Recent business news has been abuzz about small investors cashing out of their mutual funds to the tune of $33.12 billion. Depending on who you listened to, this allegedly reflected either a loss in faith in the economy, dire cash needs by small investors, or a return to the 1960’s era markets where individual investors were basically non-existent.  But everyone agreed this was a significant economic event.

This story started with Graham Bowley in the NY Times over the weekend and snowballed until it was making the rounds on most of the news networks yesterday.  MS-NBC’s Dylan Ratigan devoted a whole segment to the “crisis” on Tuesday’s show.  This might have been some crack reporting except for the fact that Bowley turns out to have been impressively wrong.

Felix Salmon actually bothered to recheck the facts, and it turns out that while Bowley was essentially right about the retreat from domestic mutual funds, he neglected to look at Exchange Traded Funds (ETFs) or international mutual funds which grew suspiciously at a little short of $40 billion over the same period.

So the news really turns out to be that people reinvested in ETFs with more flexibility and lower cost structures than mutual funds and divested into more global portfolios.  Or perhaps it was seniors continuing to draw on their 401k mutual funds while younger working investors placed their money in ETFs.  Either way, that seems pretty darned sensible of them.  Sorry folks, no crisis to see here.  Please go back about your business.

The problem here is that the “crisis” was covered with great fanfare.  That will not be true of this news.  Rather, it will buried if mentioned at all.  The result being the meme about people fleeing the stock market will stick despite there being no truth to it.

Perhaps Bowley made an innocent mistake in his initial report.  But that doesn’t excuse all those who ran with the story.  What’s supposed to distinguish bloggers from professional journalists is that journalists are expected to double check the facts.  They are trusted to be correct.  Yet increasingly that is not the case.  Whether it is just over eagerness to report a breaking story in a world of ridiculously rapid news cycles, or if it’s a more deliberate attempt to sensationalize the news for the sake of ratings, it amounts to malpractice.

In other professions there are dire consequences for malpractice.  Whether you’re a lawyer, a doctor, or an engineer malpractice can result in people being hurt.  Journalists should be held to these same high standards.  People make decisions based on information provided by journalists.  Decisions that influence public policy and ultimately all our lives.  That is no less impactful than malpractice in other professions.

This is a small example, but it’s indicative of a more endemic problem.  If journalists want to be valued and trusted, they need to step up to the plate, do the hard work, and get us the real truth we so desperately need.

The New York GOP Gubernatorial primary race has taken a turn for the interesting as candidate Carl Paladino has unleashed “Little Ricky” (a staffer in a chicken suit) to dog his opponent Rick Lazio.  At issue is Lazio’s unwillingness to commit to a debate with Paladino, hence Paladino’s attempt to call him “chicken”.

On the one hand, it would seem Lazio is not really playing fair.  After all, voters should get to hear their candidates out, and political debates have long been the gold standard for sorting out potential politicians.

Yet on the other hand, Lazio has little to gain by engaging Paladino.  He’s currently enjoying a 30% lead in the polls.  Further, Lazio has the overwhelming support of the Republican party officials in New York.  Meanwhile, millionaire developer Paladino basically bought his way into the race and forced a primary against the GOP’s wishes.  And he’s threatening to run as a third party in November if he loses the GOP nod anyway.  Debating Paladino arguably only lends credibility to a fringe candidate.

Not that Paladino minds being on the fringe.  He’s increasingly positioning himself as a Tea Party candidate.  He’s even gone so far as to recommend New York’s prisons be turned into dormitories for the poor where they will be put to work for the state and taught lessons in personal hygiene.  After all, how does one achieve affluence if one doesn’t know how to properly use a loofah?  It would be incredible (and a little sad) if his plans to open indigent work camps resonated strongly with New York voters.  It certainly seems Paladino is more of an irritant to the GOP than a serious contender.

Still, Paladino is a valid candidate.  No one is questioning his right to run.  As a candidate, he should have the right to face off against his opponent, the right to take his shot.  If he’s really as far out there as he seems, Lazio should have no trouble taking him down.

Granted, Lazio, doesn’t have to debate Paladino… but he should.  Ideally, with both men wearing chicken suits.  That would be must-see TV.

The Main Street Fairness Act (HR 5660) is intended to get states and local governments the sales tax revenue they are owed from Internet sales, but it is the wrong solution to the problem.

Massachusetts Congressman Bill Delahunt, along with five Democratic co-sponsors introduced the bill last month.  As proposed, it would allow states to optionally join in a compact that permits them to require all businesses to collect sales tax on every purchase by a customer living in that state.  Mercifully, it at least requires states to adhere to certain simplifications of, and provide for, uniformity of the state’s sales tax code in order to join.

The name of the bill and Delahunt’s own press release emphasize the need for this to level the playing field for online retailers.  Yet it’s not at all clear this is a boon to local businesses.  Repeated studies show that cost is at best a minor reason people shop online.  Certainly, there is not a significant number of customers avoiding local stores simply to avoid paying sales tax.

In many states, such as here in New York, sales tax is already required to be paid if the retailer has any brick & mortar presence in the state.  Further, the New York income tax form specifically requires you to report Internet or out of state purchases (or estimate them) so that the proper tax may be collected.  Therefore, much of the perceived cost savings doesn’t exist anyway.

While part of this bill is certainly intended to boost state sales tax revenues, it is likely to also hurt small retailers trying to do business online.  Online business is an increasingly big part of a small specialty shop’s business—even single proprietors.  Yet the sales tax laws, even with the proposed simplifications, still vary in both rates and products covered for each state.  In many states, the variances are by county.  This would almost demand that small businesses use some sort of service to automate the calculation of the appropriate tax to charge, and facilitate getting those funds paid to all the proper taxing authorities.  And that service is going to complicate their business and erode already small profit margins.  A pain that will less likely be felt by large national operations who already have ample infrastructure in place to handle the complexity.

Online sales are not going anywhere anytime soon.  They do erode from traditional local businesses, but they also provide an opportunity for a small business to reach a set of customers they never would have been able to dream of 50 years ago.  So rather than trying to prop up the dying business model, let’s try and enable the new one.

That could be accomplished by introducing a national sales tax.  That is, the policies for what products are subject to the tax, and the tax rate itself, are set uniformly at the national level.  The funds are collected centrally, but then redirected back out in their entirety to the states and counties of the purchasers.  This moves the administrative burden to the government (after all, they are the ones who want the money), and makes tax collection simple for businesses.

Politicians keep posturing about helping small businesses.  They often say how they are our future, and the means to restart the economy  Well here’s a perfect opportunity to put your legislation where your mouth is.  It’s time to truly reform an old system rather than just adding more duct tape to the ancient one whose time has long passed.