Normally, NewsBusters does not criticize editorials. However, on ocassion, one comes across one that is simply too full of myths and false statements that an exception has to be made to the rule.
On Friday, The New York Times published an editorial examining sequestration and taxes. The editorial was loaded with inaccuracies, misleading statements, and significant lacks of clarification. Below are nine corrections the editorial staff should make:
First, the editorial says the following:
The cuts, known as a sequester, will kick in March 1 unless Republicans agree to President Obama’s demand to a legislative package that combines spending reductions and tax increases.
Despite what the editorial indicates, the President’s plan is not the only alternative to the sequestration set to take place on March 1. The House, led by Republicans, has passed two alternatives to sequestration that the President has avoided and the editorial fails to mention.
Second, in the section quoted above, the Times claims sequestration “could push the economy back into recession.” This is an incomplete representation of what the Congressional Budget Office (CBO) has said is the case. A CBO analysis released on February 6 also projected spending more compared to current law would increase economic growth in the near future but would harm it in a few years. Conversely, the same analysis said spending less as compared to current law would hurt the economy next year…but help the economy in later years.
This is important context the editorial should have mentioned.
Next, the Times says to “reduce the deficit in a weak economy, new taxes on high-income Americans are a matter of necessity and fairness…” This claim is in direct opposition to any number of well-known citations about the harm tax increases have on economic growth, especially when the economy is weak. President Obama, for example, said in August 2009 that “the last thing we want to do” is increase taxes in the middle of a recession. Then-Obama advisor Dr. Alice Rivlin co-authored a paper in 2010 that included this statement:
In short, tax increases appear to have a very large, sustained, and highly significant negative impact on output.
Finally, the CBO projected in 2012 that tax increases would be the other half of the reason the “fiscal cliff” would put America back into a recession.
Fourth, the Times links to an analysis from the Center for Budget and Policy Priorities (CPBB) purporting to show the Bush-era tax and war policies, plus the recession, are responsible for current deficits and deficits in the near future, based upon CBO estimates. However, a footnote in the analysis notes the following:
As CBO itself acknowledged, its baseline employed some arguably unrealistic assumptions about the expiration of the Bush tax cuts and other policies; several other organizations pegged future deficits much higher than CBO’s official estimates.
In other words, CBO admits this particular analysis ignores major factors with regards to its expectations. Which basically negates the entire CPBB report.
On the other hand, when it comes to the long-term debt of the federal government, CBO projects future growth in deficits to largely stem from “government’s major health care programs: Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and the insurance subsidies that will be provided through the exchanges created under the Affordable Care Act [a.k.a. Obamacare].” CBO also estimated last year that spending on all programs except for Social Security and “the major healthcare programs” will significantly decrease over the next quarter-century.
Fifth, the editorial claims spending is not the problem:
Contrary to Mr. Boehner’s “spending problem” claim, much of the deficit in the next 10 years can be chalked up to chronic revenue shortfalls from the Bush-era tax cuts, which were only partly undone in the fiscal-cliff deal earlier this year. (Wars and a recession also contributed.) It stands to reason that a deficit caused partly by inadequate revenue must be corrected in part by new taxes. And the only way to raise taxes now without harming the recovery is to impose them on high-income filers, for whom a tax increase is unlikely to cut into spending.
As the chart below shows, spending really is the problem. Additionally, even if tax revenues had hit near-record levels in 2011, almost half of the 2011 federal deficit would have still existed. And as the CBO Director pointed out in July 2011, raising taxes significantly without addressing the cost of retirement programs will still lead to an unsustainable budget situation.
Sixth, claiming – as the Times does – that tax increases are “unlikely to cut into spending” ignores basic economic reality with regards to how tax increases reduce incentives to work, distort investment decisions, and decrease the efficiency of how resources are used in society. It also furthers the falsehood that spending is the only measurement of economic success, when in fact investing, savings, and productivity gains are also major factors in the positive or negative growth of an economy.
The editorial also says there is not enough tax revenue coming to the federal government. This ignores the fact that CBO’s newest baseline estimates project future tax revenue to consume more of the economy than the 40-year average by 2015, and spending will be far higher than past averages for a lengthy period of time. Also, as shown in the chart above, the White House Office of Management & Budget expects 2013 tax revenues to be equal to the decades-long average.
Furthermore, even if the Bush tax cuts and most of the Obama tax cuts had been enacted in their entirety in 2013, bracket creep (which is caused by a lack of indexing for wage growth and inflation in many tax laws) would have brought taxes above their historical averages by 2015.
The eighth misleading point is the claim that the wealthy “continue to pay low taxes.” This ignores a New York Times article on January 4, 2013, which states taxes on top earners are currently the highest since Jimmy Carter was President. Also, “low” is a relative term – the top 1% of earners make 50 times as much, on average, as the bottom 20% of earners. Yet they pay 1,500 times as much in taxes, on average.
Ninth and finally, the editorial makes an entirely unsubstantiated claim about future budgets: “Raising taxes at the top is neither punitive nor gratuitous. It is a needed step, both to achieve near-term budget goals and to lay the foundation for a healthy budget in the future.”
Simply put, a healthy budget will not be created by higher taxes. As the Treasury Department noted on January 17 in its annual review of the federal government, spending is the real problem, and it will be particularly unsustainable starting a decade from now. And as the CBO reported in August of last year, tax increases won’t be enough to prevent a fiscal problem. Finally, what does the Times consider “a healthy budget?” Apparently, one whose size causes harm to the American economy, and takes more money from the American people even as unemployment continues to be high, is “healthy” to the New York Times’ editorial staff.
In the end, the editorial continues much of the mainstream media’s intentional misinformation campaign that has left the public ignorant on taxes and spending. But at least it’s honest in one way – at least three times, it outright says it wants to raise taxes on all earners. Which is, of course, the goal of the mainstream media and its allies in Washington – to raise taxes and spending, regardless of the fiscal consequences.
To explore the budget problem in much greater detail, please view the spreadsheet below: