Watching the Fact Checkers

Rudy Giuliani runs an ad in which he explains "I know that reducing taxes produces more revenues," which is an impossible thing for Giuliani to "know" since it's false:

Fortunately, The Washington Post and The New York Times both have ad fact check features designed to set the record straight. But the Times doesn't notice what Rudy said, and the Post further misleads, saying "a matter of fierce dispute among economists." Brendan Nyhan asks "What's the point of fact-checking if you're not going to call Rudy on that claim?"

I think you'd have to say that the point is pretty clear. If a candidate puts out an ad that says things that aren't true and newspapers ignore it, then maybe the claim is true and maybe it's false. By contrast, if the papers "fact check" the ad and don't call the claim false, then you, the reader, can be confident that the claim isn't false! Why would a newspaper do that? Well, Bob Somerby could probably give you a theory or two. At the end of the day, there's no denying that Giuliani is (a) "tough" and (b) a Republican, both things beloved by the national political press. More broadly, to an almost unique extent the entire Giuliani campaign is a pure creature of positive press coverage — I liked his speeches on 9/11 and the days immediately following, too, but nothing about them suggested to me "this is a man with a sound understanding of the national security challenges facing America." It was just an awestruck press corps that started in with the "America's Mayor" business, giving him the "Man of the Year" award, suggesting he should be taken seriously as a thinker on topics way outside his area of expertise, etc., etc., ec.

Comments

I would be bothered by this, but Megan McArdle assures us that Lafferites aren't really a big deal in the Republican Party. So, you know, no problems there.

Posted by jhupp | December 4, 2007 10:09 AM

I'm sure Lafferites aren't a big deal in the Republican Party. Voters just want to be told that their "lower" taxes are a win-win-win. Plus it distracts them from the policies that are actually sucking their potential wealth away.

Posted by Bill | December 4, 2007 10:11 AM

The thing about faith-based politics is that it's problematic all around. Reducing taxes can, and has, produced more revenue. It doesn't ALWAYS do so, as we have to ask which taxes, what kind of reductions, by how much, etc. But it's clearly not false to say that properly thought out tax reductions grow the economy and produce more revenue. It's happened too many times in too many places for any but the most partisan-blinkered to simply hold it to be false.

Posted by Robert Powell | December 4, 2007 10:22 AM

of course, at some starting tax rate point, a lower tax RATE can, in fact, produce more tax revenues. It presumes that more economic activity occurs at a lower tax rate (more viable investment alternatives and less reason to avoid onerous taxation).

The problem occurs when someone says that any tax rate reduction = more revenues; at the limit, this faulty logic implies that a tax rate of 0% should produce tax revenue.... There IS a non-negative tax rate where maximum revenues occur -- that is Laffer's main point -- others have applied it mistakenly...and it is hard to pinpoint the tax rate with a great deal of precision.

What you choose to do with those extra revenues is another matter.

Posted by mike c | December 4, 2007 10:23 AM

Nobody seems to notice that Mr. Giuliani is playing a trick here (a trick on himself, presumably). While it's probably not true that Giuliani's tax cuts were responsible for the increase in municipal revenues, it is at least plausible that, at the local level, tax cuts can increase revenues. When the entities being taxed (or potentially being taxed) have a relatively easy option of moving away (or moving back) -- to Connecticut, New Jersey, Westchester, Long Island, etc. -- or of locating in a different city, then one can expect tax rate changes to have fairly large effects on the tax base. Even if it were the case that Giuliani's tax cuts were responsible for the increase in revenues, it would not follow that the same would be true for the US as a whole. Moving from the US to Ireland is a lot harder than moving from New York to New Jersey.

Posted by knzn | December 4, 2007 10:29 AM

i basically don't read the wapo, but i'd love to know which economists the wapo believes are prepared to fiercly argue that "reducing taxes produces more revenues." one would love to see who the actual economists are who claim that....

Posted by howard | December 4, 2007 10:48 AM

to an almost unique extent the entire Giuliani campaign is a pure creature of positive press coverage

Which doesn't really bode well, I don't think, for the GOP. Sure, it's great to have the media in love with your guy, but if they cool towards him for whatever reason, you're left with nothing.

Not to mention that the skeletons in his closet are unlike anything we've ever seen in a national election.

I'm as worried about the strength of a Giuliani candidacy as anyone, but part of me wonders if the GOP isn't on the verge of making a colossal blunder in choosing him.

Posted by Jason C. | December 4, 2007 10:48 AM

The Washington Post item is (understandably) anonymous, but the NYT item is by Julie Bosman. Perhaps a few polite emails to Ms. Bosman would encourage her to dig deeper in the future.

Posted by Allan | December 4, 2007 10:50 AM

I always find statements like those in the ad frustrating. Reducing taxes produces more revenues than what? "More" is a comparitive word, but we're not told what the comparison is to.

Posted by Al | December 4, 2007 10:56 AM

Rudy Giuliani runs an ad in which he explains "I know that reducing taxes produces more revenues," which is an impossible thing for Giuliani to "know" since it's false:

What an excellent opportunity for you, Matt, to explain, or link to an explanation of, why the claim is false--which you don't do. You trying to break into the newspaper business?

Posted by southpaw | December 4, 2007 11:03 AM

Wow, are we ever missing an opportunity here. If cutting taxes increases revenue, then why aren't we cutting taxes to something just above zero?

The Giuliani campaign ought to be hit by a flurry of questions along the lines of "how much more do we have to cut taxes to eliminate the deficit?"; and "why aren't you proposing this?"

Posted by McKingford | December 4, 2007 11:10 AM

Hooray for a Howler link!!

Very very important for us all to get the Howler thesis into our head if we are going to have electoral success.

You are now my favorite over Drum, who continues to stare into air over this issue.

Posted by Chuck | December 4, 2007 11:53 AM

southpaw, are you kidding? It's not like this is rare knowledge among Atlantic Online readers. Matt might as well be asked to post links to prove that Giuliani is running for President. But okay, go here (PDF) and scroll down to the bottom of page 5 and start reading. I can't tell just how snarky you're really being here, but just in case you're mostly serious...

According to the general principle of the Laffer curve, above a certain point, tax rates become prohibitive and increasing them lowers revenue. Below that point, cutting them would lower revenue. The issue is that, although nobody knows exactly where that magic tax rate is, economists across the board agree -- based on analyzing a shit ton of data -- that the U.S. is very comfortably below it. Tax rates would have to increase pretty substantially for revenues to start suffering. But Republicans are arguing that we're above that point now. This is just not true.

So when liberals say tax cuts do not raise revenue, they mean tax cuts in the actual United States. When conservatives say tax cuts do raise revenue, they mean tax cuts in some mythical country where our real average tax rate is something well north of 50%. It's just too complicated politically to explain it in terms of these hypotheticals, so liberals are right to say, "Tax cuts do not raise revenue." It has the benefit of being somewhat effective politically and the further benefit of describing the extant world.

Posted by jhupp | December 4, 2007 12:08 PM

The misleading thing about Rudy's comments is that NYC gets a great deal of tax revenue from the presence of the Wall St financial marketplace being located there. The stock market boom in the 1990s had a huge positive impact on NYC revenues that had absolutely nothing to do with Rudy's tax rates. To the point that he reduced tax rates, he most likely only deprived the city of revenue that it would have gotten regardless - NYC would have had a huge financial benefit from the tax boom if Rudy had left taxes in place, but instead he is misleadingly conflating an exogenous effect into causation. What happens if and when Rudy lowers taxes and the stock market doesn't boom?

Posted by Ethel-to-Tilly | December 4, 2007 12:24 PM

Back of the envelope, hypothetical, correct me where I'm wrong:

GDP: 1 million dollars (Dr Evilstan, e.g.)
Flat tax rate, on GDP: 33%
Govt revenue: $333,000

Now if you cut the tax to 25%, to get back to that $333k, don't you have to have an increase in GDP to ($333k / .25) = $1,333k?

That is, the year you have the 8% tax cut, don't you have to have a 33% increase in GDP, just to break even?

The same reasoning would seem to apply if the tzx cut is smaller: ie, you have to have an 11% increase in GDP to offset a tax cut from 33% to 30%.

Supply-siders will protest that the gains won't necessarily materialize the first year. But at that point they are making a faith-based argument, since they don't attempt to separate the growth caused by the tax cut from the growth that would have happened anyway.

Posted by kth | December 4, 2007 12:39 PM

It's not like this is rare knowledge among Atlantic Online readers. Matt might as well be asked to post links to prove that Giuliani is running for President.

jhupp,

It was a criticism, not a contradiction. Matt's post was primarily about fact-checking and how the newspapers hadn't caught something he knew to be false. Given the ebb and flow of Atlantic readers and the spectrum of their knowledge, I don't think it's too much to provide a link demonstrating the truth about the actual fact (or broad consensus, in this case) in question.

And to be fair, it's not the simplest fact situation in the world (also, Matt's links do amply demonstrate that Giuliani is running for president). One needs to understand the principle behind the Laffer Curve , the prevailing views of "economists across the board", and the alternate explanations for the nominal increases in tax revenue the administration has seen since its tax cuts. Forgive me if I doubt that every Atlantic Online reader knows all those things and finds them trivial.

If nothing else, the supply side argument is still politically controversial and it would help if both newspapers and Matt made the truth of the matter accessible to their readers.

Posted by southpaw | December 4, 2007 12:40 PM

I wouldn't read much into that "Man of the Year" award. That was simply Time Magazine being unwilling, in this modern media age where they announce "Man of the Year" on CNN with a big magazine sales push, to make Osama Bin Laden in the Man of the Year in 2001. Even as recently as 1979, their magazine sales tanked when they named Khomeini.

So Rudy got it because he isn't as bad as Osama Bin Laden.

Posted by Dilan Esper | December 4, 2007 3:21 PM

I'd agree with jhupp that there is wide consensus that the U.S. is nowhere near the point at which permanent tax cuts would be likely to increase revenues. But, as southpaw points out, there are some data showing increased revenues from some sectors (e.g., capital gains) where rates recently have decreased. What gives?

Well, the key is that everyone also agrees that temporary tax cuts can create short-term increases in revenue. If I can engage in a transaction today or tomorrow, and the tax is 10% today and 20% tomorrow, I do it today. That seems to be a large part of the story with the temporary capital-gains rate cut (which Congress has so far renewed only in 2-year stretches). We can tell a similar story with some kinds of corporate income -- basically, the "repatriation" provisions we passed a couple years back give a temporary, super-low corporate tax rate for multi-nationals willing to report U.S. income now, rather than deferring it indefinitely.

So, do the recent results show that we are on the right-hand side of the Laffer curve? No, unless we can somehow exclude the alternative, more likely, explanation that the increased revenue was driven by the temporariness of the lower rate. And note that these short-term revenue increases *in the long term* are usually revenue losers, since we are giving up the higher tax we could have gotten later without the temporary cut.

Hope that clears some things up.

Posted by taxprof | December 4, 2007 4:27 PM

I guess rule one in using fact checkers after TNR and the SCott Thomas Beauchamp debacle is not to use the guy's wife as your fact-checker.

Fortunately the Post and the partisan rag the NY Times has become at least still retain the guidance of the true pros that ran those places (WP still, NYT in recent memory) - not to hire Judy Nathan Giuliani as their fact-checker on Rudy claims.

Meanwhile, Franklin Foer is complaining that his crow pie contains crow guts and feathers.

Bash American troops, ensure your ducks are in a row to avoid the crow - because a huge community of active duty and Vets will check every fact free of charge. And do so, so our soldiers do not have their honor and valor again stolen on lies as it was by the anti-Vietnam Lefts dishonest propaganda. Tailwind, Dan Rathers lies about dishonorable National Guard service, Haditha atrocities, Scott Thomas Beauchamp, the Lancet "650,000 dead innocent Iraqis!!" - all efforts by the Left that were skewered...

Bush, Rumsfeld, the generals can be properly lambasted for disastrous bungling at times - but lay off efforts to slime the troops. After all, doesn't every Lefty claim they "support the stupid, duped, stuck in Iraq because they are lazy - children (in uniform) soooo much"??

Posted by Chris Ford | December 4, 2007 5:30 PM

Hope that clears some things up.

Thanks, taxprof, it does.

Posted by southpaw | December 4, 2007 7:07 PM

Thanks, Matt, for raising this. I've tried to get Howard Kurtz to defend his "fact check" by email and questions submitted to his weekly chat, and he has not responded.

Posted by Joe | December 4, 2007 10:35 PM

Allan,
The online version of the Post 'ad-check' is anonymous, but the man who was by-lined in the dead-tree version (or should it now be 'the increasingly fishwrap' version?) is none other than media analyst Howie "the Putz" Kurtz.

Who else could evaluate this ad and start with "The ad, airing in New Hampshire, is accurate..."

Posted by FactOrFiction | December 5, 2007 12:55 AM

Allan,
The online version of the Post 'ad-check' is anonymous, but the man who was by-lined in the dead-tree version (or should it now be 'the increasingly fishwrap' version?) is none other than media analyst Howie "the Putz" Kurtz.

Who else could evaluate this ad and start with "The ad, airing in New Hampshire, is accurate..."

Posted by FactOrFiction | December 5, 2007 12:56 AM

Quis custodiet ipsos custodes?

Thank goodness for blogs, then.

Posted by Oliver | December 5, 2007 1:47 AM

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Posted by Dionerend | December 17, 2007 3:18 PM