FacebookTwitterGoogle+RedditEmail

The Fiscal Cliff and Baby-Killing Doctors

by DEAN BAKER

Extreme opponents of abortion sometimes refer to obstetricians who perform abortions as “baby killing doctors.” The media do not adopt this language in their coverage of the debate over abortion, and instead use more neutral language.

Unfortunately the media do not feel the same need for objectivity elsewhere. Many of the country’s most important news outlets openly embrace the agenda of the rich and powerful, allowing this agenda to color its coverage of major economic issues.

This is perhaps nowhere better demonstrated than in its coverage of the current budget standoff between President Obama and Congress, which the media routinely describe as the “fiscal cliff.” This terminology seriously misrepresents the nature of the budget dispute as everyone in the debate acknowledges. There is no “cliff” currently facing the budget or the economy.

If there is no deal reached this year then on January 1, daily tax withholdings will rise by average of about $4 per person. Any money actually deducted from pay checks will be refunded if a deal is subsequently reached that returns tax rates to 2012 levels. Government spending probably won’t change at the start of the new year since President Obama has considerable discretion over the flow of spending. No one can think that this modest increase in tax withholdings would plunge the economy into a recession, but the Wall Street types seeking to dismantle Social Security and Medicare have used their enormous wealth and their allies in the media to generate precisely this fear across the country.

One way in which they have pushed this recession fear has been to misuse projections from the Congressional Budget Office (CBO). CBO’s projections show that if higher tax rates and lower spending are left in place for the whole year then it will substantially slow growth and push the economy into a recession.

However, these projections explicitly assume that we go a whole year without reaching a deal. They say nothing about what happens if we get a deal by the second or third week of January. Even a Washington Post editor should be sharp enough to understand this distinction, nonetheless many stories have appeared that imply the recession projections apply to missing the January 1 deadline.

The other deception that the Wall Street types have used to push their Social Security and Medicare cutting agenda is to claim that the markets are demanding that these programs be cut. This sort of assertion, which is treated as a fundamental truth by the Washington insider crowd, has the wonderful feature that it cannot possibly be contradicted by evidence.

Of course none of us knows exactly what will trouble the financial markets or how much it will matter to the economy if something does trouble the markets. (As a factual matter, even a sustained drop in the stock market has a limited effect on the economy and short-term fluctuations have almost no impact.) This means that when the Wall Street types or their designated spokespeople make authoritative sounding claims that the markets will be upset if we don’t cut Social Security or Medicare as part of a budget deal, there is no direct way to refute them. After all, it is possible that they will be right.

If economic reporters did their job they would be looking for evidence to support these assertions about financial markets. They could start by looking at the track records of those issuing the warnings. If they did examine the track records of people with organizations like the Campaign to Fix the Debt and other deficit hawks, they would tell their audiences that these “experts” have the distinction of being almost 100 percent wrong on just about all their economic predictions over the last five years.

This crew has been predicting that large budget deficits would cause interest rates to skyrocket ever since President Obama’s first stimulus almost four years ago. Many also predicted inflation would explode. Of course none of them warned of the housing bubble; they were running around the country yelling about the budget deficits even when the deficits were small enough that the debt to GDP ratio was actually declining.

In short, major national news outlets have adopted wholesale the agenda of a Wall Street elite that displays zero evidence of any understanding of what drives the economy. Their assertions that the markets will panic without a budget deal that cuts Social Security and Medicare has no apparent foundation in reality. It is just a threat that they have concocted to advance their agenda. Now that would make for a very good news story.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This article originally appeared on The Guardian.

 

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

More articles by:
July 27, 2016
Richard Moser
The Party’s Over
John Eskow
The Loneliness of the American Leftist
Arun Gupta
Bernie Sanders’ Political Revolution Splinters Apart
Jeffrey St. Clair
The Humiliation Game: Notes on the Democratic Convention
M. G. Piety
Smoke and Mirrors in Philadelphia
Guillermo R. Gil
A Metaphoric Short Circuit: On Michelle Obama’s Speech at the DNC
David Macaray
Interns Are Exploited and Discriminated Against
Norman Pollack
Sanders, Our Tony Blair: A Defamation of Socialism
Claire Rater, Carol Spiegel and Jim Goodman
Consumers Can Stop the Overuse of Antibiotics on Factory Farms
Guy D. Nave
Make America Great Again?
Sam Husseini
Why Sarah Silverman is a Comedienne
Dave Lindorff
No Crooked Sociopaths in the White House
Dan Bacher
The Hired Gun: Jerry Brown Snags Bruce Babbitt as New Point Man For Delta Tunnels
Peter Lee
Trumputin! And the DNC Leak(s)
Brett Warnke
Storm Clouds Over Philly
Ann Garrison
Rwanda, the Clinton Dynasty, and the Case of Dr. Léopold Munyakazi
Chris Zinda
Snakes of Deseret
July 26, 2016
Andrew Levine
Pillory Hillary Now
Kshama Sawant
A Call to Action: Walk Out from the Democratic National Convention!
Russell Mokhiber
The Rabble Rise Together Against Bernie, Barney, Elizabeth and Hillary
Jeffrey St. Clair
Don’t Cry For Me, DNC: Notes From the Democratic Convention
Angie Beeman
Why Doesn’t Middle America Trust Hillary? She Thinks She’s Better Than Us and We Know It
Paul Street
An Update on the Hate…
Fran Shor
Beyond Trump vs Clinton
Ellen Brown
Japan’s “Helicopter Money” Play: Road to Hyperinflation or Cure for Debt Deflation?
Richard W. Behan
The Banana Republic of America: Democracy Be Damned
Binoy Kampmark
Undermining Bernie Sanders: the DNC Campaign, WikiLeaks and Russia
Arun Gupta
Trickledown Revenge: the Racial Politics of Donald Trump
Sen. Bernard Sanders
What This Election is About: Speech to DNC Convention
David Swanson
DNC Now Less Popular Than Atheism
Linn Washington Jr.
‘Clintonville’ Reflects True Horror of Poverty in US
Deepak Tripathi
Britain in the Doldrums After the Brexit Vote
Louisa Willcox
Grizzly Threats: Arbitrary Lines on Political Maps
Robert J. Gould
Proactive Philanthropy: Don’t Wait, Reach Out!
Victor Grossman
Horror and Sorrow in Germany
Nyla Ali Khan
Regionalism, Ethnicity, and Trifurcation: All in the Name of National Integration
Andrew Feinberg
The Good TPP
400 US Academics
Letter to US Government Officials Concerning Recent Events in Turkey
July 25, 2016
Sharmini Peries - Michael Hudson
As the Election Turns: Trump the Anti-Neocon, Hillary the New Darling of the Neocons
Ted Rall
Hillary’s Strategy: Snub Liberal Democrats, Move Right to Nab Anti-Trump Republicans
William K. Black
Doubling Down on Wall Street: Hillary and Tim Kaine
Russell Mokhiber
Bernie Delegates Take on Bernie Sanders
Quincy Saul
Resurgent Mexico
Andy Thayer
Letter to a Bernie Activist
Patrick Cockburn
Erdogan is Strengthened by the Failed Coup, But Turkey is the Loser
FacebookTwitterGoogle+RedditEmail