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In Korea, Bureaucrats Lead the Technology Charge
Martin Fackler
New York Times, March 16, 2006, Page C1
This article discusses South Korea’s industrial policy. As the article notes, South Korea’s government has pursued a policy of selecting key technologies and using tax incentives, low cost credit, and other mechanisms to promote them. As a result, the country is now ahead of the United States in some areas, for example in having near universal access to broadband Internet. This is especially striking, since South Korea was as poor as Sub-Saharan Africa fifty years ago.
Mortgage Payments Lag in Katrina Zone
Kirsten Downeyfe
Washington Post, March 15, 2006, Page A5
This article reports on the record mortgage delinquency rates in Mississippi and Louisiana, indicating the difficulty these states are having in recovering from Hurricane Katrina. The delinquency rate at the end of the 4th quarter was 12 percent in Louisiana and 8 percent in Mississippi. It had been near 1.5 percent in both states prior to the storm.
Medicare Drug Benefit Works, Bush Says
Michael Fletcher
Washington Post, March 15, 2006, Page A4
This article reports on a speech by President Bush in which he touted the success of his Medicare drug benefit. The article reports that President Bush claimed that 26 million people had signed up for the benefit. This is not accurate. The vast majority of these 26 million people were automatically placed into the program either by being transferred from Medicaid or by being previously enrolled in a private or government plan that is now getting a subsidy through the program. Only about 3 million of the 20 million eligible Medicare beneficiaries, who were not previously covered by a drug plan, have actually signed up for the program.
U.S. Added 243,000 Jobs in February
Neil Irwin
Washington Post, March 11, 2006, Page D1
This article reports on the Labor Department’s release of data on employment in February. At one point the article notes that the data showed a drop in the length of the average workweek of 0.1 hour. It then quotes an economist saying that this is evidence of a shift of employment to sectors with shorter workweeks.
It is worth noting that data on hours is highly erratic. It is very likely that this drop of 0.1 hours (which may largely reflect rounding), will be reversed in next month’s data. It is also worth noting that a major snowstorm hit the northeast during the reference period for the February employment report. Many businesses in the area were forced to shut their doors for several days until the transportation system was again functional. These closings would have depressed average weekly hours nationwide. The storm may also have led to somewhat slower employment growth, since businesses would not have made intended hires on the days when they were closed.
Inflation Rate Flattened in February
Nell Henderson
Washington Post, March 17, 2006, Page D3
This article reports on the Labor Department’s release of inflation data for February. At one point the article asserts that wages are not keeping pace with inflation, because the average weekly wage declined after adjusting for inflation. Since the measurement of hours is very erratic and was likely depressed in February due to the snowstorms in the Northeast, it is more appropriate to look at hourly wages. The average hourly wage rose by 0.2 percent, after adjusting for inflation. Wage growth has been outpacing the overall rate of inflation for the last half year.
French Students Hit Streets To Protest New Labor Law
Molly Moore
Washington Post, March 17, 2006, Page A13
This article reports on protests by French students over a new labor law that would make it much easier for employers to fire workers under age 26. At one point the article asserts that “many economists” blame restrictions on firing for France’s weak economy. Actually, most of the research on this topic indicates that restrictions on firing have little or no impact on unemployment.
Many economists (including the I.M.F.) have pointed to the contractionary policies of the European Central Bank as an important cause of France’s economic weakness. It would have been appropriate to mention this in a discussion of France’s high unemployment rate.
Bachelet Sworn In As Chiles’s President
Monte Reel
Washington Post, March 12, 2006, Page A12
This article reports on the inauguration of Michelle Bachelet, Chile’s first female President. At one point it discusses the politics of Hugo Chavez and Evo Morales, the presidents of Venezuela and Bolivia, respectively. The article asserts that they are turning away from international capitalism.
It would probably be more accurate to say that they are turning way from the United States and the path of capitalist development that it has promoted. This is not surprising since the United States will be much less important to the world economy in the future than it has been in the past. Its import market will shrink by 300-400 billion euros (the dollar will decline in value, so it is necessary to use a different currency for the unit of measurement) over the next decade. By contrast, China’s import market is likely to grow by at least as much over this period. In addition, China is now the world’s largest exporter of capital, while the United States is a huge borrower of capital. Given this reality, a country that wanted to stay tied into international capitalism would be expected to turn to China and away from the United States, as many countries in Latin America have been doing.
It is also worth noting that the development policies advocated by the United States have had disastrous results in Latin America. Per capita GDP growth has been just over 10 percent over the last 25 years, compared to more than 80 percent in the years from 1960 to 1980. Given this record, it would not be surprising that countries would look to follow a different development path.
Colombians Cast Ballots In Key Election for Congress
Reuters
New York Times, March 13, 2006, Page A11
This article reports on parliamentary elections in Columbia. At several points it describes a trade pact with the United States as a “free trade” agreement. This is inaccurate, since the agreement actually increases some trade barriers, most importantly by increasing patent and copyright protections.
The article also asserts that the pact is “seen by economists as important for Columbia’s future competitiveness.” The article does not identify any economists who hold this view. Many economists have pointed out that the United States is likely to have a rapidly declining import market in the next decade, as its trade deficit contracts to a sustainable level. It is not clear how much Columbia’s economy can benefit from increased access to a shrinking market.
Cancer Drug’s Big Price Rise Disturbs Doctors and Patients
Alex Berenson
New York Times, March 12, 2006, Page A1
This article reports on large price increases in several older drugs. The main example is a cancer drug, nitrogen mustard, the price of which recently increased by close to 500 percent. The article notes comparable price increases in several drugs. In each case, the price rise was associated with the sale of the rights of the drug to a new company.
In the case of nitrogen mustard, and possibly the other drugs as well, the patent has expired. It would have been interesting to know why generic producers are not entering a market that would seem to have enormous opportunities for profit. The earlier producer of these drugs was obviously making a profit at the prior market price, so this would suggest that a generic producer could undercut the current rights holder by 80 percent and still make a large profit.
Budget Restraint Emerges as G.O.P. Theme for 2008
Adam Nagourney
New York Times, March 13, 2006, Page A18
This article discusses efforts by likely contenders for the 2008 Republican presidential nomination to portray themselves as fiscal conservatives. At one point the article asserts that Medicare, Medicaid and Social Security “have become a drain on the federal treasury.”
This is not true. Social Security is financed by a designated payroll tax. According to the Congressional Budget Office, the income from this tax, together with the interest on the government bonds purchased with prior surpluses, exceeds Social Security’s annual benefit payments by $180 billion. This means that Social Security is a huge net contributor to the treasury.
It also would have been helpful to note that the main reason that Medicare and Medicaid costs are rising so rapidly is that health care costs in the United States are rapidly outpacing the overall rate of inflation. It is striking that political figures who are apparently concerned about the cost of government spending on health care do not want to discuss the cost of health care in the United States.
Republicans on Hill Resist Spending Cuts
Jonathan Weisman
Washington Post, March 14, 2006, Page A8
This article discusses the opposition of congressional Republicans to the spending cuts that President has proposed in his 2007 budget. The article ends with a quote from Robert Reischauer, the former director of the Congressional Budget Office, that the country is trying to manage a 21st century government on a 1950s revenue base.
Actually, the mismatch is somewhat worse than described by Mr. Reischauer. In the 1950s, revenue from non-payroll taxes (Social Security and Medicare) averaged more than 14.0 percent of GDP. At present, non-payroll tax revenue is less than 11.0 percent of GDP. Since the payroll tax revenue is designated for Social Security and Medicare, this means that the rest of the government is supported by far less tax revenue in 2006 than it was in the fifties.
Despite Dire Predictions, Money Measures Always Talk
Carl Hulse
New York Times, March 16, 2006, Page A16
This article reports on congressional votes on various budget measures. At one point it discusses the vote on a $92 billion bill that provides supplemental funding for the wars in Iraq and Afghanistan and the hurricane clean-up in New Orleans. The article reports that conservatives were angry because the Republican leadership did not give them the opportunity to vote to meet this cost out of “idle money,” so instead the spending will add to the deficit.
There is no budget category for “idle money.” If the conservatives wanted to pay for this spending without adding to the deficit, then they must have been proposing substantial cuts in government programs. It would have been helpful to identify for readers the programs that these conservatives wanted to cut.
Senate Votes $2.8 Trillion Budget, Breaking Limit
Carl Hulse
New York Times, March 17, 2006, Page A1
This article reports on the Senate’s approval of a new debt ceiling. While the article reports the size of the debt ceiling as nearly $9 trillion, it would have been more informative to readers if it reported its size relative to the size of the economy. The new debt ceiling is just under 69 percent of current GDP. This pushes the debt to GDP ratio above the peaks reached in the mid-nineties (it had been falling consistently until 1981) to ratios last seen in the mid-fifties.
Conspicuous Consumption Shapes New Tokyo Skyline
Anthony Faiola
Washington Post, March 11, 2006, Page A12
This article discusses evidence of growing inequality in Japan. At one point the article presents on the distribution of earnings which must actually be data on the distribution of wealth. The article reports that in 2002, the richest 20 percent of Japanese families “earned 50.4 percent of the nation’s wealth,” while the poorest 20 percent “earned” just 0.3 percent. The statement must refer to wealth rather than earnings, since it would be impossible for the poorest 20 percent to survive if their earnings were only 0.3 percent of national income. This distribution compared to 44.3 percent of the country’s wealth held by the richest 20 percent and 2.7 percent by the poorest in 1987.
It would also be helpful if the measure of wealth were clearly defined. For example, financial wealth (e.g. stocks, bonds, bank deposits) tends to be more highly concentrated than total wealth, which includes housing wealth. In either case, these data suggest that wealth is far more equally distributed in Japan than in the United States. In the United States in 2001, the top 20 percent of families held 84.4 percent of the country’s wealth. The net worth of the bottom 20 percent was negative, as they owed an amount that exceeded their assets.
A Senate Panel Interrogates Wary Oil Executives
Jad Mouawad
New York Times, March 15, 2006, Page C4
This article reports on the testimony of the top executives of the country’s six largest oil companies before the Senate Judiciary Committee. At one point the article refers to the $14.5 billion in tax breaks to energy companies that were included in an energy bill passed last year. It is worth noting that these tax breaks (not all of which would go to the oil industry) cover a ten year period. The five largest oil companies had combined profits of $100 billion last year, according to the article.
Dean Baker is co-Director of the Center for Economic and Policy Research in Washington, DC.