Continuning Ignorance of Tax Rates & Their Effects On CNBC

House Minority Leader Eric Cantor appeared on CNBC on Tuesday morning. He was at the NYSE, apparently having accompanied John Boehner to the city the previous evening for the Speaker's address to the Economic Club of New York.

Cantor was interpreting and defending Boehner's pointed remark to the effect that a debt limit rise will necessarily include spending cuts of equal or more size, or there won't be a limit increase.

As usual when he appears on SquawkBox, Cantor was subjected to some economic idiocy, but this time, to my regret and shock, it was from Becky Quick.

Quick is a veteran Wall Street Journal reporter of many years, before joining CNBC. But, as are most other CNBC anchors, she is a journalist by training, not an economist.

Still, I know from watching the network's 6-9AM program fairly often that Quick still reads the Journal regularly.

Thus, it is inconceivable that she would have missed the editorials featured in prior posts here, here and here.

Never the less, she assailed Cantor in what may only be called an exasperated tone why the Republicans just refuse to raise taxes, pass bills to enact more taxes, in order to reduce the deficit. She then disingenuously compared that to a family under financial pressure not only cutting its spending, but having the adults take extra jobs to provide more income.

Well, consider those three Journal editorials.

In the first, from last May, David Ranson updated Hauser's Law, reminding readers that, regardless of tax rates, over time, only about 19% of GDP will be paid in taxes. Period.

In the second post, a recent Journal editorial by and Alan Reynolds reiterated Hauser's Law, then added that the non-business component of that 19% is just less than half, or about 8%. He wrote,

"Both individual income taxes and overall federal taxes have long been a surprisingly constant percentage of GDP- 8% and 18%, respectively- regardless of top tax rates on salaries, small business and investors. It follows that the only reliable way to raise real federal revenues over time is to raise real GDP."


Finally, John B. Taylor provided a simple but powerful graph in a recent Journal editorial displaying the differing percentages of GDP that federal spending would require under various alternative budgets recently proposed by the president and House Budget Committee chairman Paul Ryan.

As a responsible media anchor and occasional reporter, one would think Quick is abreast of current, mainstream, published economic findings such as those written in the Journal by Ranson, Reynolds and Taylor. We're not talking an economics journal, but the very mainstream business newspaper The Wall Street Journal.

So, assuming Quick read these pieces, why was she bludgeoning Cantor about raising taxes to collect more revenue, when the first two editorials presented clear evidence that (top) tax rates are irrelevant. It's total tax revenue that matters, which is maximized by lower rates to foster a growing GDP. The tax/GDP ratio is going to max out at 18%, so the only sensible way to raise more government tax revenue is to lower rates in order to induce more economic activity that will raise the denominator, GDP.

Why won't Quick acknowledge the empirical findings which make this so clear? Why does she continue to badger Republicans to raise taxes when she must be reading the same editorials I do which contain empirical evidence that such strategies are pointless?

Cornpone Buffett Evades CNBC's Questions

If you wanted more proof than I offered in this post that Warren Buffett is one shrewd public relations bastard, and not an open, forthcoming CEO, you need have looked no further than CNBC last Friday.

Becky Quick caught Buffett outside of a traditional Thursday evening bridge game with Fortune writer Carol Loomis. Quick tried to get Buffett to comment on the Berkshire board's published report on the Sokol-Buffett-Lubrizol scandal prior to his Saturday shareholder meeting remarks.

In true cornpone tradition, Buffett guffawed and aw-shucks-ed his way past Quick's questions and microphone. Meaning, in effect, that he totally manipulates CNBC and Quick for his own purposes. He grants them interviews and close-up face time when it suits his needs, then shuts them down when it is inconvenient.

Plus, he uses CNBC to air himself with his own faux-folksy demeanor, the better to use it every time he's on camera.

It's clearly an artifice he's created so that his every corporate move is seen not as that of a calculated, clever CEO, but your that of your wizened old good-natured Grandpa.

Yep, that's Warren. So deft that even the usually-savvy Wall Street Journal columnist Holman Jenkins, Jr., gave him a pass in this weekend's edition.

I nearly vomited from nausea as I listened to Buffett's chuckle-punctuated remarks to Quick as he brushed her off. There was nothing about the subject that would invite humor, so you knew that Buffett thought he ought to be in character because he was, well, on camera.

Imagine the same words and actions from another CEO, not laughing. It would be quite cold, off-putting and look like what it is- damage control.

But Buffett has so defanged Quick and CNBC that they happily play clips of him guffawing his way out of the awkward moment that night. And Quick, once a well-regard reporter for the Journal, simply smiles and refrains from any comments, .either on or off camera, which might jeopardize her prized access to Buffett- but always and only on his terms.

Shameful.

Sokol, Buffett & Becky Quick

By now you've probably read, heard or seen more about David Sokol's conflict of interest investment in Lubrizol, ahead of his recommending it to Warren Buffett for Berkshire Hathaway to buy, then you wanted to. It's been all over CNBC throughout the day.

That written, I won't add my own view about the propriety of Sokol's actions. He spent about ten minutes on CNBC this morning attempting to defend his actions as above question. The network had panels of various people appear on almost every program to debate Sokol's actions and defense.

But to me, there's a single glaring question you should ask, in light of Buffett's lavish, frequent use of CNBC when it suits him:

Where is Becky Quick's in-person investigative interview with the so-called Oracle of Omaha on this one?

Sure, Quick accompanies Buffett on those photo- and video-op tours of China, India, and Korea. She's with him before every annual meeting, and several more times per year. All good press for Buffett- on his terms.

What about now? Because everyone agrees that Buffett sent Sokol out to do damage control on his own. Many is the pundit who contends that Buffett is worried that this incident might finally pierce his folksy, aw shucks veil of privacy and land him in front of an SEC inquiry.

I've written many posts suggesting that Buffett's recent performance hasn't been nearly as good in recent years as it was a decade ago. Buffett gets a pass on borderline unethical or illegal takeover moves, such as Burlington Northern, that would raise eyebrows were others to attempt to use the same tactics.

Don't you wonder why, with her tight connection to Buffett, CNBC's producers didn't have Becky Quick on the line to Buffett this morning, or explaining why not?

Well, okay, that's a rhetorical question. The reason why not is that Warren obviously didn't want to be spotlighted on the Sokol-Lubrizol front-running scandal. And if Becky Quick had pushed on this, it likely would have been the last time her call would be taken or returned by Buffett.

So much for hard-hitting, investigative business news on CNBC, huh? Better to preserve marquee relationships, avoid asking embarrassing questions, and leave Buffett alone when viewers would have liked to know what he knew, what he said, etc.

That's why CNBC is a business entertainment network, not a business news network.

Fox To Start Business Channel in Late 2007

Finally, it looks like there will be some competitive pressure for CNBC. Fox has announced that it will commence operating a business news channel in late 2007.

As I wrote recently, expect to see Fox poach some of CNBC's better, more attractive female anchor personnel. My prediction is that Rebecca Jarvis and Erin Burnett will be lured to the new network. They are the brightest, most articulate, attractive female anchors who also have limited exposure.

While Becky Quick and Michelle Cabruso-Cabrera are probably better, more knowledgeable and skilled anchors than Burnett and Jarvis, they enjoy maximal exposure already.

Then again, who knows how many women, and men, may wish to bolt to Fox just to get away from "money honey" (is that trademarked yet?) Maria Bartiromo.

Additionally, I understand that, perhaps because of the 'glamor' of network exposure, compensation for anchors at CNBC is not all that lavish.

Should be interesting to see who jumps, and what the eventual anchor lineups are come fourth quarter of this year.