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And Here's Timothy Geithner to Tell You How Much the Post Supports the TARP Print
Sunday, 10 October 2010 13:55

The TARP is one of those issues like Social Security, where the Washington Post has displayed considerably less diversity in opinions than Pravda back in the days of the Soviet Union. Just in case you hadn't seen their TARP is great line enough, the Post invited Treasury Secretary Timothy Geithner to invent some myths that he could attack in the Outlook section.

Readers were no doubt looking for the line about how TARP and related bailouts used trillions of dollars of loans and loan guarantees from the Treasury, Fed, and FDIC to keep the largest financial institutions from going into bankruptcy, protecting the wealth of their shareholders, many of their creditors and top executives. But of course that is not a myth.

 
Black Teen Employment Hits Record Low and No One Notices Print
Sunday, 10 October 2010 13:30
One of the striking pieces of data in the September employment report was the fact that the employment to population ratio for black teens plunged by 2.6 percentage points to 11.7 percent, a record low.

Black teens were already taking it on the chin in this downturn. The August employment rate was down by more than 10 percentage points from the pre-recession level. It was down by 20 percentage points from the peak employment rate for black teens during the boom in 2000.

Remarkably, this fact seems to have gotten virtually no attention in the media. While everyone noted the weakness of September data, none of the major outlets seems to have commented on the incredibly dismal job prospects for black teens.

No doubt this stems in part from a new political correctness where powerbrokers don’t note the devastation that their policies have inflicted on disadvantaged groups. Undoubtedly many of these people would attribute the low employment rates to inadequate motivation to work or a lack of the necessary skills.

These explanations run into the problem that black teens seem to have been plenty motivated to work just a few years ago. Just a decade ago, the percentage of black teens who had the motivation and skills to gain employment was almost three times as high as it is today.

We can believe that the necessary skills for employment changed at an incredibly rapid rate to produce this plunge in employment rates or we can we believe that a collapse in aggregate demand led to a sharp reduction in employment opportunities. The latter explanation seems far more likely, which puts the blame on the policymakers, not black teens.

In either case, the reporters covering the September employment report should have noticed.

 
How Many Reporters Would Work for the Washington Post for $10.25 an Hour? Print
Sunday, 10 October 2010 07:33

According to the Washington Post, if the answer is not many, then we need to bring in immigrant reporters. That is exactly the logic it used in a discussion of the fact that most native born American citizens are unwilling to do farmwork for this wage.

Economists would ordinarily say that the lack of a labor supply at a given price suggests that the wage is too low. However, the Post only considers this fundamental economic principle in passing. It is likely that if farmworkers received $60,000 a year, with health care benefits, there would be no shortage of U.S. citizens willing to do this work.

Of course this would raise the price of farm products, but it would be much cheaper to advertise in the Washington Post if its reporters worked for $10.25 an hour. The lower cost of advertising would be passed on in lower prices for groceries, cars and other items advertised in the paper. At least this is what people who believe in economics would say.

 
Washington Post Invents Election Contest on Big Government Print
Sunday, 10 October 2010 07:14

The top article in the Sunday Washington Post is an entirely invented piece that tells readers in the first sentence: "If there is an overarching theme of election 2010, it is the question of how big the government should be and how far it should reach into people's lives." There is absolutely nothing in this article that supports this assertion.

The article notes in the fourth paragraph that even most people who complain about the size of government consider Social Security and Medicare, by far the largest social programs, very important. It is not clear what being opposed to "big government" means in a context where nearly everyone supports its main pillars.

There are no candidates anywhere in the country who are running in support of "big government," there are candidates who are running in support of programs which have varying degrees of support. There are many candidates (virtually all Republicans) who are running against "big government." While this position has nothing to do with the world (we all oppose waste, fraud, and abuse, the question is always the status of specific programs), it is certainly helpful to the Republicans to have the election framed in this way.

 
Politico Uses News Stories to Push Its Deficit Agenda Print
Saturday, 09 October 2010 21:54

Politico wrongly told readers that: "voters tells pollsters they’re worried about all the red ink in the federal budget, and Democratic centrists have grown more urgent in telling Obama it’s time to rein in federal spending." This is not true.

A recent NYT-CBS poll found that just 9 percent of respondents said that the deficit was something that they were angry about. It is also inaccurate to identify Democrats who raise concerns about the deficit as "centrist." They can more accurately be identified as Democrats with close ties to corporate interests. Their financing base is a far more obvious way to distinguish their ideological leanings.

The article also includes the bizarre assertion that: "liberals argue that it’s OK for the federal government to run up big deficits at a time of economic slowdown — $1.3 trillion this year — because it’s much more important to use government spending to inject some life into the economy, to help struggling families stay afloat."

This is like saying that: "liberals argue that the earth is round." While it is true, so do the vast majority of conservatives. The same is the case of deficit spending in the current downturn. Prominent conservatives such as Martin Feldstein and David Walker have also called for increased deficits in the face of 9.6 percent unemployment.

It is also bizarre that this article mentions cuts to Social Security repeatedly but never once discussed the possibility of raising the cap on the payroll tax or raising the payroll tax rate itself. Polls have consistently shown both policies to be far more popular with the public than cutting benefits. Serious news outlets are not supposed to just report on the policies they support.

 
The NYT Wants Underwater Homeowners to Throw Their Money Away Print
Saturday, 09 October 2010 21:21

The NYT argued for having Fannie and Freddie refinance homeowners who are far underwater. It makes the case with bad arithmetic and poor logic.

On the bad arithmetic part it tells readers that "up to eight million" homeowners would be able to refinance if Fannie and Freddie allowed underwater homeowners to refinance. This is true in the sense that 1000 would be "up to eight million." There are roughly 45 million homeowners with mortgages, more than half of whom are with Fannie and Freddie. Let's put it at 24 million. A very high percentage of the F&F mortgages were issued in the last two years at rates that were not very different from the current ones.

F&F are largely the market now. There were roughly 5 million homes purchases each year and a considerably larger number of refinancings, so let's say conservatively that 14 million of their mortgages were issued since January 2009, leaving 10 million older mortgages. All of the pre-2009 mortgages are not underwater, which makes one wonder which planet the 8 million figure came from.

Beyond this point, the NYT tells us that refinancing could free up as much as $24 billion in spending. Really? Suppose someone owes $300,000 on a home that today would rent for $10,000 a year. Let's say the politicians arrange for refinancing so that this homeowner only pays 4.5 percent on their mortgage. Throwing in taxes, insurance, and other ownership related expenses, this person will be paying around $20,000 a year for a house in which they can never plausibly be expected to have equity.

In other words, if the NYT program persuades this person to refinance and stay in their home rather than walk away and rent a comparable unit, it will cost them an extra $10,000 a year. This is money pulled out of the economy. If 1 million people are in this position then this is a formula to pull $10 billion out of the economy. If 2 million people are in this position then persuading people to refinance rather than walk would pull $20 billion out of the economy.

Both the homeowner and the economy would be much better off if this person just walked away. It is incredible that we still cannot get serious discussions of people walking away from homes even when they are heavily underwater.

 
Organization That Could Not See $8 Trillion Housing Bubble Warns About Aging Population Print
Thursday, 07 October 2010 22:20

Standard & Poor's, which is probably best known for giving investment grade rating to mortgage backed securities backed by junk mortgages at the peak of the bubble, warned that demographic changes would pose severe budget burdens and urged the United States to begin to begin cutting back programs for the elderly now. In an article presenting Standard & Poor's view on this issue, it would have been worth reminding readers of the company's track record. It probably would also have been appropriate to remind readers that it was paid large amounts of money for the investment grade ratings it gave to these mortgage backed securities.

This background would allow readers to better assess the nature of Standard and Poor's advice to the American people. Economists who are not paid by Wall Street banks have used the exact same data to point out that the projected budget problems are due to the incredible inefficiency of the U.S. health care system. If the United States paid the same per person costs as any other wealthy country the long-term projections would show huge budget surpluses, not deficits.

 
The Return of Phony Numbers on Auto Workers' Wages Print
Thursday, 07 October 2010 21:58

In years past news reports regularly repeated auto company assertions that their UAW workers earned in excess of $70 an hour. Thankfully this inaccurate claim seems to have been largely missing from news reports in recent months.

But, now it is back in the NYT. Our old friend arithmetic can show the problem. We know that the average UAW worker gets roughly $28 an hour in pay. (This is on the old pay scale, many new workers get as little as $14 an hour.) This leaves us with at least $42 an hour going to health insurance, pensions, and other benefits. With a 2000 hour work year this would imply $84,000 a year going to these benefits.

UAW workers do get good health care benefits, but does the average benefit exceed $20,000 a year? That seems pretty unlikely. The pensions are also comparatively generous, but it is a safe bet that GM is not contributing more than $25,000 a year to their workers' pensions on average.

The way that the industry got their $70 plus an hour figure was by including the cost of payments for retirees (e.g. health care benefits for already retired workers) and averaging them over their current workforce. This may be useful for the companies accounting, but it has nothing to do with what current workers actually receive in wages and benefits.

 
AP: "Many Scientists Believe [carbon emissions] Cause Global Warming" Print
Thursday, 07 October 2010 07:29
That's what AP told readers today. Tomorrow we will no doubt find that many scientists believe that the earth is round and that humans evolved from more primitive primates. Stay tuned.
 
Media Coverage Might Explain Greater Anger Over Public Pensions Than Wall Street Bonuses Print
Wednesday, 06 October 2010 04:53

The Post had a front page piece that highlighted efforts to cut pensions for state and local workers. The piece told readers that there is declining support for public sector workers because many people resent the fact that they have been forced to take pay cuts while public sector workers often have had their pay and benefits protected.

It is worth noting that major media outlets, like the Washington Post, routinely highlight and often exaggerate the pay and benefits received by public sector workers. In contrast, they deliberately mislead their audience about the extent of public support for major Wall Street banks.

For example, media outlets have repeatedly highlighted the fact that most of the TARP loans to the banks have been repaid without pointing out that these banks benefited enormously from having access to trillions of dollars in loans and loan guarantees at below market interest rates. Without these guarantees Goldman Sachs, Citigroup, Morgan Stanley, Bank of America and many other large banks would have gone bankrupt. Their shareholders would have lost hundreds of billions of dollars, freeing up wealth for non-Wall Street America. And their top executives would not be drawing pay in the tens of millions of dollars (@100 public sector worker pensions).

Major media outlets have acted almost as though they were conducting a political campaign. They have flooded the public with reports minimizing the cost to the public of the Wall Street bailouts while putting out endless stories (many largely false) about overpaid public sector workers.   

 
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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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