The IRS "scandal" keeps on failing to live up to its initial hype, but certainly not for lack of trying. The fracas that was once billed as the worst DC scandal since Watergate has slowly, steadily deflated despite conservative efforts to blow life into it, and the media have almost completely lost interest in the story. As both Steve Benen and Alex Seitz-Wald observe, this lack of press attention to the IRS scandal's undoing verges on reckless, given the insane amount of coverage and hype it received at the outset.
But how did we even get to the point where the IRS scandal became a "scandal?" Everyone lost their minds and jumped to conclusions based on incomplete information that, in the end, turned out to be wildly off-base. We were repeatedly told there was a "there" there before anyone bothered to check what was there. The latest attempt to keep the IRS scandal alive by National Review and the Wall Street Journal exhibits those same traits: accusing the IRS and the Federal Election Commission of inappropriately colluding against conservative non-profits without actually knowing what happened.
The National Review reported on July 31 that "Embattled Internal Revenue Service official Lois Lerner and an attorney in the Federal Election Commission's general counsel's office appear to have twice colluded to influence the record before the FEC's vote in the case of a conservative non-profit organization," according to e-mails leaked to the publication be the House Ways and Means Committee. (At this point we should know better than to implicitly trust selectively leaked "scandal"-related emails from Congressional Republicans, but here we are.)
According to the conservative magazine, in 2009 a FEC official emailed Lerner inquiring after the tax exempt status of a group called American Future Fund, which was under investigation by the commission following a complaint by Minnesota Democrats over the group's alleged political activities. National Review refers to the group's tax status as "confidential taxpayer information" of the sort that the IRS is prohibited from sharing, though it's not immediately clear that this information is indeed "confidential." The IRS maintains a public list of organizations that have been granted tax exempt status, and tax-exempt groups are required by law to make public their "exemption applications, determination letters, and annual returns." The IRS issued a statement saying the email exchange indicates "that neither person wanted the IRS to provide the FEC with anything other than publicly available information," and Lerner's attorney told the Washington Post that "anyone in the world could get that information."
Right-wing media reacted to President Obama's proposal to lower the corporate tax rate by pushing the repeatedly debunked claim that a majority of small businesses pay the top individual income tax rate. In fact, only a small fraction of small businesses pay this rate, and Obama's plan includes other incentives to help them.
From the July 27 edition of Fox News' Cavuto on Business:
Loading the player reg...
Right-wing media outlets are promoting the fallacious premise that any attempts at tax reform must be revenue neutral, an idea that tax policy experts wholly reject.
On July 25, The Hill reported that Senate Majority Leader Harry Reid (D-NV) would not be involved in the tax reform process set up by Sens. Max Baucus (D-MT) and Orrin Hatch (R-UT). According to the report, Reid suggested that, while he would not be personally involved in the process, "raising nearly $1 trillion in revenue should be the starting point for any tax reform negotiations."
Responding to Reid's call for additional revenue from tax reform, The Wall Street Journal ran an editorial that suggested true tax reform must be revenue neutral:
Democrats swear they support something they call "tax reform," but until the Obama Presidency that has always meant trading lower rates for fewer loopholes.
The Journal's premise that any attempts at tax reform must inherently be revenue neutral was quickly parroted on Fox News. On the July 26 edition of Fox & Friends, Fox Business host Stuart Varney said Reid has "destroyed tax reform" and claimed "tax reform has always meant lower rates, fewer deductions."
Varney returned to this false "tax reform" narrative on Fox Business' Varney & Co. In an interview with right-wing tax opponent Grover Norquist, president of Americans for Tax Reform, Norquist stated, "as long as Harry Reid is the leader of the Senate there will be no tax reform. He wants a tax increase, instead of tax reform."
Conservative media's notion that tax reform must be revenue neutral is directly contradicted by experts.
Fox News falsely claimed that a Republican-led congressional hearing showed that an Obama appointee was personally involved in the IRS' inappropriate targeting of conservative groups requesting tax-exempt status. This desperate attempt to further the right-wing narrative that the White House directed the IRS to scrutinize conservative groups was undermined by testimony from a witness and Oversight Committee Chairman Rep. Darrel Issa (R-CA).
The July 18 hearing led by Issa featured current and former Treasury and IRS employees. One of the witnesses, recently retired IRS employee Carter Hull, testified that staffers from the IRS chief counsel's office were involved in further assessing applications of groups identified as conservative that were seeking tax exempt status.
Fox & Friends co-hosts Gretchen Carlson and Steve Doocy claimed on July 19 that this testimony showed a link between the undue scrutinizing of conservative groups seeking tax-exempt status and the White House, because the IRS chief counsel is an Obama appointee. Carlson claimed that IRS Chief Counsel William Wilkins, the Obama appointee, directly reviewed Hull's work. Doocy expanded, falsely suggesting that Wilkins decided to target conservative applications, and that this may have been at the direction of someone at the White House. Co-host Brian Kilmeade added that any suggestion that Wilkins was not involved in should be viewed skeptically.
However, there is no evidence that links Wilkins to the assessment of the scrutinized applications. USA Today reported:
The IRS chief counsel, William Wilkins, is one of only two IRS officials appointed by the president. The evidence released by two congressional committees Wednesday does not prove that he had personal knowledge of the targeting of Tea Party groups but does significantly broaden the scope of IRS officials involved.
USA Today also noted that the IRS chief counsel's office is composed of 1,600 employees.
Indeed, Issa was very clear that Wilkins himself was not personally involved. In his opening statement at the hearing, he said:
ISSA: I hope that both my side of the aisle and the ranking member side of the aisle will be very careful and cautious in what we say. When I say something goes to the office of the counsel of the IRS, that is not to be construed as the office of the president, or to the counsel himself. It is important that we understand that words matter, nuances matter, and that we not go one step beyond what we know.
Hull's testimony also does not show that Wilkins was personally aware of the controversy. Hull testified that he met with staffers from the counsel's office, but made no mention of Wilkins.
The Washington Post more broadly noted that there is no evidence from the investigations and hearings about the controversy that connects the scrutinizing to the White House:
Key Republicans, including the oversight panel's chairman, Rep. Darrell Issa (R-Calif.), said the audit findings suggested that the IRS had systematically delayed tax-exemption applications for President Obama's opponents during the 2010 and 2012 election cycles. Some GOP lawmakers suggested that high-ranking administration officials must have been involved in the alleged effort.
There has been no evidence of White House involvement.
Fox Business host Stuart Varney misleadingly claimed federal student loans are subsidized "at great cost to taxpayers," ignoring the fact that the Congressional Budget Office (CBO) projects that the federal student loan program will contribute more than $50 billion in revenue to the Treasury in 2013 alone.
Varney appeared on Fox & Friends July 18 to discuss a deal reached by a bipartisan group of senators to avert a short-term hike in the interest rates students pay for federally-subsidized loans. While Varney mentioned problems with the high cost of attending college and high levels of indebtedness among college graduates, he claimed the deal doesn't solve "the underlying problem which is we're subsidizing all of these loans at great cost to the taxpayer."
While the rising cost of college and high debt levels for graduates are a serious problem, the fact is according to the CBO subsidized student loans do not cost the federal government any money. On June 16, USA Today reported that the May 2013 CBO projection about the federal student loan program showed that the government could expect "a record $50 billion profit on student loans this year." Although the estimates for future years don't take into account the rates in the new deal, on July 18 USA Today also reported that the new Senate deal is "estimated to reduce the deficit by $715 million over the next decade."
A February post at The Wall Street Journal's Real Time Economics blog explained how the federal government makes a profit by subsidizing student loans:
One reason the government continues to make money off of the programs is that borrowers generally can't discharge student debt through bankruptcy, and the government can garnish wages, tax refunds and even Social Security payments to collect debt. That minimizes losses.
But there's another big factor: The government is borrowing at exceptionally low rates right now, while charging students higher rates to borrow.
The 10-year Treasury yield is currently hovering around 2%, up a bit from the historic lows hit in the last year. Meantime, the government is charging most student borrowers an interest rate of 6.8%, a rate set by Congress and which took effect in 2006. (Some borrowers are charged 3.4%, thanks to temporary subsidies approved by Congress in recent years.)
Thus the spread--the difference between the interest rate the government pays to borrow and what it charges to students--is unusually large right now.
The Washington Post's Wonkblog explained that some economists favor a different method of accounting that would include risk factors similar to private sector loans. Using this so-called "fair value" accounting method, the profits from the federal student loan program would vary by year with some years resulting in deficit and others in surplus. However, even according to this different analysis, in 2013 the program is still projected to result in profit.
Democrats such as Sen. Elizabeth Warren (D-MA) have criticized the federal government for ever making a profit from indebted college graduates, arguing that the program is a public good, but that doesn't give Varney license to mislead in this debate.
From the July 14 edition of NBC's Meet The Press:
Loading the player reg...
From the July 13 edition of Fox News' Cavuto On Business:
Loading the player reg...
Media coverage of economic news has declined sharply over the past three months.
Media Matters research reveals a roughly 80 percent cumulative decline in segments dedicated to economic issues from April 1 through June 30. The week of the Boston Marathon bombings yielded zero news segments dedicated to economic coverage. Media diverted from its traditional lineup to cover the attack and ensuing manhunt. Even after accounting for this outlier in the data, economic coverage across the three major cable and broadcast networks displayed a strong negative trend.
According to a Gallup survey released June 28, Americans are most concerned about the economy when thinking about this nation's future. Economic issues remain at the forefront of American public interest polling, while media focus elsewhere.
American's concerns about the economy are not unfounded. Through the first quarter of 2013, the United States economy is on pace to produce $843 billion less than its ideal economic potential. This "output gap" is estimated to have cost the economy more than $4.6 trillion since the onset of the recession.
One major story consistently overlooked in the media is the pervasive negative effect of a weak economic recovery. Television pundits are often quick to pronounce that individual monthly job growth is insufficient but rarely discuss why those numbers are insufficient or what policy changes might be enacted to spur growth.
The primary factor holding back economic growth has been so-called "fiscal drag," or the economic policies out of Washington that emphasize austerity and deficit reduction ahead of stimulus and growth. Economists agree that fiscal austerity harms growth and has slowed economic recovery, but television news has largely ignored these expert opinions.
Despite the emergence of internet-based alternatives, television remains the primary news source for most Americans. According to a recent Gallup survey, 55 percent of Americans rely on television for current events. With finite time and resources to report developments, and with an industry-wide focus on alleged Washington "scandals," huge portions of the American public are not exposed to valuable economic coverage.
Broadcast and cable evening news coverage touched upon a variety of economic topics, including deficit reduction, economic growth, and entitlement reform throughout the second quarter of 2013. A Media Matters analysis shows that many segments lacked proper context or input from economists, while some topics went largely underreported.
Meet The Press host David Gregory misrepresented the Affordable Care Act's "medicare surtax" to suggest that it will be felt by "anybody who gets a paycheck in this country," though the provisions will only affect individuals with an annual income above $200,000.
Beginning with 2013 tax returns, new tax provisions included in the Affordable Care Act will begin to take effect. Though most Americans will only see a tax increase if they decide to forgo health coverage, some changes designed to increase fairness in Medicare funding will begin to affect the wealthiest Americans.
Gregory misled about this change during a discussion about the Affordable Care Act implementation process on the July 7 edition of NBC's Meet the Press. He noted that while he didn't understand all the "ins and outs" of the healthcare law, its Medicare tax increases were one thing that would be apparent to all working Americans on their paychecks.
Gregory's claim failed to recognize that both of the healthcare law's Medicare tax increases affect only the wealthiest of Americans. A 0.9 percent Medicare payroll tax increase will apply to individual earners whose annual income exceeds $200,000 or households earning more than $250,000 - a group representing only 4.2 percent of taxpayers. An additional 3.8 percent tax will apply to the investment income of some Americans. As Forbes noted, "for individuals who have little or no net investment income, their 3.8% Medicare Surtax will be minimal if not zero."
According to the White House, the changes are designed to increase fairness in a system that is highly regressive. Currently, Americans with substantial unearned income do not pay into the Medicare Hospital Insurance (HI) trust fund as workers do, and payroll tax caps decrease the percentage that high-earners contribute.
Over the past month or so, columnists for major newspapers have gotten it into their heads that the "scandal" involving IRS agents in Cincinnati inappropriately scrutinizing conservative non-profit groups can be traced back to President Obama. According to these professional pundits who are paid very well to fill column space for their newspapers' print and online editions, the anti-Tea Party vibes Obama put out were picked up on by the IRS bureaucrats, who were then subconsciously impelled to exact retribution on the president's political enemies.
It turns out that this theory of presidential pseudo-telepathy was completely and fantastically wrong. Who could have predicted?
Newly revealed IRS documents show that the agency's targeting efforts were also aimed at progressive groups, medical marijuana groups, organizations focused on Middle East policy -- not just conservative and Tea Party groups.
This is a big problem for columnists like Kimberley Strassel of the Wall Street Journal, who devoted no fewer than three columns to the idea that the White House was "involved in the IRS's targeting of conservatives" because President Obama said ungenerous things about the Tea Party and created an "environment in which the IRS thought this was acceptable." Here's what she wrote on June 7:
The president of the United States spent months warning the country that "shadowy," conservative "front" groups -- "posing" as tax-exempt entities and illegally controlled by "foreign" players -- were engaged in "unsupervised" spending that posed a "threat" to democracy. Yet we are to believe that a few rogue IRS employees just happened during that time to begin systematically targeting conservative groups?
Turns out this scenario that Strassel thought so unbelievable was pretty much exactly what happened, except that the IRS was also targeting liberal groups. If she has an explanation for how Obama is responsible for that as well, we'd love to hear it.
The Wall Street Journal's Steve Moore falsely claimed that there's adequate funding for infrastructure, ignoring sharp declines in infrastructure and construction spending.
On Fox News' America's Newsroom, guest host Rick Folbaum interviewed the Wall Street Journal's senior economics writer Steve Moore on the state of infrastructure spending and regulation. During the segment, Folbaum acknowledged successful efforts by Republican lawmakers to block funding for "highways, rail, transit, airports" and questioned whether current spending levels, as opposed to regulation alone, might be a problem for national infrastructure projects.
Moore ignored the claim of Republican obstruction altogether, dismissing "this idea that there's not enough money for infrastructure," and quickly returning to the question of regulation:
Moore's dismissal of infrastructure underfunding, however, ignores a number of economic realities.
Fox News hosts falsely claimed that a federal program that helps low-income Americans obtain phone access is paid for by individual taxpayers, when in fact the program is funded by fees levied on telecommunications companies. Fox fabricated this falsehood in support of a new smear campaign against low-income phone programs from conservative activist James O'Keefe.
A Fox Business correspondent claimed that it was better to forgo nearly $3 million in additional prize money than to pay the roughly $400,000 in taxes due on it, representing a continuation of the baseless Fox News narrative that the rich have unduly high tax burdens.
Professional golfer Phil Mickelson placed second at June's U.S. Open golf tournament. Fox Business correspondent Lauren Simonetti argued on June 19's edition of Fox & Friends First that it may have been better for Mickelson to have lost the tournament and place second, for he would avoid paying nearly $400,000 in additional taxes.
She explained that had Mickelson won the tournament -- and won the $1.44 million first prize -- he would have had to pay an additional $76,000 more in taxes than he paid by placing second and receiving $700,000. Mickelson would have also had to pay an additional $300,000 in taxes on $2.5 million in bonuses paid to him by his sponsors, had he won. She concluded it's better to avoid paying roughly $400,000 in taxes than to win nearly $3 million in after-tax income. Simonetti said this made Mickelson "$400,000 richer."
This conclusion may stem from Fox's zealotry against additional taxes for the rich: the rich, because of their supposed onerous tax burden, need lower taxes in order to continue amassing wealth, or else they may stop working.
The idea that the wealthiest Americans have a disproportionately high tax burden is a fabrication Fox has pushed for years. However, a February 15 New York Times article reported that incomes for top earners rose more than 11 percent during the recovery from the most recent recession, while the rest saw their incomes decline slightly. As Nobel Prize-winning economist Joseph Stiglitz noted in an April 14 New York Times Opinionator blog post, "as the top 1 percent has grown extremely rich, the effective tax rates they pay have markedly decreased." The Center for Tax Justice (CTJ) found that the effective tax rate -- a rate including all federal, state and local taxes paid -- for the wealthiest Americans is not much higher than the effective tax rate for middle class Americans:
In the same report the CTJ found that the precentage of all taxes paid by the wealthy is near the amount of all national income captured by the wealthy.
From this fabrication, Fox has argued that the supposedly high tax burden will make the rich not work or might seek lower taxes in different states. In September 2011, Fox News host Bill O'Reilly equated earnings to achievement and claimed that "if you tax achievement, some of the achievers are going to pack it in." And in September 2010, Fox & Friends co-host Brian Kilmeade argued that high levels of taxation, to the wealthy, "robs you of your ambition and your push and your drive."
However, the rich have not been doing this. As Reuters reported, millionaires in high tax states, such as Mickelson's home state of California, have not left the state for low-tax alternatives. Mickelson himself suggested in January he may quit golf due to California's income taxes, walking back the statement a day later. If the 2013 U.S. Open results are any indication, Mickelson is still playing golf, presumably because after taxes he still earns millions and because he doesn't take financial advice from Fox.