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NYT Claims of a Skills Shortage Disproved by Evidence in Article Print
Thursday, 01 July 2010 22:31

The NYT reported that manufacturers are having a hard time finding the skilled workers they need for their modern factories. However, the evidence presented in the article suggests the opposite. It reports that in Cleveland, the city on which the article is focused "more skilled workers earn $15 to $20 an hour."

This is not an especially high wage. For example, it is unlikely that many New York Times reporters live on $30,000 to $40,000 a year nor would they be very happy if their children got a job paying this much. The problem appears to be that manufacturers don't want to pay the market wage for the skills that they need. This is like someone who wants to buy a 4-bedroom home with a yard in a good neighborhood in Washington for $200,000, and then complains that there is a shortage of good homes.

There are good homes in Washington and there would be plenty of skilled workers for manufacturers to hire in Cleveland, if they were just willing to pay the market wage. The only evidence of a lack of a skills in this article is that the managers interviewed for the piece don't seem to have a good grasp of basic economics.

 
U.S. Growth in 2010 is Projected to Be Worse Than Anemic Print
Thursday, 01 July 2010 08:19

That's what readers could infer from the NYT's description of the 2.9 percent projected growth for Japan as "anemic." Japan's population is decreasing at the rate of 0.2 percent annually. Therefore this growth rate translates into a projected per capita growth rate of 3.1 percent.

By contrast, most forecasts put U.S. GDP growth in the range of 2.0-3.0 percent. Since the population in the United States is growing at a rate of 0.9 percent annually, this translates into a per capita GDP growth rate of 1.1 to 2.1 percent. In other words, the United States is expected to have a per capita growth rate that is least a percentage point slower than the Japanese rate that was considered "anemic."

 
Deficit Committee Co-Chair Reveals Himself as Numerologist Print
Thursday, 01 July 2010 05:15

Erskine Bowles, the Democratic co-chairman of President Obama's deficit commission, revealed that he was a numerologist yesterday when he suggested that the commission should set a limit on federal government spending at 21 percent of GDP. (Numerologists assign mystical powers to specific numbers.)This fact should have been highlighted more prominently because it is unusual to have people with such extraordinary beliefs in prominent positions in government.

More typically these people are pragmatists who believe that goods and services should be provided in the most efficient possible way. For example, if it is more efficient to provide retirement benefits through a public Social Security system or health care through a public Medicare-type system, most people in responsible positions would support expanding the public sector.

However, because of his belief in numerology, Mr. Bowles would waste resources, thereby slowing growth and eliminating jobs, by instead providing these services in a less efficient manner in the private sector. This is a very peculiar view and should be highlighted by those reporting on the deficit commission.

 
If Germany Is a Winner, It Is Partly Because It Has Work Sharing Print
Thursday, 01 July 2010 04:58

Harold Meyerson touts Germany as one of the winners in this downturn noting that its unemployment rate remained below that of the United States. While he attributes this fact to its strong manufacturing sector, Germany has actually suffered a steeper downturn than the United States.

The reason that Germany's unemployment rate is more than 2 percentage points lower than the rate in the United States is that it has a policy of work-sharing to deal with inadequate demand. Instead of paying out benefits to unemployed workers, it pays companies to reduce workers' hours.

In a typical arrangement workers would see their hours cut by 20 percent. The government makes up 60 percent of the lost wages or 12 percent of total wages. The company makes up 20 percent of the lost wages or 4 percent of total wages. The worker then ends up with a pay cut of 4 percent while working 20 percent fewer hours. This loss of pay is likely to be largely offset by fewer work-related expenses, for example lower commuting costs as a result of working a 4-day week instead of a 5-day week.

As a result of work sharing Germans are experiencing this downturn in the form of shorter workweeks and longer vacations. By contrast, in the United States workers are experiencing the downturn as near double-digit unemployment.

 
Were Opponents of Civil Rights Really Only Concerned About States' Rights? Print
Thursday, 01 July 2010 04:34

That is what the NYT would have told readers if they followed the same practice they do now in talking about opponents of extending unemployment benefits. The NYT told readers that: "the jobless aid measure is one of the last remnants of the Democrats' jobs agenda, which has largely fallen prey to GOP concerns about the deficit."

How does the NYT know that the Republicans are really concerned about the deficit, because they say are concerned about the deficit? Almost without exception, the opponents of the major pieces of civil rights legislation in Congress claimed that they really were not opposed to civil rights, they just wanted the issue left to the states. Would the NYT tell its readers that the opposition to the legislation stemmed exclusively from concern about states' rights.

In this case, many members of Congress who had no difficulty adding to deficits with spending on the wars in Iraq and Afghanistan or with tax cuts largely targeted to the wealthy, are suddenly concerned about the deficit when the issue is unemployment benefits or aid to state governments. While it is possible that their views about deficits really have changed, it is also possible that concerns about deficits are not the real reason for the Republicans' opposition.

Politicians sometimes are not completely honest in the explanations they give for their actions. Reporters should know this. Therefore news outlets should tell readers what politicians say. It should not try to tell readers what their motive is, because the news outlet does not know.

 
People With Aids Unable to Afford Drugs: The Cost of Protectionism Print
Thursday, 01 July 2010 04:19

The NYT had an article reporting that a number of states are restricting enrollment in a program that provides drugs for people with AIDS. It notes that the program cost governments an average of $12,000 a year. It would have been mentioning that in the absence of patent protection these drugs would sell for a few hundred dollars per year.

Patent protection for drugs is an extremely costly form of protectionism causing many drugs to be sold at several thousand percent above their free market price. There are almost certainly more efficient mechanisms for supporting prescription drug research. While the Washington Post recently devoted a lead front page article to tariffs on ironing boards, no major news outlet has been interested in discussing the much greater distortions resulting from protection for prescription drugs.

 
Affirmative Action for Mexico in the NYT Print
Thursday, 01 July 2010 03:47

The NYT had an article this morning reporting on the strong growth in much of Latin America, which it attributes in part to the high demand for commodities coming from Asia. At one point it comments:

"After a sharp contraction last year, Mexico’s economy grew 4.3 percent in the first quarter and may reach 5 percent this year, the Mexican government has said, possibly outpacing the economy in the United States."

This is actually rather weak growth given that Mexico's economy contracted 6.5 percent last year. By comparison, Brazil and Peru, two of the other countries highlighted in the article anticipate growth of more than 7.0 percent in 2010. Neither experienced a downturn as sharp as Mexico's.

Also, for Mexico it should not be much of an accomplishment to outpace the growth in the United States. Mexico's population is growing at a rate that is approximately half a percent higher than the rate in the United States. This means that it it doesn't grow more rapidly, then its people are getting poorer in average relative to people in the United States. It would be expected that its per capita growth rate would actually be faster, so that incomes are converging between the two countries. 

 
Great Piece on Goldman, AIG, and the Fed Print
Wednesday, 30 June 2010 04:12
If you're wondering why Goldman Sachs is richer than you are, and we supposedly have to cut Social Security, remember friends are everything.
 
Are Republicans Balking at Stimulus in an Election Year Because They Want to Raise Unemployment? Print
Tuesday, 29 June 2010 05:00

The Post noted that Congress has been reluctant to extend unemployment benefits in spite of the evidence that they will boost the economy. It then told readers that: "Congress is balking at the added expense in an election year, as Republicans accuse Democrats of out-of-control spending and as many rank-and-file Democrats struggle to justify an increase in already sky-high deficits."

It is not clear that members who oppose extending benefits (most of whom are Republican) are actually concerned "out-of-control" spending or "sky-high" deficits. Of course, spending grew in response to the economic downturn, as the Post should know. So it is misleading to refer to it as "out-of-control" or the deficits as "sky-high."

While the Republicans who oppose stimulus measures such as extending unemployment benefits because they are now concerned about budget deficits (most were not during the Bush presidency), it is also possible that they oppose these measures because they feel they would gain politically in November from seeing them voted down. It is likely that a weak economy will benefit the Republicans in the election. This article should have at least noted the possibility that politicians may not act for the reasons they claim in public, sometimes they don't.

This piece also said that President Obama "acknowledged" that reining in the debt may require cuts in Medicare, Medicaid, and Social Security. The correct word would be "said" or "asserted" unless the Post has some independent basis for knowing that changes in such programs are necessary, in which case it should share this evidence with readers.

 
Death and Ironing Boards at the Washington Post Print
Tuesday, 29 June 2010 04:43

Last week the Washington Post devoted a major front page story to a report on tariffs on Chinese ironing boards that can be as high as 150 percent. Today a page 2 article reported on evidence that a popular diabetes drug, Avandia, increases the risk of strokes and heart attacks.

The Avandia article never discussed the government imposed patent protection that allows Avandia's manufacturer, GlaxoSmithKline, to charge prices that are several thousand percent above the competitive market price. The enormous profits that result from this protection gave GlaxoSmithKline a powerful incentive to conceal evidence that the drug was harmful, as is alleged in the article.

It is interesting that the Post would devote so much attention to highlighting protectionism in the context of ironing boards, while ignoring the issue altogether in the case of a drug with sales of $3 billion a year and which could lead to thousands of unnecessary of heart attacks and strokes. There are other mechanisms to support drug research which would allow drugs to be sold at competitive market prices. 

 
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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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