Response to “7 Lies”

I encountered a video on Facebook, titled “The Seven Biggest Economic Lies,” and I felt compelled to respond. The video features, and was produced by, Robert Reich, J.D.  He is a highly respected man, and he has certainly earned the right to have his opinions heard.  However, it is my opinion that no amount of degrees or accolades entitle a man to pass off their opinions as facts. It is not my intention to attack the man, or his positions, but merely to examine this particular video, and to attempt to dispel the illusion that this video, and the arguments it contains, constitute proof of the 7 specific claims being dismissed as lies in the video. Before I continue, here is the video itself.

 


Now, I’m not an expert on economics, and so I’m not qualified to challenge Reich’s economic theories. Fortunately, there aren’t a lot of economic theories present in this video, just assertions. Any or all of his assertions could even prove to be correct; that is not my point. I’m simply challenging the manner in which he dismisses the claims here. Economics is a complicated subject, and actually defending or challenging most of these 7 claims is a broad and complicated task that could occupy all of the top 10 economists in the world for decades – in fact, a number of them have been debated for decades already, and still no definitive answers are to be found.

Obviously, such prolonged debate has produced far more ideas and information than could be presented in a short video like this one which is intended for laymen. Boiling it down into the simplest terms that everyone can understand is perfectly reasonable. What I consider irresponsible, however, is exclusively presenting one side of such a complex argument, in only the simplest terms, as if the side being presented were just plain, irrefutable facts, and simultaneously smearing anyone who presents a dissenting view by referring to the claims as “lies,” rather than “misconceptions” or “errors.”

So, on with the analysis!

#1 – “Tax cuts to the rich trickle down to the rest of us”

In the form presented, his argument amounts to “A followed B, therefore A caused B.” This is a commonly known as the post hoc fallacy, from the latin “post hoc, ergo proctor hoc.” The reasons this is a fallacy are simple and two-fold: first, it makes no attempt to explain how A caused B; second, it dismisses all other factors which could influence B.

There could be any number of reasons the median income level decreased over this period. Maybe A did cause B, but it is also possible that income levels would have decreased at an even faster rate if not for the tax cuts on the rich.

#2 – “High taxes on the rich hurt the economy”

The arguments here are based on the same fallacy as the first. These first two points have two of the weakest arguments in the video; I am forced to wonder if this is coincidence, or application of basic rhetorical techniques taught in many high school and college writing classes – you always open with your weakest arguments, because they are the ones most likely to go unchallenged, as the last arguments presented are the ones that most stick with the audience, and that most will naturally respond to in a rebuttal.

#3 -“If we shrink government, we will create jobs”

This time, he cherry-picks his examples of government spending based on which employ the most people per dollar invested. Education, emergency services, and infrastructure are hardly at the top of anyone’s list for proposed budget cuts. And a quick google search gives me some numbers for what % of the government budget they represent…

Education: 3%.
Transportation infrastructure:  3%
Emergency services – less than 1%
1

So in principle, 90% of the federal budget could be eliminated without firing a single teacher, policeman, judge, or fireman, or eliminating a single infrastructure-based construction job.

#4 -“Cutting the deficit now is more important than boosting the economy with further spending”

Couple of things wrong here, starting with his statement of the “lie” itself. His statement assumes that further spending will stimulate the economy. While this belief is quite prevalent, especially in Washington, D.C., it is hardly an irrefutable fact. Anyone even vaguely familiar with the last 6 years of U.S. economic policy can surely think of several examples off the top of their head that demonstrate, at the very least, that government investment in the economy is not a guaranteed recipe for economic growth.

In his argument, he points out that, instead of decreasing the deficit, we could instead increase GDP, and asserts that what is important is the ratio between the two, not the absolute values of either. I’m skeptical that this is an absolute truth, but lets just assume it is correct. He then asserts that decreasing the deficit is the wrong approach, and increasing GDP the right one. His only explanation of why this is the case is that “without creating jobs and growth, the ratio will go down.” This would be absolutely correct – if one assumes the deficit stayed the same. But ask yourself – if we increase government spending to invest in the economy, based on the belief that doing so will boost the economy (and as I already mentioned in the previous paragraph, there’s not a lot of recent evidence that it will), is it likely that we will simultaneously stabilize deficit?

It’s not impossible, but unless I am missing something, it would mean a double increase in taxes – one to pay for increased government spending, and another to cover the existing imbalance that causes the deficit to increase each year. I know the 99%’ers will cry “just tax the companies!” – but those same companies are where the government would invest to boost the economy. If the money invested in them comes from their own taxes, how is that supposed to grow the economy or create jobs?

#5 – “Medicare and Medicaid are killing the budget”

Not much to say on the logic here. I’ll just note two things.

First, his assertions about the low administrative cost of medicare are presented as fact, but are in fact widely debated. Rather than overreach my own knowledge by trying to explain how, I’ll just link a report conducted by experts that demonstrates that these figures are anything but irrefutable:

Medicare’s Hidden Administrative Costs: A Comparison of Medicare and the Private Sector, By Merrill Matthews, Ph.D.

And second, I’m rather startled by the insertion of “switching from fee for services to fee for healthy outcomes” in there. I’m sure not having to pay unless you’re cured would make healthcare cheaper, at least for those who die, but what would this do to fields like cancer treatment, where the services are expensive and long-term, and healthy outcomes are never guaranteed, regardless of the quality of care? Could an oncologist reasonably be expected to make a living under such a system? Am I just missing something here?

Also, just as a bit of food for thought, consider: If medicare is such a complete healthcare option, why do you see so many advertisements on TV for medicare supplement plans?

#6 – “Social Security is a ponzi scheme”

He doesn’t actually address the point here at all. I must note first that this “lie” was deliberately and provocatively inflamatory, but lets actually look at what the “lie” is saying first. Merriam-Webster defines a ponzi scheme like this:

An investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.

Well, right off the bat, we can see that the comparison isn’t completely unfounded; early “investors” (the first generation who paid social security) were in fact paid with the money they invested, and the money invested by the next generation of investors. So, clearly, there are certainly parallels that can be drawn between ponzi schemes and social security. The question, then, becomes “Does social security involve a cycle of more and bigger risk for investors?”

Lets return to his own statements: “Social security has been solid for 26 years,” naturally, even in an actual ponzi scheme, the first investors always profit. He continues, “and it could be for the next 100 years if we lifted the ceiling on income subject to social security payments.” Basically, he’s saying if we increase the amount we ask each new generation of investors to pay, we can continue the system for another 100 years. Well, great; 100 years! That’s plenty of time for me to collect mine, and my kids to collect theirs. But what about my grandkids, and their kids?

Maybe he has worked out a solution to this problem, or maybe he’s just confident that 100 years is plenty of time to find one. I don’t know. But to me, increasing the investment amounts while planning no increase in payouts sounds suspiciously like a cycle of increasing the risk for investors to me. Maybe the “ponzi scheme” line wasn’t so out there after all…

#7 – “It is unfair that lower-income Americans pay lower income taxes”

Actually, I don’t entirely disagree with this one; he chose well which point to end his presentation on. However, one point needs to be made. While it seems perfectly fair that people making 7 figures pay more taxes than people struggling to get by on low 5 figures, it does not follow that you can tax the richer ones any arbitrarily high amount and it will continue to be fair. This becomes clear if you consider the extreme case – if you exclusively tax the richest people, so 95% of the population paid no taxes, while the top 5% paid everything, would you still consider that fair? If your answer is “yes,” well, I don’t even know what to say, except to suggest you study the definition of fair.

Summary

Mr. Reich may be wrong, or he may be right about most of these points. The point I am trying to make with this article, is that it is irresponsible to blindly accept a video like this as fact. I do not claim that no justifications for his assertions exist, only that they do not exist in this video. If you find his positions compelling, don’t just assume they are all correct, and don’t decide that you, too, are suddenly an expert, just like Mr. Reich. He worked very hard to study the subject for years. You watched a 2 minute and 30 second video. If challenged directly, I’m sure he could go on at length and to great depth explaining in detail why he believes these seven things to be lies. If you have only watched the video, you almost certainly cannot.

And also remember, there are other experts out there, people who have studied the same subjects as Mr. Reich, for as many years, and garnered as much respect and as many accolades, while reaching completely different conclusions. Don’t mistake a bullet-point summary for an irrefutable argument. If you’re interested in the subject, study it. Clearly, you have access to the internet. Search. Look deeper into the explanations, and actively look for dissenting opinions. You don’t have to get a post-graduate degree in the subject to hold opinions on it, but you ought at least learn enough about it to appreciate that it is a subject with enough depth and complexity to occupy thousands of great minds for a lifetime.

1 much of the funding for these services is state and local, or comes from fines collected by local courts

Did you like this? Share it:
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *