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September 06, 2007

How Bad Is The Wall Street Journal?

Will Wilkinson takes unsurprising issue with my characterization of The Wall Street Journal editorial page as "mendacious, extremist, and intellectually sloppy." So let's look into it: On August 24th, they published an editorial entitled "How To Raise Revenue." In it, they promised to defend further tax cuts on grounds of equity. They did so by arguing that "The supply-side revenue effects on the rich are remarkable: Tax rates on higher incomes have been halved, but the federal tax share of the top 1% has nearly doubled." They even produced a helpful graphic:

Wsj Graph-2

Can't argue with a graphic. But you can mention what it leaves out. According to the Pikkety and Saez data, in 1980, the income share of the Top 1% was 8.18% of the national total. In 2004, it was 16.08%. For those playing along at home, that's a 96% increase.

During the same period, their share of federal income taxes went from 19% to 36% -- a 89% increase. So controlling for the increase in income, the tax burden on the rich fell. That's some remarkable supply side effect: As the incomes of the rich go up, their tax liability goes down. And it didn't just drop a few percentile points: Because we have progressive tax rates, as more income pooled at the top, their tax liability should have increased substantially, as they'd pay more on that income than less wealthy families would.

The Wall Street Journal editorial page either couldn't figure this out -- in which case they're innumerate -- or they didn't want to tell their readers, in which case they're mendacious. Either way, why does Will believe this is an institution worth supporting?

September 6, 2007 in Economics | Permalink


Your math is off. Going from 8.18 to 16.08 is a 96% increase (actually closer to 97%), and going from 19 to 36 is an 89% increase.

Posted by: KCinDC | Sep 6, 2007 10:32:06 AM

Also, your "graph" is a table.

Posted by: calling all toasters | Sep 6, 2007 10:37:32 AM

I'm a firm believer in the theory that lowering taxes and slashing the size of government would improve this country, but even I believe the WSJ editorial page is "mendacious ... and intellectually sloppy." I don't believe they are "extremist" on economics, but do find them to be authoritarian creeps on issues of domestic security and foreign policy.

Posted by: ostap | Sep 6, 2007 10:40:56 AM

KC -- thanks.

Posted by: Ezra | Sep 6, 2007 10:44:28 AM

I'm a big fan of Jon Chait's take on the WSJ editorial page: "One of the things that has fascinated me about The Wall Street Journal editorial page is its occasional capacity to rise above the routine moral callousness of hack conservative punditry and attain a level of exquisite depravity normally reserved for villains in James Bond movies."

Posted by: Becks | Sep 6, 2007 10:47:57 AM

Ezra, I suspect you have missed the point of my public service announcement. I'm no special fan of the Journal editorial page. I disagree strongly with plenty of what I find there, and I judge many of the arguments, like the one you point to, specious. It's right of you to point this out, and I hope it is an embarrassment to the Journal. Reputation is a powerful motivating force. But I'd hope this is in the spirit of reinforcing better norms of argumentation across the board, not in a partisan attempt to write off whole major venues of opinion as beyond the pale. I get the uneasy sense (I hope untrue) that you'd like to poison the well, so that when a truly cogent argument that is inconvenient to you appears in the Journal's pages, you can simply right it off as another piece of "mendacity". You seem to have been frustrated by the fact that it is difficult to completely dismiss a forum that features opinion pieces from some of the world's leading social thinkers. But you should stop wanting to dismiss whole forums, especially when they do, as you lament, feature truly outstanding content from time to time. One argument at a time, my friend.

Posted by: Will Wilkinson | Sep 6, 2007 11:06:48 AM

I'm a big fan of Jon Chait's take on the WSJ editorial page:

Darn! Reading that is the sort of thing that makes me upset that I never thought of writing it.

Will, it is perfectly valid to write off a forum with a bad track record. Your argument is almost a Sanpete-esque, "Why can't you seriously engage every mendacious hack who utters a brain fart?"

The WSJ editorial page is useful in the sense that it gives you an idea of what other right wingers are reading and an idea of what arguments they are going to use. The opportunity cost of reading them is high enough that I don't think it's unreasonable to write off the editorial board as a bunch of mendacious hacks. After all, insofar as anything appearing on their editorial pages might be useful, one could certain find the same quality content elsewhere, without the rank dishonesty. After all, if an argument made by the WSJ editorial page is so good and solid, why isn't it appearing somewhere else?

Posted by: Tyro | Sep 6, 2007 11:17:39 AM

when a truly cogent argument that is inconvenient to you appears in the Journal's pages

When pigs have wings . . .

Posted by: rea | Sep 6, 2007 11:19:14 AM

You're missing my point completely (purposefully?). I like reading conservative economists. For that matter, I like reading libertarians. I even read you! To say I want to ignore smart but contrary opinions flies in the face of the evidence.

But consistently mendacious institutions shouldn't be able to sustain themselves by smartly deploying the credibility of others. The WSJ publishes good opinions as a loss-leader for its actual agenda. Economists shouldn't let themselves be party to that game. Your comparison of the American Prospect -- which strives for honesty even as it has an agenda -- with the Wall Street Journal -- which consistently misleads in service of its agenda -- was, by the way, beneath you.

Posted by: Ezra | Sep 6, 2007 11:26:19 AM

Tyro, The implied point in my original post was that if we held Ezra's magazines to his own standards, we should stop taking Ezra seriously, given the 30-year track record of completely stupefying economic illiteracy of the guy who started and runs his magazine. But poisoning the well and guilt by association really are fallacies. We all already know that people have limited time and prefer to read forms of mendacity and incompetence they happen to agree with. But you shouldn't try to make it look like a virtue when YOU do it.

Posted by: Will Wilkinson | Sep 6, 2007 11:26:41 AM

Ezra, How is the comparison beneath me? These are two stridently ideological publications that constantly publish stuff that would never ever ever get past peer review of competent relevant authorities. Just like every other ideological magazine. It has to have occurred to you that people at the WSJ editorial board probably feel the same way about your publication as you do about theirs. And you probably think they are complete idiots. The probably think the same thing. My point was that that is a pointless dispute. So why not just evaluate arguments on their merits?

Posted by: Will Wilkinson | Sep 6, 2007 11:33:01 AM

Will, the occasional op-ed column by an invited columnist on the WSJ editorial page is not necessarily useless. However, the odds that I can get something out of it that can't be found elsewhere is quite low.

I feel the same way about op-ed contributors to the WSJ page as I feel about people who write for The New Republic. Any individual article is not necessarily crap, but their writers lend credibility to an editorial board that serves an agenda that we can call immoral even, at times, racist.

And the fact that economists contribute op-ed columns to the editorial page of the WSJ which specializes in dishonest economics does reflect badly on said economists. Will, I think a little social opporbrium is in order. I'm sure they serve good coffee at the local strip club. I don't think it's unfair to socially sanction those who frequently patronize it to get an extra cup o'joe.

Posted by: Tyro | Sep 6, 2007 11:36:43 AM

Will, you're making a moral equivalence argument but you haven't provided any evidence of equivalence. Your "completely stupefying economic illiteracy" (or rather TAP's) is a subjective opinion. So they don't agree with YOU on policy issues, swell.

Ezra's complaint isn't a subjective complaint about the Journal's politics, rather, he rather neatly demonstrated an example of its mendacity that is clearcut to everyone.

Posted by: beowulf | Sep 6, 2007 11:43:33 AM

What you've demonstrated here, Will, is your own projection. You disagree with TAP so you've decided it's economically illiterate (that Bob Kuttner's track record at predicting things like, say, inequality, or the credit meltdown, is tremendously better than Cato's should go without saying). The Wall Street Journal, as I keep pointing out, is not economically illiterate but composed of liars. I think you Cato kids are floating around in fantasy land -- it's not illiteracy so much as magical thinking -- but I'm willing to accept the existence of dumb opinions. I'm not so indulgent towards liars. Maybe you are.

Posted by: Ezra | Sep 6, 2007 11:56:51 AM

Let's normalize this out so that we aren't dealing with percentages in different scales, shall we?

Now, according to the Pikkety and Saez data here (warning: it's Excel), we have:

Tax Units: 99.6M
Avg. Income+capGains: $39,279
So Total Income: $3.9T
Top 1% share: 8.18%
So total income top 1%: $320B
WSJ cited top 1% tax rate: 19%
So tax burden top 1%: $60.8B

Tax Units: 143.9M
Avg. Income+capGains: $47,394
So Total Income: $6.8T
Top 1% share: 16.08%
So total income top 1%: $1.1T
WSJ cited top 1% tax rate: 36%
So tax burden top 1%: $396B

(Note: I'm deriving "total income" by mulitplying tax units by average income including capital gains, because I couldn't lay my hands on the raw income data.)

Now, I'm not sure what your definition of "tax burden" is (you have mine above, in 2004 dollars), but the numbers above indicate, if I did my arithmetic properly (always an iffy proposition), then the income of the top 1% increased 244% from 1980 to 2004, while their total tax dollars increased 551%.

Posted by: TheRadicalModerate | Sep 6, 2007 12:08:41 PM

Re: the underlying "substance" of the WSJ hackery.

You've noted well the problem with their "stats." What they are describing is basically the same effect of tax cuts in the roaring twenties, prior to the Great Depression.

Following that tax cut, revenue actually did go up (ignore for a sec the obvious problems with trying to draw causal links b/w economic growth and tax policy).

In the 20's the rich were the only ones paying taxes really. They got richer and yes, in absolute terms, they paid more taxes. Rather unremarkable. Everyone else got much poorer in the run up to the crash. There was really no middle class to begin with, but inequality also increased.

I have tried to lure many an idiotic supply-sider into using the tax cuts of that period to support their silly argument ("less tax = more revenue") becasue its honestly the only thing resembling empirical data they can find to support their sketchy causation.

If you get them hot-headed enough ("You actually have no evidence of that, do you?"), they'll actually throw it out there (usually after they look to Reagan and are shocked to find nothing). At which point, I usually just point out the obvious and ask, "Is that REALLY what you're gonna hang your hat on? That is all you got?"

I wish the WSJ would follow their "reasoned analysis" to its logical conclusion and draw the proper historical parallels. But alas, I wish a lot of things.

Posted by: Morris Berg | Sep 6, 2007 12:16:41 PM

I think it ought to be pointed out that Will's initial post is a bit specious itself, despite its pose of defending intellectual integrity. Boiled down to its essentials, it argues that, while Ezra is substantially correct on the facts, his postion is somehow illegitimate because of some shadowy ulterior motivation/strategy. Evidence presented for this hypothesis? None.

This strikes me as nothing more than a variation of the tripe Jonah Goldberg ran with a few days back. Invent some foolish or malign motivation for your target, then demand that they be held accountable for it. Of course Jonah's tripe was less repugnant since you might possibly find a number of individuals who actually fit his caricature.

In Will's case he has directly impugned Ezra's personal and professional integrity in an apparent attempt to make Ezra's character the issue. Evidently, Will thinks that whatever malfeasance he imagines Ezra to be engaged in should trump WSJ's admitted editorial sins.

This last is highlighted by his apparent incomprehension as to why anyone would find a comparison of the WSJ and The American Prospect to be, at the very least, odd.

I suppose we should be grateful that Ezra doesn't write for the The Monthly Review or The Progressive. Otherwise we might be treated to Wills' rationalization of why comparing them to the WSJ is perfectly legit since they too are "stridently ideological publications."

Or, to borrow Will's own tactic, perhaps he's just trying to muddy the waters in order to render any discussion of the ethics of contributing to theWSJ moot.

Posted by: WB Reeves | Sep 6, 2007 12:24:38 PM

@TheRadicalModerate: Your math may be OK, but your inputs are bad. The WSJ table percentages are "PERCENTAGE OF INCOME TAXES PAID", not "TAX RATE LEVIED ON". So you'd need to do something like this:

Tax Units: 99.6M
Avg. Income+capGains: $39,279
So Total Income: $3.9T
Top 1% share: 8.18%
So total income top 1%: $320B
[Total taxes paid]: $N Billion
WSJ cited top 1% percentage of taxes paid: 19%
So tax burden top 1%: 19% * $N Billion

Tax Units: 143.9M
Avg. Income+capGains: $47,394
So Total Income: $6.8T
Top 1% share: 16.08%
So total income top 1%: $1.1T
[Total taxes paid]: $N Billion
WSJ cited top 1% percentage of taxes paid: 36%
So tax burden top 1%: 19% * $N Billion

Then do the comparison.

Posted by: paperwight | Sep 6, 2007 12:26:04 PM

Last 3 lines of the 1980 section should be bolded as well. My apologies.

Posted by: paperwight | Sep 6, 2007 12:26:47 PM

OK, Ezra. You and yours are honest, good-hearted, but hard-headed empiricists fighting a bunch of ruthless liars. And we libertarian "kids" live in a fantasy land of magical thinking. Somehow, I suspect my original point stands.

Posted by: Will Wilkinson | Sep 6, 2007 12:27:48 PM


You misunderstood the data. The 19% and 36% numbers represent the percentage of total federal income tax paid by the top 1%. This is distinctly not the actual tax rate paid by that group which you have assumed it to be. We don't have the numbers on tax rates from this data, but based on the analysis Ezra does, it clearly drops by 4% for the top 1% of earners. Since we have a progressive tax system, we should actually expect to see a tax rate increases as the top 1% increases its share of income, so the trend is backwards from what it should be.

Posted by: mpowell | Sep 6, 2007 12:29:08 PM

Your math is wrong -- you're confusing, so far as I can tell, "rates" with "shares." The WSJ isn't saying the top rate was 19 percent, but that the rich paid 19 percent of total taxes. What you would need to do is get 19 percent of the total tax receipts in 1980 versus 36 percent of the total tax receipts in 2004, and see how that compared to the income jump.

Indeed, Pikkety and Saez -- whose data you're using -- disagree with you. Here they are in their paper on "How Progressive is the US Tax System": "The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s." That means that the rich are paying fewer taxes per dollar.

I'm not even sure how this is an issue. Does anyone actually believe that what's happened as we've dropped marginal rates on the rich is that they've begun paying a greater percentage of their income in taxes? That is, so far as I can tell, impossible.

If we've dropped rates on the rich and they're paying a higher tax burden, it's because they're making more money. And all the data suggests that is true. Simultaneously, their rates are down. The only possible conclusion, then, is that they are making more money but paying less taxes on each dollar, which is how we can be cutting taxes on them even as their percentage of taxes goes up. That, after all, is the explicit point of the tax cuts, and it would be astonishing if the WSJ was continually pushing for a policy that didn't achieve its stated goals.

Posted by: Ezra | Sep 6, 2007 12:31:02 PM

Oh, and just because this is the shell game that the WSJ and their ilk always play, let's see the total taxes paid at each income percentile group as a percentage of average income for that group, including sales tax, property tax, excise taxes of various sorts, the payroll tax, and so on.

Then let's see that number as a percentage of average wealth held.

I've seen those numbers. They don't look much like the WSJ's table, but since the income tax is pretty much the only progressive tax that we have in the US (federal and some state), shills for wealth and power tend to focus on the income tax alone when calculating "inequity".

Posted by: paperwight | Sep 6, 2007 12:33:36 PM

Will: Your efforts to miss the point are, at this juncture, tremendous (I'll remind you: There's a difference between lying and having an ideology. You'd think, as a Cato employee, you'd be really good at arguing for the relevance of that distinction). I guess your frantic efforts to change the subject are one way to avoid admitting that you're making a specious comparison, but if that's your strategy, I wouldn't snark about who is and isn't honest.

Posted by: Ezra | Sep 6, 2007 12:34:32 PM

OK, Ezra. You and yours are honest, good-hearted, but hard-headed empiricists fighting a bunch of ruthless liars. And we libertarian "kids" live in a fantasy land of magical thinking. Somehow, I suspect my original point stands.

If you're referring to your utterly baseless smear that Ezra is pursuing an ideologically driven, intellectually and journalisticly dishonest attack on the WSJ, it can hardly stand since you provided no foundation for it in the first place.

If you don't think Ezra's argument was empirically correct, you ought to impeach his assertions about the editorial character of the WSJ. Oh wait, you've already stipulated the essential accuracy of his discription.

It's likely this sort of sloppy, contradictory argument that produces the condescension you object to.

Posted by: WB Reeves | Sep 6, 2007 12:43:37 PM

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