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Economists Who Know About the Housing Market Expect Prices to Continue to Fall Print
Thursday, 30 June 2011 05:12

USA Today told readers that:

"economists say it could be several years before the nation's housing market recovers."

This is probably referring to the views of economists who did not see the housing bubble. Economists who saw the housing bubble know that house prices are still about 10 percent above their trend level. This means that they do not expect the housing market to recover in terms of prices rising back to prior levels. They expect further price declines until the market returns to trend levels and then subsequent increases in step with the overall rate of inflation.

It would be helpful to readers if USA Today did not rely exclusively on economists who managed to overlook one of the largest asset bubbles in the history of the world.

 
Would the FDA Decision on Avastian Be Easier If Genetech Didn't Have So Much Money at Stake? Print
Thursday, 30 June 2011 04:59

The system of patent-supported research gives drug companies like Genentech enormous incentive to mislead the public and government agencies, like the FDA, about the effectiveness of their drugs. Companies can lose billions of dollars if the FDA determines that a drug is not safe or effective and removes it from the market.

Therefore economic theory predicts that companies will make misleading claims to try to prevent removal. If the government did not grant patent monopolies that allow companies to sell drugs at prices far above the free market level, this incentive would not exist.

This fact should have been noted in reporting on the FDA's decision to stop authorizing the use of Avastian as a treatment for breast cancer. 

 
If Greek Debt Is Going to Be Restructured Then Current Lending to Greece Is Actually Handing Money to Creditors Print
Thursday, 30 June 2011 04:51
The Washington Post should have made this point in an article that noted that Greece is likely to face further problems in meeting its debt obligations. If Greece ultimately has to restructure (i.e. partially default) on its debt, then it means that the new money being put in by the IMF and the EU is effectively allowing current debtors to be repaid. The public lenders will then be the victims of the partial default. Rather than being loans to the Greece, these loans are effectively a transfer from the taxpayers who support these institutions to Greece's creditors. The article should have made this obvious point.
 
Speaker Boehner Can't Remember the 90s Print
Thursday, 30 June 2011 04:20

That would seem to be the implication of his quote in an NYT article:

“The American people know tax hikes destroy jobs ... They also know Washington has been on a spending binge for many years, and they will only tolerate a debt-limit increase if we stop it.”

Actually, the economy was creating 3 million jobs a year in the late 90s, when the higher Clinton-era tax rates were in effect. This means that unless the memory of the American people is as bad as Mr. Boehner's memory, they could not know that "tax hikes destroy jobs," since it is not true. (It is impossible to know something that is not true.)

This error would seem to qualify as a "gaffe," like when then-Senator Obama referred to voters in Pennsylvania being bitter and clinging to guns and religion in response to bad economic times. It would have been appropriate for the NYT to press Mr. Boehner on whether he is really ignorant of the economy's job growth record in the 90s or whether he is deliberately saying things that he knows not to be true.

The "spending binge" presumably refers to the increases in spending that began when President Bush took office. (Spending as a share of GDP rose substantially during the Bush presidency. [Corrected - thanks Tom.]) Most of the increase in spending was on the military. If the Republicans were to support reversing this increase in military spending then they would likely enjoy wide bi-partisan support.

 
What Does It Mean to Say That Investing in a 401(k) Is Safer Than Investing in Stocks? Print
Thursday, 30 June 2011 04:04
The NYT reported the results of a telephone survey which found that 41 percent of respondents thought a 401(k) or IRA was a better long-term investment vehicle than investing in stock. It's not clear what question people thought they were answering. The vast majority of people who invest in stock do it through a retirement account. Therefore, it's not clear what it would mean to say that investing in a 401(k) or IRA is better than investing in stock.
 
Doctors' Lobby Stifles Study to Examine Access to Care Print
Wednesday, 29 June 2011 05:04

Doctors in the United States have enormous political power. They use it to limit the supply of doctors domestically both by restricting medical school enrollment and the number of foreign doctors who can enter the country. As a result of these protectionist measures, the United States pays more than twice as much for its doctors as other wealthy countries, costing it more than $90 billion a year.

The NYT reported on the successful effort by the doctors' lobby to stop the use of government testers to determine the ability of people with different types of insurance to get appointments. The plan was to have people call doctors' offices and ask for an appointment saying that they have various types of insurance (e.g. Medicare, Medicaid, private insurance). This would provide a basis for determining how easy it is for people get care.

The article should have pointed out that this use of anonymous testers is absolutely standard. It has been used to uncover discrimination in the issuing of loans by banks, in selling cars, and offering jobs. It would be irresponsible for the government to be spending hundreds of billions of dollars a year on programs like Medicare and Medicaid without knowing how effective they are in providing care.

Therefore when Senator Orin Hatch complained that the administration was "wasting taxpayer dollars to snoop into the care physicians are providing their patients", he was not saying anything that made sense. Presumably he was doing the bidding of the doctors' lobby.

 
Will Legarde Do Anything About the IMF's Bloated Pensions? Print
Wednesday, 29 June 2011 04:54

Just asking, and asking why no one in the media is asking. The Washington Post, NYT and other major news outlets have been running wild yelling about excessive public sector pensions. The median pension for a public sector worker is a bit over $20,000. In many cases this is their sole retirement income, since they are not covered by Social Security. The pensions of public sector employees has been the topic of numerous front page stories in major newspapers.

This is why it is striking that no one raised this question with the announcement that Christine Lagarde had been selected as the new director of the IMF. IMF economists are often able to retire with 6-figure salaries in their early 50s. This is likely to strike many people as unfair by itself, however it would seem especially inappropriate in an institution that has explicitly called for governments to raise the age of eligibility for much smaller pensions to 65 or even 67. 

And the strangest part of it all is that no one in media is even talking about it.

 
The Washington Post Thinks That Congress is Made Up of Philosophers Print
Tuesday, 28 June 2011 05:11

A Washington Post article on the budget negotiations told readers that the battle over the budget:

"has set off an ideological battle across the Capitol."

It is not clear why anyone would think that members of Congress care about ideology. These are politicians who hold their jobs based on their ability to appeal to powerful interest groups, not their ability to espouse political philosophy. It is reasonable to assume that their stances on the budget involve appeals to these interest groups, some of whom are anxious to avoid higher taxes and some of whom value the government programs that could be cut. There is no reason to assume that ideology has anything to do with this dispute.

 
Meaningless California Budget Numbers Print
Tuesday, 28 June 2011 04:50

The NYT told its readers nothing when it said that California is using an optimistic revenue assumption of an additional $4 billion in revenue next year in order to balance its budget. It is unlikely that even 1 percent of NYT readers have any idea of how large California's budget is. There is no way to assess the importance of the revenue assumptions or spending cuts discussed in this article without knowing how large the total budget is.

California spends roughly $130 billion a year, so assuming a $4 billion rise in revenue, this would be an increase approximately equal to 3 percent of the budget [corrected -- thanks GP].

One of the major reasons that the public is so ill-informed about the budget (at all levels of government) is that reporters routinely report budget numbers without any context. Since almost no one knows how big the total budget is, they don't realize that many of the items drawing attention from politicians or the media are irrelevant for all practical purposes.

For example, the $1 million Woodstock museum that Senator McCain made a major prop of his 2008 presidential campaign cost 0.00003 percent of the federal budget. If the media had made a point of putting this cost in the context of all federal spending, it is likely that Mr. McCain would have been forced to find a more substantial item in the budget to make an argument about government waste.

 
New Prostate Cancer Drugs are Expensive Because of Government-Granted Patent Monopolies Print
Tuesday, 28 June 2011 04:41
That point would have been worth making in an article about new drugs approved by the Food and Drug Administration for treating prostrate cancer. According to the article, these drug costs can cost up to $8,000 a month. If the drugs were sold in a free market without patent protection, they would almost certainly sell for less than $100 a month. It would have been worth noting this cost of the patent system for financing prescription drug research.
 
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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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