Newspaper vs. Birdcage Liner

For useful and accurate information, buy and read the news pages of the Wall Street Journal: a newspaper:

David Wessel: Washington Wire: Do Tax Cuts Pay for Themselves? Not if you read the fine print in the new White House midsession review of budget trends. "While difficult to estimate precisely," Treasury long-run analyses of the effects of President Bush's tax cuts "may ultimately" raise total national output of goods and services by 0.7%. So is that enough to pay for the tax cuts, even after allowing them to work their economic magic over the next 10 years? The Center for Budget Policies and Priorities.... "A 0.7 percent increase in the economic output that the Congressional Budget Office has projected for 2016 would represent an additional $146 billion [in gross domestic product].... If new revenues equaled as much as 20% of the additional output, the increase in revenues resulting from making the tax cuts permanent (assuming Treasury's best-case assumptions) would be $29 billion."

That's a lot of money. But how does it compare to the size of the president' tax cuts? The congressional Joint Committee on Taxation, using conventional analyses, says making the president's tax cuts permanent would reduce federal revenues in 2016 by $314 billion. That is more than 10 times what the Treasury analysis suggests tax cuts would generate by prompting more hours of work, more savings and investment and more efficient use of resources.

For birdcage liner, buy the New York Times:

Jeremy Peters: Bush Cheers High Tax Revenues - New York Times: Surprisingly high tax revenues will help the federal government reduce its budget deficit faster than planned, President Bush said toda.... [T]he government is likely to finish its fiscal year on Sept. 30 with a deficit of $296 billion, about $127 billion less than initially forecast. The projected deficit decline helps Mr. Bush make a case that the tax cuts his administration pushed through Congress in 2001 and 2003 should be made permanent.... Bush said the latest budget figures were evidence that his administration's program of tax cuts was behind the country's prosperity. "Together, these tax cuts left nearly $1.1 trillion in the hands of American workers and families and small business owners," he said. "They used this money to help fuel an economic resurgence." But Democrats and independent budget analysts say that government revenues are now only barely above their level of six years ago, before the economy went into a brief recession. They say that this year's tax receipts appear to be a surge only because the last five years were so weak...

Or buy the Washington Post:

William Branigin and Paul Blustein: Budget Deficit Estimate Drops to $296B: Bush hailed a report today from the Office of Management and Budget showing that this year's budget deficit "will actually come in at about $296 billion," compared to what he said was the White House's "original projection" of $423 billion. The midyear revision is attributable in large part to a recent surge in tax revenue."That's what happens when you implement pro-growth economic policies," Bush said, pointing to tax cuts that he said have left nearly $1.1 trillion in the hands of workers and business owners. "We're way ahead of cutting the federal deficit in half by 2009. As a matter of fact... we're now a full year ahead of schedule. Our policies are working."Bush cautioned, however, that "we cannot depend on just a growing economy... to keep cutting the deficit." He called on Congress to help cut "wasteful spending" and to tackle what he said was "unsustainable growth in spending for entitlement programs," such as Social Security, Medicare and Medicaid.Congressional Democrats blasted Bush's speech, saying that the deficit remains too large and charging that the administration put out a gloomy early forecast in order to claim better-than-expected results later on.Other administration critics contend that the favorable news about the money rolling into the Treasury stems largely from shifts in the economy -- including fatter corporate profits, executive bonuses and stock market gains -- that reflect growing inequality...

Comments

[PQuincy]

I heard Stephen Moore on NPR this evening...arguing with Reich in front of Ray Soarez. And I was struck by the irony: Moore insisted, of course, that tax cuts accounted for this sudden "windfall" as well as for our wonderful, glowing economy; therefore, what we need is more of the same. Meanwhile, he decried the "out-of-control spending" that threatened the good news that Bush's ineffable wisdom had brought about.

And it accurred to me: in the reality-based world, while economists disagree about precisely what impact various tax cuts might have, they mostly (as I read it) agree that Keynesian growth triggered by abundant deficit spending are more likely to explain such recovery from the mild recession back in 2001 or so that we had. So, the one thing that Moore most attacked is probably, in fact, responsible for the good news he was there to pitch; meanwhile, the one thing he claimed was responsible, the tax cuts, probably had the least impact on the current upturn, and (as Brad quietly notes) had at most a trivial effect on the current slight fiscal improvement.

I did, however, appreciate Reich noting that 296 BILLION dollars is an awful lot of money. It's rather comical, isn't it, to see a self-proclaimed Manchesterian libertarian celebrating a fiscal deficit of "only" 296 BILLION dollars!

Still, since economics remains a dark art that lays claim to clarity, we can remain confident that every possible fiscal policy position will draw economists who insist, on the exclusive basis of quantitative empirical evidence and rational argumentation, that it is optimal.

[erg]

If you want real toilet paper, wait till the WSJ's OpEd page starts gloating about this.

[howard]

erg: brilliant!

prof: i'd say the wapo version is somewhat better than the ny times version, although to be fair, david wessel actually knows what he's talking about whereas the times and wapo folks are just the kind of reporters that your course was trying to improve....

[RW]

Absolutely erg, the difference between the WSJ's news and analysis pages and the WSJ OpEd pages is so stunning that they could be entirely different papers: The news pages are always worth reading, the OpEd pages would make Polly regurgitate her cracker; I'm not sure you'd even want to wrap fish heads in them much less line the birdcage.

[Al DeVito]

There's a very real difference between the news and editorial pages of the Journal. I think that their news pages may be the best in the country. They call a spade a spade even if the editorial page calls it a gold-plated extraction device created by the Administration.

[panasianbiz]

I am always amazed at how various news organizations filter, present, and even distort the information they present according to the ideology of those in power at that medium. Why do so many people think news reporting is an objective practice?

[Nordy]

I was wondering when you were going to get around to the WaPo article. I commented on it earlier today at my blog (Miblog Weighs a Ton).

I also liked how the authors made sure to point out that the man making the sensible statement from CBPP was "liberal" -- while the man from the Heritage Foundation claiming that tax cuts pay for themselves earned no partisan designation.

[bakho]

Reporting V stenography.

If you subtract the $180 Billion in off budget surplus, the deficit is $476 Billion. This is the fourth largest deficit in history. The top 3 belong to Bush. #5 belongs to the old man Bush. WTF is worth crowing about?

[Sonia]

CBO projected a 2006 deficit of $337 billion back in January of this year. It may be more informative to compare the new Administration estimate to the January CBO estimate. How much of the difference from the $337 billion CBO estimate is due to higher economic growth compared to the January CBO projection; how much is due to a shift in income to profits and high earning wages; how much is due to legislative action or inaction. The headline might more usefully have read "Administration projects 2006 deficit of nearly $300 billion or about $1000 for each U.S. resident.

[stillonmt]

Two comments:
The strangest thing about the Wall Street Journal editorial pages is that the editors apparently don't read their own newspaper. Many times I have read editorials where they condemn another newspaper for reporting on an issue when the same information was set forth in the news part of the WSJ! It is really quite bizarre.

The whole idea that lower taxes means more revenue is on its face ridiculous. If taxes are lowered to zero is revenue infinity? The critical issue is what is the rate that creates minimal disincentives to growth while raising sufficient revenue. The most important aspect for growth is not tax rate but interest rates. To the extent that interest rates rise because of unreasonable deficits that limit investment. Investment is what creates jobs and generates incomes.

[Robert Cote]

The Reich comments showed me just how intractable the spending problem is and always will be. When challenged to provide specific spending cuts to close the gap Reich didn't hesitate to rattle off a long list... of tax increases. He said end corporate welfare to big pharma, big oil, close loopholes, end farm subsidies. Hardly surprising that the people out of power in part because they don't support those polices, and partly don't support those policies only because they are out of power would say this. No, the surprising thing is that he couldn't name a spending cut.

[anne]

Phooey; we are spending $10 billion a month on the tragic occupation of Iraq as part of a war and occupation that will over time have a material cost over a trillion dollars. This material cost in addition to the other heart rending costs. Care to cut spending, then leave Iraq immediately. Leave Iraq and spend the saving, spend all the saving, on American education....

[anne]

There I have named a spending cut, a huge spending cut, or a way to spend on American education with no increase in revenue needed. Still, Warren Buffett has been saying what I say, the government deficit can be readily contained over time and is surely no crisis. Using the government deficit as an excuse to cut American social benefit programs in completely unnecessary.

[Sonia]

Re the importannce of the deficit: As Bahko points out Off Budget Social Insurance is now reducing the deficit by roughly $180 billion. As "excess" Social Security receipts turn negative and Medicare demands increase these two programs combined with elderly related Medicaid expenditures are going to crowd out social benefits for the non-elderly and other civilian programs for everyone. Triming social insurance for the well off and increasing taxes on the well off would enable us to preserve public goods like the national parks, enhance public education and provide some compensation for the losers in the winner take all economy.

[bakho]

My bad. The $296 Billion is On-budget. The $180 Billion SS surplus means that the US only has to borrow $116 Billion from outside this year. Still its a big deficit for a "booming" economy.

[bakho]

Why would anyone compare the current projection to the previous projection? The 05 deficit was $318 Billion. $296 Billion is less than a 10% reduction. If the estimate of the deficit is further off than simply using the deficit from the previous year, isn't there something wrong with the estimate?

This administration seems to be using Enron accounting.

[Dirk van Dijk]

Umm spending cuts, lets see, how about ending the F-22 program at almost $400 mil per plane. End farm subsidies. Move to a single payer system for health care (ok that will not lower gov't spending but will lower the total cost to the economy raather dramatically). Stop spending more per capita on homeland security in Wyoming than in NYC. Put those moblie homes sitting in Hope Arkansas to work for people who need housing, or sell them off. I'm sure if I thought about it for more than 5 min I could come up with more.

[anne]

Again, as Warren Buffett explained the government deficit is not too serious a problem and there is no possible excuse for cutting Social Security and Medicare and Medicaid to limit the deficit. Social Security will have a surplus, by the way, for another 12 years or more. We can afford to help support grandparents and parents who have worked a life to support us.

Worried about the government deficit, then leave Iraq immediately. Leave Iraq immediately in any event and use the $10 billion a month to help build America from education to health care.

[anne]

http://www.nytimes.com/2006/07/11/business/11overruns.html?ex=1310270400&en=3abdf5f8019ad5c8&ei=5090&partner=rssuserland&emc=rss

July 11, 2006

Pentagon Struggles With Cost Overruns and Delays
By LESLIE WAYNE

On Sept. 10, 2001, Defense Secretary Donald H. Rumsfeld stood before hundreds of military officers and civilian employees at the Pentagon and delivered a blistering attack on what he saw as the next national security threat: Pentagon bureaucracy.

He called for quicker decision-making, greater accountability and a streamlined process to get weapons into the hands of soldiers faster. "We must transform the way the department works and what it works on," he said. "It could be said that it's a matter of life and death — ultimately, every American's."

The terrorist attacks the next day did more than put Mr. Rumsfeld's transformation plans in suspension. As new weapons systems were ordered to help fight the war on terror, Pentagon spending after 9/11 jumped by hundreds of billions of dollars. And so did waste.

Now, almost five years later, Congress has promised to clamp down on the inefficiencies and wasteful practices that Mr. Rumsfeld identified, which critics and government oversight agencies say have only grown worse with the flood of new money into military spending.

Members of Congress from both parties are concerned that runaway costs threaten to weaken the armed forces as higher price tags mean they can afford fewer weapons.

In the current Pentagon budget for 2007, steps have been taken to, among other things, require fuller disclosure of cost overruns, set spending caps and use more fixed-price contracts that require contractors to stay within budget. Senator John McCain, Republican of Arizona and chairman of a Senate Armed Services subcommittee, plans to hold hearings this summer and next year on the issue.

Cost overruns have long been a Pentagon staple. But what has alarmed government oversight agencies and Pentagon observers, and spurred Congress to act, is the magnitude of the spending increases. Projects are as much as 50 percent over budget and up to four years late in delivery....

[NeilS]

I'd like a job as a Whitehouse reporter. Just sit around gossiping until just before filing time. Get a press release from the Whitehouse. Slap your byline on it. Send it in and you're done.

As I.F. Stone once asked: "If the government lies, must the press fib?"

[anne]

Notice, the excellent Edmund Andrews has written the print edition article for the New York Times and the article is as usual excellent:

http://www.nytimes.com/2006/07/12/washington/12deficit.html

July 12, 2006

White House Forecasts Drop in the Deficit
By EDMUND L. ANDREWS

WASHINGTON — The Bush administration said Tuesday that a big jump in tax revenue would reduce the budget deficit for this year to $296 billion, down from $318 billion in 2005. But budget analysts warned that the long-term fiscal outlook remained almost as bleak as before.

Tax revenue is expected to climb 11 percent this year, totaling $246 billion more than in 2005. And while spending continues to rise rapidly, taxes on corporate profits and individual investment income have grown even faster....

[johnchx]

bakho wrote: "My bad. The $296 Billion is On-budget."

No, it's not, it's unified. You're first comment was correct.

The mid-session review document is available from OMB here:

http://www.whitehouse.gov/omb/budget/fy2007/pdf/07msr.pdf

Table S-13, in the back, gives the clearest view of what's going on. For fiscal 2006, they're projecting:

unified deficit: $296 billion
change in debt held by public: $303 billion
change in total debt subject to the statutory debt limit: $593

The 2006 estimated changes in debt held by the public and the in total debt are both larger than the 2005 actuals. That is, the 2006 deficit, by reasonable measures, is forecast to be larger than the 2005 actual.

So...that's how the story will be reported, right?