ECONOMICS REPORTING REVIEW: The NYT and the
Washington Post Under the Microscope
Week of September 30 - October 6

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

PROTECTIONISM AND THE GREAT DEPRESSION 

"Gore: Methodical, Skilled, Aggressive," by Ceci Connolly in the Washington Post,
October 2, 2000, page A1. 

This article examines Al Gore's past record in debates. At one point it mentions an
incident in which he brought a picture of Senators Reed Smoot and Willis Hawley, the
sponsors of the Smoot-Hawley tariff bill, into a debate on NAFTA with Ross Perot.
The article asserts that the tariff is "often blamed for 1929 stock market crash and
the ensuing depression." 

It is not often blamed for these events by those who know history. The stock market
crash, which set off the depression, took place in October of 1929. The
Smoot-Hawley bill was passed in June 1930, nine months later. While it can be
argued that the bill made the depression worse, it clearly was not the cause. 


TRADE 

"A New Politics Born of Globalization," by Steven Pearlstein in the Washington Post,
October 1, 2000, page H1. 

This article discusses the prospects for a new path for trade policy in the United
States and around the world. The discussion is extremely misleading. It juxtaposes
proponents of "free trade" with adversaries who, the Post implies, desire autarky.
Neither of these characterizations are accurate. 

The proponents of free trade mentioned in this article have only displayed an interest
in removing barriers to some types of trade. While figures like President Clinton have
been anxious to place U.S. manufacturing workers in direct competition with the
lowest cost labor anywhere in the world, they have acquiesced in the tightening of
barriers to foreign doctors practicing in the United States. These restrictions were
tightened at the beginning of 1997 due to the concern that the competition was
lowering the wages of U.S. doctors (see A.M.A. and Colleges Assert There is a
Surfeit of Doctors," by Robert Pear, New York Times, March 1, 1997, page A7, and
"U.S. to Pay Hospitals Not to Train Doctors, Easing Glut," by Elisabeth Rosenthal,
New York Times, February 15, 1997, page A1). 

A major thrust of recent trade agreements has actually been to increase
protectionism by extending U.S.-type patent and copyright laws to developing
nations. These forms of protectionism raise the price of goods by several hundred, or
even several thousand percent, above the free market level. 

The article's implicit characterization of the opponents of the Clinton administration's
trade agenda as proponents of autarky is wrong. It is not clear that any individual
who has been prominent in this debate is an advocate of autarky. 

The article also asserts that "rising incomes in the United States as well [as] in most
developing countries that opened their doors to free trade have called into question
earlier fears that trade inevitably triggers a 'race to the bottom' or competitive
pressure to pay workers less and less." Actually, economies generally grow, unless
they are afflicted by war or natural disaster. While the collapse of the Russian
economy in the 1990s, under IMF direction, is a notable exception, it is not clear
that any serious analysts had actually expected the Clinton era trade pacts to lead
to declining economies. The question that economists would usually ask is whether
the rate of growth has increased or decreased as a result of these trade
agreements. In the vast majority of nations, growth has been less rapid in the last
twenty years than in the previous twenty, when most were pursuing more
inwardly-oriented development paths (see "The Emperor Has No Growth," by the
Center for Economic and Policy Research). 

It is also worth noting that there has been a large shift from wages to profits over
the course of the last business cycle. As a result of this shift, the real wage of the
typical worker did not increase at all over the last year, in spite of the economy's
extraordinary pace of productivity growth. While there are many factors that have
contributed to this shift, most economists would acknowledge that trade was one of
the key factors behind this shift. 


PRESCRIPTION DRUGS 

"Basic Differences in Rival Proposals on Drug Coverage," by Robin Toner in the New
York Times, October 1, 2000, Section 1, page 1. 

This informative article examines the basic approaches that Governor Bush and Vice
President Al Gore take to assist senior citizens with prescription drug costs. It
concludes with a bold assertion that is not supported by any evidence presented in
the article: "It comes down to a Catch-22 for the elderly: because their use of drugs
is so high, because so many of the newer (and more expensive) drugs are aimed at
chronic conditions that disproportionately affect older people, and because the ranks
of Medicare beneficiaries will steadily rise ... the government simply cannot afford to
match what working people get." 

The first problem with this assertion is that it does not indicate how it has
determined what the government can afford. The cost of paying for prescription
drugs for the elderly could be quite high, but it would not be as expensive (in most
estimates) as the Carter-Reagan era military build-up. The nation clearly could
"afford" this expenditure, whether it chooses to make it or not is a political question. 

It is also worth noting that the article never considers the reasons why the cost of
prescription drugs is so high. The bulk of the expense is not attributable to the cost
of actually manufacturing the drugs, but rather to the monopoly pricing power that
drug companies have by virtue of their patents. Given the inefficiencies associated
with this system of supporting pharmaceutical research, it would be reasonable to
evaluate alternative approaches before asserting to readers that government
provided drug coverage is unaffordable. 


ALASKA OIL DRILLING AND LOW INCOME ENERGY SUBSIDIES 

"Bush Supports Oil Exploration In Arctic Refuge," by Mike Allen in the Washington
Post, September 30, 2000, page A7. 

"Bush Energy Plan Seeks To Reduce Prices," by Frank Bruni in the New York Times,
September 30, 2000, page A1. 

These articles report on Governor Bush's plan to open the Arctic Wildlife Refuge to oil
exploration. Both articles report on his plans to use up to $1 billion of the
government's oil royalties to support the Low Income Home Energy Assistance
Program. It would have been helpful for readers if the article had reported the
current level of funding for this program. 

In the 2000 budget, $1.1 billion has been budgeted for the program. In a baseline
that increases at the rate of inflation, the program would cost approximately $12.5
billion over the next decade. This means that additional money proposed by Governor
Bush would be an increase of approximately 8.0 percent. This would be slightly more
than enough to keep pace with projected population growth. 


MEDICARE 

"Medicare Cuts May Be Eased," by Matthew Vita in the Washington Post, October 4,
2000, page A1. 

This article discusses a bill before Congress which would ease some of the cost
controls placed on the Medicare program in the last few years. At one point it refers
to the need to confront "Medicare's day of reckoning, when 77 million baby boomers
begin to retire." In the most recent report from the Medicare trustees, the program is
projected to be fully solvent until 2025. At that point, the vast majority of the baby
boomers will have already retired. It also is not clear what sort of "day of reckoning"
the article envisions. In the past, the Medicare program has run short of funds and
taxes were increased to make up for the shortfall. The tax increases that would be
needed to finance the program through the retirement of the baby boom generation
are no larger than the tax increases that were put in place in the seventies and
eighties. 


BUDGET DEFICITS AND DEBT 

"A Surplus of Differences Reveals Fork in the Road," by Glenn Kessler in the
Washington Post, October 5, 2000, page A19. 

"Defining Themselves, Gore and Bush Drew Traditional Portraits," by David E.
Rosenbaum in the New York Times, October 5, 2000, page A25. 

These articles discuss the differences in the budget policies put forward by Vice
President Gore and Governor Bush in their first debate. The Post article includes a
series of misleading comparisons. For example, it asserts that Gore has "advocated
the biggest increase in government spending since President Lyndon B. Johnson
erected the Great Society thirty-five years ago." The amount of new spending that
Gore is proposing will leave non-interest spending roughly constant as share of GDP
over the next decade. By contrast, there have been many occasions over the last
three decades where spending has increased by over a percentage point, measured
as a share of GDP. For example, the Carter-Reagan military build-up increased military
spending by more than 1.5 percentage points as a share of GDP between 1978 and
1986. 

It also refers to the prospect of paying off the national debt as "an economic
milestone." While it may prove to be an important political issue, there is no particular
economic significance to paying off the national debt, except possibly the problems
created by eliminating an asset (government bonds) that has played an integral role
in the operations of the national and international financial systems. According to
standard economic models, it will make relatively little difference whether the debt is
paid off in twelve years, or whether it grows at the same pace as the economy --
which would imply a deficit of about $160 billion a year at present. 

It is also worth noting that the only economic expert used as source for this article is
Robert Bixby, executive director of the Concord Coalition. The Concord Coalition is
identified as a "nonpartisan group that advocates balanced budgets." This
identification is misleading. The Concord Coalition is a conservative group that has
consistently advocated cutting government programs. It can be called "non-partisan"
in the same way that many ideological research organizations, such as the Heritage
Foundation or American Enterprise Institute, can be termed non-partisan. While it is
not affiliated with a political party, it does hold strong political views on the issues
being discussed. 

This is demonstrated by Mr. Bixby's complaint in the article that government spending
has increased at the rate of 5.5 percent annually over the last three years. Even if
spending grew at this pace, it would still imply that government spending has been
shrinking as a share of GDP, since the economy grew at a 6.3 percent nominal annual
rate from the middle of 1997 to the middle of this year. It also isn't clear where the
5.5 percent figure came from. Presumably he is referring to discretionary spending
(overall spending has grown much less rapidly). From 1997 to 2000 this category of
spending increased at a 3.5 percent nominal annual rate. The final spending figure for
2001 has not yet been determined, but in order for the three year growth to reach
the level cited by Mr. Bixby, spending would have to rise by almost as much in 2001
as it had in previous two years taken together. 

The Times article asserts that both Gore and Bush stuck to their party's traditional
lines in the debate. Gore advocated not only balancing the budget, but actually
paying off the debt. The Democrats have traditionally argued that moderate deficits
pose no harm to the economy. It is also worth noting that in 1992 most Democrats
(including Bill Clinton), and even many Republicans, advocated national health
insurance. This item has apparently been dropped from Gore's agenda, even though
the number of uninsured has risen from about 35 million in 1992 to over 43 million at
present. 

It is also worth noting that this Times article begins with a jibe at Ralph Nader. While
Nader is evidently an important enough figure that news articles can devote space to
ridicule him, the paper apparently does not believe that it has room to present his
views, which have received almost no coverage in this campaign. 

"Both Sides Made Math An Elastic Concept," by Glenn Kessler and Ceci Connolly in
the Washington Post, October 4, 2000, page A17. 

"Both Debates Play Games With Numbers," by Glenn Kessler in the Washington Post,
October 6, 2000, page A21. 

These article evaluate the accuracy of the claims made by the presidential and vice
presidential candidates in their debates. The first article questions Gore's claim that
every dollar of additional spending he proposes is matched by a dollar of tax cuts by
referring to the assessment of the "bipartisan Committee for a Responsible Federal
Budget" which claims that Gore "devotes five dollars in on spending for every dollar in
tax cuts." The Committee for a Responsible Federal Budget is a conservative
organization which wants to reduce federal spending. The characterization of them
as "bipartisan" is misleading. It also should have been possible for the article to
independently verify the accuracy of Gore's claims rather than relying exclusively on
an organization with a clear ideological bias. The spending and tax proposals in Gore's
platform have been clearly spelled out. Only simple arithmetic is necessary to
determine their accuracy. 

At one point the second article challenges the claim that Al Gore's proposal will leave
the Social Security program fully solvent through 2054, asserting that, "virtually no
Social Security expert believes the current system can survive another half-century
without benefit cuts, tax increases or some other fundamental restructuring." This is
untrue. The Social Security trustees report shows that the fund can pay all
scheduled benefits through 2037 without any changes whatsoever. If there is an
infusion of general revenue into the program, as proposed by Gore, then this date
can be pushed back into the future indefinitely. 


THE KOREAN STOCK MARKET 

"South Korea's Central Bank Increases Key Interest Rate," by Samuel Len in the New
York Times, October 6, 2000, page W1. 

This article reports on the decision of the South Korean central bank to raise its
short-term interest rate. At one point the article refers to the reaction of a stock
market index, which it characterizes as "a barometer of the nation's economic mood."
The stock market index at most may reflect the sentiments of shareholders, there is
no reason to assume that it reflects the views of the nation as a whole. For example,
a series of strikes that led to large wage gains for workers, would probably drive the
index down, even though the wage increases might leave most of the nation quite
pleased about their economic prospects. 


OUTSTANDING STORIES OF THE WEEK 

"'Facts' and the Debate: A Guide to the Key Claims," by Glenn Kessler in the
Washington Post, October 3, 2000, page A10. 

This article examines the accuracy of some of the key claims that Vice President
Gore and Governor Bush have been making in their presidential campaigns. 

"With Quiet, Unseen Ties, Drug Makers Sway Debate," by Jeff Gerth and Sheryl Gay
Stolberg in the New York Times, October 5, 2000, page A1. 

This article examines how drug companies finance the operations of "grassroots"
groups, who in turn lobby Congress in support of their drugs. 

"Low-Paid Jobs Lead Advance in Employment," by Steven Greenhouse in the New
York Times, October 1, 2000, Section 1, page 1. 

This article reports on the findings of a new study, that showed that most of the
jobs that been created in New York City since the last recession are low wage jobs. 

"A Case Sounds a Warning About Pension Safety," by David Cay Johnston and
Kenneth N. Gilpin in the New York Times, October 1, 2000, Section 3, page 4. 

This article reports on a pension fund in the Northwest which went bankrupt,
apparently due to mismanagement and possibly theft. It notes that many workers
who had money in this fund were unaware that the defined contribution accounts are
not ensured by the government. As the article notes, it is likely that many workers
across the country are unaware of this fact.

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