It’s time to do more than just say the economy is the No. 1 issue

By Martin Lobel
lobel@lnllaw.com

Economic issues are the key to the midterm elections, but voters are in the dark because neither political party is doing a good job of explaining their plans – and with but a few exceptions, neither is the press. Merely repeating slogans in a he-said, she-said fashion doesn't help democracy or the public. The media need to ask some tough questions and put some light on extremely important, rarely discussed issues. For example:

A stated goal of the Financial Regulatory Reform Bill, hailed by Democrats and signed by President Obama in July, was to put in place regulations that would prevent another economic crisis. Does anyone think it could still do that if the need arises, given the way it was picked apart before enactment? Many economists are skeptical because, as Paul Volcker pointed out, it does not solve the "too big to fail" problem or the problems created by derivatives. Nor does it do anything to change traders’ incentives to risk the system for short-term gains. In addition, many experienced Washington observers believe that those who will be regulated under the bill will be able to weaken it even more when the regulations are being drafted in the administrative agencies and the public will not be watching as closely. As the headline on a Gretchen Morgensen column in the New York Times put it recently, "It's Not Over Until It's in the Rules."

Will the media be watching, or is this too technical for editors to understand or care about?

Republican leaders have called for cutting appropriations and increasing tax expenditures at the same time. That's a killer, "starve the beast" position. It is intellectually inconsistent as well; economists agree that the economic effect of an expenditure, whether it is appropriated or in the tax code, is the same. Is anybody reporting this in real terms?

I've written about tax expenditures on this site before, but I don't mind being a little repetitive; the subject is just too important. Who benefits from tax expenditures, aka tax subsidies, tax loopholes, as compared to appropriated expenditures? Most tax expenditures go to the wealthiest individuals and corporations, while the poor and middle class benefit most from appropriated expenditures.

Questions the press should deal with: Are tax expenditures a form of class warfare? How much, if at all, has this shift of income contributed to our economic problems? If we simplified the tax code and eliminated tax expenditures, what impact would that have on the budget deficit? Economists estimate tax expenditures cost about $1.2 trillion a year while our estimated deficit this year is about $1.4 trillion.

It is widely agreed that we need to increase demand if the economy is to recover and that many corporations are sitting on large profits, with abundant cash, but aren't increasing hiring and production because of lack of demand. Given the enormous shift in income from the middle class to the top 1 percent over the last 30 years and the decline in the value of housing, how can we get the middle class to spend money? Where should the balance be between encouraging increased spending or increased savings?

What was behind the massive shift of income from the middle class to the very wealthy in the first place?

Can we change the stimulus program to create more jobs? How? Why hasn't there been a nationwide Depression-like public works program to repair the infrastructure, and why does there seem to be so little discussion of it?

Higher taxes, it is claimed, discourage people from working. Is there any evidence this is true and at what level? Based on empirical evidence, economists Saez, Slemrod, and Giertz in an August 7 paper estimate that it would take a tax rate of about 70 percent to discourage people from working.

Why have the business groups, such as the U.S. Chamber of Commerce, consistently taken positions that favor the multinational corporations over the smaller domestic companies they are supposed to represent? See Stacy Mitchell, Misrepresenting Small Business, Bloomberg Businessweek, Aug. 30, suggesting it is because these groups are controlled by big businesses.

How serious are the financial problems in the Social Security and Medicare programs? What are the options to put them on a sounder financial footing? Who is supporting or opposing such options and why?

What are the options for dealing with Fannie Mae and Freddie Mac and what are their consequences for the housing market? Who is supporting or opposing such options and why?

To what extent, if any, do Republican economic proposals differ from those of President George W. Bush? The list goes on, as does the importance of the media's examination of these and similar questions. If some news organizations aren't equipped to take on all these questions, they can at least get into a few of them. The press needs to clarify and explain these and similar issues, lest it become truly irrelevant and fail our democracy.

Martin Lobel is a partner in Lobel, Novins & Lamont, a Washington, DC, law firm, and chairman of the board of Tax Analysts (www.tax.org), a source for journalists. E-mail: Lobel@LNLlaw.com

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