Scrutinizing Jeff Stein

Let's analyze just one article in the Washington Post

This week, let's take a close look at just one article in the Washington Post to see how the national debt is discussed in elite discourse. This article, by Post White House economics correspondent Jeff Stein, was published on September 3 and was titled, "U.S. deficit explodes even as economy grows". Its first paragraph reads:

"The federal deficit is projected to roughly double this year, as bigger interest payments and lower tax receipts widen the nation’s spending imbalance despite robust overall economic growth."

Ideological Framing: the Household Budget Analogy

Note that in just one sentence Stein has already provided an ideological framing for his discussion of the federal deficit. There's a clear implication that a deficit is a bad thing; hence, to double a deficit is to make that thing doubly bad. The United States is said to suffer from a "spending imbalance" -- something which, from the context, is also presumed to be bad.

Stein does not have to make a reasoned argument for the federal deficit being a bad thing. He can get away with merely implying it is bad because he can presume that his readers' thinking is already shaped by the discourse which, in earlier posts in this blog, I have called the Household Budget Analogy. That analogy posits that the federal government's finances work in just the same way as that of an individual household. An individual household needs to amass money before it can spend, but it can't create that money itself. That money has to come from some place outside the household: wages from the sale of household members' labor-power or borrowing. If the household borrows too much, it risks going bankrupt.

The Household Budget Analogy argues that the U.S. federal government's finances work the same way. Before the government can spend, it needs to amass funds from some place outside the federal government via taxation or borrowing. If it borrows "too much," it, too, risks going bankrupt.

The Household Budget Analogy is the all-pervasive framing for discussion of federal government finances, qualifying you to participate as a Very Serious Person in national media and politics. As law professor Neil H. Buchanan recently put it,

"[B]ecause people have it hardwired into their brains that national debt is bad bad bad, one of the only truly bipartisan moves in US politics is to say, 'Oof, that national debt, am I right?'"¹

Journalistic Technique

Back to Stein's article. Like any good establishment journalist, Stein knows that you have to do two things to bolster your argument: First, you have to quote people said to be subject matter experts. If you're in Washington, there is an abundance of think-tanks ready to give you good quote on any possible political position. Stein turns no fewer than three times to the Washington Post's favorite think-tank on federal finances: "the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for lower deficits." Oooh, a nonpartisan group of experts: they're the best to quote!

Second, to appear to be nonpartisan yourself, you have to quote some people from the "left" and some from the "right." So Stein quotes the all-too-frequently quoted Jason Furman of Harvard University and formerly of Obama's Council of Economic Advisors. To ensure partisan balance, Stein also quotes Brian Riedl, "an economist at the Manhattan Institute, a libertarian-leaning think tank."

To be sure, Stein does not simply rely upon these old standbys for quotations. There's a new entry in his Rolodex: Kyla Scanlon, "a financial analyst who founded Bread, which produces financial education."²

Muddled Thinking

Stein and the experts he quotes engage in some muddled thinking in this article. Let's look at two cases.

First, after conceding that the "federal government can still issue more debt even as interest payments rise, with demand for the dollar remaining strong," he first raises the spectres of capital flight, falling exchange rates and devalution ...

"In Argentina, soaring debt levels have forced the government to impose limits to prevent citizens from taking money outside the country. Other government debt crises have been marked by catastrophic drops in the exchange rate, amid investor concerns that the currency will be devalued."

... and then effectively retracts his argument:

"These signs of distress have not materialized in the United States."

False alarm, folks; we're not Argentina!

Of course we're not Argentina, Jeff. Argentina is saddled with massive debt denominated in U.S. dollars -- a currency which Argentina does not issue. The U.S. government only "borrows" in the currency which it itself creates.

A second example: Stein writes,

"Larger government deficits lead to higher interest rates, which can distort private investment and drive up the cost of loans, like home mortgages."

For the sake of argument, let's stipulate that higher interest rates can distort private investment and do drive up the cost of loans, such as mortgages. The Federal Reserve has steadily raising the fundamental interest rate (the "federal funds" rate) for over a year. Mortgage rates have soared and the housing market has, as expected, slumped. Earlier this year, higher interest rates -- which necessarily entail declines in the "mark-to-market" value of existing government and corporate bonds -- led to the collapse of several banks. We could plausibly label that a "distortion in private investment."

But were those higher interest rates the consequence of "larger government deficits"? Hardly. From the time of the Great Financial Crisis (2007 onward) to the onset of COVID-19 in 2020, the Obama and Trump administrations consistently ran large budget deficits at a time when interest rates were historically low. The interest rates were low because the Federal Reserve kept them low. Big budget deficits had negligible effect on interest rates. (This has also been the experience of Japan over the past thirty years.)

Summary

When reading articles about our political economy in the mainstream media, it's important to recognize the ideological framing within which such articles are written. It's also important to scrutinize a journalist's use of subject matter experts, their raising of false alarms and their use of spurious reasoning to establish causality. Jeff Stein is a rising star at the Washington Post, but this article was not one of his better efforts.

1. "How Vacuousness on "Serious Issues" Takes Over the US Political Discussion", Neil H. Buchanan, "Dorf on Law" blog, September 26, 2023.

2. Bread Financial's website describes it as "a tech-forward financial services company. We provide simple, personalized payment, lending and saving solutions." It's not clear what qualifies its founder to comment on national finances.