Budget Baloney

Mark Weisbrot

How much falsehood and stupidity should the media allow to go unchallenged in public debate? At what point do journalists and the press have an obligation to step in and supply the necessary facts and explanations, so that the public can have a chance to understand what is being misrepresented?

I couldn't help thinking about this after appearing on a TV talk show last week, in which a representative of the Republican National Committee asserted that the typical, middle-income family would receive about $7400 dollars over the next ten years from the Republicans' proposed tax cut. I pointed out that this was false, that economists had estimated the number at about $160 a year, or $1600 for the 10-year period.

No, she insisted, it was $7400, as if this were common knowledge. Curious to learn where she got this number, I asked her after the show where I could find some documentation of this claim. She handed me a print out from the web site of a group called the Tax Foundation. They had divided the total tax cut over 10 years ($792 billion) by the number of households in the country, to get $7400.

I tried to explain to her that this average did not represent what a typical or middle income household would receive-- because the richest 10 percent of households will get sixty percent of the tax cut, with the average household in the top 1 percent hauling down $460,000. Of course her average would still be $7400 even if the whole $792 billion went to one person and everyone else got nothing. But it was clear that this was entirely irrelevant to her-- it reminded me of Winston Churchill's remark about people stumbling over the truth, only to pick themselves up and hurry off as if nothing had happened.

Unfortunately this is no isolated incident: it has become the norm in debates on budgetary and economic issues. Politicians assume that the level of numerical literacy is so low that they can get away with anything. Last week Congressional Republicans gathered under a large banner that said, "Stop Robbing Social Security." Now, where are the limits here? If they held up a banner that said, "Stop the Invasion of Murderous Space Aliens," would this be reported as though the invasion were actually taking place? Or as though it were a matter of debate among scientists and law enforcement officials?

Nobody is robbing Social Security of anything. Social Security is running a surplus, projected at $150 billion over the next year. In other words, the Social Security Trust Fund is taking in more money from payroll taxes than it is obligated to pay out in benefits. By law, the Trustees are required to invest this money in US Treasury obligations-- which means they are loaning money to the federal government.

The same thing happens when anyone else buys a bond (or a note or bill) issued by the US Treasury. The bondholder gets interest, and the principal when it is due. If that is robbery, someone should immediately alert the millions of investors holding US Treasury obligations, throughout America and the world, that they are being robbed!

The politicians insist that the Social Security surplus must be used only to pay down the national debt-- that is, pay off other bondholders. But this would leave the Social Security Trust Fund in exactly the same position as if the money were spent on anything from education to health care to tax cuts. The Trust Fund would still be holding US Treasury obligations for the amount that it lends to the Federal government.

Unfortunately most Democrats have decided to play along with this game of liar's poker, in order to beat back the proposed Republican tax cut. This has led to a whole slew of additional tricks and subterfuges-- including programs labeled as "emergency" spending, pushing expenditures into the next fiscal year, etc.-- all to avoid "dipping into the Social Security surplus." One of the gimmicks proposed by House Republicans-- postponing the earned income tax credit for low-wage workers-- blew up in their faces last week when George W. Bush accused them of trying to "balance the budget on the backs of the poor."

No wonder so few people are paying attention to the debate over the budget. How much would they learn about it if they did?

Mark Weisbrot is research director at the Preamble Center in Washington, D.C.

Name: Mark Weisbrot E-mail: <weisbrot@preamble.org>
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