If aliens landed on Earth and picked up the cover of the December
8 Washington Post, theyd think the House of Representatives were a
bunch of reckless advocates of tax cuts that do nothing to help the
economy. Unless, of course, those visitors knew something about
economics. In his front page article, Jonathan Weisman penned a
partisan piece about a House-endorsed package of tax cuts that would
cost the government billions and have no real impact on the stock
market or economy.
Weisman opened his article by noting that the House
tax-cut package would trim the federal revenue by $94.5 billion
over five years nearly double the budget savings that Republicans
muscled through the house last month. Missing was the history, to
say nothing of recent news, behind tax cuts and the growth in
federal revenue they produce.
Just last quarter, a growing economy bolstered by cuts
in capital gains, dividend and income taxes saw a stellar job gains
reach 30 consecutive months, red hot manufacturing numbers, 4.3% GDP
growth and increased productivity. The federal deficit (for that
period) dropped $80 billion, from $412 billion to $331 billion.
Weisman referred to tax cuts as a cost five times in
the story, but that is based on the premise that tax proceeds are
the governments money to begin with. This sort of creative
accounting implies that all money and property belong to the
government and can be confiscated on a whim.
Parroting Democratic talking points, Weisman also
claimed that cutting the dividend tax would overwhelmingly benefit
affluent investors, especially as Congress moves to cut programs for
the poor in the name of deficit reduction. After getting a
throwaway quote from a House Republican about the benefits of tax
cuts, Weisman turned to study by a liberal group that claimed they
would be harmful: The liberal watchdog group Citizens for Tax
Justice says that the richest 1 percent of Americans would enjoy 53
percent of the value of the extension that year, while 78 percent
would receive no benefit.
If Weisman was interested in balanced analysis, he
would have considered a recent report from the Tax Foundation. In
that study, foundation President Scott Hodge found as stock
ownership becomes more universal in America, stock owners those
claiming dividends or capital gains income are becoming
increasingly middle class. In addition, the foundation discovered a
rarely mentioned demographic most likely to benefit from the tax
cuts: the elderly.
Source: Tax Foundation
Instead of using that study, Weisman hyped a flawed
report from the Federal Reserve Board to draw the conclusion that
the earlier dividend tax cut package had no real impact on the
stock market and prompted only muted gain in total corporate
payouts.
Weismans faith in that study was misplaced. According
to a December 6 Wall Street Journal article, the Fed study had such
a small event window that it can hardly be taken as conclusive.
According to the Journal: The economists tracked stock performance
during a few days in early January, after the Bush Administration
officially announced the tax cut proposal, and on a couple of other
arbitrary dates. Apparently, the $4 trillion growth of the market
since 2003 didnt factor into the conclusion. Much like Weismans
story, the Fed cherry picked data for the study.
While Weisman did find comment from conservatives, he
only offered them enough ink for vague talking points while hyping
detailed numbers, studies, and analysis from liberal groups. Saying
Our economic policies have done the trick, didnt carry near the
authority of a Federal Reserve Board study, even if that study was
fundamentally unsound.
Overall, Weisman painted a dour picture of the past,
present, and future of dividend tax cuts. His portrait of policies
that would save $50 billion over five years by imposing new fees on
Medicaid recipients, trimming the food stamp rolls, squeezing
student lenders and cutting child support enforcement doesnt do
the economy or free market principles, justice.
