A good example is a big feature in yesterday's Sunday New York Times Magazine -- "The Iraqi Time Bomb" by Jeff Madrick. It's about how the costs of the war and all its consequences, in combination with Bush's proposed tax-cuts, will lead to massive budget deficits that will slow economic growth and cause government services to be slashed. I'm going to take a close look at this article, but not for the sake of arguing with its conclusions (even though I disagree with them radically). Instead, I'm going to treat the article as a showcase for exposing some of the dirty tricks the media employs when it reports on seemingly objective economic topics to advance its own subjective political agenda. Throughout, quotes from the article will be indented; in all cases emphasis will be mine.

The first dirty trick is the author himself. A reader naturally assumes that a world-class newspaper like the Times would have selected a highly qualified expert to write on such a technical subject. But just who is this Jeff Madrick really, and why is he qualified to write this? The Times says of him only that

"Jeff Madrick is a contributing economic columnist to The New York Times, editor of Challenge Magazine and the author of 'Why Economies Grow.'"

In other words, he's qualified to write because he writes. But let's look deeper. Challenge Magazine has left absolutely no footprints that I can detect -- if you can find a trace of it anywhere on the web, you're a better Googler than I. As to Madrick's other accomplishments, we find that (according to a bio supplied in connection with Congressional testimony by Madrick in 2000) it's pretty much all various forms of media work, including articles for leftist publications like Salon.com (an article there criticizing Bush's first tax cuts was called "Long Live Big Government!"), the New York Review of Books and The American Prospect -- and the a book with the gloomy title The End of Affluence. The only exceptions are that, then at least, he was an adjunct profession of social sciences at The Cooper Union, and he claims to have been a "Wall Street financial consultant and an executive at Columbia Pictures" -- no details are given. Oh, and one more thing... he is a Senior Fellow at the World Policy Institute, a hyper-liberal think-tank that studies "management of a world market economy."

Madrick's article begins with a double rhetorical trick -- an arch exaggeration of the opposing view, and an argument by metaphor.

On Wall Street, when companies did not generate the promised profits to justify the bubble in stock prices, many analysts told investors that profits did not matter. ...Today, in similar fashion, as the federal budget has plunged into the red over the past two years, President Bush's economic team is telling the nation that deficits no longer matter.

Here Madrick takes Bush's limited view that the small deficits implicit in his tax-cuts are acceptable, and blows that up into "telling the nation that deficits no longer matter." But he doesn't offer any evidence that even this exaggerated view is wrong -- he simply likens it to something else that is known to be wrong.

The article is littered with "to be sure" statements -- where the author acknowledges briefly that opposing views may have merit. How many time lately have you read, "To be sure, Saddam Hussein is a terrible dictator, but... "? Such statements are designed to give an illusion of balance, to allow the author to say he acknowledged opposing views -- but without giving them anything like equal time.

And I, for one, am not a deficit hawk. At times, deficits are necessary to stimulate economic growth, and their dampening impact on private investment is occasionally exaggerated.

And

Occasionally, tax cuts make sense.

Madrick uses undefined and emotive terms -- expressions that have no real meaning, but that readers will accept on the grounds that the author is an authority on the subject.

...deficits are now approaching unmanageable levels, as they did in the 1980's. In fact, the federal government's fiscal health has deteriorated at a pace so stunning that few have yet caught up with the facts.

What exactly does it mean for deficits to become "unmanageable"? What does it mean for deficits to be "approaching" such levels? How is the "pace" of deterioration measured, and when does it become "stunning"?

Madrick manufactures a consensus by claiming, with no evidence whatsoever, that certain views he favors are held by "most economists" while others he opposes are held by "few economists."

Some economists in the Bush camp claim that... The economy will grow faster than traditional economic models anticipate, producing tax revenues that will reduce projected budget deficits. But most economists say there is a large measure of ideological wishful thinking here... Few economists agree, however, that eliminating dividend taxes will have more than a modest impact on stock prices.

When there's no source at all, Madrick just makes it up

As I understand it, since even before the war started, the Defense Department has been spending money so fast it can't keep track of it.

As is almost always the case in articles like this, Madrick's conclusion is critically dependent on a handful of subjective and debatable input assumptions. The President of the United States is not considered a trustworthy source for such inputs, but unnamed others apparently are:

The president has asked Congress for $75 billion to finance war-related costs, but many think a more realistic estimate of the combined costs of war and reconstruction will be closer to $200 billion.

Later in the article Madrick cites one or two of the claimed "many," building his case by citing carefully selected friendly sources.

Unfortunately, economists outside the government estimate that the deficit will be even larger. William Gale and Peter Orszag of the Brookings Institution figure the deficit is likely to approach $2.5 trillion. The Wall Street economists William Dudley and Edward McKelvey of Goldman Sachs say that the deficit will exceed $4 trillion by 2013.

Gale and Orszag are devoted anti-tax-cut partisans associated with a left-learning think tank. They are frequently cited as authorities in media stories like Madrick's. Why are only Brookings and Goldman estimates cited, though? There are plenty of other think tanks and investment banks for have very, very different takes on this.

Who knows, really, how these people who agree with Madrick came up with their statistics -- Madrick never questions them. But he does question the inputs to opposing arguments:

And that's based on a moderately optimistic forecast, one that assumes the economy grows at a healthy rate. Specifically, it assumes that productivity -- the output per hour of work that is the primary source of growth -- will rise by 2 percent year.

Madrick makes use of many arguments en passant -- critical links in a chain of reasoning required to support the author's conclusions, but offered in passing as though they were beyond question, or not directly relevant to the present matter. For example:

But the $1.4 trillion tax-cut package passed in 2001 would have been more productive if it had been temporary and applicable to more taxpayers. Instead, it was skewed to the rich (who are prone to save rather than spend) and will be permanent -- far from disappearing should the economy improve, the tax cut will grow larger.

Madrick manufactures evidence out of semantics, by using expressions like "it appears." How does it "appear"? To whom does it "appear"?

The administration proposed a second major tax cut in early January, estimated to cost $726 billion over 10 years, and it appears to be even less effective as a near-term stimulus...

Madrick employs guilt by association to discredit ideas with which he disagrees.

...more than half of the total results from the elimination of taxes on dividends, an idea raised at Bush's economic summit in Waco, Tex., last August by a stockbroker, Charles Schwab.

Is the idea bad because it was raised "by a stockbroker," as opposed to a "Wall Street financial consultant and an executive at Columbia Pictures"? And is it fair to characterize Schwab as simply "a stockbroker," rather than, say, "the highly successful entrepreneur who broke the Wall Street cartel on commission prices and opened up stock trading to millions of Americans"?

Madrick cites economic theory as fact. He says,

The concern about large deficits is that they reduce long-term economic growth and produce even less revenue for social programs. When large enough, government deficits require so much federal borrowing that they can displace private investment and push up interest rates on mortgages, consumer credit and business borrowing to levels that thwart home buying, consumer purchases and capital investment.

Of course we don't know what he means by the vague words "large enough," but he could have said with just as much truthfulness "deficits increase long-term economic growth" or "deficits have no effect at all on long-term economic growth." The evidence of recent history -- in terms of growth, interest rates, home buying, and so on -- could be pressed into the service of any or all of these claims.

While citing theory as fact, he dismisses fact as irrelevant, even facts he admits:

If they [deficits] remain as low as the budget office predicts, they will come to less than 1 percent of gross domestic product in the last few years of the forecast. Even so, this will probably impede economic growth.

Madrick's arguments contain unexplained contradictions. I noted earlier that he criticized Bush's 2001 tax cut because

 ...it was skewed to the rich (who are prone to save rather than spend)...

But later he warns that deficits are especially dangerous,

Because Americans save so little...

Madrick makes damned lies out of statistics by shuffling their context. In one case he worries about the fall of the dollar,

Over the last year, the dollar has already fallen by 20 percent against some major currencies.

But he fails to mention that prior to that it rose 30% -- the context is gone, so 20% appears to be a huge move. Then later, "20%" appears again -- and this time context is provided, making 20% seem insignificant:

And even a 20 percent boost in stock prices from current levels does not restore them to their recent highs.

Finally -- and this is the fatal conceit of all writers like Madrick whose economic views are informed entirely by their political preferences -- Madrick can't resist revealing his political agenda: because to him, his subjective partisan agenda is simply reality. Here, Madrick declares why he's so scared of even the tiniest budget deficits -- because he thinks they'll get in the way of his "Long Live Big Government!" dream:

The rising costs of education and health care will be harder for the typical family to meet. Meanwhile, government will not have the money to help. Programs may be cut across the board. And consider what was not accomplished in the 1990's, despite the nation's prosperity. More than 40 million Americans still have no health insurance. The United States has the highest proportion of children born into poverty in the developed world. The quality of education remains grossly unequal. Even two-worker families cannot afford quality day care. Much remains to be done.

That's it for the dirty tricks. Time to go wash your hands. Scrub hard. And remember all this next time you read an article about economics (that’s really about politics).

Posted by Donald L. Luskin at 5:15 PM | link    

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