End of the Year Whoppers

Barry Ritholtz – who enjoys the gift that keeps on giving with the Big Lie – points me to this column by Jonathan Alter, compiling his four whopping lies of the year:

These and other contenders for this year’s Lie of the Year title are worth cataloguing, but let’s remember that not all big fat ones inflict equal damage on our politics. I’m more concerned with what bloggers call “memes,” which are ideas — or in this case, lies — that may not be attributable to an individual, but penetrate our consciousness through repetition and are soon assumed to be true.

Of course The Big Lie is number one, and always worth remunerating in Punditocracy (my emphasis in bold):

No. 1. “The financial crisis was caused not by Wall Street but by the federal government, namely Fannie Mae (FNMA) and Freddie Mac.”

This is a convenient argument made by conservatives trying to gut regulation of Wall Street (or attack Freddie “consultant” Newt Gingrich), one that draws its force from Fannie and Freddie’s role as a piggy bank for ex-officials from both parties over the last 20 years. The two institutions performed abominably and attempted to conceal their mistakes and thwart regulators; so far, six of their former executives have been sued by the Securities and Exchange Commission.

But the abuses of Fannie and Freddie did not cause our woes. David Min of the Center for American Progress makes mincemeat of Peter Wallison, a lonely dissenter on the Financial Crisis Inquiry Commission who has loudly and fallaciously insisted that the government’s affordable housing policies lie at the root of the entire financial crisis. Min points out that bubbles in commercial real estate and consumer credit developed independent of housing, and that the crisis extended around the globe to regions and institutions with no U.S. residential housing exposure. Besides, mortgages from private lenders defaulted at higher rates than those from Fannie and Freddie, which got into the securitization racket much later and at lower levels thanWall Street, the true source of the mess. This week’s $335 million settlement in the Countrywide case, where private lenders preyed on blacks and Hispanics, is a reminder that Fannie and Freddie were hardly the only miscreants and shouldn’t be immortalized as the direct cause of the crisis.

I’ll leave it to you click through and read numbers two and four – both of which I think are a little weak to included – but number three is a lesser known cousin of the type of infectious lie that number one represents (again, my emphasis in bold):

No. 3. “Democrats’ tax increases on millionaires are a ‘job-killer’ for small business.”

Republicans this year have argued that Obama’s proposal for a surtax on millionaires would hurt as many as half of all small-business owners. It’s the only reason they have (other than paying off wealthy campaign contributors) for placing the protection of the rich at the very top of their agenda.

But the Treasury Department’s Office of Tax Analysis (made up of career, not political, staff) recently issued a technical report that details who among the 392,000 Americans reporting more than $1 million in annual income could reasonably be called “small-business owners.” The answer was about 51,000, or 13 percent — a long way from half of all small-business owners.

Moreover, there’s no evidence to suggest that even those 51,000 job creators would dismiss workers if they paid taxes at Clinton-era levels. In fact, at higher levels of taxation during the 1990s, these and other employers were creating a record 22 million new jobs. In the last decade, when they were paying lower taxes, job creation was little changed.

Another big GOP talking point is that expiration of the Bush tax cuts would mean that half of all small-business income would be taxed at higher rates. According to the Treasury study, this is also false. The number applies only if all American businesses — big and small — are included. In truth, according to the nonpartisan Joint Committee on Taxation, the end of those cuts for the wealthy will affect only 3 percent of all taxpayers with net positive business income.

I can’t let this whopper go without mentioning the memorable anecdote of Sh!t My CEO Says. Basically there are very smart, very wealthy people who don’t even know what their top marginal tax rate is – and in some cases don’t even understand the definition of a marginal tax rate. So beyond all the normal, empirical proved stuff that renders number three a nonsensical talking point, it’s hard to imagine that a handful of percentage points on a marginal tax rate would have a similar behavioral response to, oh I don’t know, say the greatest economic catastrophe since in the Great Depression:

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One response to “End of the Year Whoppers

  1. Pingback: Instructional graph of the day | Punditocracy·

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