Journal Still Promoting Voodoo Economics

October 6th, 2014 · 3 Comments · budget policy, Congress, economy, journalism, tax policy

By Denise Tessier

Based on the latest figures from the U.S. Labor Department, USA Today (and other news outlets) reported over the weekend that September’s unemployment rate had dropped below 6 percent for the first time since 2008, when George W. Bush left in his wake a destroyed economy that saw losses of a million jobs a month.

Then, in this morning’s New York Times, Paul Krugman warned that “voodoo economics” will be getting a push in Congress again this year.

So, what did the Albuquerque Journal offer readers on this topic? Yet another column by discredited economist Micha Gisser, paired up with his former Rio Grande Foundation colleague Kenneth Brown, both of whom have been criticized on ABQJournalWatch for their economic analyses, as well as by economists who generally rebut those analyses via letters to the editor or columns of their own.

Five policies that could fix economy” was the title on a column actually promoting the very voodoo economics Krugman warned against (with a call for repeal of Obamacare thrown in for good measure).

As we pointed out in August, even Rio Grande Foundation Director Paul Gessing (in his own letter to the editor of Business Outlook) found himself criticizing a previous column by Gisser, saying he respected Gisser as an economist, “but I think he allows politics to cloud his economic thinking in his recent column on the U.S. and New Mexico economies.”

One need only look at the first of the five Gisser/Brown policy “fix” claims — the one on fiscal policy — to see them proving Krugman’s point (and Gessing’s, although he might not agree with its application here): that politics, rather than economics, is driving their argument. The first of the Gisser/Brown five is:

• Fiscal policy: In a sluggish economy, cutting taxes will result in faster economic growth leading to higher demand for labor and rising federal-tax revenue. The best candidate for the chopping block is the U.S. corporate-income-tax rate which is the highest among the industrial nations. The federal statutory corporate tax is 35 percent, and adding the states’ taxes, it is 39.1 percent. To avoid the high tax, American companies park substantial portions of their foreign earnings abroad. However, reducing the corporate tax from 35 percent to, say, 15 percent would repatriate most of the $2 trillion U.S. corporate earnings invested abroad back to the U.S. and, consequently, give a huge boost to production and employment at home.

Even a non-economist can argue that corporations generally do not pay the federal rate of 35 percent, and that even if the rate was lowered to 15 percent (which is more in line with what corporations actually pay, if not less or even zero), that cheaper labor costs abroad would keep jobs from coming home.

One can argue that Gisser and Brown’s column is political because in it, they are drumming up support for the expectation that Rep. Paul Ryan, chairman of the House Budget Committee, will again try to cut corporate taxes. Krugman says Ryan has been “dropping broad hints that after the election he and his colleagues will . . . try to push the budget office into adopting “dynamic scoring,” that is, assuming a big economic payoff from tax cuts.”

As Krugman points out in his column, recovery from the 2007-9 recession “has actually been a bit faster than the typical recovery from financial crisis, despite unprecedented cuts in government spending and employment.”

And even though millions of Americans are still unemployed or underemployed, as USA Today and other outlets reported over the weekend:

A better labor market is benefiting more Americans, including those with less education.

September’s unemployment rate fell from 6.1% to 5.9%, slipping under 6% for the first time since 2008. Those with only, or less than, a high school diploma saw even sharper declines.

Add to that the results of research by the International Monetary Fund which, as Krugman noted, shows “redistribution of income from the affluent to the poor, which conservatives insist kills growth, actually seems to boost economies.”

“It’s not because voodoo economics has become any more credible,” Krugman wrote.

So why would Ryan (and Gisser, Brown and, by use of the Gisser/Brown column, the Albuquerque Journal) continue to promote voodoo economics?

Here’s Krugman’s explanation:

First, voodoo economics has dominated the conservative movement for so long that it has become an inward-looking cult, whose members know what they know and are impervious to contrary evidence. Fifteen years ago . . .the Clinton boom posed a problem for their ideology. . . .

Second, the nature of the budget debate means that Republican leaders need to believe in the ways of magic. For years people like Mr. Ryan have posed as champions of fiscal discipline even while advocating huge tax cuts for wealthy individuals and corporations. They have also called for savage cuts in aid to the poor, but these have never been big enough to offset the revenue loss. So how can they make things add up?

Well, for years they have relied on magic asterisks — claims that they will make up for lost revenue by closing loopholes and slashing spending, details to follow. But this dodge has been losing effectiveness as the years go by and the specifics keep not coming.

Inevitably, then, they’re feeling the pull of that old black magic — and if they take the Senate, they’ll be able to infuse voodoo into supposedly neutral analysis.

And based on shamefully consistent use of columns like that which appeared today, it’s likely the Journal will accept that voodoo infusion without question.

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3 Comments so far ↓

  • Dennis J. O'Mara

    It’s one thing to print editorials by Will, Goldberg, et. al. but quite another to give Republicans free space to publish their manifesto. Democrats need to request equal time.

  • mark ropel

    OK, lower the Corp. Tax to 25%, with 20% mandatory.

  • Dennis J. O'Mara

    What does “awaiting moderation” mean with regard to my earlier comment? Meanwhile, what is being done to counter this piece of junk that the Journal published? I wrote a lengthy letter to the editor replete with facts and data, but I doubt they’’ll publish it ‘cause I’m not an economist. Does anyone know of a reputable economist who could/would write a piece that would get published?

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