29 Jan

Washington Post Publishes Another Anti-Sanders Hit Piece—Still Gets it Wrong


Washington Post Publishes Another Anti-Sanders Hit Piece—Still Gets it Wrong

Jeff Bezos-owned Post is going full-tilt against the Vermont Democratic Socialist.

The McGlynn: There is the question of whether people who break the law in the financial industry have reason to fear the consequences. In the years since Dodd-Frank the financial sector has not stopped its shenanigans. There was the famous London Whale incident in which billions of dollars of trading losses at Morgan Stanley were concealed from regulators.

There was also the case of MF Global, a commodity trading company, which apparently used money in its clients’ accounts to cover its own trading losses. MF Global was headed by Jon Corzine, a former Democratic governor and senator from New Jersey. No one went to jail, no one was prosecuted.

And, earlier this month Goldman Sachs announced a settlement in which it paid $5 billion related to its mortgage practices during the bubble years. No one went to jail, there were no prosecutions. There was not even an admission of guilt.

In assessing the regulatory agendas of the presidential candidates, we have to ask, do we think they would end too big to fail banks? Do we think they would downsize the industry?

The Big Question Remains: 

When will the Wall Street criminals have to worry about going to jail?

The Washington Post again went after Senator Bernie Sanders in its lead editorial, telling readers that the Senator’s proposals were “facile.” It might be advisable for a paper that described President Bush’s case for weapons of mass destruction in Iraq as “irrefutable” to be cautious about going ad hominem, but this is the Washington Post.

Getting to the substance, the Post is unhappy with Sanders proposal for single payer health insurance which it argues will cost far more or deliver much less than promised. While the Post is correct that Sanders has put forward a campaign proposal rather than a fully worked out health reform bill, it is not unreasonable to think that we can get considerably more coverage at a lower cost than we pay now. After all, there is nothing in our national psyche that should condemn us to forever pay twice as much per person for our health care as people in other wealthy countries. (I have written more about this issue here.)

On financial reform the Post seems to want everyone to think that after Dodd-Frank things are just fine on Wall Street. It apparently has not noticed that the big banks are even bigger than ever and that the financial sector continues to grow as a share of the economy, imposing an ever larger drag on growth. For these reasons, Sanders proposal to break up the big banks makes good sense, as does his plan for a financial transactions tax. The latter would both raise a huge amount of money and downsize the industry. (I have some more comments here.)

Finally, it is worth applying some econ 101 to the Post’s never-ending complaints about Sanders and other politicians not having a plan to deal with its imagined long-term budget crisis. First, much of the projected shortfall stems from the projected growth in health care costs. (The rate of projected health care cost growth has plummeted in the last five years, but this has not affected the Post’s complaints.)

First if Sanders succeeds in reining in health care then most of the projected budget gap disappears. However there is still the issue of rising costs due to an aging population. Of course this is not new. We have had a rising ratio of retirees to workers for the last half century. For some reason the Post seems to view it as an end of the world scenario if somewhere in the next two decades we were to raise payroll taxes to cover the costs of longer retirements, just like we did in the decades of the fifties, sixties, seventies and eighties.

Fans of basic economics know that it matters hugely more to workers if their before-tax wages keep pace with productivity growth, implying wage gains of 15-20 percent over the course of a decade, than if their payroll taxes are increased by 1-2 percentage points. However the paper endlessly obsesses on the latter, while almost completely ignoring the former.

The Post almost never discusses the negative impact that unnecessarily restrictive Fed policy has had on wage growth. It also does its best to ignore the impact on the typical workers’ pay of the policy of selective protectionism that we apply in trade (protected doctors and lawyers, exposed manufacturing workers).

The Post gets very upset when political figures like Bernie Sanders raise issues about before tax wage. Instead, it wants workers to fixate on the possibility that they may at some point face a tax increase. And when politicians diverge from the Post’s chosen path, it calls them names.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

Comments are closed.

© 2023 | Entries (RSS) and Comments (RSS)

Global Positioning System Gazettewordpress logo