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That "Job Killing" Health Care Bill: AP Does Real Reporting Print
Tuesday, 18 January 2011 13:49

The Republicans have been ranting for most of the last year about the "job killing" health care bill (now changed to "job destroying" in an effort at promoting comity). As I noted yesterday, reporters are supposed to attempt to verify such accusations, not just repeat them.

The Associated Press made precisely the sort of effort at verification that reporters are supposed to do. They found the Republicans came up a bit short in the evidence department. The best they could do was an analysis from the Congressional Budget Office that estimated that around 600,000 people would opt out of the labor force if they could get health insurance through the new health care system. The reason is that they would no longer need to work for their health care coverage. This is not exactly "job killing" or "job destroying" – after all, the jobs will still be there, it's just that people will opt not to take them.

In this way we can think of the bill as being job destroying in the same way that winning the lottery might be job destroying. Many people who take home multi-million dollar jackpots opt not to work because they no longer need the money. The Republican methodology would have us worried about "job killing" lottery jackpots.

AP deserves credit for doing the sort of basic fact checking that good reporters do. This sort of reporting provides valuable information to the public.

Addendum:

McClatchey also did its homework.

 
Prices Don't Matter: The Bizarre Case Against Lowering the Dollar/Yuan Exchange Rate Print
Tuesday, 18 January 2011 05:43

Harvard Law Professor Mark Wu argued that the value of the yuan against the dollar is no big deal in determining the U.S. trade balance in China in an NYT column. His argument is bizarre to say the least.

First he argues that the value of the yuan has little to do with the ability of the U.S. to export to China. He points out that exports to China grew at a more rapid rate in the years from 2002 to 2005 when the yuan did not appreciate than in the years from 2005 to 2008 when the value of the yuan rose by almost 20 percent against the dollar.

This is true, but the problem is that the very low base in 2002 makes percent change a very misleading measure. The increase in exports from 2002 to 2005 was $19.1 billion, from $22.1 billion to $41.2 billion. Exports increased by $28.5 billion from 2005 to 2008 to $69.7 billion. The more obvious metric would be the increase as a percent of U.S. GDP, which was considerably larger in the second period.

If one was just looking at percent changes then the near doubling of imports in the three years when the yuan did not rise in value is a striking contrast to the increase of just over 40 percent in the three years in which the yuan rose by 20 percent. Of course a full model would consider relative price changes and other factors, but it takes some serious data abuse to use export volumes to argue that exchange rates don't matter.

The other arguments are equally off-base. Wu claims that if the yuan rose against the dollar then we would simply import more from Cambodia, Vietnam and other countries. There are two problems with this argument. First the list of competing countries is not nearly large enough to replace China as a source of imports. If imports from China fell by a third, this would be roughly equal to Vietnam and Cambodia's combined GDP. The other flaw in this logic is that countries like Vietnam and Cambodia target the value of their currency against the yuan. When China abruptly raised the value of the yuan in 2005, a wide range of countries followed suit. It is likely that further increases in the yuan would also be matched by rises in other currencies leaving the relative valuation of their exports little changed. (If these countries were just interested in gaining more of a competitive advantage of the yuan, they could devalue their currency any day of the week.) 

The final point that Wu makes is that only 15 percent of our exports compete directly against Chinese exports in third markets. This is likely true, but by itself this is already a large volume of trade. Furthermore, this percentage is rising rapidly as China moves into more upscale manufacturing sectors. The share of exports that compete with Chinese goods likely would have been close to zero five years ago.

In short, there is not much of a case here. Economists generally believe that relative prices matter and the exchange rate is a major determinant of relative prices. (Do tariffs of 20 percent matter? The Chinese sure think so.) Mr. Wu's column gives us little reason to discard standard economics.

 
No Shopping Lists for China: Dealing with China Involves Trade-offs Print
Monday, 17 January 2011 21:40

The United States remains the world's number one economic and military power. This means that when President Obama sits down with many heads of state, the list of concerns that he presents is essentially a shopping list that he expects his counterpart to make good on. In many cases, the head of state of a country heavily dependent on the United States will have little choice but to deliver on the items on the list.

This is not true with China. While not yet the equal of the United States in either economic or military power, it is certainly a formidable enough power that the United States cannot simply dictate to it. This means that when it gives China a list of issues, it cannot reasonable expect China to agree to U.S. terms on all them. Therefore, when President Obama meets with China's President Hu Jintao this week, he will have to emphasize some things on the U.S. list while downgrading the importance of others.

For example, President Obama may emphasize enforcement of the patents and copyrights of U.S. companies like Pfizer and Microsoft. Or he may emphasize market access for financial service companies like Goldman Sachs and Citigroup. The emphasis on these issues may imply that concerns over items, like the value of the yuan, get less attention.

The issue of trade-offs is not mentioned in the NYT's stage setting for the meetings. This omission is striking since this priority setting obviously must be central in the administration's preparations. Surely the NYT could have contacted some experts on U.S.-China relations even if it could not find anyone in the administration who was prepared to discuss its priorities.

 
Temp Employment Is Down, Not Up Print
Monday, 17 January 2011 13:42
USA Today had a piece today noting the rise in temporary unemployment and warning that it may be permanent. It is worth noting that temp employment had fallen by more than 30 percent in the downturn. While there has been some upturn in temp employment in recent months, it is still down by more than 15 percent from pre-recession levels.
 
Is the NYT Prohibited from Discussing Alternatives to Austerity? Print
Monday, 17 January 2011 10:55

The NYT reported on the austerity agenda being imposed across Europe:

"governments must get their costs down by reducing wages, compensation and income, while cutting spending and raising taxes."

That's all a very good way to make a downturn even deeper, slowing growth and raising unemployment. Of course European governments actually do have options.

They could leave the euro. Yes, the process would be disruptive, but it likely promises a much better growth path than the path prescribed by the geniuses of euro austerity. The Argentine 2001-2002 default/devaluation is the model here. Of course the threat of Ireland, Spain, Portugal, Greece and other troubled economies leaving the euro may be sufficient to prompt the core euro nations and the European Central Bank to adopt more expansionary monetary policy, which would be the best possible outcome.

However, it is bizarre that that the NYT would devote a lengthy piece to a discussion of European austerity without even mentioned the opt-out option. This is certainly being discussed by many Europeans.

 
Would Employers Avoid Hiring Now Because of the Health Care Bill? Print
Sunday, 16 January 2011 09:53

That's what Representative Vicky Hartzler (R-Missouri) claims is going on in her district. The article could have noted that no evidence supports this claim. In other words, there is no increase in average hours per worker, no surge in temp employment, nor are the businesses most affected by the law (those with around 50 employees) in any apparent way less prone to add workers than larger or smaller firms.

It is also worth noting that most of the requirements of business, like buying insurance for workers or paying a penalty, don't kick in until 2014. Four million workers leave their jobs every month. If a firm is worried that a requirement that kicks in 2014 will make it unprofitable for it to have additional workers on its payroll at that time, there would be little reason for it not to hire in 2011, since it will almost certainly lose workers between now and 2014 which will allow it to get back to the size it desires when the new requirements go into effect.

 
Utopian Thinking on Jobs and Unemployment at the Washington Post Print
Sunday, 16 January 2011 09:11

Fox on 15th went Utopian on its readers today, ridiculing the suggestion by James Galbraith to temporarily lower the age at which workers can receive full Social Security benefits to 62. The plan, which also was put forward in a bill by Representative Dennis Kucinich, would pull some number of older workers out of the labor force and thereby create more jobs for unemployed younger workers.

The Post disses the plan. In addition to telling readers that it baffled financial journalists (are financial journalists really so thick that they had problems understanding this one?) it goes on:

"The proposals echo a familiar, and questionable, notion on the left: that we should find ways to better parcel out existing jobs. It's the same logic that leads some countries to consider cutting the number of hours or days someone can work each week, so that more people can share the work pool. In reality, the true challenge is to figure out how to create new jobs."

This one really is too delicious to believe that it actually appeared in print. Let's go in order.

The first part describes the idea that we might want to redistribute work by cutting the number of hours each person works as a "notion on the left." Wow, according to the Washington Post, Germany's Christian Democratic government is now on the left. German Chancellor Angela Merkel has been a big supporter of the country's work sharing program, although the idea originated with a Social Democratic minister in the previous unity government. These stupid leftists think they should be happy just because Germany's unemployment rate is just 6.7 percent, in spite of the fact that its GDP has taken a bigger hit than the U.S. in this downturn. In fact, many other countries across the OECD also have work sharing policies and most of these countries are not run by politicians who are viewed as leftists by anyone other than the Washington Post.

Okay, now for part II: "In reality, the true challenge is to figure out how to create new jobs." Oh yeah! And, let's see what are the ideas that the Washington Post has for putting 15 million people back to work. Hmmmm, I looked through the rest of the Outlook section, I didn't see any. I looked through the rest of the paper, and yesterday's too, didn't see any there either. In fact, I did a search of the paper over the last two months and I can't say that I saw anything that resembled a proposal to put 15 million people back to work. A naive reader might think that the Washington Post, and the group of policy wonks it considers respectable, just don't have ideas for creating "new jobs" and putting 15 million people back to work.

It sure would be wonderful if these respectable people did rise to the "true challenge" and come up with a way to put millions of people back to work, but they seem to be spending most of their time thinking of ways to reduce the deficit. It appears that our choices at the moment might be sharing the available work or having near double-digit unemployment.

The Post concludes by telling readers:

"sometimes the conventional wisdom is not only conventional, but wise as well."

That might be true, but this doesn't seem like one of those times.

 
Bruce Reed, New Biden Adviser, Did Not Encourage Free Trade Print
Saturday, 15 January 2011 09:08

The Washington Post wrongly asserted that Bruce Reed, who will be Vice President Joe Biden's chief of staff: "encouraged free trade and deficit reduction during the economic boom years of the 1990s."

This is not true. Reed, along with Gene Sperling and William Daley, the other recent Obama picks mentioned in the article, pushed for trade agreements that had the effect of putting manufacturing workers in more direct competition with low-paid workers in Mexico and other developing countries. Such deals had the predicted and actual effect of lowering the wages of manufacturing workers and non-college educated workers more generally.

None of these people have been associated with a larger free trade agenda, which would include efforts to eliminate the professional and licensing barriers that protect highly educated professionals like doctors and lawyers from foreign competition. And all three have been supportive of the protectionist portions of recent trade deals that increase the strength of copyright and patent protections. For these reasons, it is totally inaccurate to describe Reed, as well as the other Obama officials, as supporters of "free trade." 

 
Republicans Call Obama Policies "Job Killers" Because the Media Might Ask for Evidence If They Called Them "Baby Killers" Print
Saturday, 15 January 2011 08:45

The key to being an effective politician is making the most damning charge possible about your opponent that the media will view as credible. The Republicans have been very effective in this respect because they routinely refer to President Obama's health care bill as "job killing" and use similar language to refer to other measures that he has pushed.

Serious reporters would ask the Republicans for evidence that the bill has actually killed any jobs. If the charge was true then the Republicans should be able to point to a sharp upturn in average hours worked per worker, as firms worked their existing employees harder rather than risk the cost of taking on a new worker. The Republicans would also be calling attention to the huge surge in temporary employment, as firms looked to temp firms for their workers rather than put workers on their own payroll. And, Republicans would note that the firms most affected, those employing near 50 workers (bigger firms almost all already provide health care and smaller firms are largely unaffected) are lagging other firms in employment.

Of course the Republicans do not provide this evidence because it does not exist. Average hours per worker is up somewhat from its low-point in the downturn, but it is still far below its pre-recession level. Employment of temps is also up slightly from the trough of the downturn, but it is still more than 20 percent below the pre-recession level. And it would be very difficult to find any evidence in the data on employment by firm size that mid-size firms are any more reluctant to hire than the larger or smaller firms that are less affected by the health care bill.

In principle, reporters have the time to investigate allegations like the claim that the health care bill is costing jobs. Readers on the other hand do not. If the Republicans can make an untrue assertion and simply have it passed along as a credible statement, because reporters do not do their jobs, then we should expect them to make even stronger statements. Perhaps we will soon be reading accusations from Republicans that President Obama and the Democrats are baby killers. After all, given the current practice of the national media, they would likely just pass the charge along as a reasonable statement about events in the world.

 
Did You Hear the One About the 445,000 New Jobless Claims Last Week? Print
Friday, 14 January 2011 10:53

Yeah, well it's not really very funny, but you should have been able to read about the big jump in UI claims last week. These data are erratic, and it is only one week, but after a couple of weeks in which news outlets were eagerly touting lower claims numbers, to be consistent they should have given this jump some attention.

Claims had hit a low for the upturn of 391,000 in the week after Christmas before rising back to 410,000 last week. This was still good news compared to the 450,000 levels we had been seeing in the summer and early fall. After the last recession, the economy was not creating any jobs until weekly claims fell below 400,000. Certainly claims in the 450,000 range would not be consistent with robust jobs growth.

 
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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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