Investor's Business Daily Owes Its Readers a Correction


It's easy to get worked up when reading the news, but one tries to reserve one's fury for the moments of truly transcendental nonsense. Take for example this Investor's Business Daily story. 

Just about every sentence of the article is contentious. It claims the Recovery Act failed and says OECD studies has concluded that stimulus "cures nothing." Only tax cuts, they conclude, will jump-start the economy.

I cannot find the study they're citing. But here's a 2009 OECD report that claimed the direct government purchases have a multiplier of 1.1, more than twice as high as any tax cut. The OECD isn't the voice of God in fiscal policy, but it makes sense that in a balance sheet recession, tax cuts are going to be pocketed as families and businesses repair their savings.

But the virtue of tax cuts versus spending in a recession is at least an open question. The unquestionably pernicious stuff in the article concerns the Bush tax cuts and Democrats' plans to let them expire for the top two percent. IBD writes:
Bizarrely, the Democrats instead seem set on letting the Bush tax cuts of 2001 and 2003 expire - an effective $921 billion tax hike that will sink the economy and kill any hopes of a jobs-led rebound.

As the U.S. Chamber of Commerce recently noted, "Marginal income tax rates will increase for every taxpayer. Capital gains tax rate will climb 33%. Dividend rates for stockholders will jump as much as 164%. The child tax credit will be cut in half and the marriage penalty return." That's a recipe for economic depression.
Marginal tax rates will increase for every tax payer if we extend the Bush tax cuts for the bottom 98 percent? That didn't sound right. So I looked up the Chamber of Commerce quote, and here it is in full:
If Congress does not act, on Jan. 1, Americans will face the biggest tax hike in history. Marginal income tax rates will increase for every taxpayer. The capital gains tax rate will climb 33 percent. Dividend rates for stockholders will jump by as much as 164 percent. The child tax credit will be cut in half and the marriage penalty will return.

Ah, you see what they did there? They assumed that instead of Democrats getting the bill they want, Congress would get the bill that nobody wanted. They assumed that the thing Democrats insist cannot happen would happen, because Democrats insist on it. This kind of stuff isn't even debatable. It assumes a new baseline for reality. It's just wrong, and Investor's Business Daily owes a clarification to its readers.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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