each week. Data collection is often interrupted by bad weather, special state holidays or administrative delays caused by problems such as computer breakdowns. Individuals can also file a protest if their claim for benefits is rejected. (MarketWatch, 11/11/2010, emphasis added)
When discussing that later revisions to the data are "the norm," the same MarketWatch article further discredited claims that the Labor Department manipulated the data for political purposes:
The information is compiled by career civil servants free from political interference and their methods made publicly available. That's why it's virtually impossible to find any economist, even those who lean strongly liberal or conservative, who suspects foul play. (Market Watch, 11/11/2010).
Such volatility in weekly jobless claims reports due to incomplete data is precisely why economists choose to focus more on four- week averages as an indicator of labor market conditions - a figure that shows signs of improvement, falling by 11,500 to 364,000 jobless claims.
In fact, four-week averages of weekly jobless claims have been on a downward trend since 2009:
(Federal Reserve Bank of St. Louis, accessed 10/11/2012)
UPDATE: Business Insider reports that all states did in fact report data, but that it is likely the data was incomplete for California. Claims are expected to rise to about 335,000-365,000 when data are revised, slightly lower than the 370,000 expectation.
Fox Business anchors repeatedly suggested that today's stock market gains are due to perception of a Romney victory at last night's presidential debate, overlooking other crucial drivers of stock performance.
Throughout Markets Now, anchors and guests consistently credited rising stocks to a "Romney rally." From Markets Now:
The "Romney rally" talk continued throughout Fox Business' afternoon programming, emerging as the primary explanation of today's stock growth. Meanwhile, other important determinants of the stock market were rarely discussed, if at all.
According to a Bloomberg Businessweek article, today's rally could be attributed to a number of explanations unrelated to last night's debate, including better than expected economic figures and bullish stock market betting. From the article:
U.S. stocks rose as Labor Department figures showed applications for jobless benefits increased 4,000 to 367,000 in the week ended Sept. 29. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. Orders placed with U.S. factories fell 5.2 percent in August, the Commerce Department said. The median forecast of economists in a Bloomberg News survey called for a decline of 5.9 percent.
Some traders pointed to a bullish bet on the S&P 500 in the options market as helping to fuel today's rally. One investor bought 11,000 calls expiring tomorrow to buy the index at 1,465, 1 percent above yesterday's closing level, Chris Rich, head options strategist at JonesTrading Institutional Services LLC in Chicago, said in an interview. (Bloomberg Businessweek, 10/4/2012)
Fox Business anchor Cheryl Casone set an unreasonable standard for weekly jobless claims, stating that the figure needed to dip to 200,000 or lower to show a healthy labor market - a level that hasn't been reached in over 40 years.
In the wake of the Labor Department's release of weekly jobless claims figures for September 23-29 that showed a slight increase from the previous week's report, Casone weighed in on what this meant for overall job growth. From the October 4 edition of Fox & Friends:
CASONE: Here's the problem. We need to see job growth. We need to see these claims numbers come down to 200,000 and below to see meaningful job recovery and we're just not getting that unfortunately.
However, the real problem lies in Casone's figures. The 200,000 benchmark is unrealistic today, as historical data show that the last time initial claims numbers were that low was in 1970, when the U.S. population was about 203 million (around 65 percent of current population estimates). Furthermore, the current figures are by no means outlandish, approximating those experienced in the early 2000s. From the Federal Reserve Bank of St. Louis:
(Federal Reserve Bank of St. Louis, 9/22/2012)
The above graph also shows that while there have been slight upticks in initial jobless claims, the overall trend has been downward since 2009. While Casone claims that these numbers inhibit job recovery, the private sector has nonetheless created 4.5 million jobs in the last 29 months.