Washington Post Sees Good Economic News, Declares It Bad

The lead from an editorial in today's once great Washington Post Bezos Bugle, home of unrepentant deficit scolds:

WHEN IS an improving fiscal situation not really an improving fiscal situation? When it’s the United States’ current one.

That’s the lesson of the White House’s annual budget update, known as the Mid-Session Review, which was published Tuesday by the Office of Management and Budget (OMB). Data in the report show the federal government is on course to record a $455 billion budget deficit this year, which is $128 billion less than the Obama administration had projected six months ago. Expressed as a percentage of gross domestic product, this is even more impressive: it amounts to six-tenths of a percent of GDP that we were planning to borrow this year, but won’t have to borrow after all. Well over half of this unexpected deficit reduction is due to above-forecast tax revenue, generated by the economy’s continued growth. Given the report’s forecasts for next year, it is likely that, as a share of the economy, the budget deficit at the end of the Obama presidency will be three-quarters smaller than it was at the beginning. Not too shabby. 

But, of course, this impressive accomplishment can't be allowed to stand unchallenged.  Allusion to the Simpson-Bowles "catfood commission" in 3...2...1:

These stubbornly high levels of public debt, and the prospect of truly uncontrolled debt in the years beyond 2025, reflect the lack of fundamental reform to U.S. entitlement programs such as Medicare and Social Security. President Obama may be able to boast about lower deficits on his watch, but not his avoidance of this issue. 

"Yes, =cough= much lower deficits =cough= but let's keep our eye on the small picture:  keeping the oldsters from robbing us!  Let them eat catfood!"

For a look at the world the rest of us live in, let's turn instead to Robert Kuttner, who we'll quote at length on what the real debt problem is:

This is the real debt problem—the merciless and economically stupid failure to write off old debt. It is the opposite of the claim that is relentlessly promoted by conservative groups, who tell a story of debts that must always be paid and of public debt burdening future generations. The reality is the opposite. It is growth that tames debt and makes it less burdensome; sometimes it takes debt relief to restore growth.

Here in the United States, the Peter G. Peterson Foundation and a variety of front groups that it has created have spent more than $1 billion to propagate the story of public debt destroying America’s economic future. In this view, only austerity—budget cuts intended to pay down debt—can spare America from this fate.

This view violates the most basic logic of economics. If an economy is in a deep recession, balancing the budget is the worst policy that can be pursued, because fiscal contraction during a downturn reduces the rate of growth. The government’s books may eventually balance, but at a needlessly depressed level of economic output. This is what has occurred in Greece, where forced austerity has caused the economy to shrink by more than 25 percent and the budget is still not in balance.  [snip]

Peterson and the deficit hawks have continued to warn that deficits and debts are courting sky-high inflation, on the theory that government borrowing crowds out business borrowing and pushes up rates. But in a subpar economy, demand for credit is depressed and the inflation never arrives. That the austerity mongers have been proven wrong again and again has not diminished their puritanical crusade.

President Obama needlessly succumbed to the allure of the deficit hawks in 2010. He defined America’s prime economic problem not as prolonged stagnation but as excessive public debt. He appointed a bipartisan ["catfood"] commission inspired by the Peterson Foundation, chaired by Erskine Bowles and Alan Simpson, to come up with a belt-tightening program. Mercifully, the commission could not agree on a plan that met its required supermajority.  [snip]

Only when the Federal Reserve embraced heroic monetary policies of bond purchases on a scale unknown since World War II—more debt!—did the economy begin a real recovery. The debt-to-GDP ratio began coming down faster than projected—not mainly because of the budget cuts but because growth was resuming. Obama finally abandoned austerity economics in his 2015 State of the Union Address. By then, the political damage was done. Republicans controlled both Houses of Congress and his proposals for increased public investment were dead on arrival.

Not that we expect the editorial board at the once great Washington Post Bezos Bugle to acknowledge the abject failure of their prescriptions for economic health.  As the times pass them by, count on their finding more gray linings inside silver clouds.

Letters We Wish We'd Written - Reaganomics And Income Inequality Edition

The once great Washington Post's Bezos Bugle's non-economist economics writer Robert "Not Paul" J. Samuelson provides a reliably wrong-headed right-wing point of view on op/ed pages once graced by the likes of Walter Lippmann.  Today, two perceptive readers take issue with one of "Not Paul" Samuelson's recent forays into dunderhead economics:

Robert J. Samuelson’s May 11 op-ed column, “Poof goes the big tradeoff,” cited Arthur Okun’s “Equality and Efficiency, The Big Tradeoff,” which theorized that higher growth would come with increased inequality and increased equality would lead to stagnation. But that hasn’t worked out in the real world, and this puzzled Mr. Samuelson.

Mr. Samuelson claimed to have no clue as to why the U.S. economy is stagnating while the richest (after-tax, inflation-adjusted) 1 percent of Americans command nearly half of the nation’s income (almost equal to the lower 80 percent’s total) and how this inequality has occurred.

Hasn’t Mr. Samuelson noticed that the “Reagan revolution” is still going on? Congress’s budgets have given massive tax breaks to the richest while cutting funds for education and making no provision for budget-balancing states and municipalities that have been forced to cut funding for schools, police and other essential services.

President Obama tried to stimulate the economy by proposing measures for necessary repairs and improvements to roads, bridges and other infrastructure, but the Republican Congress turned him down flat.

Mr. Samuelson surely knows that consumer spending drives 70 percent of the U.S. economy’s activity. But skinflint policies have targeted the very people who do most of the consuming. In short, Mr. Okun’s 1975 theories don’t apply today. The billionaires have bought Congress, and the resulting increase in inequality has led to economic stagnation.

Russ Prickett, Austin

Robert J. Samuelson contended that relatively weak U.S. economic growth and widening inequality demonstrate factually that “the big tradeoff has proved unworkable” because “we do not know enough to manipulate economic growth, productivity and income distribution.” Right facts, wrong conclusion. A few years after Arthur Okun’s article, the United States implemented Reaganomics, shifting massive wealth from the public to the private sector. But the “job creators” have not behaved as expected, using a greater portion of these funds to increase their wealth through financial investments (hedge funds, collateralized debt obligations, outsourcing to increase profit margins, executive stock options, etc.) rather than investments in productive equipment and output. With the reduced funds available to the public sector (exacerbated by long wars in Iraq and Afghanistan), we get crumbling infrastructure and limited ability to support bootstrapping efforts. We do know enough now: This 35-year experiment has demonstrably failed to achieve the right set of tradeoffs. The United States needs to recalibrate the public-private balance, not just give up hope.

Len Levitt, McLean

Unfortunately for America, the "Reagan revolution" is still going on, as Mr. Prickett notes.  Thanks to the usual suspects -- an infantile media, plutocrats emboldened by Citizens United,  and an array of spineless "centrist Democrats" -- the rather obvious connection of income inequality to policies that have long-favored the wealthiest 1 per cent ("makers!") is obscured  by people like Samuelson to the detriment of us all.

The Washington Post: They Decide, Then Report

Once great Washington Post Bezos Bugle staff writers Ylan Mui and Zachary Goldfarb are having trouble distinguishing between opinion and news, among other things.  From the front page of today's paper, they tell us:

Washington is finally set to get out of the way of the nation’s economic recovery in 2014, fueling hopes for faster growth after years of sluggishness.

No major new rounds of government tax hikes or spending cuts are on deck. Optimism is growing that lawmakers will forge a deal on the federal budget next week and avoid the partisan gridlock that threatened to derail the economy a few months ago. Massive layoffs among state and local governments have largely ended, with many places now adding jobs.  [our emphasis]

Get out of the way, Washington!  Partisan gridlock!  Everyone's to blame!  (Can you be more specific?  No?  How about we give it a try:  "Get out of the way, Republicans!"  That sounds more accurate.  Please proceed.)

Government policies over the past three years have created the largest drag on growth in at least half a century, according to his [Moody's Mark Zandi] calculations. There was the end of the federal stimulus program in 2011, followed by a series of political showdowns that led to budget restraint the next year. This year, Washington lawmakers sharply cut back on spending and implemented the largest tax hike in decades, affecting all working Americans.  [our emphasis]

But, wasn't the federal stimulus program a "government policy" that kept the economy afloat prior to 2011?  Are we talking about the Democratic policies or the Republican sabotage opposition?  In the next segment, they continue to step all over their dicks premise:

Yet the private sector recently has come to life. The Labor Department reported Friday that a solid 203,000 jobs were created in November and the unemployment rate fell to 7 percent. The job gains ranged across sectors, from construction to health care, and those who already were employed enjoyed an uptick in hours and wages.

In addition, the drop in the jobless rate was the result of the pickup in hiring. In previous months, declines have been driven by a shrinking labor force as many discouraged Americans gave up looking for work.

“This is just a clean sweep,” said Stuart Hoffman, chief economist for PNC Financial Services Group. “It’s a very good report. It’s across the board.” [our emphasis]

Ignore the man with the facts behind the curtain!  Then, we get those darn partisans posturing!  Who can tell who's right and who's wrong?  Maybe they're both right and wrong!  Start posturing!

Still, there was plenty of room for partisan posturing around even unequivocally strong data. The White House used the report to highlight the plight of the
4 million people who have been out of work for six months or more. The administration is calling for an extension of emergency benefits for the long-term unemployed, which are slated to expire at the end of the year, but the measure faces staunch opposition from House Republicans.

“It’s really important to peel the onion to its core to understand that while we are continuing to move in the right direction in this economy, the long-term unemployed continue to suffer disproportionately,” Labor Secretary Thomas Perez said in an interview.

Republicans said the data prove the opposite point: that the recovery is ready to stand on its own.

The November jobs report “includes positive signs that should discourage calls for more emergency government ‘stimulus,’ ” House Speaker John A. Boehner (R-Ohio) said. “Instead, what our economy needs is more pro-growth solutions that get government out of the way.”  [our emphasis]

Wait, our intrepid reporters have decided who's right after all:

Government’s fading role as an impediment to growth is only one of several reasons economists are more optimistic about next year’s prospects. The housing market, which was ground zero in the financial crisis, has become one of the bright spots of the recovery. Americans have dramatically reduced the huge amount of debt they carried coming out of the recession and have padded their savings.  [our emphasis]

Sounds like that could have been written by Mr. Jobs himself, Weeper of the House John "Mr. Tangerine Man" Boehner.   We don't need no more stinkin' unemployment benefits  food stamps  Fed easing  stimulus  Government role!  Notice the intrepid reporters allow the modest Boehner to avoid taking credit for Washington's "drag on growth" (via the shutdown, budget cuts, etc.).  It's "Washington" that's the problem, dammit, and it deserves a newspaper that's part of the problem.

Krugman Educates the Kaplan Daily

In his blog, New York Times columnist and Nobel Prize winner Paul Krugman mocks the editorial position of the Kaplan Daily / WaPo, which seems to say we need more action to reduce unemployment, but then rejects the action that will get us that result:

"Policy wisdom, as the WaPo describes it, is entirely dictated by fear of things that aren’t happening: fiscal expansion will invite an attack by the invisible bond vigilantes, if you try monetary expansion the inflation monster hiding under your bed will come out and eat you. The problem we actually have — the problem the Post says we dare not let happen — doesn’t seem to matter at all."

The "Very Serious Person" cult at the Kaplan Daily -- publishing writers like Charles Kraphammer and Marc Thiessen, who have been wrong almost every time about almost everything-- is a plague on the institution of journalism. No one is ever sanctioned in Very Serious Person-land for screwing up things like Iraq and the economy, they just get a writing gig at the Kaplan Daily.

UPDATE: But some pupils remain dumb as a rock. Calling Lyin' Ryan's Medicare plan "honest" bears the unmistakable hands of Very Serious Persons and Kaplan Daily editorial boarders Fred Hiatt and Ruth Marcus. FAIL.