From Nobel laureate Paul Krugman's February 4 New York Times column:
So why the sudden ubiquity of deficit scare stories? It isn't being driven by any actual news. It has been obvious for at least a year that the U.S. government would face an extended period of large deficits, and projections of those deficits haven't changed much since last summer. Yet the drumbeat of dire fiscal warnings has grown vastly louder.
To me - and I'm not alone in this - the sudden outbreak of deficit hysteria brings back memories of the groupthink that took hold during the run-up to the Iraq war. Now, as then, dubious allegations, not backed by hard evidence, are being reported as if they have been established beyond a shadow of a doubt. Now, as then, much of the political and media establishments have bought into the notion that we must take drastic action quickly, even though there hasn't been any new information to justify this sudden urgency. Now, as then, those who challenge the prevailing narrative, no matter how strong their case and no matter how solid their background, are being marginalized.
And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction.
Let's talk for a moment about budget reality. Contrary to what you often hear, the large deficit the federal government is running right now isn't the result of runaway spending growth. Instead, well more than half of the deficit was caused by the ongoing economic crisis, which has led to a plunge in tax receipts, required federal bailouts of financial institutions, and been met - appropriately - with temporary measures to stimulate growth and support employment.
The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs.
Why, then, all the hysteria? The answer is politics.
The main difference between last summer, when we were mostly (and appropriately) taking deficits in stride, and the current sense of panic is that deficit fear-mongering has become a key part of Republican political strategy, doing double duty: it damages President Obama's image even as it cripples his policy agenda. And if the hypocrisy is breathtaking - politicians who voted for budget-busting tax cuts posing as apostles of fiscal rectitude, politicians demonizing attempts to rein in Medicare costs one day (death panels!), then denouncing excessive government spending the next - well, what else is new?
The trouble, however, is that it's apparently hard for many people to tell the difference between cynical posturing and serious economic argument. And that is having tragic consequences.
For the fact is that thanks to deficit hysteria, Washington now has its priorities all wrong: all the talk is about how to shave a few billion dollars off government spending, while there's hardly any willingness to tackle mass unemployment. Policy is headed in the wrong direction - and millions of Americans will pay the price.
CNN.com has an article with the helpful-sounding headline "Things you should know about budget." But rather than clearly and directly explaining budget basics to CNN readers, the article drives home the fact that the news media fails badly at informing and educating the public.
Keep in mind: this is not a "political analysis" piece, or an article focused on the reception the budget is getting among lawmakers. The whole purpose of this article is ostensibly to give readers the information they need to assess the budget.
So, how does the article fail? Well, for one thing, it makes no effort to indicate how the $3.8 trillion budget breaks down. What portion of that is devoted to defense, to Medicare, to education, etc? CNN doesn't tell us. Take, for example, the article's treatment of the Defense budget:
To pay for wars in Afghanistan and Iraq, Obama is seeking $33 billion in supplemental funds for this budget year and $159.3 billion for next year's. Funding for military families would increase 3 percent to $8.8 billion. The president would appropriate in advance $50.6 billion for veterans' medical care.
Notice what's missing? That's right -- there's no indication of what total defense spending is.
CNN does, however, point to several drop-in-the-bucket items, such as "End grants to manufacturers of worsted wool. Annual savings: $5 million" and "Terminate Christopher Columbus Fellowship Foundation, aimed at fostering "new discoveries in all fields of endeavor for the benefit of mankind." Savings in 2010: $1 million."
The cumulative effect should be obvious: Readers are given a warped picture of the relative amount of spending on defense and things like worsted wool grants.
But that's not nearly as bad as CNN's treatment of taxes. Here's CNN's handling of tax-cuts for wage-earners:
Still a little extra in your paycheck
The Making Work Pay tax breaks would be extended for a year. These were part of last year's stimulus and resulted in slightly higher paychecks for 110 million families, the White House said.
Wow. No mention of the extension of the Bush tax cuts for 98 percent of Americans. That's weird. But that oversight is made worse by what comes a little later:
The president's budget would reduce the nation's debt by $1.2 trillion over the next 10 years. Obama would let the Bush tax cuts expire for high-income families, impose a "financial crisis responsibility fee" on large banks and end fossil-fuel tax subsidies for oil, gas and coal companies. Discretionary spending that is not defense-related would get a three-year cap, saving $250 billion over the next 10 years. Read more
Well, what does "high-income families" mean? CNN doesn't say -- and that's a big, big problem, because time and time again, studies have shown that more Americans think they are "rich" or "wealthy" or "high-income" than actually are. In other words, a lot of people who read this article will falsely think Obama is letting their tax cuts expire. (The proposal would only affect individuals making more than $200,000 a year and families making more than $250,000 a year -- about 2 percent of American households.)
Maybe you're wondering if CNN made this clear in that "Read more" link. Even if they did, that wouldn't be adequate -- but they didn't. The link takes you to an article that explains:
Let 2001-2003 tax cuts expire for high-income households: The Bush tax cuts are scheduled to expire by 2011. As it has promised all along, the Obama administration would like to keep those tax cuts in place for everyone except the highest-income households.
It estimates nearly $700 billion will be raised over 10 years by letting the cuts expire for the wealthiest Americans.
"High-income households" ... "highest-income households" ... "wealthiest Americans": those are all vague and misleading phrases -- but that's all CNN gives us. It's almost like CNN is deliberately obscuring the fact that only people making more than $200,000 and families making $250,000 will be affected.
Fox News anchor Martha MacCallum falsely reported that "if you remember correctly, last Thursday, Congress voted to raise the debt ceiling by 1.9 trillion, right, to 14.3 trillion," and that according to a wire report, "the Treasury Department has just said that we're gonna be on track to hit that approved debt ceiling this month, in the month of February." In fact, the Associated Press reported the same day that "[t]he Treasury Department said Wednesday it expects to hit" the "current" debt limit of $12.4 trillion and noted that "the House has yet to pass" the proposed $1.9 trillion increase.
A Washington Times editorial falsely claimed that under president Obama's 2011 budget, "people currently in the 10 percent, 25 percent, 28 percent, 33 percent and 36 percent personal income tax rates will all face higher tax rates." In fact, Obama's budget proposes allowing the top two income tax rates to return to their pre-Bush tax cut levels -- affecting only income that exceeds $200,000 for individuals and $250,000 for families -- and leaving the other three income tax rates at their current levels.
From a February 2 TalkingPointsMemo article:
The news service Reuters withdrew a story last night titled "Backdoor taxes to hit middle class" after the White House reached out and pointed out "errors of fact."
The story, which claimed the White House's deficit reduction plan relies on raising taxes against the middle class by allowing tax cuts to expire, was withdrawn at about 8 p.m. Monday, according to Yahoo timestamps. The original story ran at 4 p.m. The withdrawal promises a replacement story later this week.
"The story went out, and it shouldn't have gone out," said Courtney Dolan, a spokeswoman for Reuters. "It had significant errors of fact."
She would not elaborate on the specific errors, but said Reuters will "address those specific points that were incorrect."
A February 1 Reuters article - subsequently withdrawn by the wire service -- claimed that the Obama administration's budget plan includes "backdoor tax increases that will result in a bigger tax bill for middle-class families," citing increases to marginal federal income tax rates that would go into effect if the Bush tax cuts were allowed to expire, and an increase in middle class families that would be subject to the Alternative Minimum Tax (AMT) without the renewal of a patch to limit its impact. In fact, Obama's 2011 budget calls for the Bush tax cuts to be extended for individuals making $200,000 or less and couples making $250,000 and for the AMT patch to be extended at its 2009 parameters through 2020.
From February 2 edition of Fox & Friends:
From the February 1 edition of Fox News' Fox & Friends:
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From the January 28 edition of Fox News' Glenn Beck:
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Fox News chief political correspondent Carl Cameron claimed that "budget and deficit reduction" and "fiscally frugal principles and proposals" are "Republican issues." Cameron's claim is belied by Republican support for Bush policies that are far more responsible for current and projected deficits than proposals enacted since President Obama took office, as well as Republican opposition to health care reform legislation that would reduce long-term deficits.
From the January 27 edition of Fox News' The Fox Report:
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In recent months, media figures have advanced a litany of false and dubious claims regarding deficits and public debt. In addition to promoting the false narrative that portrays Republicans as responsible budget stewards and Democrats as fiscally reckless, these claims advance the argument that the administration should cut spending and focus on balancing the budget in the short term, a position rejected by numerous economists who advocate for continued stimulus spending.
Ignoring Congressional Budget Office (CBO) estimates showing health care reform will reduce deficits, a Wall Street Journal editorial asserted that President Obama should "[d]rop the health-care bill" if Democrats "really are serious" about fiscal responsibility. The editorial further attributed all of the fiscal year 2009 spending to Obama, but the increases in spending and the deficit also reflect the impact of policies enacted under former President Bush.
Purporting to grade President Obama's first year in office, Dick Morris falsely attributed to Obama all of the federal spending and deficit from fiscal year 2009, which began in October 2008. Morris therefore ignored spending that took place under President Bush from October 1, 2008, to January 20, 2009, including significant outlays committed by the federal government in response to the recession, as well as the impact of the recession itself on the federal budget.