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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.

News in the Post: President Obama Is Not Doing What The Post Wants Print
Friday, 14 January 2011 07:39

In most newspapers "news" is something that happens. However, the Washington Post chose to make one of its major news stories the fact that President Obama doesn't seem as concerned about reducing the deficit as it wants. Since there is no real event in the world that is highlighted, this is the only real way to describe this piece. (The article does refer in passing to the fact that the bond-rating agencies, who rated hundreds of billions of dollars of subprime mortgage backed securities as investment grade, threatened to downgrade the government's debt. However these warnings are just mentioned in passing.)

One might think that it is also news that President Obama does not have any plan to reduce the 9.4 percent unemployment rate. However, this is apparently not as big a concern at the Post.

The NYT Can't Find Any Economists to Talk About the United States' Debt Problem Print
Friday, 14 January 2011 06:22

That appears to be the case. The NYT had an article discussing the warnings about downgrading U.S. government debt from S&P and Moody's, both of whom rated hundreds of billions worth of mortgage-backed securities backed by subprime mortgages as investment grade. 

At one point the article notes that Moody's emphasized the deficit in the medium term, not the current deficit. It then tells readers that:

"For some economists, the failure to rein in the deficit now could spell trouble, not immediately but in 10 or 20 years."

However, the two people then cited are Peter G. Peterson, a wealthy investment banker, and David M. Walker, an accountant who has worked for organizations funded by Mr. Peterson. While both Mr. Peterson and Mr. Walker stressed the need to reduce the deficit, if the article had talked to an economist they might have pointed out that the projections of large long-term budget deficits are attributable to projections of exploding private sector health care costs. If per person health care costs in the United States were comparable to those in other wealthy countries the projections would show large surpluses rather than deficits.

Ford's Labor Costs Divided by Hours of Work Is NOT Their Hourly Compensation Print
Thursday, 13 January 2011 16:22

The NYT told readers that Ford's labor cost for a worker is now $59 an hour, which is says is down 20 percent from what it used to be. It is important to recognize that this number is not what Ford is paying for current workers' pay and benefits. This includes all payments that Ford makes for labor, including contributions to its pension and health funds for workers who are already retired.

This is an important distinction. Unionized auto workers are paid more than the typical worker, but their pay is not as out of line as this figure implies.

Credit Rating Agencies That Rated Subprime Junk as Investment Grade Warn U.S. Over Downgrade Print
Thursday, 13 January 2011 08:00

This would have been an appropriate headline for an article about warnings from S&P and Moody's that they might downgrade U.S. debt. These credit agencies rated hundreds of billions of dollars worth of mortgage backed securities that were backed largely by subprime and Alt-A loans as investment grade. Of course they were paid large amounts of money by investment banks for these ratings.

It would be appropriate to provide readers with background information so that they can better assess these sorts of warnings. It also is worth noting that Japan's debt was downgraded by S&P back in 2001 and in 1998 by Moody's. The interest rate on Japan's 10-year Treasury bonds is currently a bit over 1.0 percent. Clearly the downgrading by these credit rating agencies have not had much effect on Japan's ability to borrow.

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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.