Dean Baker's Blog, page 530

Do Businesses Consider It Burdensome to Pay the Tax They Owe?

The NYT did some mind reading to better serve its readers telling us that businesses "consider" a law requiring a 3 percent withholding on federal contracts to ensure tax compliance to be "burdensome." The reason for this withholding is that many businesses cheat on their taxes. The government loses tens of billions of dollars a year to businesses who do not pay the income tax they owe.

Some people may be familiar with the requirement for withholding taxes, since they work for a living and...

The United States Owes China So Much Money Because China Is Keeping Down the Value of Its Currency

The Washington Post has to find economics reporters and/or editors who some economics. Then it would not print without comment a statement like:

"'The problem for the U.S. is they owe China so much debt,' he [Shi Yinhong, director of the Center on American Studies at Beijing's Renmin University] said, referring to the Chinese government's vast holdings of U.S. Treasury bonds, estimated at about $1.5 trillion."

This statement appears in the context of a discussion of whether the dollar is...

Post Invents Longstanding Problem of the Debt

The Post wrongly implied that the problem of a large national debt has been longstanding. It told readers that the Congressional supercommittee is trying to "break the impasse over taxes that has long blocked aggressive action to tame the national debt."

Actually, the budget deficits prior to the downturn were relatively modest. The Congressional Budget Office actually projected that the deficit would turn to a surplus after the Bush tax cuts were scheduled to expire this year. The large...

Spain's Growth Is Worse Than Expected Because It Is Reducing Its Deficit

The NYT left this important fact out of a discussion of the state of the debt crisis in Europe. It noted that lower than projected growth is likely to cause Spain to miss its deficit target. The predicted result of cuts in government spending and increases in taxes in the middle of a severe downturn is lower growth. (GDP is equal to consumption, investment, government spending, and net exports. If government spending falls in the middle of a severe downturn, there is no obvious mechanism thro...

Social Security Tax Base Depends on Wages, Not Prices

CNNMoney wrongly told readers that the rise in prices that provided the basis for the 3.6 percent cost of living adjustment for Social Security beneficiaries will also cause 10 million workers to pay more in Social Security taxes. The reason it gave was that this rise in prices would increase the cap on wage income subject to the tax (currently $106,800). Actually, the cap on wage income subject to the tax is determined by the increase in average wages, not the increase in prices.

NYT Does Name Calling on Europe

An NYT news story told readers that it doesn't like Europe. That is the only thing that readers can conclude from an article that said Europe is "in economic and demographic decline."

While the collapse of the housing bubbles in Europe have impaired growth, just as they have in the United States, and the drive to austerity has further slowed growth, there is no reason to believe that Europe's economy will be condemned to permanent stagnation if it gets competent people at the European...

Will the Banks Stop Fracking?

Good article in the NYT. It discusses the fact that most mortgages may prohibit property owners from signing drilling leases with gas companies without prior approval. The point is that the mortgage holder must be concerned about preserving the value of the property and drilling could reduce it. This could be a case of banks doing what they are supposed to do.

Argentina, Planet Money, and Other Planets

I see that my earlier blogpost on Planet Money's podcast on Argentina has prompted a defense from both Planet Money and Megan McArdle. Both seem to feel that the piece on Argentina was quite balanced and indicated that there were many positive aspects to Argentina's decision to default.

That was not the story that I heard. The piece I heard began by mentioning Greece's debt crisis and then said (slight paraphrase):

"There is a worst case scenario and that scenario has a name: Argentina."

My g...

The NYT Misleads Readers by Implying that Large Budget Deficits Have Been A Longstanding Problem

The NYT implied that large budget deficits have been a longstanding problem in an article discussing the progress of the supercommittee working on a deficit plan. It told readers that the committee is trying to find solutions:

"in a matter of weeks, to find fiscal answers that have eluded Congress and the White House for years."

Actually, the budget deficits prior to the downturn were relatively modest. The Congressional Budget Office actually projected that the deficit would turn to a...

It Wasn't Just in Hindsight that the Housing Bubble Was Dangerous

The Washington Post told readers that Federal Reserve Board Chairman Ben Bernanke now says that it is appropriate for the Fed to target bubbles like the stock market bubble in the 90s or the housing bubble in the last decade which, "were in hindsight dangerous bubbles."

Actually, it was easy to see in real time that these were dangerous bubbles. Greenspan, Bernanke and other people in policy making positions simply chose to ignore the evidence. Since the Washington Post and other news...