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Post Pushes Government Versus Market Fairy Tale, Again Print
Friday, 14 October 2011 06:55

The Washington Post likes to tell readers that politics is not really about interest groups fighting to use the government to advance their ends, but rather reflects a difference in philosophy. It did so again today, telling readers that we can't get a jobs plan because:

"each side’s philosophy holds that the other’s is essentially bunk."

The piece continues:

"For the GOP, the big idea is that government is the main problem.

Republicans have proposed to stop new environmental and financial regulations, and lower corporate taxes. Then, the logic goes, a liberated private sector will pull itself off the mat.

For the Democrats, the idea is that government can be the main solution.

Democrats have also called for increases in government spending on roads and bridges, teachers and firefighters. This money, the logic goes, will spark the private sector to begin hiring workers again."

This is a cute exercise in pushing stereotypes, but now let's step back to reality for a second. The vast majority of the money in President Obama's job plan is in the form of tax cuts, mostly cuts in the payroll tax for workers and employers. How exactly does this fit with "government can be the main solution?"

As far as the Republican side, how many Republicans called for ending federal deposit insurance and other supports for the banking system? Republicans have no problem with all sorts of government regulations (e.g. patent and copyright protection) that impose enormous costs on the economy, but disproportionately benefit the wealthy. Their objection is not to government, their objection is to government doing anything to help the poor and middle class. 

The Post should stick to reporting the news and stop trying to pass off its fairy tales about politics in the United States.

 
WOW! Fracking Added 0.1 Percent to Employment in PA Print
Thursday, 13 October 2011 05:42
That's what NPR told listeners this morning. Although they didn't bother to put the 6,400 new jobs in any context, just reporting that fracking was leading to an employment boom. This piece is a joke, it is the sort of thing that you would expect the industry to run as an ad.
 
NYT Ignores Division Between Bankers and Democracy on Fed Print
Thursday, 13 October 2011 04:59

The NYT ran a piece on the divisions on the Fed over the future course of monetary policy with some members strongly supported more aggressive measures to boost the economy while others expressed concern about inflation. The piece noted that this division was in evidence in the last two votes by the Fed's Open Market Committee, however it failed to point out the fact that it was closely tied to who appointed the members.

All five of the Federal Reserve Board governors, who are appointed by the president and approved by Congress, voted for stronger action. (Three of these governors are Obama appointees, one is a Bush appointee, and Chairman Bernanke was appointed by both.) The five voting regional bank presidents, who are appointed by the banks in their region, split 3 to 2 against stronger action.

The NYT should have called readers attention to this gap in voting patterns. Banks in general tend to be very concerned about inflation, since it erodes their profits, whereas unemployment does not directly affect banks.

The piece also told readers that deflation can be a problem because it, "can cause buyers to delay purchases, derailing the economy." Actually, the likely rates of deflation that the economy might experience would have little effect in along these lines. For example, if prices were falling by 0.5 percent a year, this would mean that a person buying a $20,000 car could save $100 by waiting a year. This is unlikely to have much impact on their behavior.

The real problem is that inflation is lower than is desired. The drop from an inflation rate of 0.5 percent to a deflation rate of 0.5 percent creates no greater problem that the drop in the inflation rate from 1.5 percent to 0.5 percent. There is nothing magical about falling prices.

 
Covering Up Protectionism Print
Thursday, 13 October 2011 04:21

The NYT went overboard in covering up the protectionism in the trade pacts approved by Congress yesterday. All three deals substantially increase protectionism in the form of patent and copyright protection. The former will likely increase the price of drugs in the countries partnering with the United States. The distortions created by these protections will reduce real wages and lower output.

For this reason, it is wrong to call these pacts "free trade" agreements, as the NYT did four times in a short piece. It is also inaccurate to say as the NYT does:

"Economists generally predict that free trade agreements, which eliminate tariffs and other policies aimed at protecting domestic manufacturers, benefit all participating nations by creating a larger common market, increasing sales and reducing prices."

This does not follow when protectionist barriers raise the price of a substantial group of products.

[The Post committed the same sin.]

 
Can't the Post Get Democratic Officials to Speak on the Record? Print
Wednesday, 12 October 2011 05:23
A Post article on the failure of the Senate to approve President Obama's job bill included quotes or cites from "a senior White House official" and "a senior Senate Democratic aide." It is difficult to see any reason that the statements in the piece should have been printed without attribution. If the sources were not willing to go on record, then their comments or insights should not have been presented to readers.
 
Imports Cost Jobs: Tell Marketplace Radio Print
Wednesday, 12 October 2011 04:54

Marketplace radio did a short segment this morning in which it cited estimates of job gains associated with increased exports from the Korean trade pact. Jobs are generated by net exports, which is equal to exports minus imports. While the trade deal will surely increase exports to Korea, it will also increase imports from Korea. If past agreements are any precedent, the increase in imports will exceed the increase in exports meaning that in the short-term the agreement would be a job loser. (In the longer term trade is about increasing efficiency, not jobs.)

Just reporting the jobs created by exports is incredibly irresponsible. It is like reporting one side of a football score, it tells listeners nothing. Marketplace's reporters and editors should know this.

 
The NYT Should Have Corrected Perry: The Government Did Cut Spending Under Clinton Print
Wednesday, 12 October 2011 04:48
During the Republican debate last night, Texas Governor Rick Perry said that he opposed budget compromises that involved both tax increases and spending cuts because the people, "never see a cut in spending." Actually, President Clinton had large cuts in both domestic and military spending. If the public did not see it then it is the result of poor reporting and the efforts of politicians to conceal these cuts. This should have been noted in this article.
 
Newt Gingrich Wants to Force Taxpayers to Pay for Useless Medical Procedures Print
Wednesday, 12 October 2011 04:31

The NYT had a short piece commenting on and correcting some of the statements made by the Republican presidential nominees in last night's debate. One of the items was a complaint by Newt Gingrich that a government task force had recommended that Medicare and private insurers stop paying for routine prostate cancer tests, where there is no reason to believe that a patient has cancer. The piece notes that, contrary to Gingrich's claims, the task force was comprised of medical professionals and made its recommendation based on evidence that testing often led to pointless procedures and did not reduce the risk of cancer.

It would have been worth adding that nothing that this task force recommended would have done anything to prevent people from paying for tests out of their own pockets, if they felt the tests were worthwhile. This is also relevant in the context of Gingrich's endorsement of Sarah Palin's charge that Obamacare would set up death panels, since there are some medical procedures that are considered of little medical value that Medicare may not pay for.

In no circumstance would anything being proposed or considered by the Obama administration prevent any patient from getting any care that they were prepared to pay for out of their own pocket. This means that if Gingrich and Palin are troubled by the administration's actions, then it is because they want taxpayers to be forced to pay for medical care that experts consider wasteful.

 
If the Volcker Rule Forces Other Countries to Subsidize Their Banks, Why Should We Care? Print
Tuesday, 11 October 2011 07:47

An NYT piece on the Volcker rule raised the possibility that if the rules are too tight then some trading may go overseas. It would have been worth reminding readers that rule would only limit the activity of banks that hold government insured deposits. Independent investment banks, which do not have government insured deposits, would be entirely free to do whatever trading activity they liked. 

If the rules are drawn in a way that are too restrictive then we would expect that trading activity would migrate from banks that hold insured deposits to financial institutions that do not and therefore are not subject to the restrictions. If instead the trading goes to countries where banks are allowed effectively to gamble with money from government insured deposits this would imply that foreign governments are subsidizing their banks.

As every trade economist knows, if other countries want to subsidize an industry it is best for the United States to take advantage of this subsidy and shift resources to sectors where they can be more productivity employed. The fact that foreign governments want to be foolish and create large risks for taxpayers by subsidizing banks (e.g. Iceland) is not an argument for the U.S. government to be equally foolish.

 
The Oil Industry Gets Its Jobs Numbers the Old-Fashioned Way: It Makes Them Up Print
Tuesday, 11 October 2011 07:14

The is the gist of a front page Washington Post article on the jobs numbers that are frequently cited by the oil industry, as well other industries, to justify changes in regulatory policy. This piece is very useful for pointing out that the job numbers that industry uses to push industry policies are often very flimsy.

In fact, in many cases the numbers are even worse than this article implies, since in many cases policies promising big job gains may have no discernible effect on employment whatsoever. Still, this is a very useful piece. Hopefully, Post reporters and others will be more cautious about simply passing along industry job claims in the future without seeking out an independent assessment.

 
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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.

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