Economic Illiteracy Of The NY Times

The Times’ understanding of economics boils down to a simple formula — tax cuts, bad; spending, good. The Times thinks it’s not only possible, but desirable, to try to spend our way out of a recession caused by over-spending, deficits and misplaced priorities.

An editorial in yesterday’s Times urges President-elect Barack Obama to spend more — apparently, $800 billion isn’t enough — jettison his call for business tax breaks (which amount to less than $1 for every $5 of new spending) and forget entirely about his promise to cut taxes for those who make up to $200,000 a year.

While The Times is all for tax cuts for “low and middle-income” Americans (at least in theory), it is apoplectic at the idea of cutting taxes on the rich (a term it never defines). It reasons that while middle-class tax cuts will “stimulate the economy”, while upper-income taxpayers are more likely to save, which supposedly will result in little economic benefit.

How does The Times think the rich will save — by shoving their tax refunds into a piggy-bank?

Their tax savings will be invested in stocks, bonds and mutual funds, which will lead to more capital investment and more job creation — far more than simple spending on consumer goods. Investment, which leads to job creation, which in turns leads to long-term consumer spending, is essential to a recovery.

It’s amazing that the editorial board of America’s self-styled newspaper of record can’t grasp basic economic principles.

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