February 3, 2013
Media Matters Pushes Flawed Spending StudyBy Kavon W. Nikrad
On January 29, purported media watchdog Media Matters reported on a study the organization did on 273 cable news segments regarding the debt ceiling debate throughout the first three weeks of January. Unfortunately, the results of the study, as well as Media Matters' reporting on the study, have significant flaws in their representation of actual economic, deficit, and debt data and projections for the federal government.
Media Matters reports "the Great Recession triggered massively higher counter-cyclical spending, some of which was automatic for things like jobless benefits and food stamps, and some spending that was newly enacted to buoy a collapsing economy." The insinuation is that spending will drop as the economy improves. However, this insistence ignores two facts about the recession and federal spending since the recession started:
First, the recession officially ended in June 2009. "Counter-cyclical spending" should have ended with the recession, if it was truly designed to counter the recession. Note that no dollars from the 2009 stimulus had actually gone into effect by this time, meaning the recession ended prior to the infusion of this money.
Related, current spending appears to be nearing permanent, not temporary, status. The 2012 budget was nearly $300 billion larger than that of the 2009 budget, without accounting for inflation, and yet Washington shows few signs of decreasing spending in the 2014 budget. The total increase of spending from 2006 (pre-recession) to 2012 (post-recession), according to the White House's own numbers, was $1.14 trillion.
When it comes to current deficits, the study "found 55 segments attributing deficits primarily to entitlement program spending, compared to just four segments acknowledging that rising health care costs and the economic collapse are to blame." Unfortunately for the narrative pushed here, the 55 segments decried are actually accurate, and the four praised represent factually-challenged perspectives. Consider:
The economic collapse has indeed harmed federal deficits. Even accounting for these reductions in expected federal revenues, though, the Congressional Budget Office (CBO) estimated in September 2011 that just over one-third of expected deficits at that time were due to the lack of federal tax revenue. The rest was due to overspending.
Additionally, according to calculations based upon data from the Tax Policy Center, if federal tax revenues in 2011 had reached 20% of Gross Domestic Product (GDP) - which has only happened three times since 1934 - instead of its actual rate of 15.4% of GDP, 47% of the federal deficit would have still been due to overspending.
Media Matters also blames the Bush tax cuts for "recent deficits." Yet from 2005 through 2007 (pre-recession), tax revenues totaled an average of 3.1% above the mean of the prior 40 years. (A side note: most of the Bush tax cuts were extended from 2010 to 2012, and most of those were extended in 2012, under President Obama both times and under a Democratic Congress in 2010. The term "Bush tax cuts" should probably be updated to reflect this change in policy decisions.)
Regarding the impact of entitlement spending on current deficits, Social Security and Medicare (the two biggest entitlements in the federal budget) were 33.4% of the 2011 federal budget. According to the Treasury Department on January 17, 45% of federal spending in 2012 was on the Social Security Administration and the Department of Health & Human Services, most of which consists of Social Security, Medicare, and Medicaid spending. These numbers do not account for tens of billions in tax credits, food stamps, and other entitlement programs, which raises the total cost of entitlements to over 50% of the budget in 2012.
Clearly, regardless of one's support or opposition to entitlement programs, they cost the federal government far more than interest, defense, and non-entitlement spending combined, and approximately 66% above what the 2012 deficit was.
Media Matters is correct that rising health care costs are indeed a major problem for the federal budget and current deficits. However, Media Matters treats such costs as though they are separate from the federal government's influence. Factors such as a government-mandated insurance monopoly exemption, tax bias against the individual insurance market, and underpayments in Medicare and Medicaid to doctors have all helped shift costs to the private insurance market. While an aging America is partly to blame for rising health care costs, which is what Media Matters insinuates, these other factors have major parts to play.
Media Matters also argues that entitlements are not the major problem for future budget problems in America:
As mentioned above, health care costs are in large part entitlement costs. Second, the aforementioned Treasury Report also focuses on health care costs as one of the major factors in future deficits:
In other words, the Treasury Department - which is full of the economists upon which Media Matters is so fixated - expects rising health costs (read: primarily Medicare and Medicaid spending) to be a major problem in the next 35-plus years. And the above quote from Treasury does not include expectations on interest payments, which has future costs partially dependent on what America does to slow the rise of health care costs.
Next, Media Matters cites the CBO in claiming only minor tax increases on Social Security are needed to make the program "solvent for 70 years." This claim has at least two major flaws:
First, the CBO report was published in mid-2010. As Social Security Trustee Charles Blahous pointed out in 2012, the most popular form of tax increases in Social Security - eliminating the cap on income taxed for Social Security - is no longer a viable option for program solvency because of the deterioration of Social Security's Trust Fund. Blahous also noted on January 31, 2012 that "[t]ax increases [for Social Security] have obvious downsides..."
Second, making Social Security solvent through raising the payroll tax would require a 21% tax increase on all Americans. This would raise current taxes from 12.4% of income up to the current cap to approximately 15%, on average. It would equate to a $73,000 lifetime tax increase on the average American worker. This is not a minor change by any means.
Finally, Media Matters says "once economic growth catches up to its potential, our fiscal health will depend almost entirely on our ability to control health care costs." Media Matters is correct here - even accounting for the alleged control of health care costs in the Affordable Care Act, federal debt is expected to grow enormously in the next few decades even under ideal economic circumstances. However, the "potential" of the American economy with its current level of debt - over 100% of GDP - is extremely limited. As pointed out in a 2010 American Economic Review paper, nations with debt over 90% of GDP have extremely slow growth rates. For a point of comparison, if America had its current level of debt from 1970 through 2010, its GDP would be approximately half of its current size.
When it comes to economic and debt analysis in this "report," Media Matters is showing its preference for messaging over facts. Unfortunately, its influence is substantial, which means thousands of Americans will believe its inaccurate representations of the public policies necessary to prevent the coming fiscal collapse.
Kavon W. Nikrad is the editor-in-chief of the campaign and elections website Race42016.com and a 2011-2012 policy fellow at the Humphrey School of Public Affairs at the University of Minnesota. He has been published at American Thinker, The Washington Times, and Roll Call.
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