Grading PolitiFact: Robert Reich, corporate profits and "just before" the Great Depression

Words matter -- We pay close attention to the specific wording of a claim. Is it a precise statement? Does it contain mitigating words or phrases?
--Principles of PolitiFact and the Truth-O-Meter

The issue:

(clipped from PolitiFact.com)

The fact checkers:

Louis Jacobson:  writer, researcher
Martha Hamilton:  editor


Analysis:

PolitiFact makes a show of insisting that words are important.  "We play close attention to the specific wording of a claim," reads a portion of PolitiFact's page of fact checking principles.

Unfortunately, PolitiFact's application of this principle, as is the case with many of its other principles, ends up a matter of convenience.  Sometimes the specific wording of a claim matters but sometimes it doesn't.  And good luck discerning the criteria for the varying application of the standard.  This fact check of liberal economist Robert Reich serves as the latest example.

Reich's statement occurs as its own paragraph in the midst of an op-ed published at a (no doubt non-partisan) PBS site. Reich builds a comparison between the modern state of American labor and the state of labor during the Great Depression, comparing wage growth between the two periods, for example.  Reich's statement, in context, extends that comparison:

The ratio of corporate profits to wages is now higher than at any time since just before the Great Depression.

Meanwhile, the American economy has all but stopped growing – in large part because consumers (whose spending is 70 percent of GDP) are also workers whose jobs and wages are under assault.

Perhaps there would still be something to celebrate on Labor Day if government was coming to the rescue. But Washington is paralyzed, the president seems unwilling or unable to take on labor-bashing Republicans, and several Republican governors are mounting direct assaults on organized labor (see Indiana, Ohio, Maine and Wisconsin, for example).

The PolitiFact story reveals that Reich's statement came under review at the request of a reader.

On with that review:

We turned to statistics compiled by the Bureau of Economic Analysis, the federal office that calculates official statistics about the economy. We found numbers for corporate profits as well as for two measures of worker income -- wage and salary disbursements, and total employee compensation received. We then divided corporate profits by both of the income measurements, all the way back to 1929. (Here are the full statistics from 1929 to 2011 as we calculated them.)

Do click the link and review PolitiFact's numbers.

PolitiFact:

For wages, we found that Reich was essentially correct. The ratio in 2010 -- the last full year in the statistics -- was .281, which was higher than any year back to at least 1929, the earliest year in the BEA database. The next highest ratio was in 2006, at .265. (We didn’t find pre-1929 data, so the one part of Reich’s statement that we can’t prove is that the ratio was higher "just before the Great Depression.")

Excuse me, but the "just before the Great Depression" part constitutes a key part of Reich's overall argument. His op-ed, as mentioned, builds a comparison between modern times and the Great Depression and tries to pin the blame for the similarity on business and government inaction.  Take away the reference to the Great Depression and the statement no longer suits Reich's purposes.  We end up with a modern ratio slightly higher, for example, than the one observed during World War II.  Reich doesn't want workers toiling loyally as though we're at war (even if we are at war).  He wants people to push for government action such as many people believe helped alleviate the Great Depression.

We have yet another case where PolitiFact pays close attention to the specific wording of the claim so that its agents can make sure to give a pass to liberals who say indefensible things.  Applying PolitiFact's (fallacious) "burden of proof" grading criterion would result in giving Reich a poor rating such as "False."  By ignoring the part of the claim for which Reich would have borne a burden of proof--changing the claim, in effect--PolitiFact can give him a better grade.

I can't wait to see how this one turns out.


PolitiFact:

We also looked at total compensation, since the portion of worker compensation delivered outside of wages has grown significantly since 1929. The numbers were slightly different, but the general pattern still held. The ratio in 2010 was .226, which was matched or exceeded in only four years -- 1941, 1942, 1943 and 1950.

Only four exceptions to Reich's claim using that method?  That certainly sounds like trouble for Reich even if he gets a pass on "just before."

To capture the most up-to-date trends, we also looked at the ratios for the last six quarters. For both wages and compensation, the ratio has risen steadily over that year-and-a-half period. For wages, the ratio has climbed from .274 in the first quarter of 2010 to .290 in the second quarter of 2011. For compensation, the ratio has risen from .220 in the first quarter of 2010 to .234 in the second quarter of 2011.

Trends?  Reich doesn't argue trends.  Trends are irrelevant to his argument.  He's asserting a problem now regardless of trends and trying to emphasize the severity of the problem by using the comparison to numbers preceding the Great Depression.

PolitiFact continues:

So numerically, there’s little question that Reich is essentially right. (Or, at least for now he is. Economists note that statistics about corporate profits and wages are often revised after the fact.) A more interesting question is what this trendline actually means.

Little question that "Reich is essentially right"?  PolitiFact isn't even checking what Reich said!  Reich gets graded on a new claim invented for him by PolitiFact:    Goodbye, "since just before the Great Depression."

PolitiFact's eagerness to rescue Reich's op-ed via the emasculation of one of his key points is all the more outrageous given yet another of PolitiFact's viscous principles:

Context matters -- We examine the claim in the full context, the comments made before and after it, the question that prompted it, and the point the person was trying to make.

PolitiFact couldn't verify Reich's claim and changed it to something verifiable that failed to help Reich make the point he was trying to make in his op-ed.

Welcome to the wonderful world of PolitiFact fact checking.

The fact check goes through a series of paragraphs explaining the numbers in a manner that further undercuts Reich's point.  Try this one, for example:

Typically, businesses initially lose ground during a recession, while workers suffer somewhat less, in part due to "sticky wages" -- the tendency for worker pay to increase or stagnate rather than fall, even in hard times. This pattern tends to decrease the ratio of corporate profits to wages.

If you're wondering how this meshes with Reich's claim of a high corporate profits to wages ratio just before the Great Depression then join the club.  But don't expect PolitiFact to explore the discrepancy. 

Let's skip to the end:

On the numbers, Reich’s claim is essentially correct. And in his analysis, Reich doesn’t over-promise on what the data indicate. Amid evidence that these numbers could turn out to be a temporary spike, he resists the temptation to label it the culmination of a long-term trend. We find Reich’s formulation both factually supportable and appropriately cautious in its interpretation. We give it a rating of True.

This is flippin' ridiculous.  "Reich doesn’t over-promise on what the data indicate."  Right, because PolitiFact didn't check the datum Reich was using to make his point, which was the supposed corresponding peak of the corporate profits to wages ratio at the time "just before the Great Depression."  Reich also carefully avoided confusing "effect" with "affect" by using neither term in this op-ed.  Sheesh.

PolitiFact went into full spin cycle for Reich.


The grades:

A quick review:

• Ignore a big part of Reich's claim ("just before the Great Depression")
• Ignore the context of the claim
• Ignore the underlying message Reich was trying to make
• Ignore four exemptions to Reich's claim under one of the methods PolitiFact used to test the claim
• Ignore "burden of proof" criterion

Louis Jacobson:  F
Martha Hamilton:  F

I'd imagine shoddy fact checking like this can emerge consistently from an organization only if it is overpoweringly overconfident in its own even-handedness and competence.  It makes me think of a Southern lady who once drawled "Ah don't have an accent!"