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Free Market Project

3/7/2006 12:45:55 AM

Updated 02/24/06

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No Shortage of Errors in Deficit Coverage
Newspapers continue faulty approach to tax cuts.

by  Amy Menefee
July 21, 2005

     Higher-than-expected tax revenues and a lower federal deficit now thats news. The White Houses July 13 announcement that revenue was flowing in above projections prompted a flurry of deficit stories, and more than half the coverage analyzed by the Free Market Project repeated common errors exposed in Tax & Spin: Five Ways the Media Distort Tax Issues.

     In 11 newspaper stories between July 13 and July 15, more than half contained at least one distortion. Journalists emphasized record high deficits, bemoaned tax cuts as a cost to the government, and cited tax cuts as a cause of the deficit. These distortions failed to put the deficit in a historical perspective and failed to explain the economics behind tax cuts.

High-Dollar Deficits

     A July 14 Washington Post story by Jonathan Weisman said, in dollar terms, the 2005 deficit of $333 billion would still be the third highest on record. But focusing on todays dollars, as several stories did, doesnt take inflation into account.

     Later in the same story, Weisman admitted that Now, the deficit is expected to finally begin receding, and it would come in at 2.7 percent of the GDP, smaller in those terms than the deficits of 15 of the past 25 years. This comparison with GDP is a more accurate statement, because it allows a constant comparison from year to year. When todays deficit is viewed alongside that of 1985, when it was 5.1 percent of GDP, the situation turns out to be less dire than records would suggest.

     Edmund L. Andrews of The New York Times included a commendable bit of context in his July 13 story that revealed the economic advantage America derives from its free market. Andrews said, If current trends hold, the deficit could amount to less than 3 percent of the gross domestic product less than in many West European countries that have been hobbled by slow growth and the heavy cost of supporting social welfare programs. That was the only comparison that put Americas deficit in a wider context.

Tax Cuts as Cost

     Economists have pointed to President George W. Bushs tax cuts as a source of the increased revenue. Lightening the load of taxation has enabled businesses to grow, in turn growing the tax base. But the media tended to blame tax cuts for causing the federal deficit, choosing to focus on that instead of on rising government spending.

     Warren Vieth and Richard Simon did just that in their July 14 Los Angeles Times article: Bush has asked Congress to extend his previous tax cuts and to approve new tax reductions that would cost the government $1.3 trillion over 10 years.

     Likewise, Andrews reported in his July 13 New York Times article: Mr. Bushs intention to extend his tax cuts indefinitely, and to add new ones, would drain more than $1.4 trillion from government coffers over the next 10 years.

     As the Free Market Project and the National Taxpayers Union pointed out in Tax & Spin, a tax cut allows taxpayers to keep more of their own money. Calling it a cost to the government is based on the idea that all the money is the governments in the first place. A more accurate approach is to consider the flow of money in and out of government paying attention to the areas where spending is growing.

Tax Cuts Causing Deficits

     The media have been eager to blame the Bush tax cuts for the current deficit. While deficit coverage often referred to an economic downturn in 2001, only one story attributed that downturn at least in part to the Sept. 11 terrorist attacks. Instead, the norm which was upheld by five of the stories in this short time period was a reference to the $128 billion surplus Bush inherited in 2001, as Weisman put it in his July 14 Post story. The clear implication was that Bush came into office and squandered a surplus by spending it on tax cuts.

     In a July 14 story, the Chicago Tribunes William Neikirk quoted budget-watcher Robert Bixby as saying that we are still more than $300 billion in the hole. Neikirk continued, He said that confirms what many analysts had been saying at the time of the Bush tax cuts that even a strong economy would not wipe out the deficit they would cause.

     Neikirk added, When Bush took office in 2001, the Congressional Budget Office projected a $5.6 trillion surplus over 10 years, but that rosy picture evaporated as the economy went into a recession and a stock market bubble burst. Again, the reporter provided no link between the terrorist attacks, the cost of the war on terror and the deficit; instead, Bush taking office and a recession were the primary catalysts.

     Simply put, there are no deficits without higher federal spending. But as long as the media continue to portray tax cuts as costly and bad for the budget, the audience wont get the full story.

Related Links:
Tax & Spin: Five Ways the Media Distort Tax Issues

Post Slants Tax Cut Story

One Economy, Two Spins: Economic Conditions Portrayed as Positive During Clinton Presented as Negative for Bush


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