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More He Said/She Said on Minnesota's Budget from NPR Print
Thursday, 07 July 2011 04:17
Morning Edition had another piece on the standoff over Minnesota's budget. Again it gave listeners no background that would allow them to determine the validity of Republican claims that state spending is soaring out of control. As noted before, the state is spending less relative to the size of the economy than it did in the early 90s. This means that the Republicans either are unfamiliar with the state budget or they are not being honest.
 
NPR Doesn't Know How They Balanced the Budget in the 1990s Print
Wednesday, 06 July 2011 15:14

That's the problem when you have young reporters. They can't remember back to the 1990s.

If NPR did have reporters who remembered back to the 1990s they would not be telling listeners that Ohio Governor John Kasich was "chairman of the House Budget Committee when he balanced the budget with President Clinton in the 1990s."

Actually, neither John Kasich nor President Clinton balanced the budget in the 1990s. The 1996 Congressional Budget Office (CBO) projections for the fiscal year 2000 budget showed a deficit in that year of $244 billion. Instead, the government ran a surplus of $232 billion. According to CBO the legislated changes put in place by Mr. Kasich and Mr. Clinton over this four year period added $10 billion to the deficit. 

This background information might have given listeners a somewhat different perspective on Mr. Kasich's quote:

"At the end of the day, you look yourself in the mirror, and you say to yourself, 'Did I do what was right for families and for children, and if I paid a political price, so what?"

CBO_projections_96-00_11873_image001
Source: Congressional Budget Office and author's calculations.

 
Yet More Editorializing in the Post’s News Section Print
Wednesday, 06 July 2011 08:32

An article on the congressional debate over a new transportation bill began:

“The next flash point in the debate over the nation’s will to live within its means may emerge this week as House Republicans present a long-term transportation bill expected to cut funding for highways and mass transit by almost one third.”

Characterizing the battle over the transportation bill as a “flash point in the debate over the nation’s will to live within its means” is crude editorializing that would not appear in a news section of a serious newspaper. It’s because of articles like this that the Post is known as “Fox on 15th Street.”

 
When It Comes to Budget Deficits, the Post Again Makes It Up Print
Wednesday, 06 July 2011 08:31

The Post reported on President Obama’s assertion that it is necessary to make large cuts in projected deficits, telling readers:

“Obama weighed in Tuesday, noting that a remarkable bipartisan consensus has emerged about the scope and severity of the nation’s debt problem. ‘Most of us already agree that to truly solve our deficit problem, we need to find trillions in savings over the next decade, and significantly more in the decades that follow,’”

It would have been more appropriate to use the term “asserting” rather than “noting.”

Noting implies that the claim that President Obama is making about a consensus is true. It is not.

People familiar with economics know that the main reason that the country is facing large budget deficits is because of the economic crisis created by the collapse of the housing bubble. Contrary to President Obama’s assertion, the main way to solve the deficit problem is to get the economy back to full employment.

This is yet another case where the Post has ignored journalistic standards in a front page story to foist its editorial position on readers.

 
Mexico’s Secret Economic Boom Print
Wednesday, 06 July 2011 08:26

In an article on the decline in illegal immigration from Mexico, the NYT cited a “prominent economist” as saying that Mexico’s per capita GDP had increased by more than 45 percent since 2000. This view of Mexico experiencing an economic boom is radically at odds with the official data. The IMF data show that Mexico’s per capita GDP has increased by just 10 percent since 2000, including a 4 percent increase projected for 2011. This is considerable less than per capital GDP growth in the U.S. over this period.

 
When It Comes to Argentina's Economy, the NYT Redefines "Stagnant" Print
Tuesday, 05 July 2011 05:52

NYT readers must have been stunned to see the second paragraph of an article on the prospects for shale oil in Argentina refer to "the country’s long-stagnant economy."

According to data from the IMF, Argentina's economy grew at almost an 8 percent annual rate from 2003 to 2008, following a severe recession in 1998-2002. The world economic crisis brought its economy to a standstill in 2009, but it grew by 9.2 percent last year and is projected to grow 6.0 percent this year. This is stagnant?

 
NPR Does the He Said/She Said on Minnesota Shutdown Print
Tuesday, 05 July 2011 04:31

It is not balanced reporting to present a Republican legislator from Minnesota talking about spiraling state spending and then present someone else talking about state services. Most NPR listeners will not have the time to look up the data on state spending in Minnesota. NPR's reporter should.

If NPR had done its job, it would have pointed out that there has been no upward trend in state spending. Therefore when the Republicans complain about out of control or spiraling spending, they are not being honest.

 
Greg Mankiw and Monty Python Print
Monday, 04 July 2011 12:48

One of the great skits from the days of Monty Python's Flying Circus was the "Stake Your Claim Game Show." The first contestant on this show is introduced as claiming that he wrote the complete works of Shakespeare.

By asking the contestant's age, the host is able to quickly determine that works of Shakespeare were known for several hundred years before he was born. At that point the contestant acknowledges that this is where his claim breaks down and concedes that the host is more than the match for him.

I felt sort of like this contestant when I saw that Greg Mankiw had discovered that Ron Paul's plan to destroy the $1.6 trillion in government bonds held by the Fed (which I endorsed) to get around the debt ceiling was "just an accounting gimmick." Clearly Mr. Mankiw is more than the match for me.

Of course it is an accounting gimmick. We have an accounting problem (the debt ceiling). It cries out for an accounting solution.

However, there is a more serious issue in the second part of the story. If the Fed destroyed the bonds, rather than selling them back to the public as currently planned, it can save the government close to half a trillion in interest payments over the next decade. That sounds like a good deal to me, especially in a context where people are talking about cutting Social Security and Medicare as a way to reduce deficits.

Destroying the bonds would create some problems. The reason that the Fed plans to sell the bonds is to pull reserves out of the system thereby preventing inflation at a point where the economy has recovered. The alternative that I suggest is that the Fed could simply raise reserve requirements to accomplish the same goal. 

Mankiw points out that:

"assuming the Fed does not pay market interest rates on those newly required reserves, it is like a tax on bank financing."

This is true. Higher reserve requirements will increase the gap between the interest rate that banks charge on loans and the interest rate they pay on deposits. However, this may be seen as a relatively harmless tax. After all, what's the consequence of people getting 20 basis points (0.2 percentage points) less on average on their bank deposits or paying 20 basis points more for loans?

In any case, this implicit tax seems like the sort of proposal that should be in the policy mix right now. After all, I suspect that most people would consider it preferable to the bi-partisan plans to reduce Social Security payments 3 percent by changing the cost of living adjustment formula.

 
Tax Increases and Do They Ever Fire Headline Writers? Print
Sunday, 03 July 2011 23:01

The headline of the NYT story told readers:

"2 Republicans Open Door to Increases in Revenue." 

However, the second paragraph of the article said:

"One of the senators, John Cornyn of Texas, said he would consider eliminating some tax breaks and corporate subsidies in the context of changes in the tax code, provided there was not an overall increase in taxes."

Okay folks, "not an overall increase in revenue" directly contradicts "increases in revenue."

What the hell is so hard to understand about this? Cornyn said that he would be willing to redistribute the tax burden, he explicitly said that he is not open to increasing revenue. How can the NYT headline say something 180 degrees at odds with reality?

In fairness to the headline writer, the first sentence of the article commits the same error by telling readers:

"Two senior Republicans said Sunday that they might be open to raising new government revenue as part of a deal to resolve the dispute over the federal debt ceiling."

It is not clear who deserves the blame here, but this NYT article managed to turn reality on its head.

 
Will the Washington Post Ever Learn Trade Theory? Print
Sunday, 03 July 2011 08:35

The lead editorial in the Post tells us that they are very upset that Congress has not approved the trade deals negotiated with South Korea, Colombia, and Panama. The Post of course wrongly refers to them as "free-trade" deals. This is inaccurate since they do little or nothing to reduce the trade barriers that protect highly educated professionals (e.g. doctors and lawyers) and actually increase protection in many areas (e.g. patents and copyrights).

The Post also is more than a little off-base in telling readers that:

"Basically, each party is playing some last-minute hardball on behalf of its respective ideological bases. On the Democratic side, labor unions have been unable to prevent Mr. Obama’s belated conversion to the cause of the free-trade agreements. Trade adjustment assistance (TAA) money is the consolation prize labor demands — and the White House is determined to let the unions have it. On the Republican side, the anti-spending Club for Growth and affiliated back-benchers in Congress see TAA as yet another failed, expensive bureaucracy and want to kill it. GOP leaders on the Hill are committed to giving them at least a chance to vote 'no' on TAA."

Let's try an alternative explanation. This trade pact will mean lots of money to the companies most directly affected. These companies will be likely to reward the party with campaign contributions that is perceived as delivering for them. Companies seeking trade pacts elsewhere will also be impressed with this party's ability to deliver. This means that President Obama wants to get the pacts through to get more money for his re-election campaign, whereas the Republicans are trying to block him because they don't want him to get more money for his re-election campaign.

That's my theory: no ideology just money. Of course, I live in Washington.

Now for the Post's lesson on trade theory. The Post tells us:

"Both sides need to focus less on pleasing their bases and more on figuring out a politically realistic plan for passing both the free-trade agreements and trade adjustment assistance — ASAP. On Friday, as Washington dithered, a free-trade agreement between the European Union and South Korea took effect. In other words, German, French and Italian workers got a head start in the race for those jobs you’ve been hearing so much about."

Okay, in the world of trade theory that the Post is presumably relying upon for the basis of its editorials, more free trade is generally better than less free trade. However, they get it 180 degrees wrong with the European Union story. In trade theory, the deal with European Union and South Korea makes the U.S. better off, not worse off. We are better off when our trading partners get richer.

Maybe we can start a collection to get the Post's editorial writers an intro trade textbook. It might be good if they read one before lecturing the rest of us on the topic.

 
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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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