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It is a Fact that Charter Schools Don't on Average Improve Performance, Not Just Something that the Teachers' Union President Says Print
Tuesday, 20 March 2012 07:02

The NYT had a bad case of he said/she said reporting this morning in an article that reported on a panel's recommendations for improving the nation's education system. The article noted the panel's recommendation for increased the choice of schools available for parents to select among. It then cited comments from Randi Weingarten, the President of the American Federation of Teachers, saying:

"school choice options like vouchers and charters, which use public funds but are run by a third party, have not proved to be sustainable or to improve schools."

This is not just something that Ms. Weingarten says, it also happens to be true. Extensive research has found that the vast majority of charter schools do not result in better performance by standardized test measures than the public schools, and a substantial portion do markedly worse.

The NYT should have pointed out that Ms. Weingarten's assertion was true and not left it to readers to try to decide between competing claims. The NYT's reporters have the time to investigate these claims, its readers do not.

More Mind Reading at the Post Print
Tuesday, 20 March 2012 05:23

The Washington Post is quickly becoming an employment service for psychics. An article on the Republicans' latest budget and tax proposals, which will reduce tax rates on corporations and the wealthy, tells readers that Republicans believe that their plan "will spur economic growth and provide them with a politically potent election-year message."

Reporters know that politicians do not always say what they believe. This is why real newspapers only report what politicians say. Only psychics would try to tell people what politicians actually think.

This piece also wrongly implies that reducing the number of tax brackets from 6 to 2, as the Republicans propose, is connected to tax simplification. It isn't. To calculate one's taxes, it is necessary to go to the tax tables and see what you owe given your income level. This is the same process regardless of whether there are 2 tax rates or 200 hundred. (Thanks to Robert Salzberg for calling this one to my attention.)

The Value of the Dollar and Manufacturing: Does the Post Know Any Experts Familiar With Arithmetic? Print
Tuesday, 20 March 2012 04:45

Readers of the front page WAPO piece on manufacturing productivity will assume that neither the Post nor any of the economic experts it consults have heard of arithmetic. The piece points to research showing that manufacturing productivity has been overstated. While it is good to see that the Post has finally noticed research that many of us have talked about for years, the Post grossly misrepresents the issues concerning manufacturing productivity and employment.

The Post presents the question as being one of whether higher productivity or increased imports are responsible for job loss in manufacturing. Those familiar with arithmetic know that the answer is that both are responsible.

Arithmetic tells us this because we know that our net imports of manufactured goods are equal to almost one-third of the manufactured goods we consume. If we produced these goods in the United States then manufacturing employment would rise by close to 40 percent.

On the other hand, the increase in the efficiency of manufacturing production has also affected the demand for labor in the sector. If productivity had not improved then more people would be employed producing the same amount of manufactured goods. While we would have lost some output due to import competition if productivity had not improved, there are sectors of manufacturing that are still subject to limited import competition. In these sectors higher productivity translates fairly directly into fewer jobs. 

Insofar as productivity growth has been exaggerated due to a failure to accurately measure imports, as the research cited in this piece shows, it means that a larger portion of job loss has been due to imports and a smaller portion is attributable to productivity growth. However, it doesn't change the fact that manufacturing productivity growth has still been strong and that both have been important factors explaining job loss.

Remarkably, this piece never once mentions the value of the dollar. The dollar directly affects the competitiveness of U.S. manufactured goods. A 10 percent fall in the real value of the dollar relative to the currencies of our trading partners has the same impact on competitiveness as a sudden surge of 10 percent in labor productivity.

As a historical matter, the United States went from adding jobs in manufacturing to losing jobs when the dollar surged following the East Asian financial crisis in 1997. The decline accelerated as the dollar continued to rise through the end of the 90s.

It is bizarre that a major piece on manufacturing employment would never mention the value of the dollar. This would be like reporting on patterns of gasoline consumption without ever talking about the price.

Healthcare Costs and Household Income: Median versus Average Print
Monday, 19 March 2012 07:01

The Post's Wonkblog had an interesting post about a new study showing that the cost of health insurance for a typical family will be equal to the median family income by 2037, if current trends continue. Unfortunately, the post inaccurately reported that the comparison was with average family income.

Given the growth of inequality in the last three decades this makes a big difference. According to the Census Bureau, median household income in 2010 was 49,445, whereas average income was $67,530. Perhaps more importantly, average income by definition grows in step with the economy whereas median income has been growing slowly as a result of upward redistribution. (The confusion actually is in a chart in the original paper, so Wonkblog can be forgiven for not catching it.)

The story is still an important one, if not quite as dramatic as reported. The vast majority of people in the United States will soon be unable to afford health care if nothing is done to contain costs. This is the second most predictable crisis in history, after the housing bubble, and almost no one is talking about it.

My favorite solution is to take advantage of trade -- every other health care system in the world is more efficient than ours. Unfortunately, the political debate in the United States is dominated by Neanderthal protectionists, at least when it comes to trade measures that could lower the income of doctors and other powerful special interest groups.



What's This "We " Jazz, White Man? Robert Samuelson Edition Print
Monday, 19 March 2012 04:59

Robert Samuelson uses his column today to complain that:

"Four years after the onset of the financial crisis — in March 2008 Bear Stearns was rescued from failure — we still lack a clear understanding of the underlying causes."

Wow, it sure doesn't seem very hard to me. The Reagan-Volcker policies of the early 80s broke the link between productivity growth and wage growth for ordinary workers. This meant that demand growth did not necessarily keep pace with output potential as had been true earlier in the post-war period, since higher wages would quickly translate into higher consumption. 

That created an environment which opened a door to speculative bubbles. In the 90s it was the stock bubble which drove growth, primarily by pushing saving rates to then record lows. In the last decade it was the housing bubble which drove growth, both by creating a building boom and also by pushing saving rates even lower as bubble-generated home equity led to a consumption boom.

None of this story is new. I was writing about how the stock bubble was driving the economy in the 90s and how the housing bubble was driving the economy as early as 2002. And, I gave the historical picture in Plunder and Blunder: The Rise and Fall of the Bubble Economy.

But, folks like Robert Samuelson would rather pretend that the whole story is a great mystery rather than contemplate the possibility that the economic instability of the last decade had its roots in a pattern of growth that was built on redistributing income from ordinary workers to the most highly paid workers and corporate profits.

Another Exercise in Mind Reading from the Washington Post Print
Sunday, 18 March 2012 08:40

Politicians don't always say what they are thinking. Most of us know this fact. Unfortunately, the folks at the Washington Post don't. In a major front page article on the budget negotiations last summer between President Obama and the Republican leadership the Post told readers:

"Another key caveat: Much of the $800 billion would have to come from overhauling the tax code — not from higher tax rates. The Republicans believed lower rates and a simpler code would generate new revenue by discouraging cheating and spurring economic growth."

The Post actually has no clue what Republicans "believed." It only knows what Republicans say.

Suppose for a moment that Republicans want to lower tax rates for the wealthy because they get large campaign contributions from wealthy people who want to see their tax rates go down. It is unlikely that Republicans would go around telling the public that they want to lower tax rates for the wealthy because wealthy people feel like paying less money in taxes.

They would need some alternative argument that might have appeal beyond the 1-2 percent of the public that benefits from lower tax rates. The claim that lower tax rates on the wealthy will lead to more growth, thereby benefiting everyone, is one such argument.

While it is possible that Republicans actually believe this claim, it is also possible that they are just saying it for political purposes and know it to be false or simply care whether or not it is true. It irresponsible for a newspaper to tell us that politicians' statements actually reflect their view of the world when it has no basis whatsoever for this assertion.

The Washington Post Keeps Up the NAFTA Cheerleading Print
Sunday, 18 March 2012 08:26

Developing countries are supposed to grow more rapidly than rich countries. For example, China has maintained a growth rate of close to 10 percent annually for three decade. India has recently approached this range. Argentina's growth averaged almost 7 percent over the last decade.

By contrast, Mexico's per capita GDP growth has actually trailed that of the United States. This naturally leads the Post to run a front page piece today telling readers that "Mexico's middle class is becoming its majority," a fact which it attributes in part to NAFTA.

Yes, this always happens in slow growing countries. Those who care about data will note that per capita income in Mexico fell from 32.4 percent of per capital income in the United States in 1993, the last pre-NAFTA year, to 31.4 percent in 2011. But hey, why let the data get in the way of a good story? At least the Post didn't try to claim that Mexico's GDP had quadrupled from 1987 to 2007, again.

This NYT front page story on the surge of kidnapping in Mexico provides an interesting contrast.

Post Reports Secret Debt Crisis in France Print
Sunday, 18 March 2012 08:10

Those who have been following the problems of the euro zone indebtedness have no doubt heard about the problems of debt crises in Greece, Ireland, Italy, Portugal, and Spain. But apparently France has also had a debt crisis. At least that is what the Post told readers.

An article that told readers that Europe is already so highly taxed that it can only look to cut spending referred to:

"the colossal French government debt that helped push Europe into a dangerous yearlong financial crisis from which it only now is emerging."

The French government debt is actually not especially large, at around 80 percent of GDP. Furthermore, it was the economic crisis that pushed up French debt from a much more modest 60 percent of GDP. While France did see some increase in interest rates on its debt relative to Germany's, interest rates never approached the levels seen in the crisis countries. 

Much of the problem with French debt stems from the failure of the European Central Bank (ECB) to act as a lender of last resort, which would ensure that interest rates remain low. Also the failure of the ECB to act more aggressively to boost the euro zone economy has slowed growth and raised unemployment in France and across the euro zone. This has also worsened the budget deficit. A serious piece discussing Europe's fiscal situation would have noted these facts.

Does the Washington Post Believe in the Tooth Fairy? Bowles-Simpson Rides Again! Print
Sunday, 18 March 2012 07:47

The Washington Post once again jumped over the line separating the news section from the editorial section and fiction from reality. It ran a tribute to North Dakota Senator Kent Conrad on the front page of the business section.

Conrad, the chair of the Senate Budget Committee and perhaps the biggest deficit hawk in the senate, is retiring at the end of the year. His views on the deficit closely parallel the views of the Post editorial page, hence the tribute.

In praising Conrad the article repeatedly makes reference to the report of the Bowles-Simpson commission. In fact, there was no report of the Bowles-Simpson commission. The report that the article is referring to is the report of the co-chairs of the commission, former Senator Alan Simpson and Morgan Stanley director Erskine Bowles.

In order for a report to have been approved by the commission it would have needed the support of 14 members of the commission. This report only had the support of 11 members. As a result, the chairs never even put the report up for a formal vote.

Since the Post's editorial page is sympathetic to the report of the co-chairs, it apparently feels it is appropriate to misrepresent the report as a report of the commission itself. This has the effect of giving the report greater legitimacy. This is the sort of behavior that has led the Post to be known as "Fox on 15th Street."

Readers of this piece should have been warned. The second sentence refers to Conrad as "a lonely Cassandra." Of course Cassandra was the person who foretold of the disaster that eventually befell Troy.

By contrast, Senator Conrad completely missed the disaster that was made inevitable by the growth of the housing bubble. Instead, he was diverting the public's attention from this imminent crisis with his complaints about budget deficits even at a time when the deficits were relatively modest. 

Charles Murray's White Male Problem Print
Saturday, 17 March 2012 15:29

Charles Murray is back in the Wall Street Journal rejecting the idea that poor economic prospects had anything to do with the fact that so many whites without college degrees dropped out of the labor force. There are a few points that are worth noting about this story. 

First Murray does a bizarre comparison by looking at real wages between 1960 and 2010. This is bizarre because wages rose rapidly through the sixties and into the early seventies, then largely stagnated. (I am using manufacturing workers to pick a typical job held by non-college educated white makes.)


                             Bureau of Labor Statistics.

Note that there is some increase in real wages in the late 90s, the first period of sustained low unemployment since the late 60s. Interestingly, these wage gains coincided with the first period of sustained low unemployment since early 70s. Also, if we look at the graph that Murray has with his article we see that the labor force participation for whites with just a high school degree actually rose slightly in this period, reversing the long-term trend. That might suggest that labor market conditions are a big part of this story.

There are two other points worth considering in this story. First, the share of white males with just a high school degree (i.e. no college or even vocational training) has fallen sharply over this period. In other words, whites with just a high school degree are a smaller and relatively less educated segment of the white work force today than was the case 40 years ago.

The other point is that we might think that relative income means something. In a thirty year period where per capita income more than doubled, we might expect that workers would have at least something to show. The fact that the wages of white males with just high school degrees has barely budged in three decades indicates that their situation has deteriorated seriously in relative terms.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.