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Will Legarde Do Anything About the IMF's Bloated Pensions? Print
Wednesday, 29 June 2011 04:54

Just asking, and asking why no one in the media is asking. The Washington Post, NYT and other major news outlets have been running wild yelling about excessive public sector pensions. The median pension for a public sector worker is a bit over $20,000. In many cases this is their sole retirement income, since they are not covered by Social Security. The pensions of public sector employees has been the topic of numerous front page stories in major newspapers.

This is why it is striking that no one raised this question with the announcement that Christine Lagarde had been selected as the new director of the IMF. IMF economists are often able to retire with 6-figure salaries in their early 50s. This is likely to strike many people as unfair by itself, however it would seem especially inappropriate in an institution that has explicitly called for governments to raise the age of eligibility for much smaller pensions to 65 or even 67. 

And the strangest part of it all is that no one in media is even talking about it.

 
The Washington Post Thinks That Congress is Made Up of Philosophers Print
Tuesday, 28 June 2011 05:11

A Washington Post article on the budget negotiations told readers that the battle over the budget:

"has set off an ideological battle across the Capitol."

It is not clear why anyone would think that members of Congress care about ideology. These are politicians who hold their jobs based on their ability to appeal to powerful interest groups, not their ability to espouse political philosophy. It is reasonable to assume that their stances on the budget involve appeals to these interest groups, some of whom are anxious to avoid higher taxes and some of whom value the government programs that could be cut. There is no reason to assume that ideology has anything to do with this dispute.

 
Meaningless California Budget Numbers Print
Tuesday, 28 June 2011 04:50

The NYT told its readers nothing when it said that California is using an optimistic revenue assumption of an additional $4 billion in revenue next year in order to balance its budget. It is unlikely that even 1 percent of NYT readers have any idea of how large California's budget is. There is no way to assess the importance of the revenue assumptions or spending cuts discussed in this article without knowing how large the total budget is.

California spends roughly $130 billion a year, so assuming a $4 billion rise in revenue, this would be an increase approximately equal to 3 percent of the budget [corrected -- thanks GP].

One of the major reasons that the public is so ill-informed about the budget (at all levels of government) is that reporters routinely report budget numbers without any context. Since almost no one knows how big the total budget is, they don't realize that many of the items drawing attention from politicians or the media are irrelevant for all practical purposes.

For example, the $1 million Woodstock museum that Senator McCain made a major prop of his 2008 presidential campaign cost 0.00003 percent of the federal budget. If the media had made a point of putting this cost in the context of all federal spending, it is likely that Mr. McCain would have been forced to find a more substantial item in the budget to make an argument about government waste.

 
New Prostate Cancer Drugs are Expensive Because of Government-Granted Patent Monopolies Print
Tuesday, 28 June 2011 04:41
That point would have been worth making in an article about new drugs approved by the Food and Drug Administration for treating prostrate cancer. According to the article, these drug costs can cost up to $8,000 a month. If the drugs were sold in a free market without patent protection, they would almost certainly sell for less than $100 a month. It would have been worth noting this cost of the patent system for financing prescription drug research.
 
Why Is It Relevant That EPI Gets Money from Teacher Unions, But It's Not Relevant That Erskine Bowles Gets $350,000 a Year from Morgan Stanley? Print
Tuesday, 28 June 2011 04:15

The NYT has a piece this morning on the teacher evaluation policy used in the Washington, DC schools. The end of the piece includes a quote from Mark Simon who works on education issues with the Economic Policy Institute (my former employer). In identifying the Economic Policy Institute (EPI), the NYT added the comment:

"which receives teachers’ union financing."

While it is arguably relevant that EPI gets teacher union funding in this context, it is unusual for the NYT to present the sources of financing for individuals or organizations who get large amounts of money from the corporate sector.

The most obvious example of this difference in policies is Erskine Bowles, one of the co-chairs of President Obama's deficit commission. Mr. Bowles receives $350,000 a year as a director of Morgan Stanley. It is worth noting that the Bowles-Simpson report did not include a financial speculation tax or any other tax on the financial sector, making Wall Street one of the few industries to escape unscathed. This is especially striking since there has been a major push by many in Washington and around the world for a financial speculation tax and even the International Monetary Fund has called for a substantial increase in taxes on the financial sector.

In the same vein, the NYT printed a blogpost by Laura Tyson, another Morgan Stanley director, arguing against taking any steps to lower the value of the dollar against the Chinese yuan. Morgan Stanley has substantial interests in China. The NYT did not identify Ms. Tyson's ties to Morgan Stanley in this piece.

 
Why Is It So Hard to Understand that the Fiscal Commission Never Issued a Report Print
Monday, 27 June 2011 20:38

The rules under which President Obama's fiscal commission were formed are very clear. They required that any report must be approved by a vote of 14 of the 18 members. The rules also required that the vote take place by December 1, the date that the commission went out of existence.

As it turned out, there was no plan approved by 14 of the 18 commissioners. Nor was there a formal vote taken by the members of the commission before December 1, although 11 of the 18 members did indicate support for a plan from the co-chairs Erskine Bowles and Alan Simpson on December 2, the day after the commission went out of existence.

This means that there is no commission report. We can assume that when reporters at the Hill or other publications refer to the Bowles-Simpson report as the commission's report that they are telling us that they like the report. However they are not conveying information accurately to readers.

 
NPR Missed the Recession Print
Monday, 27 June 2011 05:13

In a segment of Morning Edition where Scott Horsley discussed the budget negotiations, he told listeners that we face a large debt because Congress likes to spend money. This is like saying that firefighters spray water on buildings because they like to spray water from hoses.

The proximate cause of the large budget deficit, as every budget analyst knows, is the economic downturn caused by the collapse of the housing bubble. If Congress opted not to spend money, then the economy would have sunk further and the unemployment rate would be considerably higher today. 

There are many people who make up stories about out of control government spending. This is not true and NPR's reporters should know this fact.

 
The Washington Post Still Has Not Heard About the Housing Bubble Print
Monday, 27 June 2011 04:53

A Post article on the possible effects of lowering of the loan limit for Fannie and Freddie backed mortgages said this could hurt the "faltering" housing market, pushing prices down further. Of course the current price decline is simply the deflation of a bubble. Nationwide prices still have to fall by around 10 percent to return to their trend level.

The piece is also somewhat confused on the effect that lowering the limit would have. It tells readers that:

"The loan limit [the new limit of $625,500]— down from $729,750 — would have affected about 40 percent of mortgages made in Great Falls if it were in place last year and more than 20 percent of the loans made in expensive areas such as Bethesda, McLean, Chevy Chase, Dunn Loring, Potomac, Fairfax Station and Upper Northwest Washington, according to a Washington Post analysis of data from LPS Applied Analytics."

Many homebuyers would take advantage of the opportunity to borrow up to the limit when buying a new house because they can get a low interest rate. If the limit were lowered, many of these upper income homebuyers would simply arrange to put up a larger downpayment. In other words, the limit is likely a major factor determining the size of the mortgage.

 
NYT Does Its Homework on Shale Gas [corrected] Print
Monday, 27 June 2011 04:24

The NYT has an excellent piece today presenting evidence that the Energy Information Agency has been presenting an overly optimistic picture of potential shale oil reserves as a result of relying on industry claims instead of independent analysis.

It also has a piece on an rule change by the Securities and Exchange Commission that allowed gas companies to claim much larger reserves. Yesterday it ran a piece suggesting (based on internal e-mails and discussions with company insiders) that these companies were inflating their reserves in press releases and other company documents.

This is what newspapers are supposed to do.

 
Doctors Say, Just Give Us Government Money and Stop Asking Questions Print
Sunday, 26 June 2011 21:18

The NYT tells us that doctors are really upset that the government is trying to find out how easy it is for patients to get access to their services. The article interviews several doctors who expressed anger that the government plans to have testers call for appointments without identifying themselves as testers. The purpose is to determine how difficult it is for people with various types of insurance (e.g. Medicare and Medicaid) to get appointments.

This is a standard practice for researchers. In fact, it would be outrageous if the government were spending close to $1 trillion a year on various health insurance programs without knowing how effective they were in providing care.

While the NYT did interview some people connected with the government testing program, it should have interviewed some independent experts who could have reaped ridicule on the doctors. Of course no one forces the doctors to practice medicine in the United States. If they find the government too intrusive, as several complained, then they have the option to work in Canada, the United Kingdom or any other wealthy country and earn about half as much.

 
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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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