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Economic Illiteracy

The conventional wisdom among the current generation of school reformers is that bad teachers are to blame for the failure of many of our children to learn. Applying this logic to the current debates over the budget and the economy, we should be pointing a big finger of blame at the media.

As survey after survey shows, the vast majority of the public are incredibly ignorant of the most basic facts about the budget and the economy. If we treated their teachers in the media the way the educational reformers treat public school teachers, few economics and budget reporters would have jobs.

One needs only to pick up a newspaper or turn on the television to get examples of thoroughly awful reporting. When we hear pledges to reduce the projected deficits over the next 12 years by $2 trillion or $4 trillion, how many people have any clue how large these reductions are relative to projected spending or projected GDP over this period? (The $4 trillion figure is 8.7 percent of projected spending and 3.7 percent of GDP.)

How about that $14.3 trillion figure? That’s a really big number, really scary. So is just about every number connected with the United States budget. We are a huge country with a huge economy. Competent reporters would focus on this being about 90 percent of U.S. GDP.

Is that big? Well the debt-to-GDP ratio was over 110 percent after World War II. The United Kingdom had debt-to-GDP ratios of more than 100 percent for much of the 19th century as it was establishing itself as the world’s pre-eminent industrial power.

Japan has a debt-to-GDP ratio of more than 220 percent of GDP and can still borrow in financial markets long-term at interest rates of less than 1.5 percent. So, what’s the problem? The politicians who want to cut Social Security and Medicare obviously want the public to believe that there is a huge problem and due to the incompetence of the media, they have managed to instill fear throughout the nation about this massive non-problem.

If the media were doing their job, the public would be able to put these debt numbers in context. And the politicians who attempted to exploit fears based on ignorance would be subjected to ridicule. For example, when Senator McCain was basing his 2008 president campaign on the $1 million spent on creating a Woodstock museum, competent reporters would have barraged him with questions as to whether Mr. McCain understood that this came to 0.00003 percent of federal spending.

They would ask him how much time he thinks that Congress should spend scrutinizing 3 hundred thousandths of one percent of the federal budget. If Congress spent 1 minute debating every McCain Woodstock museum size expenditure, it would take it 6.3 years to get through this year’s budget, assuming that it was in session 24 hours a day, 365 days a year.

In the same vein, when a politician asserts that Social Security is going bankrupt and that there will not be anything left for her children or grandchildren, serious reporters would ridicule her for being ignorant of the Social Security trustees projections. These projections show that even if nothing is ever done to change the program, future beneficiaries will always be able to collect a higher benefit than current retirees. The “nothing there for our children” would be treated as a serious gaffe, sort of like then-Senator Obama’s comment before the Pennsylvania primary about working class people being bitter and clinging to guns and religion. The difference is that the Social Security comment has direct relevance for policies that affect people’s lives.

When a politician complains about President Obama’s taxes strangling the economy, reporters should ask them whether they know that taxes are less of a burden on the economy now than at any point since World War II. A politician who is concerned about tax burdens should be expected to know this.

If economic and political reporters applied the same sort of investigative zeal to economic and budget reporting as they did to Representative Anthony Weiner tweeting pictures of underwear, we would have a much better informed public. Not only would the news stories that we see and hear be much more informative, but politicians would be less likely to make things up to advance their political agenda.

If politicians knew that they would pay a political price for making things up about the budget and the economy, then they would be less likely to do it. But we aren’t likely to get competent reporters until it is as easy to fire incompetent ones as it is to fire incompetent school teachers.

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 column was originally published by The Guardian.

 

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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.

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