UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

February 27, 2009

THE MEDIA'S ROLE IN THE FISCAL CRISIS

Dean Baker, Prospect - NPR helped a blackmail effort, as it was accurately described by MIT economist Simon Johnson, by telling us that we will have to pay huge amounts of money to rescue the banks. While it gave Johnson a brief chance to make his case, the piece concluded by telling listeners that "the problem is us," that we had borrowed too much and therefore we have to pay the cost in the form of big taxpayer bailouts. . .

First, the excessive borrowing wasn't just shear frivolity, it was attributable to something that got very little notice from NPR at the time and unfortunately still gets very little notice from NPR: an $8 trillion housing bubble.

People borrowed against this bubble wealth because the experts that NPR and other media outlets present to the public all said that this run-up in house prices was real and would persist. Economists who warned about the housing bubble were almost completely excluded from NPR.

Because NPR and the media more generally led homeowners to believe that the run-up in house prices would persist, people acting in a way that was entirely reasonable given this view. If the price of their home had gone from $200,000 to $400,000, many homeowners opted to borrow some of this equity to take vacations, buy a car, pay for their children's education or engage in other spending. They may also have stopped contributing to retirement accounts because their home was saving for them.

The problem was not "us," the problem was the experts who run our economy were unable to see an $8 trillion housing bubble and the reporters who cover the economy largely refused to talk to any of the experts who could have pointed this out.

These reporters now want the taxpayers rather than the bankers, who profited from the bubble, to pay for this failure.

538 - [At the White House press briefing] it felt like a primal whine from rich reporters. Hasn't Barack Obama considered that maybe John McCain's tax policy is the right one? Does Obama not realize that the best way to be a Democrat is preserve conservative Republican tax policy?

Why would Obama raise taxes on people making over $250,000 beginning in two years? If you tamper with trickle-down, the dramatic shift of income toward the wealthy that was the hallmark of George W. Bush's tax policy, don't you know it'll be disaster? It'll be "class warfare!" (The first questioner: Are you worried that the "class warfare" argument could sink the budget?). . .

The Washington Post online afternoon headline blared, "Obama Budget Would Raise Taxes on Wealthy." As a seeming afterthought, the article notes, "At the same time, a refundable income tax credit for 95 percent of American workers would be made permanent under the budget proposal.". . .

As one reporter observed after the briefing, "Did you notice all the questions about taxes came from reporters making over $250,000 a year, especially the TV guys?"


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