ECONOMICS REPORTING REVIEW: The NYT and the
Washington Post Under the Microscope
Week of September 2 - September 8

Dean Baker is co-director of the Center for Economic and Policy Research.


SOCIAL SECURITY 

"Rivals' Economic Visions Differ Sharply," by Glenn Kessler in the Washington Post,
September 8, 2000, page A1. 

This article discusses the economic proposals put forward by George W. Bush and Al
Gore. At one point it seriously misrepresents both the health of the Social Security
program and Gore's proposal to strengthen it. 

The article notes that Gore has proposed increasing Social Security benefits to
widows and then adds: "while offering a technical, bookkeeping fix for putting off
Social Security's anticipated demise." In fact, Gore has explicitly indicated his
intention to place general revenue into the Social Security fund, meaning that
non-Social Security taxes will be used to pay Social Security benefits. It is not clear
what the article means by "technical" or "bookkeeping." It would be equally accurate
to say that Governor Bush is proposing a "technical" or "bookkeeping" tax cut, since
the tax cut will appear in the nation's books and can be viewed as technical. In both
cases, there is real money involved from an clearly designated source. 

The assertion that Social Security has an "anticipated demise" is also unsupported.
The Social Security trustees projections show that Social Security can pay all
promised benefits for thirty-seven years, with no changes whatsoever. After 2037,
even if no changes are ever made, the program would be able to pay a larger
benefit, adjusting for inflation, than what the average retiree receives at present. So
there is nothing in the projections that implies the program will cease to exist. 

Furthermore, the additional revenue that would be needed to keep the program fully
funded in years after 2037 is not large compared with tax increases passed in each
of the four decades from the fifties to the eighties. It is difficult to imagine that an
electorate in which more than a third of the voting population is receiving Social
Security benefits, would not support the additional taxes needed to keep the
program fully funded. 


THE UNEMPLOYMENT RATE 

"Economic Growth Gradually Slowing," by John M. Berry in the Washington Post,
September 2, 2000, page A1. 

This article reports on the release of August employment data by the Labor
Department. The first paragraph applauds the Federal Reserve Board for raising
interest rates and thereby slowing the economy "just enough to keep inflation at bay
without significantly raising the risk of a recession." 

It is not clear that it was necessary to slow the economy to the extent that the
Federal Reserve Board has, in order to keep inflation at bay. The main way in which
slower economic growth affects inflation is by reducing employment and thereby
placing downward pressure on wages. In the last year, wages have barely outpaced
inflation, meaning that the real wage has remained virtually unchanged. Since
productivity growth has been more than 5.0 percent over this period, there should
have been substantial room for real wage gains without inflation. 

The combination of flat real wages and rapid productivity growth led to a large shift
to profits in this period. Corporate profits, adjusted for inflation, rose almost 12
percent from the second quarter of 1999 to the second quarter of 2000. While this
may be good news for shareholders, the vast majority of the population, which
derives most of its income from wages, has little reason to celebrate a Federal
Reserve Board policy that has helped to prevent them from sharing in the gains from
productivity growth. 

The article also includes a technical error in reporting on the data in the August
employment report. It reports that manufacturing jobs dropped by 79,000 in August.
While this is accurate, it follows an unusual jump of 51,000 new jobs reported in July.
As was pointed out by some observers at the time, the increase reported in July was
probably a statistical fluke (see August "Jobs Byte"). It is far more likely that
manufacturing jobs have been relatively stable in this period, rather than surging
upward in July and then plunging back in August. 


LIVING STANDARDS 

"U.S. Families Working More, Study Shows," by the Associated Press in the
Washington Post, September 3, 2000, page A13. 

This article discusses some of the findings on the living standards of American
workers in a new book, The State of Working America, 2000-01. The book was put
out by the Economic Policy Institute, which the article describes as "a
union-supported think tank." It is unusual for news reports to identify the source of a
think tank's funding when reporting on its work. For example, the media rarely refer
to other think tanks as "corporate supported" even though much of their funding
often comes directly or indirectly from corporations. Furthermore, only about 25
percent of the funding for the Economic Policy Institute comes from labor unions,
most of its support comes from foundations. [Note: the author is a former employee
of the Economic Policy Institute.] 


GLOBALIZATION 

"Globalization Tops 3-Day U.N. Agenda For World Leaders," by Barbara Crossette in
the New York Times, September 3, 2000, Section 1, page 1. 

This article discusses plans for a three day summit meeting being held this week at
the United Nations. The article repeatedly refers to ongoing debates over
globalization, although it would be virtually impossible for a reader to gain any
understanding of what is at issue from reading this article. 

For example, Carol Bellamy, the executive director of Unicef, is quoted at some
length denouncing critics of globalization, at one point saying "an outright rejection
of globalization is a head-in-the-sand approach." It is not clear what Ms. Bellamy
could possibly be referring to as an "outright rejection of globalization." If the
meaning is an end to international communications (e.g. cutting telephone lines and
Internet communications) the statement might be meaningful, but no prominent
critics of globalization have suggested this approach. 

Later Kofi Annan, the Secretary General of the United Nations, is quoted as
commenting "it has been said that arguing against globalization is like arguing against
the laws of gravity." The debate over globalization has included a wide range of
issues. In many cases the proponents of "globalization" have been attempting to
impose more restrictions on economic flows. For example, the application of
U.S.-type patent and copyright laws in developing countries, which will impose a
government-enforced monopoly on large categories of goods, could be cited as
"globalization." It is difficult to understand how the process whereby such restrictions
come to be imposed could possibly be viewed as unavoidable, like the laws of
gravity. 

"A Quiet Forum at Town Hall Opposes the East River Forum," by Edward Wong in the
New York Times, September 6, 2000, page A13. 

This article reports on a forum in New York City held by the International Forum on
Globalization (IFG), an organization opposed to the current path of globalization. The
lead paragraph of the article includes a derisive editorial comment about the forum,
commenting that if any of the world leaders attending the United Nations forum
walked down to the IFG forum "plenty of words of wisdom awaited them."
Newspapers usually do not allow this sort of facetious comment to appear in a news
story. 


CANADA 

"O Canada! A National Swan Song?" by Steven Pearlstein in the Washington Post,
September 5, 2000, page A1. 

This article presents an overview of the current situation in Canada. Its main theme
is that "economically, culturally, socially, demographically, even politically, Canada ...
is becoming indistinguishable from the United States." However, much of the body of
the article is a series of inaccurate attacks on Canada's welfare state. 

For example, the article asserts that "Canada increasingly lags behind the U.S.
economy in productivity, innovation, and the ability to generate high-income jobs. ...
Increasing numbers of the country's best and brightest are seeking their future in the
United States. In recent years, about 25,000 Canadians have permanently moved
south each year." 

In fact, there has been an outflow of highly educated workers from Canada for the
last half century. A recent paper by John F. Helliwell, a Canadian economist,
examined the evidence of a brain drain from Canada to the United States ("Checking
the Brain Drain: Evidence and Implications"). The paper found that the rate of
emigration of Canadians to the United States has fallen sharply over the last four
decades. This decline in emigration is particularly dramatic for scientists and
engineers. In the early 1960s more than 30 percent of Canadian scientists and
engineers moved to the United States. By the mid 1990s, this number had dropped to
8 percent (see ERR, 5-1-2000). 

At one point the article comments: "already, the per capita income in Canada is
about a third less than in the United States. Analysts ... predict it could fall to 50
percent by the end of the decade." According to the United States Bureau of Labor
Statistics, using a purchasing power parity measure, per capita income in Canada is
more than three quarters of the per capita income in the United States at present.
(It would be more than 80 percent of U.S. per capita income using a straight
currency conversion.) The Congressional Budget Office projects that per capita
income in the United States will rise by approximately 20 percent over the next
decade. This means that if Canada's per capita income is be just half of the U.S.
level by 2010, then it will have to fall by more than 20 percent in the next ten years.
It is extremely rare for a country not suffering from war or natural disaster to
experience this sort of economic collapse. 

It is also worth noting that the tales of a Canadian economic catastrophe in this
article contradict its main thesis, that the country is becoming more like the United
States in every way. If the economic claims in the article were true, it would imply
that Canada is rapidly turning into a poor country. It would also imply that its efforts
to integrate its economy more with the United States have proven disastrous for the
Canadian people. 


PROFIT SHARES AND COMPETITION 

"Many Workers Say Timeout To Overtime," by Sarah Schafer in the Washington Post,
September 4, 2000, page A1. 

This informative article examines some of the factors that have led to a rise in the
average number of hours worked by a typical family. At one point the article
attributes efforts by companies to squeeze more labor out of workers to "a tight
labor market and the intense competitive pressures of an around-the-clock
economy." Profit margins have soared over the last decade as the profit share of
corporate income has risen by 2.5 percentage points, from the 1988 profit peak of
18.8 percent in the last business cycle to 21.3 percent profit peak reached in 1997.
This rise in the profit share of income seems inconsistent with the view that firms are
being forced by competitive pressures to make greater demands on their workers. 

"H.M.O. Costs Spur Employers To Shift Plans," by Milt Freudenheim in the New York
Times, September 6, 2000, page A1. 

This article presents a well researched account of how employers are responding to
double-digit increases in premium prices by health insurers. However, at one point it
inaccurately contrasts the 1970s and the present. It asserts that in the 1970s,
companies were able to pass along higher health care costs in higher prices, whereas
they are unable to so at present. In fact, the record profit shares of recent years
suggest that most companies have been quite successful in passing on their costs.
In contrast, the profit share in the 1970s was at its lowest level in the post-war
period, which indicates that firms were having some difficulty passing on cost
increases. 


PRODUCTIVITY 

"Debating Detailed Plans for Hypothetical Money," by Richard W. Stevenson in the
New York Times, September 7, 2000, page A24. 

This article examines the plans put forward in Vice President Gore's campaign book.
At one point the article discusses the importance of productivity for living standards
and then comments: "productivity dropped sharply in the early 1970s." This is
incorrect. While productivity did fall for cyclical reasons in 1974, it grew every other
year in the first half of the decade, for a total increase of 13.0 percent from 1970 to
1975. The rate of productivity growth did begin to slow in the seventies, but
productivity continued to increase. It is extremely rare for a country to experience a
sustained period of declining productivity, unless it is suffering from war or natural
disaster. 


VICE PRESIDENT GORE'S ECONOMIC BLUEPRINT 

"Gore to Propose A Reserve Fund," by Ceci Connolly in the Washington Post,
September 6, 2000, page A1. 

"Gore Camp Offers Far-Reaching Economic Blueprint," by Katherine Q. Seelye in the
New York Times, September 6, 2000, page A21. 

"Gore Offers Vision Of Better Times For Middle Class," by Katherine Q. Seelye in the
New York Times, September 7, 2000, page A1. 

These articles discuss a series of proposals and goals laid out in a new document
released by the Gore campaign. It is worth noting that some of these goals appear
less significant than is indicated in the articles. For example, the Post article reports
that one of the goals is to raise real family income by more than a third. As the
articles also report, Gore is committed to reducing the poverty rate to less than 10
percent from its current level of 12.7 percent. However, if the incomes of the poor
rise by a third, the increase Gore has targeted for the average family, then the
poverty rate would be well under 9 percent. 

Both articles also refer to Gore's plans to set aside a $300 billion reserve fund to
cover shortfalls in the event that budget projections prove too pessimistic. However,
the rest of his plans assume economic growth that is approximately 1.0 percentage
point more rapid than is currently projected. If this growth actually occurred, then
the surplus over the next decade would be more than $1 trillion larger than is
currently projected. 

At one point, the Post article comments that "there are noticeable gaps in the vice
president's approach to the nation's coming economic challenges. Gore is silent on
the question of structural reform for programs such as Social Security and Medicare."
The article does not indicate why structural reform for these programs is one of the
nation's coming economic challenges. Both programs are very efficiently run
compared to private sector alternatives and are projected to be financially sound far
into the future without any changes whatsoever. 

This coverage ignored several claims in the Gore campaign book which are misleading
or untrue. For example, the Gore book compares national savings rates between
1993, when the economy was still recovering from the recession with the current
levels, when the economy is at a business cycle peak. The more appropriate
comparison is with the last business cycle peak in 1989, which would show a slight
decrease in national savings. 

The Gore book also repeatedly refers to his plans to make the United States debt
free by 2012. At present the United States is acquiring foreign debt at the rate of
more than $450 billion annually. If the United States continues its current trade
deficit, measured as a share of GDP, then the foreign debt in 2012 will be close to 70
percent of GDP, or more than $12 trillion. 

The book also asserts that exports have been responsible for the bulk of the growth
in U.S. manufacturing (page 85). This is extremely dishonest. The U.S. has lost far
more manufacturing jobs to imports in the last decade than it has gained from
exports, so that trade has on net cost the nation manufacturing jobs. It would have
been worth noting in these stories that the Gore campaign believes it must resort to
these sorts of deceptions to make its case for trade. 


OUTSTANDING STORIES OF THE WEEK 

"Foreign Workers At Highest In Seven Decades," by Steven Greenhouse in the New
York Times, September 4, 2000, page A1. 

This article examines the recent growth in the number of immigrant workers and its
impact. It points out that this growth has benefited employers by keeping down the
wages of less skilled workers, and also many professionals and high income individuals
who rely on immigrant workers to do household chores. 

"A Taxing Question," by Carey Goldberg in the New York Times, September 4, 2000,
page A8. 

This article discusses the battles that many small towns have had over assessment
values, when wealthy people moved in and built luxury houses. Since the houses are
so large as to be unique, it is difficult to determine what the fair market value would
be. In many cases owners have been able to argue for substantial reductions in their
assessments. 

"Stricter Rules for Tire Safety Were Scrapped by Reagan," by Keith Bradsher in the
New York Times, September 4, 2000, page A8. 

This article reports on how the Reagan administration scrapped plans to increase tire
safety regulation in 1981. The proposed regulations may have detected the defects
in Firestone tires which have been linked to eighty-eight deaths. 


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