Tuesday, March 22, 2022

Reporters Often Get Things Wrong, But Political Hacks Can Be Worse

by Neil H. Buchanan
 
One of my central complaints about the American press is that reporters tend to be generalists and thus have only the most basic familiarity (at best) with any particular subject matter.  This can -- and frequently does -- lead them to make egregious errors, which is annoying and often harmful but does provide plenty of grist for my columns.
 
The other night, one of the MSNBC commentators made that point in the context of coverage of the war in Ukraine, noting that generalist reporters are expected to pivot from talking about corporate taxes to green energy to military matters.  He then noted that almost all of the reporters from major news organizations had quickly grabbed onto the "no-fly zone" notion, continually asking questions of Administration figures that essentially said: "A no-fly zone is obviously a good idea, so why aren't you doing it yet?"  The commentator then explained that, happily, reality had penetrated the reporters' ignorant bubble, and there had been a notable abandonment of that line of questioning.

If reporters are going to learn a lesson relatively quickly, I am certainly glad that they learned that particular lesson, given that they had inadvertently been pushing for a policy that could lead to nuclear war.  That is cause for a big sigh of relief, even though we of course still face that possible horror for a number of other reasons.  Still, the conventional wisdom can indeed change, which is encouraging.

In this relatively brief column, I want to note two much more low-stakes errors that show up again and again in news coverage.  Interestingly, the second of the two involves a politician trying to correct a reporter for a perceived error, but it is the politician who is wrong.  Hackery can be worse than ignorance.

Last week, in "Oil, War Profiteering, and Political Opportunism," I described how orthodox economists excuse the increase in prices of gasoline and related petroleum products by saying that the supply curve has shifted, because the price of the inputs has increased, so it is more expensive to continue to produce oil products in the future, and the companies are merely taking those higher costs into account.

My point there was that such an argument waves away the fact that the public-relations arms of those companies are essentially trying to "work the consumers" by getting them to accept the higher prices: "Well, I guess Exxon had no choice!"  That justification conveniently ignores a few things, one of which is that it deliberately treats the demand effect (increasing people's willingness to pay) as not part of the story.

But again, this claim is backed up by mainstream economists, and if anyone is good at echoing and rationalizing the neoliberal orthodoxy, it is a Washington Post employee.  Last week, in "The truth about gas prices and oil production" (no grandiosity there!), the fact-checker for The Post, Glenn Kessler, wrote this:
"The war — and efforts by the United States and its allies to stem purchases of Russian energy products — sent the price of crude oil skyrocketing. Many gasoline stations have only two or three days of product in stock, and so they price gasoline at what it will cost to refill those tanks underground. This is an economic term known as 'replacement cost.'"
Well, so long as there is a label for it, then we understand it, right?  Richard Feynman would be proud.  Kessler quickly conclude that this is "not an example of price gouging."  What would be such an example?  He does not say.

What matters here is that, no matter what you call it, the companies in question bought the raw materials for their product at a low price and are now selling their goods at a much higher price.  Moreover, their decisions are now irreversible, and the only question going forward is whether they will cover "replacement costs" when they turn the replacement inputs into future outputs.

This means that imposing taxes on the windfall gains that the companies are making is not only equitable but "efficient" in even the narrowest sense.  That is, if Congress were to impose what is commonly called an excess-profits tax (even though conservatives would go crazy and say that there is no such thing as excess profits), the reality is that the imposition of even a 100 percent tax on these windfalls would not change the companies' incentives going forward.

Even pure profits taxes do not change the logic of profit-maximization, because keeping a fraction of profits after taxes is still an incentive to maximize one's profits.  Importantly, this is not some esoteric theory but is a trivially obvious result of mainstream economic theory.  Some economists will teach this to their students, but most do not.  And so we end up with a Post reporter saying that there is no "gouging" going on -- and that is "the truth," his headline writers assure us.  Is there any evidence that Kessler did anything more than read an apologist's argument that invoked the notion of replacement cost?  Is there any reason to believe that Kessler would not do the same slipshod job when fact-checking, say, claims about budget deficits, constitutional law, or anything else?

The second example -- which, as I noted above, is a bit of an inversion on this phenomenon -- comes from a Post op-ed by Mitch Daniels, the arch-conservative budget director under George W. Bush and Mike Pence's predecessor as governor of Indiana.  Daniels is one of those people who mainstream news sources swoon over, because he presents himself as a straight-talking non-ideologue, when he is anything but.

Today, Daniels decided to scold a local reporter in Indiana -- although Daniels condescendingly allows that she was "yet another young reporter in the parched landscape of what was once local journalism, [so] she couldn’t bring a firsthand, historically informed philosophical understanding to the assignment" -- for displaying "implicit biases now thoroughly ingrained across what these days is referred to as the corporate press. The negative slant about the tax policy in question, a legitimately debatable matter, is less important than the mentality it reflects."
 
And what is that mentality?  Daniels is angry because the reporter wrote -- twice -- that a proposed tax cut "would 'cost the state' money," that "the state would 'lose out' on large sums," and that she showed "evident alarm by labeling the bill a 'potential hit' against both state and local governments."
 
All of those things are, however, true.  A tax cut bill causes the state to bring in less revenue.  (At least Daniels is not openly pushing a Laffer-like idea here, which is a pleasant surprise.)  The state does thus lose out on large amounts of revenue.  And the budgets of the state of Indiana and its local governments will take hits.  So what is the problem?

This is where Daniels's pompous reference to a "historically informed philosophical understanding" comes in.  And what is that deep philosophy?  He does not like the idea of taxes at all: "It’s more than just a matter of money, because every act of taxation imposes a diminution of freedom."  He then gleefully explains why a person is less free because they have less money, but he never bothers to say how people can be made more free by having the money spent on public works, social services, and so on.  It is the old, familiar move where an ideologue only focuses on the costs and not the benefits; but that is the least of it.

Daniels is especially proud of an advertisement that he ran when he was actively in politics, where he said that citizens should be happy with tax cuts, because "[a]fter all, it’s your money!"  If that playful tone did not do the trick, he also writes this: "The real point, one hopes a didactic one, was that property in a free society belongs not to the state but to its people, and it should be expropriated by the state only for truly necessary purposes, in truly necessary amounts."
 
But this is utter nonsense, and not only because he hides so much behind the terms "truly necessary purposes" and "truly necessary amounts."  As I have mentioned many times here on Dorf on Law (e.g., here), there would not be any property without the state, which not only sets up the rules of property but also the rules of contract, criminal law (including property crimes), and so on.  Indeed, the title of Liam Murphy and Thomas Nagel's The Myth of Ownership is aimed at this specific logical error.

Daniels commits the same logical error that so many libertarians commit, which is to say that if property does not belong to the taxpayer, then we must be saying that it belongs to the government.  The government owns everything!!  That is wrong, because the point is that the property would not belong to anyone if it did not exist, and there is no zero-government (and thus zero-tax) baseline that would allow us to say that people would have their property in ex ante knowable amounts, with the government coming in to steal it from them.

That is all that I will allow myself to say about the Murphy/Nagel argument here, because I did intend to make this column somewhat shorter than usual.  Still, Daniels's arrogant condescension needs to be seen for what it is.  He is angry that a reporter does not use his skewed worldview to paint all taxes as expropriation by a rapacious state.  That, however, is his problem, not the reporter's.  Political hacks can try to hide behind supposedly deep philosophy, but the rest of us do not need to pretend that their pretensions deserve to be taken seriously.