CEPR - Center for Economic and Policy Research


En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press

Beat the Press

 facebook_logo  Subscribe by E-mail  

Ben Bernanke Did Not Save Us from a Second Great Depression Print
Tuesday, 13 December 2011 06:15

The Wall Street Journal felt the need to tell readers that Bernanke's action to provide liquidity to the banking system:

"may have prevented a repeat of the Great Depression."

This is not true. We know how to reinflate an economy after a collapse. It just requires massive amounts of government spending, as happened during World War II. The first Great Depression was not caused just by the failure to counter the initial financial crisis effectively. It was attributable to an inadequate policy response over theh following decade.

The piece also tells readers that Bernanke is worried that businesses are not investing because of concerns about future deficits. He would not have this fear if he looked at the data. Measured as a share of GDP business investment is almost back to its pre-recession level. This is very impressive since we would ordinarily expect that large amounts of excess capacity in many sectors would be depressing investment.

Mark Zandi and the NYT Hugely Underestimate the Number of Vacant Homes Print
Tuesday, 13 December 2011 05:58

The NYT cited Mark Zandi as saying the number of vacant homes is roughly 1 million, which he puts as equal to the gap in household formation that resulted from the recession. According to the Commerce Department, if the vacancy rate was back at its pre-bubble level, there would be 3 million fewer vacant units.

Addendum: Calculated Risk argues that Zandi's vacancy number is closer to the mark than the Census number. The core of the argument is that the rate of housing destruction should be much higher than implied by the Census data, based on construction data and the change in the stock of housing.

What I think he is missing is that the construction data only include homes built from scratch. During the bubble years there were a lot of dilapidated structures that were renovated and turned into usable housing units. You also had some commercial and industrial properties that were converted into residential units. These units would not be picked up in the new construction data. The units in these categories could easily fill the gap that CR identifies between a reasonable rate of housing destruction and the numbers implied by calculating the change in the housing stock and subtracting new construction.

How Does the NYT Know That Prohibiting Millionaires from Getting Food Stamps Is Part of a Desire to Make the Rich Pay More? Print
Tuesday, 13 December 2011 05:39

The NYT told readers that the Republican proposal to prohibit people with income of more than $1 million a year from receiving food stamps and unemployment insurance:

"demonstrates an increasing desire among members of Congress to find some way to make sure that the wealthiest Americans contribute more to reducing the deficit and paying for middle-class tax relief."

As the piece notes, it is almost impossible to find any millionaire who received food stamps. The article reports that millionaires received a total of $20.8 million in benefits in 2009. This is less than 0.0007 percent of the budget and less than 0.02 percent of the cost of maintaining the Social Security payroll tax cut for another year. It ir roughly equivalent to an increase of 0.01 percent on the income of the richest one percent.

It is far from obvious that the purpose of a proposal that would have almost no impact on the overwhelming majority of rich people is in fact motivated by a desire to "make sure that the wealthiest Americans contribute more to reducing the deficit and paying for middle-class tax relief." In fact, if anyone looks at the numbers, one could get the opposite impression since these proposals are being presented as alternatives to proposals to have a surtax on the income of the richest one percent. Such taxes would be a much greater expense to the richest one percent.

The Republican proposal also has the advantage of undermining the universal character of a program like unemployment benefits, for which the rich made contributions just like everyone else. This could be a first step in means-testing the program, which could then make it into an anti-poverty program rather than an insurance program.

Denying unemployment benefits to millionaires can be seen as comparable to denying the charitable tax deduction to millionaires. They certainly do not need it, but they have as much right to a deduction for charity as anyone else. 

Companies that Offer Jobs at Below the Market Wage Can't Find Workers Print
Tuesday, 13 December 2011 05:15

That is what NPR told listeners in a story about AAR Corp on Morning Edition. It told listeners that AAR, which hires mechanics to maintain planes, has had great difficulty attracting workers. According to the piece, its starting wages are between $12-15 an hour ($24,000-$30,000 a year), with wages topping out at $28 an hour ($56,000 a year). It didn't give any information about benefits.

The piece indicated that these are jobs that require a fair amount of skill and involve a considerable degree of responsibility on the workers' part. The piece also noted that competitors often pay $5-$10 more an hour.

In other words, AAR is effectively offering to pay doctors $40 an hour ($80,000 a year) and finding few takers. It is not clear whether this should be taken as evidence of a shortage of doctors.

The NYT Does He Said She Said on the Shape of the Earth and Income Inequality Print
Monday, 12 December 2011 22:32

The NYT doesn't know it, but the income of the rich rises and falls with the stock market because [top secret: they own lots of stock.] Sorry, but this piece on the decline in the relative income share of the top 1 percent is beyond silly. We know the income of those at the top drops in relative terms every time the market takes a dip.

Of course the stock market took a plunge in 2009, therefore we knew, even before we got the data, that their share of total income would fall. This is why it is very silly for the NYT to be interviewing people about whether there is now a reversal of the upward redistribution of income over the last three decades.

As they say in some parts, it's the stock market stupid. Don't waste readers time pretending it is anything else.

[Addendum: Larry Mishel picked up on this point and graphed capital gains income for the top 1 percent against the S&P 500.]

Robert Samuelson Does Some Serious Fed Apologetics Print
Monday, 12 December 2011 05:52

The Federal Reserve Board is a perverse animal. While ostensibly a public institution, the banking industry has the extraordinary privilege of being able to pick 5 of the 12 members of its most important governing body, the Open Market Committee (FOMC). The banks also get to have 7 other representatives sit in on the FOMC's secret meetings. Given this structure, it is not surprising that people who do not believe that the banks necessarily place the interest of the general public first are suspicious of the Fed.

Robert Samuelson is nonetheless outraged that anyone could question the neutrality of this institution. He attacks a piece by Bloomberg News that called attention to the Fed's secret lending during the financial crisis as "slander." Samuelson argues that the loans were not secret, the Fed disclosed the amounts being lent under the programs, just not the identities of the borrowers. He argues that it was necessary not to disclose the identity of the borrowers in order to avoid the risk of creating runs on troubled borrowers.

Samuelson neglected to mention that the Fed refused to release the identities of the institutions receiving the loans available even after the fact. The names of these institutions were only made public as a result of a bill sponsored by Ron Paul and Alan Grayson for auditing the Fed. A version of this legislation was eventually included as an amendment to the Dodd-Frank bill. A successful lawsuit by Bloomberg also led to the release of additional data on Fed loans. In other words, the Fed tried very hard to keep the identity of its borrowers secret even long after the release of the identity of borrowers could have had any impact on their financial situation.

The point of the Bloomberg analysis in question is that making money available to banks during a liquidity crisis involves a substantial subsidy. The banks that have access to the Fed's lending are advantaged over institutions that do not have access. This allows them to profit off public money when they lend it out. 

It may be desirable to allow this profit in the context of a financial crisis, since it would be harmful to the economy to see a financial collapse, but there is no reason that the public should not expect some quid pro quo in exchange for the profits it gave to the banks. The Bloomberg analysis is intended to give the public an estimate of the size of the subsidy it gave to the banks, and in particular the nation's largest banks, through the Fed's lending windows. It was an extremely valuable public service. 


The Washington Post Tells Readers that a Climate Deal with no Binding Caps is Catching Up With Reality Print
Monday, 12 December 2011 05:43

That's right, if you thought there was some urgency to do something about climate change the Post is now telling you the opposite. It told readers that the agreement that came out of the Durban talks, which includes no binding commitments:

"shows that the byzantine negotiations which have steered global policymaking on climate for two decades are now catching up with reality."

The agreement does propose a plan that will eventually impose limits on emissions by fast growing developing countries, most importantly India and China, however these restrictions are not included in this agreement.

Also, there is no clear commitment that rich countries would pay poorer countries for the cost of restricting their emissions. This would almost certainly be a part of any reality based agreement since the rich countries are asking poor countries to incur large costs to address a problem created by the rich countries.

President Obama Wants Credit for Avoiding a Great Depression: Where Is the Ridicule? Print
Monday, 12 December 2011 05:32

In its top of the hour news segment NPR reported that President Obama hoped that voters would give him credit for avoiding a second Great Depression. If this is an accurate representation of what President Obama said then it should have devoted a segment to economists ridiculing the president for trying to set an unbelievably low bar for measuring the success of his economic policy.

The first Great Depression was the result of a decade of inadequate policy responses. The massive spending associated with World War II that eventually got us out of the Great Depression could have been undertaken a decade sooner, if there had been political will.

There was nothing about the financial crisis at the beginning of President Obama's term that could have condemned the country to decade of double-digit unemployment. This only could have happened if Congress failed to respond adequately to a financial collapse.

Budget Numbers Without Meaning Print
Monday, 12 December 2011 05:15

It is unlikely that many NYT had any idea of the meaning of the numbers in an article on various budget issues, such as adjusting the Alternative Minimum Tax for inflation and increasing doctors' payment under Medicare. None of them are put in any context, for example expressing them as a share of the budget. In many cases, it is not even clear how many years spending would be affected by the measure.

This is a classic Washington fraternity type piece. The article reports on these numbers in a way that satisfies the standards of the Washington fraternity of budget wonks, but means almost nothing to anyone outside this tiny group. Even the well-educated readers of the NYT are likely to gain no information from reading this piece.

Is Associated Press Working for the Fracking Industry? Print
Sunday, 11 December 2011 12:40

That's what millions of readers are asking after seeing a piece that asserted:

"The vast Marcellus and Utica shale formations are already paying off in thousands of wells in Pennsylvania and West Virginia, bringing great wealth to landowners and jobs throughout the region."

Actually, the industry has created relatively few jobs in Pennsylvania and many of the jobs that it has created have gone to out-of-staters, providing little benefit to the people in the regions where fracking is taking place. News stories should not include unsourced assertions like this one in the AP piece. The article should have sourced the claim and made an effort to evaluate its accuracy if it came from someone with ties to the industry.

<< Start < Prev 251 252 253 254 255 256 257 258 259 260 Next > End >>

Page 259 of 422

Support this blog, donate
Combined Federal Campaign #79613

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.