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Has God Been Talking to the Washington Post? Print
Thursday, 14 April 2011 04:57

In its article covering President Obama's speech on the budget yesterday the Washington Post told readers that:

"Obama acknowledged that the debt must be tackled faster than he has previously proposed."

It is only possible to "acknowledge" something which is true. The Post obviously believes it is true that "the debt must be tackled faster than he has previously proposed," but that does not make it so. This is the Post's opinion. A real newspaper would have reported that President Obama "said that the debt must be tackled faster than he has previously proposed." It would not have implied that its view of the world is the unquestioned reality, especially in a front page news story.

Remarkably, the coverage of the President's speech in both the Post and the NYT included no mention of the recession. The main reason that the deficit has soared in the last three years is because of the economic collapse that followed the crash of the housing bubble.

If the deficit is reduced substantially before the economy has gotten back to near full employment levels of output the main effect will be to slow growth and throw more people out of work. This fact was never mentioned in either piece even though President Obama proposes to have his deficit reduction targets to become binding in fiscal year 2014, a point at which the unemployment rate is still projected to be 7.2 percent. By contrast, the first stimulus package was put into law under President George W. Bush when the unemployment rate was just 4.7 percent.

Both articles made reference to the deficit reduction plan from the President's deficit commission. This is wrong. There was no plan from the commission. The co-chairs of the commission, Erskine Bowles and Alan Simpson, never put their plan up for a vote because they knew they lacked the majority needed for passage. The plan referred to in these articles is only the proposal of the two co-chairs. It is not the plan of the commission.

This should be a simple point for a major newspaper to get right.

 
Misrepresenting the Policy Debate on China: Is the NYT Covering Up for Obama Print
Thursday, 14 April 2011 04:29

The NYT discussed the agenda of an upcoming meeting of G-20 finance ministers. It focused on efforts to pressure China to raise the value of its currency.

This discussion implied that the United States must depend on its ability to pressure China to change its currency policy. In fact, the United States does not have to rely on China changing its policy, it can force a change with unilateral action.

Specifically, just as China sets an official exchange rate of the yuan against the dollar that is below the market value of the yuan, the U.S. could set an exchange rate of the dollar against the yuan that is equal to the market value of the yuan.

This could mean, for example that the Treasury Department would announce a policy whereby it would buy yuan at the rate of 4 yuan for a dollar. This compares to the rate of 6.7 yuan to a dollar supported by China's government. While it would be illegal under China's laws for its nationals to take advantage of this exchange rate, it is likely that many businesses and wealthy individuals would find ways to evade the law. This would make the exchange rate set by the Treasury the effective exchange rate in the market.

It is a policy decision by the Obama administration not to take this route. This should have been pointed out by the article. Obviously the Obama administration has chosen to not really push aggressively to raise the value of China's currency.

China's government knows that the U.S. can take these steps and has chosen not to, therefore it may infer that the push to raise the value of its currency is not really a priority and is instead being done for political purposes. This NYT article supports the Obama administration's efforts to mislead the public on this topic.

 
Dana Milbank Missed the Health Care Reform Act Print
Wednesday, 13 April 2011 07:22

This is the only thing that readers can infer from his reference to President Obama's "refusal to propose a viable solution" to the debt problem. In fact, the Congressional Budget Office projects that the health care bill approved by Congress last year will trim tens of trillions of dollars off the long-term deficit. One can only conclude that Milbank wasn't aware of the bill in making this accusation.

 
WSJ Mixes Data With Invented Story Lines When It Comes to Health Care Print
Wednesday, 13 April 2011 06:57

The WSJ had a nice piece showing that United States pays far more per person for health care than other wealthy countries, even though they all enjoy longer life expectancies than we do. After presenting the data, the article then tells readers:

"Among the things that do matter [for controlling costs]: Consumers need to have some skin in the game, through mechanisms such as co-payments."

Actually, in most, if not all, of the countries in the WSJ chart, patients typically have lower co-payments/cost-sharing than is the norm in the United States. This would not seem to be an essential part of controlling costs.

 
How Are Ordinary People Responding to Higher Gas Prices? The Post Asks Someone With An Au Pair from France Print
Wednesday, 13 April 2011 04:59

I'm not kidding. The rest of the article actually is reasonable, but we get this from a person on the street interview:

"'We have an au pair from France, and she recently filled up our minivan and gave me a bill for $70,' said Melanie Janin, a mother of three from Bethesda. 'I was like, Oh, my God.' ”

 
Is the NYT Lobbying for Senator Wyden's Plan to Undermine Employer Insurance Pools? Print
Tuesday, 12 April 2011 21:10

It sure looks that way since it presents the removal of a provision in the health care bill pushed by Senator Wyden as a victory for special interests. This removal was part of the final budget deal.

The provision would have allowed healthy workers to opt out of their company's insurance plans, leaving only older and sicker workers. This is an effective way to undermine employer provided benefits, which was presumably Senator Wyden's intention in pushing this proposal.

While the NYT gave extensive space to Senator Wyden complain about the removal of his provision as a victory for special interests, and gratuitously added the irrelevant information that the provision cost the government nothing, it did not interview anyone who opposed the provision for the article.

 
Currency Devaluation Is More Essential Than Entitlement Reform Print
Tuesday, 12 April 2011 05:01

The Washington Post had a piece on the reaction of financial markets to the debate over the budget. It included a comment from William Gross, the manager of the Pimco bond fund, complaining that if the United States did not reform entitlements then a default is inevitable. He then said that the default would take place through "inflation, currency devaluation and low-to-negative real interest rates.”

This sort of "default" probably does not sound too bad to the overwhelming majority of the public who do not hold large amounts of government debt. More importantly, the devaluation of the currency is essential if the United States is to stop being a huge net borrower from other countries.

Changes in the currency value are the main mechanism for adjusting trade balances in a system of floating exchange rates. If the dollar is over-valued by 20 percent then this has roughly the same effect as subsidizing our imports by 20 percent and placing a tariff of 20 percent on all our exports. The over-valued dollar has far more impact on our trade balance than all of our trade deals put together.

If the value of the dollar does not fall substantially, then the United States will continue to run large trade deficits. This logically implies that we will have negative domestic savings (i.e. it is an accounting identity, there is no way around it). Low private savings means either large budget deficits or very low private savings or some combination.

In other words, if Mr. Gross does not want the dollar to fall, then he either wants to see large budget deficits and/or very low private savings. Or alternatively, he doesn't understand basic economics.

 
Budget Cuts and the Economy: The NYT Notices! Print
Tuesday, 12 April 2011 04:44
The NYT had a piece discussing the impact on the economy of the budget cuts in the compromise agreement last week. The prospect of losing hundreds of thousands of jobs should have been a central theme in the discussion of the negotiations, but it was almost never mentioned.
 
Power Breakfast: Right Wing Drivel Early In the Morning Print
Tuesday, 12 April 2011 04:36

WAMU, my local NPR affiliate, had an especially appalling segment of "Power Breakfast" this morning. The segment highlighted a congressional hearing on the topic of financial literacy and then commented on the obvious irony.

Of course there is no obvious irony to anyone who has ever learned any economics. The government's large deficit (presumably the source of Power Breakfast's "irony") is supporting the economy right now. This spending is needed because the collapse of the housing bubble created a gap of more than $1.2 trillion in annual demand in the economy. Anyone who thinks that the government should balance its budget right now wants to throw millions more people out of work.

Our Power Breakfast crew might not understand enough economics to realize this fact, but that does not change the truth of the matter. It is of course ironic that someone who knows nothing about economics can have a job reporting on it, while millions of people who can do their jobs are going unemployed.

 
The Debate Over Privatizing Medicare: Can Anyone Say $20.5 Trillion? Print
Tuesday, 12 April 2011 04:27

The NYT has a front page story on the debate over Representative Ryan's plan to privatize Medicare. The article is entirely in the form of he said/she said, providing readers with absolutely no information that would allow them to assess the arguments over the plan. This is especially important since the article reports that changes like those in the Ryan plan are necessary to control costs.

The assessment from the non-partisan Congressional Budget Office (CBO) is that the Ryan plan raises, not lowers, the cost of insurance. The CBO assessment implies that the Ryan plan would raise the cost to the country of buying Medicare equivalent policies by $20.5 trillion over the next 75 years (Medicare's planning period). This amount is almost four times as large as the projected Social Security shortfall. It comes to more than $60,000 for every man, woman, and child in the country. While this extra cost would not be borne by the government under the Ryan plan, it implies an enormous burden on future generations of retirees who may have to spend more than half of their income on health care.

 
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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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