Written by Roger Aronoff
Events are moving fast toward the artificial deadline of August 2nd. President Obama has apparently given up on getting a tax hike, and thus balance, as he has called it. In his Friday morning (July 29th) announcement, he urged folks to keep the pressure on with phone calls and tweets. Speaker of the House John Boehner has revised his plan that failed to garner enough votes on Thursday night to include once again a balanced budget amendment. And Sen. Majority Leader Harry Reid is reportedly planning to finally introduce Democrat-backed legislation sometime soon.
The general performance of the media during the debt ceiling debate has been atrocious. The currency of journalists consists of words, and by completely debasing that currency, they are undermining their profession. They are also making it that much more difficult for the public to understand the choices and the consequences they are facing.
The constant reference to August 2nd being the date we default on our debt is utterly false. ABC has shown a “Countdown to Default” clock, ticking away to August 2nd. CNN has run similar graphics, as have all the networks, including the Fox News Channel. Even today MSNBC is showing a graphic that says, “Four Days to Default.” They have continued right through this week. Default occurs only if and when the U.S. fails to make interest payments to the bondholders on the debt it owes. Not only is August 2nd not the day the U.S. defaults on its debt, but the issue could easily be taken off the table, and President Obama could calm the markets by announcing that under no circumstances will he allow the U.S. to default, and he could assure that by saying he will definitely make that payment the highest priority until a deal is reached in Congress. Instead, he chose to have the debt ceiling “used as a gun against the heads” of Americans, which is exactly what he accused the Republicans of doing earlier this month, in language that was supposed to be no longer acceptable after the tragic shooting of Rep. Gabrielle Giffords in Tucson last January.
Charles Gasparino of Fox Business News reported this week that the Obama administration has begun calling major Wall Street banks to assure them that the U.S. won’t default on its debt. Sources have told me that the administration is also trying to get the banks to lobby on its behalf.
The other egregious falsehood reveals an astounding lack of knowledge, or willingness to deceive, about the difference between the deficit and the national debt. Here, for example, from Jake Tapper of ABC News: “The president continues to push for a ‘grand bargain,’ buoyed by the bipartisan ‘Gang of Six’ proposal that would reduce the deficit by $3.7 trillion over the next decade through spending cuts and tax increases.”
And here, from Stephanie Condon of CBS News: “The deal would reduce the deficit by nearly $4 trillion...”
President Obama in his July 25th prime time address to the country said, “This balanced approach asks everyone to give a little without requiring anyone to sacrifice too much. It would reduce the deficit (emphasis added) by around $4 trillion and put us on a path to pay down our debt.
This misuse of the language has been the rule, not the exception. As explained on the Treasury Department’s own website, “The deficit is the difference between the money Government takes in, called receipts, and what the Government spends, called outlays, each year.” (emphasis added) The same website says that “One way to think about the debt is as accumulated deficits.” This is basic economics, but astonishingly, the President and most of the media constantly get it wrong. Is it on purpose, to mislead, or do they not understand the difference?
But what they are really talking about is that under President Obama’s ill-fated budget put forth in February, the only one put forth by Democrats since April of 2009, in dereliction of their duties, he projected spending of some $46 trillion over the next 10 years. A $4 trillion cut means they would still be spending $42 trillion over that period. It’s not a reduction of anything other than the stated, but unrealistic intentions of a 10-year budget with a four percent growth rate. It also assumes the end of the Bush tax cuts, which would supposedly generate $3.5 to $4 trillion in projected revenues, according to the Congressional Budget Office’s (CBO) estimate, based on so-called static scoring, over that same period. That isn’t likely for either of two reasons. It won’t pass a Republican-controlled House or Senate, and if it did somehow pass, it would be a huge blow to any economic recovery. It contains assumptions that are unrealistic, and it assumes that while we are now spending $3.7 trillion a year, the annual budget will average $4.2 trillion over the next decade. However, the size of the deficits each year is completely unpredictable and unknowable, and Congress is supposed to pass new budgets each year. In other words, this gives smoke and mirrors a bad name.
Just when it seemed that the reporting on this story couldn’t get much worse, on MSNBC’s “Morning Joe” on July 25th, Steven Rattner, former New York Times reporter and Wall Street financier who had to stop his business activities with Wall Street and pay a $6.2 million fine, and who was the Obama administration “car czar,” said this: “We are in uncharted waters. You have a whole school of people who say, ‘well, we should pay the debt first,’ which is 40%, as you know, of our budget and that would mean cutting off all the Social Security to people so as not to default on the debt, or vice versa. Nobody has any idea what will happen August 2nd if they don’t extend this debt ceiling.”
Forty percent? The total debt is over $14 trillion, so no one is suggesting we pay that off. But if he means the interest on the debt, it is actually more like 10%. According to the Bipartisan Policy Institute, the payment of interest for the month of August would be $29 billion out of a monthly budget to run the U.S. Government of approximately $306 billion. It says that the U.S. Government will take in about $172 billion in August, enough to pay the interest on the debt, Social Security (which is technically in a separate trust fund), Medicare, Medicaid, Defense vendor payments and unemployment benefits. To put these numbers in perspective, the first total U.S. annual budget to hit $100 billion total was in the 1960s. Now, less than 50 years later, we are having to borrow more than $135 billion per month to meet our obligations. So is it fair to say we have a spending problem? You’re damn right.
What I am guessing Steven Rattner meant is that we are borrowing 42 cents of every dollar we spend, which Speaker John Boehner pointed out on Fox News Sunday the day before, and they showed that sound bite during the segment. Then he would have been correct.
After the sound bite, and Rattner’s statement, Joe Scarborough, a former congressman and host of “Morning Joe,” said, “You heard what Steve said, and what John Boehner said, when he talked about 42 cents of every dollar the United States of America spends, they spend on servicing the debt. That number just keeps going up.” In other words, Scarborough conflated what Rattner incorrectly said, with what Boehner correctly said, and came up with an absurd conclusion. This time the White House didn’t immediately text a message to co-host Mika Brzezinski to “correct the record,” as they have done in the past. They let it stand, knowing it was false. Rattner let it stand, suggesting that that was what he understood the situation to be as well. Hopefully “Morning Joe” will correct this error.
Just to compound it, and confirm that he didn’t understand the situation, Scarborough said that if interest rates go up over our failure to deal with this issue, “suddenly the 42 cents on the dollar becomes 50 cents on the dollar that we’re servicing, 60 cents...” Again, our cost of servicing the debt is less than 10%. Period. This has been widely reported.
Lawrence O’Donnell, who took over the Keith Olbermann seat at MSNBC, has been savoring this process. O’Donnell, who proudly calls himself a “socialist” and someone who lives to “the extreme left of you mere liberals,” has also been candid about Obama’s true intentions. The day the Sen. Mitch McConnell (R-KY) plan came out, giving the President the debt ceiling hike he wants with no commitments to cut spending, O’Donnell could hardly wipe the smirk off his face as he crowed that what Obama was doing had all been an act to appear that he was compromising, when in fact he wasn’t and had no intention of doing so. O’Donnell has continued the theme for weeks now, to the discomfort of some of his guests, who didn’t want to acknowledge that he was on to Obama’s game: Pretend to be offering cuts on Social Security and Medicare, while in fact having no intention whatsoever of having to make them, but instead just make the offer to show how intransigent the Republicans are.
Here is how O’Donnell opened his show on July 13, the day after Mitch McConnell offered up his backup plan to give Obama the debt ceiling hike and total ownership of the budget:
“The normally disciplined congressional Republicans are now in an all-out panic in the most difficult negotiation they have faced to date with President Barack Obama. As the president holds to his bluff that he wants a big deal, a $4 trillion deficit reduction package, the Republican leadership has gone from retreat from $4 trillion to $2 trillion, then from yesterday’s surrender position outlined by Republican Senate leader Mitch McConnell to today’s total outright confusion about what to do or think next. They should, by now, have realized that they were tricked by the president into weeks of discussion of trillions in possible spending cuts.
O’Donnell has perfectly revealed Obama’s plans and tactics, and he has done it night after night. He has understood better than his fellow MSNBC hosts and other journalists what was really going on.
The House Republicans were harshly criticized for having taken a day to vote on Cut, Cap & Balance, which was said to be symbolic and something they knew couldn’t become law. The same is being said of their attempt to craft a compromise bill, but as of Thursday night (July 28th), they weren’t able to muster quite enough votes. But the Senate Democrats, who are in the majority, and Obama, have put nothing forth, certainly nothing in writing, or conceptually, that could pass the House. So are they being symbolic and wasting our time too, or is that charge only reserved for Republicans? Why the double standard? Because the media believe they can help force the Republicans into a situation in which they betray their commitment to the people who put them in office, while Obama won’t have to make any cuts, and we can move on to getting him reelected in 2012, thus satisfying their political agenda.
Then there are polls. This CNN/ORC poll finds 66% approve (see question #23) of Cut, Cap and Balance, which passed in the House with five Democrats voting for it. The same poll found that 74% (see #25a) favor a balanced budget amendment, also called for in the House bill that passed. Yet aReuters/IPSOS poll taken about the same time claims to show that by a margin of 56% to 19%, the public prefers President Obama’s combination of tax hikes and cuts to the Republican’s cuts only plan. What this proves is that polls are easily manipulated to promote an agenda, depending on who is asked, what they are asked and how they are asked.
Sen. Jeff Sessions (R-AL) addressed the “myth” that “our current budget crisis is the result of two wars and a tax cut. Let’s consider that claim. The total cost of the wars in Afghanistan and Iraq, over the entire last decade, is $1.3 trillion. Again, that’s over the last decade. This year alone the deficit is expected to be $1.4 trillion dollars. War costs represent only 4 percent of total outlays over the last ten years. The total amount of money spent since the President took office is $8.5 trillion dollars. By the end of his first three years in office we will have added $5 trillion to our gross federal debt.”
While there is no question that both sides share in the blame for where we stand today, it is way past time for our media to attempt to shed some light on these crucial issues that confront our nation’s economic health going forward. Instead, the media, when not getting their facts and terminology completely wrong, continue covering for President Obama and the Democrats who are trying to preserve business as usual while pretending to be fiscally responsible.