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explicitly assume that we go a whole year without reaching a deal. They
say nothing about what happens if the government cuts a deal by the
second or third week in January. Even a Washington Post editor should be
sharp enough to understand this distinction; nonetheless, many stories
have implied that the recession projections apply to missing the 1 January
deadline.
Wall Street types have also pushed this idea that the markets are
demanding for programs like social security and Medicare be cut. This
sort of assertion, which is treated as a fundamental truth by the
Washington insider crowd, has the wonderful feature of escaping
contradiction. Of course, none of us knows exactly what will trouble the
financial markets or by how much that trouble would hurt the economy.
(In fact, even a sustained drop in the stock market has a limited effect on
the economy, and short term fluctuations have almost no impact.) This
means that when Wall Street, or their designated mouthpieces, make
authoritative-sounding claims that the markets will be upset if we don't cut
social security or Medicare as part of a budget deal, there is no direct way
to refute them. After all, it is possible that they might be right.
If economic reporters did their job, though, they would be looking for
evidence to support these assertions about financial markets. They could
start by looking at the track records of those issuing the warnings. If they
examined the track records of people at organizations like the Campaign to
Fix the Debt, and other deficit hawks, they would reveal to their audiences
that these "experts" have the distinction of being almost 100% wrong on
just about all their economic predictions over the last five years.
This crew has been predicting that large budget deficits would cause
interest rates to skyrocket ever since President Obama's first round of
stimulus, almost four years ago. Many also predicted that inflation would
explode. Yet, none of them warned us about the housing bubble: they were
too busy running around the country yelling about the budget deficits even
when the deficits were small enough that the debt to GDP ratio was
actually declining.
In short, major national news outlets have adopted the agenda of the
Wall Street elite that displays zero evidence of any understanding of what