You can sign up to receive ERR and other CEPR e-newsletters at the CEPR Listserve Signup Page. You can find the latest ERR at the Economic Reporting Review Main Page. All ERR prior to August 2000 can be found at Fair.org.

Links to both New York Times and Washington Post articles require registration. To sign up for these free services, go to the NY Times Sign-up Page and the Washington Post Registration Page.


Outstanding Stories of the Week

Shifting Drug Prices Muddy Medicare Card Choice
Bill Brubaker
Washington Post, May 21, 2004, Page E1

This article reports on the fact that the cost of purchasing drugs through Medicare discount cards can change frequently. This means that consumers may select a specific card based on one set of prices, but later find that the promised discounts are no longer available. Since there are limited in their ability to switch cards, this could mean that the discount card they have selected will be of little use.

Pioneers Fill War Chest, Then Capitalize
Thomas B. Edsall, Sarah Cohen, and James Grimaldi
Washington Post, May 16, 2004, Page A1

This article examines the fundraising practices of the Bush campaign. It reports on how many of the largest fundraisers either obtained high positions in the Bush administration or managed to win contracts or legislative provisions that benefited their companies.

When Citigroup Met WorldCom
Gretchen Morgenson and Timothy L. O'Brien
New York Times, May 16, 2004, Section 3 Page 1

This article reports on the relationship between Citigroup and WorldCom, which led to a payment of $2.65 billion by Citigroup to WorldCom investors. The payment resulted from a class action suit that charged that Citigroup had misled investors in order to sell WorldCom debt.

Back to Top of Page

Housing

Housing Starts Fell in April
Daniela Dean
Washington Post, May 19, 2004, Page E1

Rates Rise, Changing Face Of Home Sales
Jennifer Bayot
New York Times, May 20, 2004, Page C1

These articles report on the current state of the residential housing market. While both articles refer to evidence of slowing in response to the recent rise in mortgage interest rates, neither article presents the views of any of the economists who have warned of the possibility of a bubble in the housing market. Nor do the articles note any of the trends that might portend a collapse of the housing bubble, such as increase of more than 1 million in the number of vacant rental housing units over the last four years, or the fact that the rate of housing construction is exceeding demand growth by more than 400,000 units a year.

This failure appears to be at least partly attributable to the reliance on experts who are connected to the housing industry. This problem is especially evident in the Times article, which presents views of economists connected with the National Association of Realtors, Fannie Mae, the Mortgage Bankers Association, and Quicken Loans. The article does not cite the views of any economists or analysts who are independent of the housing and mortgage industry.   

The increase in home prices in excess of the overall rate of inflation during the last eight years, which is unprecedented, has increased housing wealth by close to $4 trillion nationwide. Not discussing this run-up in an article on the current state of the housing market is comparable to ignoring the stock bubble in an article assessing stock market prospects in 1999.

Back to Top of Page

Canada

Health Care Leads Other Issue in Canadian Vote
Clifford Krauss
New York Times, May 17, 2004, Page A6

This article discusses the political situation in Canada as the country prepares for elections that are likely to take place in June. The article reports that Canada’s public health care is likely to be the biggest issue in the election. It notes that many people are upset about what they view as deterioration in the quality of care provided by the system. It also reports that the system is becoming “so expensive it is forcing many provinces to trim their budgets for education and other vital services.”

It would have been helpful if the article had provided more context. Much of the discussion implies that the current system is inefficient and that it would somehow be more efficient if there were a greater role for the private sector. There is not much evidence to support this view.

Canada currently spends approximately half as much per person as the United States, yet its citizens enjoy longer life expectancies than do people in the United States. Neither of these facts is mentioned in the article, although the article does discuss waiting times for M.R.I. exams.

It also would have been helpful to inform readers that Canada has actually reduced the share of its GDP spent on health care over the last decade, even though its population has gotten considerably older during this period. While the health care system may have become somewhat more efficient as a result of this cutback, it would be surprising if such cuts in spending did not lead to some deterioration in the quality of care.

Back to Top of Page

Mexico

This article reports on the release of data showing the Mexico's GDP was 3.7 percent higher in the first quarter of 2004 than in the first quarter of 2003. It reports that this growth figure was higher than expected and "welcome news" to Mexico's president, Vicente Fox. While this is better growth than Mexico had experienced in the recent past, it is worth noting that it is not very impressive for a developing country. As a developing country, Mexico should be experiencing per capita GDP growth in the range of 3 to 4 percent, which would translate into GDP growth at a 4 to 6 percent annual rate. Mexico managed to sustain 4.1 percent annual per capita GDP growth in the two decades from 1960 to 1980

Back to Top of Page

Stock Options

Intel Balks At a Request To Expense Stock Options
Gary Rivlin
New York Times, May 20, 2004, Page C1

This article reports on the decision by Intel's management to refuse to treat stock options as an expense, in spite of a vote by its shareholders in favor of this accounting practice. At one point, the article refers to the "belief" of Intel's senior management that expensing stock options would be bad for both Intel and the technology industry as a whole. While Intel's management has made statements to this effect, the article presents no evidence that such statements reflect management's actual beliefs. It is plausible that Intel's management supports it current accounting practice because it allows them to mislead shareholders about the company's true financial situation.

The article also presents management's complaint that existing methods of pricing options are inadequate and would make its financial statements less accurate. It is worth noting that Intel's current practice effectively assigns a price of zero as the value of its stock options.

Back to Top of Page

China and India

China's Government Tries to Calm Economic Boom
Edward Cody
Washington Post, May 19, 2004, Page E1

This article discusses the efforts by China's government to slow its growth. At one point the article reports China's GDP as $1.41 trillion and claims that its per capita GDP had just crossed $1,000. These figures are currency conversion values of GDP. Economists usually use purchasing power parity measures of GDP, which measure output assuming that the prices of goods and services are the same in all countries. By this measure, China's GDP is close to $7 trillion. Its per capita GDP is now close to $5,000.

Old Reflexes Hurting 2 Asian Economic Giants
Keith Bradsher
New York Times, May 19, 2004, Page C1

This article discusses the current economic and political situations in China and India. It argues that political considerations may hurt the economies of both countries, leading to slower economic growth.

Most of the evidence for this view is the sharp declines in the stock markets in both India and China. While these declines may be bad news for individuals who hold large amounts of stock, it is not clear that they are bad news for the economies of the two countries. In both countries stock markets provide a very small share of the capital used for investment. Therefore, there is no reason to expect any substantial falloff in investment based on the stock market declines, nor is there any other obvious negative effect.

Sikh Who Saved India's Economy Is Named Premier
Amy Waldman
New York Times, May 20, 2004, Page A3

This article reports on the selection of Manmohan Singh, a former finance minister, as the new prime minister of India. The article asserts that Mr. Singh had "saved India from economic collapse in 1991" and that he instituted a set of reforms that laid the basis for India's recent economic boom.

While India faced economic problems in 1991, it is not clear that it was in danger of a collapse. It had a current account deficit, which was addressed in large part by devaluing the country's currency. This is a standard practice, which countries do all the time.

It is also important to note that the acceleration in India's growth rate began in 1980, not with the reforms instituted in 1991. These reforms have been associated with growing inequality, so that much of India's population has seen few benefits from recent growth.

Back to Top of Page

The Budget

House Approves $447 Billion in Spending for Military
Carl Hulse
New York Times, May 20, 2004, Page A

Extra $150 Million Found to Pay for Housing for the Poor
David W. Chen
New York Times, May 19, 2004, Page A

These articles report on spending for the military and housing vouchers for low income families. It would be more informative to readers if the sums were expressed as shares of the budget instead of, or in addition to, dollar amounts. The military spending approved by the House is equal to 18.6 percent of projected federal spending in 2005. The additional funding for the housing voucher program is equal to 0.006 percent of projected federal spending.

Back to Top of Page

Gasoline Prices

Democrats Urge Bush to Act on Gas Prices
Jodi Wilgoren and David E. Rosenbaum
New York Times, May 19, 2004, Page A18

This article reports on Democrats who have criticized President Bush for not taking steps to lower gas prices. The article reports that Senator Charles Schumer has called on President Bush to release 60 million gallons of gasoline from the nation's reserves over the next two months. It would have been worth noting that this is equally to approximately 0.4 percent of gasoline consumption over this period. An increase in supply of this amount is not likely to have a large effect on the price of gas.

This article reports on Democrats who have criticized President Bush for not taking steps to lower gas prices. The article reports that Senator Charles Schumer has called on President Bush to release 60 million gallons of gasoline from the nation's reserves over the next two months. It would have been worth noting that this is equally to approximately 0.4 percent of gasoline consumption over this period. An increase in supply of this amount is not likely to have a large effect on the price of gas.

Back to Top of Page

Trade

Trade Deal Opens Australia To U.S. Manufactured Goods
Elizabeth Becker
New York Times, May 19, 2004, Page C4

This article reports on the signing of a trade agreement between Australia and the United States. It describes the agreement as a "free trade" agreement. This is inaccurate, because the agreement does not necessarily liberalize trade. In fact, one of the main provisions is the requirement that Australia increase protection for patent monopolies in the pharmaceutical industry. It would be more accurate to simply refer to the pact as a "trade" agreement.