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How Did the Washington Post Determine that Congress Has an "Addiction to Spending?" Print
Wednesday, 23 February 2011 06:01

That's what readers of a front page Washington Post article are undoubtedly asking after reading the first sentence:

"Is Rep. Harold Rogers the right man to break Congress's addiction to spending?"

There is nothing in the article that explains an "addiction to spending." It does describe efforts by members of Congress to get projects for their districts for which they can take credit, but it does not provide any evidence that this has been a major problem for either the federal budget or the economy. Virtually all budget experts agree that narrowly defined pork barrel spending, of the sort described in this article, is a small share of the total spending. Many projects are actually useful -- members of Congress just want to circumvent the normal appropriation process so that they can take credit for it.

It would have been more reasonable to begin a piece with a phrase like "fear of deficits" as the disease that Congress needs to overcome, since tens of millions of people are now unemployed or underemployed because Congress has a seemingly irrational fear of running larger budget deficits.

 
"Right to Work" Versus Freedom to Contract Print
Wednesday, 23 February 2011 05:39

The hoary phrase "right to work" has been appearing frequently in news reporting on the efforts by many Republican governors to weaken the power of public sector workers. This phrase, while very useful for opponents of unions, fundamentally misrepresents what is at issue.

There are absolutely no circumstances in which someone is denied the "right to work" in the absence of the laws that go under this name. These laws are actually about restricting the freedom of contract. Under U.S. labor law, unions are required to represent all the workers in a bargaining unit that they represent, regardless of whether or not they belong to the union.

This means that workers who opt not to join a union still benefit from the union's representation. This is true both in the sense that non-members get the same contract that union members receive (the contract can't specify one wage scale for union members and another for non-members) and also the union is required to defend the rights guaranteed to non-members on the contract. For example, if a non-member is fired or in any other way sanctioned, the union is required under the law to defend their rights as described in the contract.

In other words, U.S. labor law requires that the union incur costs to represent workers in a bargaining unit whether or not they choose to join the union. Not surprisingly, unions like to sign contracts that require workers to pay for this representation. This is a condition of employment just like employers impose conditions of employment (you don't like the pay, go work somewhere else).

So called "right to work" laws prohibit unions and employers from signing contracts that require workers to pay for their union representation. In this sense they could more accurately be termed "right to freeload," since they guarantee that workers will have the opportunity to benefit from union representation without paying for it.

 
Michael Gerson Makes It Up To Go After Public Sector Unions Print
Tuesday, 22 February 2011 17:14

On the Washington Post opinion pages you can make up anything you like as long as you are using it in an argument against working people. Therefore we get columnist Michael Gerson telling readers that:

"public employee unions have the unique power to help pick pliant negotiating partners - by using compulsory dues to elect friendly politicians."

Nope, that is not true in this country. Unions are prohibited from using dues to pay for campaign contributions. (If Mr. Gerson knows of any violations of the law, I'm sure that there are many ambitious prosecutors who would be happy to hear his evidence.) Unions do make contributions to political campaigns, but these are from voluntary contributions that workers make to their union's PAC. They are not from their union dues.

As Barry Goldwater once said, "making things up in the service of the wealthy is no vice," or something like that.

 
Microsoft's Finances are on the Verge of Collapse: Libel in the New York Times Print
Tuesday, 22 February 2011 06:04

You would not read that line in the New York Times. There are two reasons. The first is that it is not true (at least as far I know). The second is that the NYT would be quickly sued by Microsoft if it said something like this with no support.

However the NYT can say this about governments, which do not have the same ability to use libel suits to correct inaccurate statements. Therefore the NYT felt no qualms about beginning an article on Japan's stock market with the line:

"Japan’s government finances are on the verge of collapse."

Of course investors who are putting billions of dollars on the line do not agree with this unsupported assertion. The interest rate on 10-year bonds issued by the Japanese government is less than 1.3 percent. Investors usually demand a higher return from a company or government that they believe is on the verge of collapse.

 
David Brooks on Wisconsin: Flaunting Ignorance of Economics Print
Tuesday, 22 February 2011 05:38

Let's all have a hearty round of laughter at David Brooks' expense. He doesn't know that employer side payments for benefits like pensions and health care come out of workers' wages. In his column today, he tells his readers that public employees in Wisconsin should have to pay for these benefits just like private sector. Apparently he doesn't know that they already do.

Go into any economics department and tell the faculty that you think employers should have to pay more for workers' Social Security benefits. The ridicule with which that suggestion would be greeted should be heaped on Mr. Brooks for failing to understand basic economics. And of course, we actually have data that show that the higher benefits received by public sector workers in Wisconsin are more than fully offset by lower pay.

Of course the bigger mistake in Brooks' column is the assertion that we are looking at a decade of austerity. This may prove true, but this is a policy choice. We had unbelievably incompetent economic policy in the last decade. The Fed and the Bush administration allowed (arguably encouraged) the growth of an $8 trillion housing bubble. It was fully predictable that it would collapse and lead to a serious recession.

Unfortunately, economic policy continues to be guided by people who were too incompetent to recognize this bubble and the danger it posed. The route out of this downturn is simple: the government needs to spend money to create demand. This is the economy's problem at the moment, not a scarcity of resources. However, the incompetents control the debate and are now promising us a decade of austerity rather than taking the simple steps that would be needed to get back to full employment.

 
The NYT Puts Its Desire for Public Sector Workers to Take Pay Cuts in Its News Section Print
Monday, 21 February 2011 07:50

A NYT article on President Obama's relationship with unions in Wisconsin referred to the "need for public employees to sacrifice." There is no "need" for public sector workers to sacrifice.

As virtually all economists acknowledge, the economy's current problems stem from a lack of demand. If there were more demand, then the economy would grow more and it would generate more jobs. If public sector workers "sacrifice" by accepting cuts in pay and benefits then they will have to cut their spending. This will mean less demand, less growth, and fewer jobs.

For this reason, there is certainly no "need" for public sector workers to sacrifice. The NYT and others may feel better seeing them take cuts in pay, but this has nothing to do with the needs of the economy.

 
House Prices and the Economy Print
Monday, 21 February 2011 06:06

The Washington Post, which completely missed the $8 trillion housing bubble whose collapse wrecked the economy, is still having a hard time understanding house prices. It notes that the Case-Shiller 20-City index is a moving average of sales closings for the prior three months. And, there is typically a 6-8 week period between when a contract is signed and when it closes. It therefore tells readers that the December data to be released on Tuesday:

"should reflect the autumn lull in the economy. The question is whether the improved economic outlook over the past few months will translate into a firming up of home prices in early 2011."

Actually no. Short-term ups and downs in the economy will not be reflected in house prices. The main factor pushing house prices lower right now is the end of the homebuyers tax credit. This credit, which could be used for homes contracted before April 30th (and likely closed before the end of June) pulled many sales forward from the second half of 2010 and even 2011 into the first half of the year. Prices began to fall as soon as the credit ended.

It is easy to see from the data that the credit was driving the housing market, not short-term economic fluctuations. House prices stopped falling and actually rose somewhat in the second half of 2009, a point where the economy was still losing jobs, as people rushed to buy homes before the expiration date of the initial credit in November of 2009.

 

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The main factor in the housing market is the further deflation of the housing bubble. People who understand the housing market expect prices to continue to drop until the bubble is deflated. This means a price decline of another 10-15 percent over the next year.
 
Does Robert Samuelson Worry About Monsters Under His Bed at Night? Print
Monday, 21 February 2011 05:54

That's what readers of today's column must be wondering. After all, we have a government where the big banks can count on bailouts whenever they get in trouble, where pharmaceutical companies can makes tens of billions every year based on government-granted patent monopolies, where health insurers can protect themselves from competition with a more efficient government agency (i.e. Medicare), and where the rich more generally can count on Congress to fill their pockets and whose power does Robert Samuelson worry about? The AARP.

Let's note a couple of quick facts that Mr. Samuelson apparently doesn't have access to over at Fox on 15th Street. First, Social Security and Medicare are not just supported by AARP. They are supported by the vast majority of voters of all ages. In other words, Mr. Samuelson's foe in his quest to cut these programs is the public as a whole, not this one lobbying organization.

Second, the story of massive huge future budget deficits has little to do with aging. It is a story of a broken private health care system. If the United States paid the same amount per person for health care as any other wealthy country we would be looking at huge budget surpluses, not deficits. Of course we can't lower our costs because of the enormous power of the health care industry.

But Samuelson doesn't mention this lobby. He is busy looking under his bed for monsters and the AARP lobby.

 
Good Piece in the Post on the State of the Economy Print
Sunday, 20 February 2011 09:04
The Post deserves credit for an outstanding front page piece that did a serious analysis comparing how African Americans, Hispanics and whites are experiencing the downturn and view the future of the economy. Its polling had the unsurprising result that African Americans tend to be faring worst in the downturn, but interestingly were the most optimistic about the future.
 
Fox on 15th (a.k.a "The Washington Post") Goes All Out to Push For Its Deficit Agenda Print
Sunday, 20 February 2011 08:47

The Washington Post took its unbalanced treatment of the budget to new extremes today with a whole page devoted exclusively to deficit hawks telling us how we should rein in deficits. The lead piece is by Senator Alan Simpson and Erskine Bowles, the co-chairs of President Obama's deficit commission. This is followed by 5 pieces from deficit hawks.

There was no one pointing out the obvious truths that all budget experts acknowledge:

1) The explosion of the deficit in the last few years was the result of the downtown caused by the collapse of the housing bubble.

2) If the government reduced its deficit any time soon the main result would be slower growth and higher unemployment.

3) The main factor driving the horror stories of an exploding deficit in the long-run is the growth of private sector health care costs. If we paid the same amount per person for health care as people in other wealthy countries we would be looking at huge budget surpluses, not deficits.

 
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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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