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The Post Thinks That Its Readers Have More Time to Study Budget Proposals Than Its Reporters Print
Tuesday, 17 May 2011 05:06

That is the only thing that readers can conclude from a classic he said/she said piece about the Ryan budget plan approved by House Republicans last month. The piece simply repeated assertions about his budget from Representative Ryan and responses from House Minority Leader Nancy Pelosi and other Democrats.

It did not, for example, point out that the Congressional Budget Office projects that the Ryan plan would increase the cost of buying Medicare equivalent policies by $34 trillion (5 times the projected Social Security shortfall) over the program's 75-year planning period. Nor did it point out that the Republican proposal envisions that by 2050, most areas of government spending, including the military budget, will shrink to a size that is less than two-third the current size of the military budget.

The Post readers generally will not have time to look such things up for themselves. Post reporters should.

 
How Does the Post Know the Way Republicans "Regard" the Health Insurance Exchanges In the ACA? Print
Tuesday, 17 May 2011 04:53

Of course the Post does not have a clue as to how Republican politicians actually "regard" the health insurance exchanges established under President Obama's health care plan. All the Post can know is what these politicians say. It has no idea what, if anything, they actually believe about this system. This should cause readers to question why it asserted:

"Republicans, however, regard it [the insurance exchange system] as a likely first step down the road to a government-controlled insurance system."

The people in question are politicians, not political philosophers. They do not get their jobs for their refined views on social and economic issues. They get their jobs for appealing to important interest groups. The Post should understand this fact.

 
Greed and Medicare: Understating the Waste in the Ryan Plan Print
Tuesday, 17 May 2011 04:36

Timothy Egan understated the extent to which the Ryan plan would raise costs for Medicare beneficiaries. He reports that it would double the amount that the typical beneficiary would have to pay for their care. Actually, the Congressional Budget Office projects that it would triple the cost for retirees by 2030, with the ratio rising even higher in later years. (This doesn't take account of the increase in the eligibility age to 67.)

It's worth noting that the vast majority of this additional cost is due to increased payments to the insurance industry and health care industry. The CBO projections imply that only about one-fifth of the increased cost to beneficiaries will be savings to the government.

 
Robert Samuelson Is Too Lazy to Look Up Income Data for the Elderly Print
Monday, 16 May 2011 04:11

Fortunately for Samuelson, his job as a columnist for the Washington Post doesn't require him to know anything about income distribution among the elderly, even though according to his own claim, he has been writing about it for decades. Samuelson has another big push for means-testing of Social Security and Medicare, telling us how wealthy the elderly are.

Samuelson's piece is full of comments that are either deliberately misleading or profoundly ignorant. For example, he tells readers:

"From 1959 to 2007, the proportion of the 65-plus population with incomes under the government’s poverty line ($12,968 for a couple in 2009) dropped from 35.2 percent to 9.7 percent, which was half the poverty rate for children under 18 (18 percent)."

It's true that the elderly poverty rate has fallen from what had been very high levels to roughly the same rate as for the adult population as a whole. It's not clear why Samuelson thinks it is appropriate to compare their poverty rate to that of children. Would he also compare the poverty rate for African Americans to the poverty rate for children to tell us that it's not that bad?

Furthermore, there are serious questions about the methodology for calculating poverty among the elderly. The methodology designed by the National Academy of Sciences shows the poverty rate for the elderly is about 10 percent (@1.1 percentage point) higher than for the prime age adult population.

Samuelson also quotes a government report telling us that:

"Most older people are enjoying greater prosperity than any previous generation."

This would actually be true of any age group, at least before the recession. Per capita income is growing at roughly a 2.0 percent annual rate. It has nearly doubled since 1980. Even with substantial upward redistribution, most people at most points in the income distribution have seen some gains over this period.

Most importantly, if Samuelson did know anything about income distribution among the elderly he would know that means-testing of Social Security and Medicare is not likely to save much money unless the intention is to take benefits away from middle-income people. The problem is that the portion of the benefits going to the wealthy (as opposed to the portion of income) is not very large.

Means-testing cannot be a cliff where everyone earning over some amount (e.g. $100k or $200k) gets zero. It has to involve a phase out. Unless these phase outs start at incomes around $40k (Samuelson's definition of wealthy?) and are very steep, they will not save much more than they would cost to administer.

Fortunately for Samuelson, his job does not require him to know anything about income distribution among the elderly.

 
Tell Jacob Lew, The Economy, Not Deficit Reduction, Gave the Country a Balanced Budget Under Clinton Print
Monday, 16 May 2011 03:49

The NYT has an article discussing the possibility of an automatic spending cut rule as a mechanism to hit deficit targets. It quotes President Obama's budget director, Jacob Lew, on the past success of such rules.

Mr. Lew credits such budget rules for reaching a balanced budget in the 90s. Actually, these rules were of limited value relative to much better than expected economic growth. In 1996, the Congressional Budget Office (CBO) projected a deficit in the year 2000 of 2.7 percent of GDP. The government actually ran a surplus of 2.4 percent of GDP, a shift of 5.1 percentage points of GDP, the equivalent of $750 billion in today's economy.

According to CBO, none of this shift from deficit to surplus was the result of spending constraint or tax increases, its scoring shows that legislated changes over this 4-year period actually raised the deficit by $10 billion. By far the biggest reason that the budget shifted from a large deficit to a large surplus was much better than expected economic growth.

This growth pushed the unemployment rate down to 4.0 percent in 2000. CBO projected that it would be 6.0 percent. Mr. Lew should know that it was economic growth, not spending constraints that led to the Clinton surpluses. The NYT should have pointed this fact out to readers.

 
The Reason the Public Option Failed: The Post Never Heard About It Print
Sunday, 15 May 2011 08:15

During the debate over the health care bill, tens of thousands of health care activists pushed for either a universal Medicare-type system or having the option of buying into a Medicare-type public plan included in the exchanges established in the plan that ultimately was passed into law. In spite of the work of these activists, which did lead the overwhelming majority of congressional Democrats to support a public option, no public option was included in the final bill.

Remarkably, it seems that the Washington Post (a.k.a. Fox on 15th Street) never heard about this debate. Its lead editorial told readers that:

"The current debate has an ideological incoherence on both sides. Republicans endorse a premium support model for Medicare even as they work to undo the new insurance exchanges in the health-care law. Democrats distrust premium support when it comes to Medicare but support the exchanges, with sliding scale subsidies that amount to premium support, in the health-care plan."

If the Post had heard about the debate over a public option they would know that the vast majority of Democrats actually distrust a system of premium supports when it comes to the exchanges as well. This is why they pushed so hard for the public option. This public plan would both provide people with a way of escaping the private insurance system altogether and provide an effective competitor that could help to ensure that private plans did maintain acceptable standards.

 
What's This "We" Jazz, Larry Summers? Print
Sunday, 15 May 2011 08:06

In an interview in the NYT Larry Summers, who was Treasury Secretary under President Clinton and head of President Obama's National Economic Council, was asked about his portrayal as a supporter of deregulation in Inside Job and Frontline. In his response he said:

"Did we 10 years ago foresee everything that happened with respect to derivatives? Absolutely not."

Of course there were people who did foresee problems with a vast unregulated derivative market, most notably Brooksley Born. As head of the Commodity Futures Trading Commission in the Clinton administration she proposed tighter regulations for options, futures, credit default swaps and other derivative instruments. She was beat back in this effort by Alan Greenspan, Larry Summers, Robert Rubin, and other Clinton officials with close ties to Wall Street.

Some of us also saw the growth of the housing bubble and recognized the enormous risk that it posed to the economy. Mr. Summers was not among that group nor was anyone else among President Obama's economy advisers.

 
The NYT Doesn't Understand Marginal Tax Rates Print
Sunday, 15 May 2011 07:43

The NYT ran a column asking whether people who make more than $250,000 are really rich. It told readers that the richest 2 percent of the population face money problems also, suggesting that those near this cutoff for tax increases by President Obama might be unfairly victimized.

The poster child for this story is a person named Mason, who live in Manhattan with 2 young children and reportedly makes $262,000 a year. Since the 3 percentage point increase in the tax rate would only apply to income above $250,000, or $12,000 of his income, Mason would have to pay an additional $400 a year in taxes.

This comes to approximately 0.16 percent of Mason's income. If he gets his entire income from working a 2000 hour year, then Mason will have to work about 3 more hours a year to cover this tax increase.

 
AP Spreads Nonsense on Oil: Can Republicans "Know" the Earth is Flat? Print
Saturday, 14 May 2011 11:50

Fool or liar? That is the only question that needs to be asked of anyone saying that they want to promote domestic oil production in order to bring down the price of gas.

The simple fact is that there is not enough oil in the United States to bring down the price of gas to any noticeable degree. This is not a debatable point, the United States has 22.3 billion barrels of proven reserves. The U.S. consumes around 20 million barrels a day. This means that we could supply the country for 3 three years with domestic production.

Of course, from the standpoint of domestic oil prices what matters is the U.S. contribution to world production. This is around 90 million barrels a day. In an incredibly optimistic scenario the U.S. could increase its domestic production by 2 million barrels a day, this would increase output by a bit more than 2 percent [thanks Rogermac]. The net effect might be a reduction in price @5-6 percent. Even this price decline would take around 8-10 years to realize.

There is not much basis to dispute these basic facts. Therefore when AP reported that Doc Hastings, the Chairman of the House Natural Resources Committee, said:

"The president is finally admitting what Republicans have known all along, that increasing the supply of American energy will help lower prices and create jobs."

It should have pointed out to readers that increasing domestic supplies will not lead to noticeable effect on prices. Readers may not have the time to discover this fact for themselves.

 
NYT Misreports European Growth Print
Friday, 13 May 2011 05:31

The NYT told readers:

"The Federal Statistics Office in Germany reported on Friday that gross domestic product grew 1.5 percent over the previous quarter, when harsh winter weather had held growth to just 0.4 percent."

Let's see, GDP growth in the United States was 1.8 percent in the first quarter, so I guess we're doing a bit better than Germany at this point.

Wrong!!!! The growth figure reported by in this article is a quarterly rate of growth. The annual rate of growth in Germany in the first quarter was a very solid 6.1 percent.

It is difficult to understand why the media insist on reporting quarterly rates of growth when the standard in the United States is to report GDP growth as an annual rate. Often it is not even clear that the growth being reported is a quarterly rate. For example, later in this piece the NYT tells us:

"France, too, surpassed expectations with growth of 1 percent, the steepest increase since spring 2006, according to the statistics office Insee in Paris. That compared to an increase of just 0.3 percent in the last quarter of 2010, and a median forecast of economists surveyed by Reuters and Bloomberg News of 0.6 percent."

This is like reporting the temperature in a European country as being 20 degrees without bothering to tell readers that this is the temperature measured on the Centigrade system. Presumably the point of this article is to convey information to readers. If we want to let people in the United States know how hot it is in France then the proper way to do this is to convert the Centigrade measure into a Fahrenheit measure.

If the point is to let people in the United States know how fast Germany and France are growing then the growth rates should be reported as annual rates. It's that simple.

[Addendum: I corrected the German growth figure from 4.9 percent that I had gotten from a Wall Street Journal article. What I took to be an annual rate of growth for the first quarter was in fact a year over year rate of growth. Stefan Karlsson had the correct number.]

 
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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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