MediaWatch: January 1995

Janet Cooke Award: The "Nonpartisan" Take on Reaganomics

From the isolation of their newsrooms inside the Beltway, Washington journalists often see the nation's fiscal business through the eyes of the federal bureaucracy. In the December 12 U.S. News & World Report, Senior Writer Susan Dentzer suggested: "Although recent polls show that more than 80 percent of Americans favor a cut in taxes for most Americans, the key question is whether America can afford all this government largess."

To Dentzer, the tax money taken out of Americans' paychecks doesn't belong to the people, but is given to them by the government as "largess." For criticizing tax cuts with liberal numbers and advocacy in three stories, U.S. News & World Report earned the Janet Cooke Award. 

Dentzer's lead article claimed: "Several of the tax cuts the Republicans have proposed -- notably the House GOP proposal to cut capital gains taxes -- are fiscal time bombs that could explode into hundreds of billions of dollars in lost tax revenue in future years."

Democrats made the same arguments in defeating capital gains cut proposals in 1989. But Chris Frenze, majority staff economist with the Joint Economic Committee, told MediaWatch the predictions of formerly Democrat-controlled agencies like the Congressional Budget Office, often touted by reporters, are very inaccurate. "Actual capital gains realizations from 1989 to 1992 were $527 billion less than the CBO estimated. That's more than half a trillion dollars off the mark. CBO's static methodology created huge forecasting errors that they failed to admit to the media or the public. It is preposterous to tout the accuracy of the CBO on capital gains when their track record is abysmal, if not embarrassing."

But U.S. News did just that -- tout the CBO's accuracy. In a sidebar, Senior Editor David Hage implied GOP control could damage the credibility of the CBO and the Joint Committee on Taxation: "For years, the agencies have enjoyed reputations for nonpartisan numbers and bipartisan whistleblowing. The CBO, for example, regularly challenged the rosy economic forecasts of the Reagan administration, and last year it embarrassed Bill Clinton by ruling that his health care proposal would increase the federal deficit."

"Wrong," Frenze replied. "If you look at the actual numbers, CBO's revenue estimates are very close to the White House numbers in 1981." As for the CBO's mild rebuke of the Clinton health plan (claiming insuring 37 million people would add $70 billion to the debt over five years), Frenze argued: "The CBO liked the single- payer, totally socialist approach, and claimed single-payer would save more money than Clinton. They're not nonpartisan. They're to the left on both issues."

But Hage concluded: "Capitol Hill centrists may yet prevail in the choice of Congress's top number crunchers. But if they don't, the nation may find itself buying bad economic policy at misleading prices -- and paying the true cost for years to come."

Hage teamed with Senior Editor Robert F. Black for an article titled "The Repackaging of Reaganomics: Republican tax cuts could well boost the deficit." The duo recycled almost every liberal argument against supply-side economics, which they wrote "never actually appears in Newt Gingrich's `Contract with America'.... [but] has rallied Washington Republicans like a lost battle cry."

Among the menu of charges, Hage and Black claimed: "Unfortunately, when the supply-side doctrine was tested in the early 1980s, the Treasury Department lost $644 billion in foregone revenues, the federal debt doubled in size, and there was no special burst of worker productivity or investment activity."

"No special burst"? What happened to a historic recovery? Hage and Black claimed "Net business investment in new equipment and buildings also declined, from 3.2 percent of gross national product in 1981 to 1.9 percent in 1986. And though the massive tax cuts probably prolonged the economic expansion of the 1980s, overall growth averaged 2.8 percent annually, far below the promised spurt."

In both cases, Hage and Black were finessing the Reagan numbers to look bad. As former Reagan Treasury official Paul Craig Roberts explained in the book The Right Data, "Net investment has been falling as a share of U.S. GNP for the past 25 years...By misinterpreting a change in asset mix as a decline in investment, economists painted a false picture of disinvestment." Roberts noted that the February 5, 1991 New York Times reported that the rate of manufacturing productivity had tripled during the 1980s, and that manufacturing's share of GNP had rebounded, reported the Times, to the "level of output achieved in the 1960s when American factories hummed at a feverish clip."

As for growth, Frenze explained that the 2.8 percent number must include the years 1981 and 1990, both recessionary years. If growth is measured from 1982 to 1989, overall GDP growth rises to 3.7 percent.

In an interview with MediaWatch, Hage stuck to the claim that "the 1980s saw an expansion, but the growth of productivity was less than the '70s, '60s, or '50s. Whether tax cuts are good or bad -- we are agnostic on that issue -- what is clear is that tax cuts did not produce the economic facts expected." Asked if their critiques of Reaganomics didn't prove a liberal bias, Hage replied: "You can say I'm liberal, and my friends at the AFL-CIO and the Economic Policy Institute can say I'm conservative."

U.S. News also brandished a chart headlined "Budget-buster" over a picture of Ronald Reagan, using a CBO chart of individual income tax revenue as a percentage of gross domestic product. Text accompanying the chart read: "During the early Reagan years, income tax rates were slashed, and the tax cuts contributed to a dramatic rise in the budget deficit." Frenze found the chart a bit misleading: "Taxpayers paid less in income tax, but more in social insurance taxes [from $182.7 billion in 1981 to $283.9 billion in 1986]."

Individual income tax revenues never took a dramatic dip, increasing from $285.9 billion in 1981 to $349.0 billion in 1986. Overall revenues increased from $599.3 billion in 1981 to $769.1 billion in 1986. The Reagan budget plan projected a revenue loss of $726 billion, but it wasn't really a "loss," but a reduced projection of future taxing. Increasing demand for federal spending, not an actual decline in revenues, expanded the deficit.

Hage and Black failed to report that in the last three Reagan budgets, the deficit ended up around $150 billion, which outperformed the Bush regime and so far, the Clinton administration as well. U.S. News seemed more interested in the repackaging of Reaganomics -- or any movement toward tax cuts -- as a disastrous mistake, an unwise distribution of "government largess."

Featured Posts

Bozell Slams Hillary’s Shills in Media: ‘They Are Covering for’ Her

Get the Latest News From CNSNews

Get the Latest Media Analysis on NewsBusters