A Zombie Lie Is Born

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

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 falsehood:

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, 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 procedures.

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 dependents.

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 president.

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 State?”

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, will you?

(h/t to Thimbles for the Cafferty video link)

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum. Tags: , , , ,