Consider this article from yesterday's New York Times business section, "A Career as a Window to the Future" by Claudia H. Deutsch and David Cay Johnston. It's a review of the career of CSX Corporation CEO John Snow, who was recently nominated to be Treasury Secretary. Appearing among many seemingly objective facts about Snow's past performance as an executive is this paragraph:

"CSX, through a variety of legal techniques, also managed to avoid paying federal income taxes in three of the four years from 1998 to 2001, when it earned a total of $934 million in profit, according to data in its reports to shareholders first disclosed by Citizens for Tax Justice, a labor-backed group whose figures are widely accepted. CSX received $164 million more in refunds than it paid during those years, it told shareholders."

What is the "fact" reported here? Apparently it is that CSX paid no taxes in three of the last four years. Properly, the source of the fact is given (Citizens for Tax Justice), and properly, it is noted that this source has possible reason to be biased (it is "labor-backed"). But, improperly, these qualifications are themselves qualified away by the assertion -- as a "fact" -- that Citizens for Tax Justice's "figures are widely accepted." By whom (other than the authors of this article at this moment)?

I, for one, do not accept these figures. The day they were released I debunked them. These figures arbitrarily focus on the amount of taxes physically paid during arbitrary regulatory reporting periods, rather than the much larger amount of taxes accrued on the company's books to be paid in the future when they become legally due. The full reality is that CSX's profits are taxed as fully as anyone else's -- indeed, in that one year of the last four when taxes were physically paid, they exceeded 100% of profits for that regulatory reporting period.

Did the New York Times do any original research into CSX's financial reports to verify or qualify the claims of Citizens for Tax Justice, whom the reporters themselves admit are biased? No, they just reported those claims as facts, and absolved themselves of responsibility as they absolved themselves of hard work -- by noting the source and (sort of) disclosing potential bias. Job done. Time to go home for Christmas, or "remember the neediest," or whatever New York Times business reporters do with all the spare time that is freed up by not having to report facts.

Is there any "fact" at all in this? Yes. The fact is that a particular lobbying organization made a particular claim. The fact is not the content of the claim -- but the fact that they made it. Yet now the content of the claim has been embedded as "fact" in America's "newspaper of record." And mark my words -- it will be reported again over the coming years, over and over and over, passing into a realm of historicity where it is beyond questioning. And the source that will be cited? The New York Times.

Posted by Donald L. Luskin at 9:53 AM | link  

Tuesday, December 24, 2002