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President Clinton, Who Set the Bubble Economy In Motion, Is Giving Economic Advice Print
Friday, 23 September 2011 05:08

The NYT told readers that former President Bill Clinton is planning to write a book giving the country advice on how to improve the economy. At one point the article cites the material from the publisher:

"In the book, according to a statement from Knopf, Mr. Clinton says that the United States has lost its commitment to fiscal responsibility, shared prosperity and balanced growth."

Remarkably, the article does not point out that President Clinton endorsed the high dollar policy that led to the large trade deficits of the last decade. This trade deficit created the gap in demand that was filled by the demand generated by the housing bubble.

This is like the captain of the Titanic giving lectures on safe ocean travel. [Here is a brief discussion of national income accounting for those who need to be reminded why Clinton's high dollar policy set the economy on a course for disaster.]

 
The NYT Is Wrong, China Can Save the World Print
Friday, 23 September 2011 04:49

The NYT ran a Reuters column in its business section that told readers that China lacked the ability to support the world economy. The piece essentially argued that China will act in its own interest, not the interest of floundering economies in the United States and Europe.

This piece ignores the actions that China is already taking. China's government has bought more than $1 trillion in U.S. government debt to keep up the value of the dollar, in order to sustain its export markets in the United States.It is virtually certain to lose money on these bonds because the dollar will inevitably fall when China stops buying up vast amounts of dollar assets.

This means that China already spends huge amounts of money to sustain its export markets. Switching to purchases of euro zone debt or guarantees of this debt would simply mean redistributing some of the money that China spends to support its export markets, it would not be a change of policy.

On a per dollar basis, China's purchases and guarantees of euro zone debt would almost certainly have far more impact on sustaining its exports than the marginal purchase of U.S. government debt. A collapse of the euro would almost certainly lead to a double-dip recession not only in Europe, but also the United States. This means that if China were to continue its policy of using its currency purchases to support its exports, it should be shifting from supporting dollar to supporting the euro.

 
They Are Trade Pacts, not "Free-Trade" Pacts Print
Friday, 23 September 2011 04:43

The NYT referred to the trade agreements negotiated with South Korea, Panama, and Colombia as "free-trade" agreements. This is inaccurate. They increase many forms of protectionism, most importantly by increasing the extent of patent and copyright protection in U.S. trading partners.

The Obama administration and Congress are strongly opposed to free trade in intellectual output. The NYT should not misrepresent their views on such an important economic issue.

 
Can't the NYT Find Someone With a Name to Talk About the World Economy? Print
Friday, 23 September 2011 04:10

In an article on the recent instability in financial markets and the weak world economy, the NYT turned to "a senior World Bank official" for extensive comments about the world economy. The official's comments included no inside information, nor were they qualitatively different from the views expressed by many other economists who would have no problem being on the record.

Many economists have extremely bad track records in assessing the state of the economy, including many officials at the World Bank. For this reason it would be helpful for readers to know the names of the economists whose views are being presented so they know the credibility that should be attached to them.

 
Disaster Relief Accounts for 0.1 Percent of the Budget Print
Thursday, 22 September 2011 04:57
The Post reported that most House Democrats opposed a continuing resolution to keep the government running because it included cuts of $1.5 billion to partially offset an appropriation of $3.65 billion for disaster relief. It would have been worth telling readers that $3.65 billion is approximately 0.1 percent of the budget, whereas the $1.5 billion in cuts is equal to 0.04 percent of spending. Many readers would not know how large these sums are in total federal spending or relative to the deficit.
 
The NYT Has Not Heard About Work Sharing in Germany Print
Thursday, 22 September 2011 04:47

The NYT noted that Germany's unemployment rate is just 6.2 percent and told readers:

"One reason is a series of policies that loosened job protections and put more pressure on unemployed people to find work."

That might be one reason, although most research shows that these measures have a limited impact on unemployment. The more obvious explanation for Germany's low unemployment rate is its policy of work sharing. This policy encourages firms to reduce work hours rather than lay off workers. The result has been that Germany has met its reduced demand for labor primarily by shortening work hours.

The context for this comment was an assertion that Greece will have to take comparable measures to force people to find work. The prospect of work sharing in Greece and other countries facing demands for austerity might look like an attractive alternative to maintain employment during the downturn.

 
It Was Not Just Random Fed Members Who Opposed Boosting the Economy Print
Thursday, 22 September 2011 04:19

A segment on Morning Edition noted that 3 members of the Fed's Open Market Committee (FOMC) opposed the plan to shift from shorter term debt to holding longer term bonds in an effort to drive down interest rates. It would have been worth mentioning that all 3 of the no votes came from the district bank presidents. The bank presidents are essentially appointed by the banks in the district.

The 5 bank presidents who are voting members of the FOMC split 3-2 against this measure. By contrast, the 5 Fed governors who were appointed through the political process (by both Presidents Bush and Obama) voted 5-0 in support further action.

This is a striking split between the FOMC members who essentially represent banks and the members who were appointed by democratically elected officials. It would have been worth mentioning this fact in this story. (The NYT and the Post committed the same sin.)

 
Tax Increases and Spending Cuts in Italy Will Slow Growth, Not Speed It Up Print
Wednesday, 21 September 2011 05:08

In an article discussing debt problems of euro zone countries the NYT told readers that a statement issued by the Italian government yesterday:

"said the government was preparing steps to lift growth and recently passed measures to control public finances through tax increases and spending cuts."

It would have been appropriate to remind readers that spending cuts and tax increases slow growth by pulling money out of the economy. It is likely that whatever steps the Italian government might prepare to boost growth will be more than offset by the impact of its austerity package.

 
NYT Gets Taxing the Rich Story Right Print
Wednesday, 21 September 2011 04:43

President Obama made a simple and true statement in his speech on the budget Monday. He said that there were millionaires and billionaires who pay tax at a lower rate than middle income families.

Many news outlets went to town to point out that on average millionaires and billionaires pay tax at a higher rate than middle income families. Of course this is not what Obama said. He was pointing out that some of the richest people in the country (Warren Buffet was his model), get most or all of their income as capital gains and therefore only pay taxes at the 15 percent capital gains rate.

The NYT gets this right today. Other outlets could have saved a lot of trees and better served their readers if they didn't work so hard trying to refute something that President Obama did not say.

 
The Post Turns Battle Over Money Into Philosophy Print
Wednesday, 21 September 2011 04:07

The major battle line in Washington budget debates is between those who want to cut Social Security and Medicare, the social insurance programs that the vast majority of low and middle income people depend upon, and those who believe that the wealthy should pay more to support the government. Since government policies have led to an enormous upward redistribution of income over the last three decades, the latter group would seem to have a good case.

While this seems a rather straightforward battle over money, in a front page story the Washington Post told readers that this battle is actually about, "contrasting visions of the American idea." There is nothing obvious in this debate about "visions." The debate is being conducted by politicians, not political philosophers.

It is certainly understandable that the wealthy and their allies would try to turn this debate into a battle over visions, since they are hugely outnumbered by the people who stand to lose if their agenda is followed. However, most immediately this is a battle over money. Real newspapers would call it that way and not try to distract their readers' from the issues in front of their face. 

 
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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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