March 2011, Week 3


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Wed, 16 Mar 2011 15:52:58 -0400
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Economic Crisis, The Audit

Zombie Lie Is Born

    CNBC's false welfare-state story spreads far and wide

By Ryan Chittum
Columbia Journalism Review
March 11, 2011


Two days ago I fisked a false report from CNBC that
said more than a third of all wages and salaries are
now government handouts.

That kind of a report, based on a study by an outfit
called TrimTabs Investment Research, is genetically
engineered to go viral. I closed my post with this
pessimistic note:

    This one will presumably be bouncing around the
    message boards and chain emails for years.

And it will. But here's a list of more prominent
outlets that have spread this garbage just in the last
two days:

CNN, The Wall Street Journal, the New York Post, Dow
Jones, Investors Business Daily, The Atlantic, the Las
Vegas Review-Journal, the Michigan Live, WLS Chicago,
Rush Limbaugh, The Daily Mail, The Daily Caller,
NewsMax, Moneynews.com, Pajamas Media, Newser,
TheStreet, The New American. And, of course, Fox News.

And it's now in the Congressional Record, courtesy of
Representative Cliff Stearns, Republican of Florida.
God bless America.

For these folks, this story was too good to check.

Hard to imagine grumpy ol' Jack Cafferty of CNN being
credulous, but there he was on Wednesday spreading the

    Government social welfare programs like Social
    Security, Medicare, Medicaid and unemployment
    insurance made up 35% of all public and private
    wages and salaries last year.

Naturally, Cafferty didn't credit quasi-competitor CNBC
on this one and he flat accepted that folks on Social
Security (who make up a disproportionate share of his
viewership, I might note) are welfare recipients.

What did he get wrong? Read my original post for the
full debunking [http://www.cjr.org/the_audit/cnbc_misleads_on_welfare_state_1.php],
but here's a synopsis: So-called personal current
transfer receipts like Social Security payments,
Medicare, and unemployment benefits are not
included in the Bureau of Economic Analysis's wages 
and salaries numbers, which totaled $6.4 trillion 
last year.

How'd they get that 35 percent handout number then? By
erroneously dividing the $2.2 trillion of transfer
receipts into wages and salaries. You can't do that.
They also included health care payments like Medicare
and Medicaid in the numerator but didn't include them
in the wages and salaries denominator. That makes no
sense, and it ought to be obvious to any halfway
numerate person (which I'll admit excludes many of my
fellow journalists) that it doesn't.

The study also excluded capital income. If you add all
that together, the "handouts" percentage comes to 18
percent of personal income. But that's only if you
accept that things like Social Security and veterans
disability payments are welfare. I don't and neither do
most people. All workers pay into Social Security and
get money out according to how much they (or their
immediate family member, in the case of a widow or
orphan) have paid in. You don't pay, you don't get.
That's insurance, not welfare.

Take out Social Security and veterans benefits (which
they earned, after all, serving our country) and you
drop down to about 10 percent of personal income, and
that 10 percent includes things like Medicare, which is
also something of a social-insurance program with taxes
taken out during working years explicitly to fund it.
Here's the BEA numbers. Look at them yourself:


Rush Limbaugh couldn't even get the false report right,
saying repeatedly that 35 percent of people live off
handouts, when the report says falsely that 35 percent
of wages and salaries are.

    One-third of us don't earn anything. One-third of
    us live totally on handouts.

The incredible thing about Limbaugh is that after
ranting on and on about welfare laziness and handouts,
he got two calls from conservatives on disability and
Social Security and exempted them both from their inner
conflicts over taking checks from the gubmint. Read
Andrew Sullivan on that.

(Picking at Limbaugh for being wrong about facts could
be a full-time job, but it's worth noting the
falsehoods here:

    Yeah, and look at Europe. Are they a world power, a
    leader in anything? They have lost their countries.
    They've lost their borders. They're losing their
    cultures. They have all these cradle-to-grave
    programs. They've got 14% unemployment. They've got
    rampant poverty. They've got people that cannot get
    treated for months in line for simple medical

Eurozone unemployment is 9.9 percent. Unemployment in
"socialist" Germany is 7.3 percent. In the UK, it's 7.9
percent. And check out this chart that shows the folks
in Europe, like France, Germany, and the UK, who wait
less for doctors than we do.)

The kooky Investors Business Daily put down the Ayn
Rand long enough to type up an editorial leading off
with this falsehood:

    More than one-third of all wages and salaries in
    this country are actually government handouts. We
    should be alarmed that we've become a nation of

That led further down into this truly amazing claim
about how the "truly privileged class" in America is
the bottom 50 percent:

    Today, more than 97% of federal income tax receipts
    are paid by the top 50% of income earners.

    The bottom 50%? They pay less than 3% of the taxes,
    making it a truly privileged class because many of
    its members get to live at the expense of others.

Left unsaid, of course, is that the bottom 50 percent
makes just 13 percent of total income.

The Journal's James Taranto even understands that the
report is misleading, but apparently figures it's still
worth pushing. Note the euphemism here:

    This doesn't give a full picture, since it omits
    income from saving and investment. But it does give
    a sense of why Americans are increasingly nervous
    about the growth in government spending, which has
    only accelerated since Barack Obama became

Taranto doesn't give a full picture, either, since he
lets them include Social Security et al in wages and
salaries. But at least he pointed out that there are
problems with this study.

Las Vegas Review-Journal senior opinion editor Thomas
Mitchell wrote:

    The road to serfdom is paved with government checks

The Atlantic's Daniel Indiviglio couldn't pass up on it
to get that classic annoying Atlantic headline in the
form of a question: "Is the U.S. Becoming a Welfare

    Uncle Sam has been aggressively increasing
    Americans' allowance recently. Government
    entitlement programs have grown to account for 35%
    of wages, according to a new analysis by Madeline
    Schnapp, director of macroeconomic research at
    investment research firm TrimTabs.

What would a zombie lie be without Fox News amplifying
it? Steve Doocy and Eric Bolling got into the act,
Media Matters reports:

    DOOCY: I saw this statistic, couldn't believe it: a
    third of the people in this country are winding up
    with a handout from the government?

    BOLLING: The government payouts account now for 35
    - see that? - 35 percent of total wages in America
    right now. And that's up from 21 percent in 2000
    and you can see 1960 is only 10 percent. At this
    rate, in four years, the government will account
    for more than 50 percent of total wages in America.
    As baby boomers are retiring, they're getting a lot
    of Social Security benefits, unemployment benefits.
    It's a bad, bad scary trend.

Hey, Doocy, if something strikes you as unbelievable,
there's probably a good reason for that.

Of all these, only Jackie Headapohl, a blogger with
Michigan Live, which is one of those newspaper co-op
websites, has updated with a correction.

Applause to her. Tomatoes for everyone else.

It'll be interesting to watch this zombie lie progress
over the next days and months, and it will be
fascinating to see how many of these outlets correct
their errors. Help me keep an eye out for all that


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