(image by Bill Black)
I have written repeatedly about the New York Times' needs to create a prize in incompetence in macroeconomic reporting (IMR) and suggested that the paper award the IMR prize to its reporters. I suggested that the prize consist of a two hour lunch with Paul Krugman in which he will provide them with a remedial lecture on why austerity is an economically illiterate response to a recession.
NYT columns discussing austerity, particularly in the eurozone, demonstrate that its reporters religiously avoid reading Krugman's scores of columns on austerity. As always on this subject, I want to make express that I don't insist that the reporters agree with economics. It is fine for reporters to state that economics has known for 75 years that austerity is a self-destructive response to a recession but that some economists disagree. It is fine for the reporter to explain why he agrees with the austerian economists. It is not acceptable journalism to ignore the dominant economic view, 75 years of supporting events, and the empirical studies by austerians (the IMF) finding that fiscal changes have more powerful effects on the economy consistent with the dominant theory. It is not acceptable journalism to ignore unemployment and inequality and the role of austerity in increasing both. I end by expanding on Krugman's column about a tragic financial media meme by discussing three related memes that are causing great harm.
This column discusses three articles that ran in the NYT on February 20, 2014. The columns are by David Brooks, Michael Shear, and Paul Krugman.
David Brooks' column: NYT's Reporters are to the Right of Brooks and AEI on Austerity
How bad have NYT reporters and editorial board become on the subject of austerity? They are to the right of David Brooks and the hard right American Enterprise Institute. My new plea, therefore, is that if the NYT is determined to ignore Krugman and economics on the subject of austerity, would they be willing to listen to David Brooks? In a February 20, 2014 column entitled "Capitalism for the Masses" Brooks wrote about his namesake (not a relative) who runs the American Enterprise Institute (AEI). AEI is a hard right group that is particularly culpable for its unholy war against effective financial regulation that was a major contributor to the criminogenic environment that produced the accounting control fraud epidemics that drove the crisis and the Great Recession.
"[Arthur Brooks] pointed out that conservatives love to talk about private charity, but, if you took the entire $40 billion that Americans donate to human service organizations annually, it would be enough money to give each person who receives federal food assistance only $847 per year.
Instead, Republicans need to declare a truce on the social safety net. They need to assure the country that the net will always be there for the truly needy."
Michael Shear's ode to austerity
Contrast this call by the AEI head for an end to the right's "war" against "the social safety net" with the Michael Shear's news story that ran the same day in the NYT and was entitled "Obama's Budget Omits Trims to Social Security."
Shear's nostalgia for the "grand betrayal"
Shear's first paragraph demonstrates that he buys into austerity so completely that it isn't even an issue.
"President Obama's forthcoming budget plan will not include a proposal to trim cost-of-living increases in Social Security checks, the gesture of bipartisanship he made to Republicans last year in a failed strategy to reach a "grand compromise" on reducing projected federal debt."
The article treats the "grand bargain" as an obviously grand thing because it is "grand" and it is (purportedly) a "compromise." Bad journalists have a Pavlovian-response to the word "compromise" -- it must be good. Compromise can be very good. It can also be terrible.
The "grand bargain" is actually a grand betrayal. It isn't a "compromise" on austerity; it's an agreement to inflict multiple forms of austerity contemporaneously. The grand betrayal is equivalent to bleeding the patient three times. It would have sharply cut spending on social programs and the safety net (through "chained" cost-of-living payments to Social Security recipients) while increasing taxes. It would harm the economic recovery, reduce services to those that needed them at the time they most needed those services, and it would increase inequality. It would also have been an act of war against the safety net under Arthur Brook's martial metaphor imploring the right to offer a "truce" ending its war against the safety net. I've explained why, had President Obama been able to reach the grand betrayal in the summer of 2011, the resultant austerity would have thrown the economy into a gratuitous second recession, doomed Obama's reelection campaign in 2012, and given the Republicans control of the Senate. Obama abandoned stimulus and moved toward austerity under the increasing influence of Treasury Secretary Timothy Geithner and Bill Daley -- Wall Street's leading apologists within the administration.
Don't fall for news accounts that tell you that Geithner wasn't from Wall Street -- the NY Fed is the true center (it has no "heart") of Wall Street. Geithner represented Wall Street, not the U.S. public, when he was its president. That's why he was promoted to run Treasury after finishing in a dead tie with Greenspan and Bernanke as the most destructive anti-regulators in U.S. history. If any of those three individuals, now thankfully removed from any pretense that they serve the American people, had been even a minimally effective financial regulator and had acted against the accounting control fraud epidemics driving the crisis there would have been no crisis and no Great Recession.