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Will the Protectionists Wipe Out Solo Practitioners in Medicine? Print
Saturday, 23 April 2011 07:30
That is the implication of an NYT article on the decline in the number of physicians in independent family practices. The article argues that long hours and uncertain pay make it unattractive for physicians in the United States. This may be true given the extent to which the doctors' lobbies have been able to limit the number of people licensed to practice medicine in the United States. However, there is a huge supply of people in the developing world who would be willing and able to train to U.S. standards and work under the conditions described in the article. If the Obama administration and Congress were not so completely dominated by protectionists, they would be working to eliminate the barriers that are making it more expensive for people in the United States to get health care.
 
Looniness on Domestic Oil Production, Will the Post Print Anything? Print
Friday, 22 April 2011 05:55

The Washington Post printed an oped column from Alaska Senator Lisa Murkowski arguing for increased domestic oil production. The column directly confuses short-term economic weakness with the impact of long-term oil prices.

It cites Harvard professor and former AIG director Martin Feldstein as supporting the claim that "that if prices remain high, economic growth will languish." In fact, the quote from Feldstein explicitly refers to economic growth this year. There is nothing that the government can do that will in any significant way affect the amount of oil that the U.S. produces this year. Therefore, Feldstein's statement is irrelevant to the issue at hand.

As far as the longer term question, higher oil prices would have a modest impact in slowing growth in most economic forecasting models. However even large increases in domestic production would have little impact on world oil prices (the relevant variable) and therefore have little effect on economic growth. A serious newspaper would not have allowed a columnist to make such misleading assertions.

 
Workers Are Never Required to Join Unions Print
Friday, 22 April 2011 05:18

The NYT wrongly told readers that a bill approved by the New Hampshire legislature would, "disallow collective bargaining agreements that require employees to join a labor union." It is already the case that collective bargaining agreements cannot require employees to join a labor union.

Under current New Hampshire law, collective bargaining agreements can require workers to pay representation fees to a union. National labor law requires that a union represent all workers who are in a bargaining unit regardless of whether or not they opt to join the union.

This means that non-members not only get the same wages and benefits as union members, but the union is also required to represent non-members in any conflict with the employer covered by the contract. For example, if a non-member is faced with an improper dismissal the union is obligated to provide them with the same representation as a union member.

The new bill passed by the New Hampshire legislature effectively guarantees non-union members the right to get union representation without paying for it (representation without taxation). It denies workers the freedom of contract that they currently enjoy, which would allow them to require that everyone who benefits from union representation has to share in the cost of union representation.

 
The Post Is Confused About Government Debt and Foreign Debt Print
Friday, 22 April 2011 05:02

Readers of the front page Washington Post article headlined, "the dollar, no longer almighty," no doubt walked away very confused. The article never distinguishes between the government deficit/debt and the trade deficit/foreign debt.

The dollar will likely fall because of the ongoing trade deficit. This is the adjustment mechanism for a trade deficit in the system of floating exchange rates like the one we have in the United States. This has no direct relationship to the budget deficit. If the United States were running its current deficit of around $600 billion a year (@ 4 percent of GDP), it would be expected that the dollar would fall regardless of whether or not the country is running a budget deficit.

The decline in the dollar will benefit workers who are subjected to international competition, most importantly manufacturing workers. The decline in the dollar will reduce U.S. imports by making them more expensive and increase exports by making them cheaper to foreigners. This will increase the demand for manufacturing workers, driving up their wages.

By contrast, workers who are largely protected by regulations against foreign competition, like doctors, lawyers, and other highly educated professionals, will likely lose when the dollar falls. They will have to pay more for manufactured goods and will probably not be able to raise their fees proportionately.

It would have also been useful to remind readers of the basic accounting identity that net foreign borrowing is equal to net national investment. An identity is something that is true by definition -- there is no possible way around it.

This identity means that if the United States has a large trade deficit, as it does now, then it must have either a large budget deficit or very low private savings, or some combination. (In principle, investment can rise, but as practical matter it is very hard to make non-residential investment rise by much as a share of GDP. Residential investment did rise substantially during the housing bubble, but it would be difficult to view this experience as health.)

This identity means that anyone who wants the budget deficit to fall without wanting the dollar to fall, want to see very low private sector savings. This would be a very perverse goal, although many policymakers seem to advocate this position without realizing it.

 
New Unemployment Insurance Claims: Which Way Is Up? Print
Thursday, 21 April 2011 09:18

The headline of the WSJ article on weekly unemployment insurance filings told readers, "jobs data signal progress." The article then went on to tell readers that:

"Initial jobless claims decreased by 13,000 to a seasonally adjusted 403,000 in the week ended April 16."

It's always good to hear that unemployment claims are down from the prior week, except the prior week's number was a jump of 31,000 from the level reported two weeks earlier. This means that the number reported for last week was still 18,000 higher than the the number of claims reported two weeks earlier. In fact, this is the first time that we have seen two consecutive weeks in which claims have exceeded 400,000 since January.

We always need the caveat that weekly jobless claim numbers are erratic, and two weeks does not establish much of a pattern. But it is clear that the news in this report suggests that the economy is going in the wrong direction, except to the WSJ.

 
The Washington Post's Economic Experts Expect House Price Decline to Stop Quickly Print
Thursday, 21 April 2011 05:08

House prices have been declining at the rate of 1 percent a month for the last four months. This is why it was somewhat surprising to see Paul Dales, a senior economist at Capital Economics, quoted in the Post as saying that house prices would decline by about 5 percent this year. That would imply a sharp slowing in the rate of price decline in the months ahead.

The Post gained notoriety during the run-up of the housing bubble for relying on David Lereah, the chief economist for the National Association of Realtors, as its main and often exclusive source on the housing market. Mr. Lereah was also the author of the book, Why the Real Estate Boom Will Not Bust and How You Can Profit from It.

 
The NYT Reports on Paul Ryan's Presidential Ambitions and Flat Earthers' Plan for Astronomy Department Print
Thursday, 21 April 2011 04:33

The NYT somehow thinks that it's good journalism not to point out that people who say that the earth is flat are wrong. How else can one explain the fact that it reports on Representative Paul Ryan's presidential ambitions (or lack thereof) and notes in passing that he has different views on how to constrain health care costs and promote growth than President Obama.

Representative Ryan's views on both topics have been tested and shown to be wrong. The government run Medicare program is far more effective in constraining costs than the private sector. This is why the Congressional Budget Office (CBO) projects that adopting Representative Ryan's plan would add $30 trillion to the cost of buying Medicare equivalent plans over Medicare's 75-year planning horizon.

This is not the sum transferred from the government to beneficiaries. It is the increase in total costs -- waste to the government, income to insurers and health care providers. This $30 trillion figure is approximately 6 times the size of the projected Social Security shortfall. It comes to almost $100,000 for every man, woman, and child in the country.

We also have had ample opportunity to test Representative Ryan's other main theme, that lower taxes are necessary to boost growth. President Reagan had large tax cuts in the 80s. This was the worst decade for growth in the post-war period until the last decade when President Bush had another big round of tax cuts. This is why CBO projects that tax cuts do not pay for themselves and will lead to deficits that will be a drag on growth.

Given the overwhelming weight of the evidence, the NYT is misleading readers when it reports that:

"And Mr. Ryan is making a counter case — tax cuts are needed to stir economic growth, and Medicare is on an unsustainable path — as he travels through towns like North Prairie, Delavan and Clinton, population 2,162."

The reporter should know that Mr. Ryan's case does not make sense and should not imply to readers that it does.

 

 
If the United States Loses Its Aaa Rating Will China Raise the Value of the Yuan Against the Dollar? Print
Thursday, 21 April 2011 04:23

This is the logical implication of the threats reported in a Reuters article, saying that China would cut back its investment in U.S. government bonds if the United States loses its Aaa credit rating. The article implied that this threat is something that would be scary to the Obama administration.

In fact, it should not be scary at all, since China is effectively threatening to do exactly what the Obama administration claims it is asking them to do. The Obama administration claims that it wants China to raise the value of its currency against the dollar. The way that China keeps the value of its currency down is by using the dollars it accumulates as a result of its large trade surplus to buy government bonds and other dollar denominated assets.

If China stopped buying government bonds, then the dollar would fall against the yuan (i.e. the yuan would rise), exactly what the Obama administration supposedly wants. This would make Chinese goods more expensive in the United States, leading us to buy fewer imports from China, and it would make U.S. exports cheaper in China, leading China to purchase more U.S. exports.

This sort of adjustment is necessary to get the U.S. economy on a stable growth path. Therefore this threat from China should have been viewed as a positive development. It was not reported this way.

 
The Washington Post Confuses Economic Recovery with Fears of Insolvency Print
Wednesday, 20 April 2011 08:09

The Washington Post told readers that when interest rates on UK debt rose from 3.0 percent in 2009 to 4.2 percent:

"It was a sign that the country’s creditors were beginning to get nervous that the nation’s debt was becoming unsustainable."

It doesn't tell readers how it made this determination. The more obvious explanation is that the UK economy had come out of the free fall that it and other major economies were in. During this free fall UK government bonds were one of the few trusted assets, which meant that they paid extraordinarily low interest rates.

A 4.2 percent interest rate, which is less than 2.0 percent in real terms, is still extremely low by any historical standard. For example, the real interest rate on U.S. government debt was 2-3 percent in the late 90s when the government was running budget surpluses. Lenders usually demand far higher interest rates on assets to which they attach considerable risk.

It would have been worth mentioning in this article (which explores the lessons that the UK holds for the U.S.) that hundreds of thousands of workers in the UK are currently unemployed so that the country could maintain its top credit rating.

 
Washington Post Wrongly Claims that the Republican Medicare Plan Will Have "Sizable Savings in Future Costs" Print
Wednesday, 20 April 2011 05:13

According to the Congressional Budget Office's projections, the Republican Medicare plan will actually lead to an enormous increase in health care costs. Its projections imply that the cost of buying Medicare equivalent insurance would rise by $30 trillion over Medicare's 75-year planning period. This amount is approximately 6 times the size of the projected Social Security shortfall.

Therefore the Post was incorrect in claiming that the Republican plan would lead to sizable cost savings, although the government's payments for Medicare would be reduced.

 
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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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