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Can Someone Get Dana Milbank to Read the Washington Post's Fact Checker Column? Print
Wednesday, 05 February 2014 06:19

If Dana Milbank had read this, he wouldn't have written something as silly and misinformed as this.

 
Frat Boy Budget Reporting at the NYT Print
Wednesday, 05 February 2014 06:08

The NYT was almost as bad as the Washington Post in its reporting on the farm bill. The NYT gets a few points for explaining how many people would be hit by the cuts in food stamps and what the cuts translated to in dollars per month.

But the main numbers still appeared as just really big numbers. No one knows what $1 trillion in spending means over the next decade and the article offers no context to provide meaning. So, this one will get a good humma, humma, humma, down at the budget reporters' frat house, but provides almost no information to readers.

The NYT had committed itself to placing these numbers in context more than three months ago. What is going on? It really is not that hard.

 
Inequality and Mobility: Is the NYT Writing News Stories from Republican Talking Points? Print
Wednesday, 05 February 2014 05:21

That is what readers of a piece discussing President Obama's shift in emphasis from the word "inequality" to "opportunity" will undoubtedly think. The piece notes that President Obama is using the word "opportunity" more and downplaying talk of inequality. It presents comments from several people saying that "inequality" raises the specter of class war and that it eliminates the possibility of compromise with Republicans.

Incredibly the piece presents the Republicans' official line uncritically, telling readers:

"Republicans generally argue that government should do little; a free market and a growing economy will create opportunity. Their ideas to overhaul education, job-training and safety-net programs often double as budget-cutting initiatives."

Of course Republicans argue that the government should do lots of things to redistribute income upward, they just don't highlight the fact that the government is doing these things. For example, they are strong supporters of government granted patent monopolies that increase drug prices by close to $300 billion a year, an amount that is roughly equal to 1.8 percent of GDP and almost four times the SNAP budget. They support keeping in place the protectionist measures that largely insulate doctors and lawyers and other highly paid professionals from the same sort of international competition faced by autoworkers and textile workers.

Republicans support keeping in place a tax code that is littered with tax breaks, the exploitation of which is the primary basis for the existence of the private equity industry. (See my colleague Eileen Appelbaum's forthcoming book on this topic.) Republicans support a special exemption of the financial industry from the sort of taxes that apply to other industries. This implicitly means higher taxes on other sectors of the economy and allows people to get ridiculously rich in finance. And they support a budget policy that keep millions of people out of work and puts downward pressure on the wages of most workers.

In short, it is absurd to say that the Republicans want the government to do little; they want the government to intervene in huge ways to redistribute income upward. Of course they don't openly say this, they would much rather pretend that all the policies they support that lead to an upward redistribution of income are just the natural workings of the market. In this way, the NYT has done them a great service in uncritically projecting the Republicans' romanticized image to readers as reflecting reality. However this completely distorts the relevant issues at play.

The real question is whether either party is prepared to attack the policies that have shifted such a vast amount of income upward over the last three decades. For practical purposes, if these policies are not changed, the agenda on mobility is just silly happy talk and everyone knows it. If the current policies promoting inequality are left in place there is nothing that Washington can do that can affect in more than a trivial way the life prospects of those in the bottom half and especially the bottom quintile of the income distribution.

 
CBO Says Obamacare Will Raise Wages Print
Tuesday, 04 February 2014 17:58

Apparently a lot of media folks have made such a habit of repeating Republican talking points that they can't see what is right in front of their eyes. The Republicans are touting the fact that the Congressional Budget Office (CBO) expects the Affordable Care Act (ACA) to reduce the number of people working.

Guess what? This was one of the motivations for the ACA. It is a feature, not a bug. There are a lot of people who would prefer not to work and would not work if they had some other way to get health care insurance. Imagine a 62 year-old with diabetes and other health conditions. No insurer will touch this person. If they can get insurance at all they are looking at bill that will certainly run well over $10k a year. If this person has a job that provides insurance they will keep it until they qualify for Medicare no matter how much of a struggle it is to go to work each day.

Now with the ACA this person will be able to buy insurance at the same price as anyone else in the age 55-64 age group. If they can get by on their Social Security and prior savings then they may well decide to retire early. They may also qualify for a subsidy in the exchanges. Is this an awful story? You be the judge.

The other likely scenario is the case of a mother with a newly born child. She may want to spend some time at home with her kid, but may have no other way to pay for her health insurance if she leaves her job. The ACA will give her an opportunity to get lower cost insurance (possibly with a subsidy). Again, is a mother taking some off to be with a new born kid a horror story?

Finally, we should be very clear about what CBO said on wages since there really is no ambiguity here. It said:

"According to CBO’s more detailed analysis, the 1 percent reduction in aggregate compensation that will occur as a result of the ACA corresponds to a reduction of about 1.5 percent to 2.0 percent in hours worked. (p 127)"

If hours fall by 1.5 to 2.0 percent, but compensation falls by 1.0 percent, then compensation per hour rises by 0.5-1.0 percent due to the ACA. If this is bad news for workers then someone must have been enjoying the new found freedoms in Colorado or Washington State too much.

 
More Frat Boy Budget Reporting at the Washington Post Print
Tuesday, 04 February 2014 07:51

The Washington Post gave us some good frat boy budget reporting in a front page story on the farm bill this morning. Frat boy budget reporting is when you write a piece that provides no information to the vast majority of readers but lets you go down to the budget reporters' frat house and give each other the budget reporters' secret handshake. In this case, the piece told us that the farm bill will cost $956.4 billion over the next decade, it will reduce spending on SNAP by $8 billion and save $16 billion in total.

Yes, this is really helpful. At least 0.1 percent of Washington Post readers have any clue what these numbers mean for the budget over the next decade. It is possible and easy to express these numbers in ways that would be meaningful.

CEPR's extraordinary Responsible Budget Reporting Calculator would allow any budget reporters to determine in seconds that the total bill is 2.05 percent of projected spending, which immediately would give the vast majority of Post readers a clear idea of the farm bill's importance to the budget. They could also quickly recognize that the cuts to the SNAP bill are 0.017 percent of projected spending and the total savings on the bill are 0.034 percent of projected spending.

It's really not hard to do budget reporting in a way that provides information to its audience. However the Post simply chooses not to.

 
Charles Lane is Wrong on NAFTA and the Trans-Pacific Partnership Print
Tuesday, 04 February 2014 05:47

Charles Lane is wrong, as usual, in arguing that the Trans-Pacific Partnership (TPP), like its predecessor NAFTA, is good for U.S. workers. However, the piece is useful in providing an opportunity to explain some basic economics.

Most of the piece is dedicated to saying that NAFTA, which to some extent is a model for the TPP, was really good for the country. Lane starts by disputing that NAFTA contributed to the $181 billion trade deficit that the United States ran with Canada and Mexico. He tells readers:

"But $100.7 billion of this deficit is because of oil imports, according to U.S. government trade statistics. NAFTA has nothing to do with this; Canadian and Mexican oil imports always flowed freely."

Nope, that's not how it is supposed to work. The United States is a net importer of oil and derivative products. That does not mean that the United States is supposed to run a trade deficit. According to good old econ 101, a deficit on oil trade is supposed to mean that the dollar falls, which then leads us to increase exports and reduce imports of other items. This adjustment would not take place over night, but we would expect it to take place over a long enough period of time. So pointing to oil imports and saying that we really don't have a trade deficit with these countries really is silly. (This doesn't mean the deficit is due to NAFTA, but it certainly doesn't preclude the possibility.)

Then Lane gives us a head scratcher. He tells us this trade figure doesn't include, "almost $90 billion worth of goods that entered this country from elsewhere and then got re-exported to Mexico or Canada." He then points out that re-exports create jobs in the U.S. in shipping and other areas. Incredibly, Lane then adds in the full $90 billion value of the re-exports, telling readers:

"Eliminating oil and including re-exports produces a U.S.-NAFTA surplus of roughly $7 billion in the goods trade."

Wow, so we get just as many jobs from having one million cars pass through ports in Oakland and Los Angeles on their way to Mexico and Canada as we do from building one million cars and exporting them to Mexico and Canada? Apparently we do on the Post's opinion page. Remember these are the folks, who in NAFTA boosterism, claimed Mexico's economy quadrupled from 1987 to 2007. (The actual increase was 83 percent.)

Read more...

 

 
Fiscal Surpluses in States Likely Driven by Capital Gains Income Print
Monday, 03 February 2014 06:06

The NYT had a piece noting how states across the country are seeing better budget pictures than they had projected. While this is attributed to growth, economic growth in 2013 was pretty much in line with expectations (worse in first half, better in second). The more plausible explanation is that the run-up in the stock market to both more capital gains taxes (a point that is noted) and also for capital gains income in many cases to be reported and taxed as normal income.

For tax purposes, short-term capital gains (assets held less than a year) are treated the same as normal income. Therefore it is likely that many households just report capital gains earnings as normal income. This would explain why the statistical discrepancy turns negative following large run-ups in asset prices such as the stock bubble in the 1990s and the housing bubble in the last decade.

statistical-disc

The implication of this scenario is that much of the increase in the tax revenue that states are now seeing is ephemeral. Unless stock and/or house prices continue to rise at an extraordinary pace, the statistical discrepancy will fall back toward zero and the extra tax revenue states are now seeing will disappear.

 

 
It's Monday and Robert Samuelson Is Defending the One Percent, Again Print
Sunday, 02 February 2014 21:09

Yes, not much of a surprise here. (I had to check the date to be sure I wasn't reading an old column.) Anyhow, let's start with the punch line:

"Economic inequality is usually a consequence of our problems and not a cause. For starters, the poor are not poor because the rich are rich.

"The two conditions are generally unrelated. Mostly, the rich got rich by running profitable small businesses (car dealerships, builders), creating big enterprises (Google, Microsoft), being at the top of lucrative occupations (bankers, lawyers, doctors, actors, athletes), managing major companies or inheriting fortunes. By contrast, the very poor often face circumstances that make their lives desperate."

Really? So the fact that doctors and lawyers secure themselves protection from competition and thereby drive up the cost of medical care and other products (yes, we do pay for corporate lawyers in the price of goods and services) doesn't affect the income of the poor? Not where I learned arithmetic.

How about the fact that the rich use their control over politicians to get them to run high unemployment policies by reducing the deficit and demand in the economy. This costs low and middle income workers both jobs and wages (see Jared Bernstein and my book on the topic.)

Oh yeah, and what about the fact that the Wall Street boys can get themselves too big to fail subsidies from the government ($83 billion a year according to Bloomberg, a bit more than the SNAP budget)? And of course they also get exemptions from the sales taxes that other industries have to pay. Where does this money come from if not the rest of us?

But hey, Robert Samuelson tells us their wealth has nothing to do with other people suffering. Who are you going to listen to, common sense, logic, and arithmetic or Robert Samuelson?

Then we get Samuelson telling us:

"Finally, widening economic inequality is sometimes mistakenly blamed for causing the Great Recession and the weak recovery. The argument, as outlined by two economists at Washington University in St. Louis, goes like this: In the 1980s, income growth for the bottom 95 percent of Americans slowed. People compensated by borrowing more. All the extra debt led to a consumption boom that was unsustainable. The housing bubble and crash followed. Now, weak income growth of the bottom 95 percent 'helps explain the slow recovery.'

Actually, the logic goes like this, as told by those of us who knew enough about the economy to see this crash coming. The economy suffers from weak demand because of so much money being redistributed upward to rich people who spend a smaller share of their income than middle and low income households. This problem was aggravated enormously by the explosion of the trade deficit that followed the run-up in the dollar due to botched East Asian financial crisis in 1997.

In the presence of weak demand the Fed allows interest rates to fall more than would otherwise be the case. In the absence of investment demand, these low interest rates create an environment that is very conducive to bubbles, hence we got the stock bubble in the 1990s and the housing bubble in the last decade. In the absence of another bubble to boost the economy we are continuing to see slow growth and high unemployment.

That one is probably too simple for Robert Samuelson to understand, but for most other people it provides a pretty direct link between inequality and the economic and social disaster of the Great Recession.

So the story is pretty simple. The system has been rigged to redistribute income upward. The rich have used their control of the political process to ensure that it stays that way and their control of news outlets like the Washington Post to try to distort reality.

 

 
The Value of Health Insurance Print
Sunday, 02 February 2014 11:23

The Washington Post has a very good piece about what having health insurance means to poor people in Eastern Kentucky with chronic health care conditions. As a famous vice-president once said, "it's a big f***ing deal."

That's not an excuse to overlook the huge flaws in Obamacare. For many people care will still be unaffordable. And the insurance companies, drug companies, medical supply companies and doctors are still ripping us off. But as this piece shows, it is already having a huge impact on people's lives.

 
Mayor Richard M. Daley Is Credited With Leaving Chicago an Unpayable Debt Burden Print
Saturday, 01 February 2014 21:52

We've been reading stories in the NYT and elsewhere about how Chicago has pension obligations to its workers that it can't possibly meet. Most of these accounts are exaggerated and seem intended to provoke excessive fears in order to facilitate default on the city's pension obligations. Nonetheless, there is no doubt that the city has seriously underfunded pensions.

This is why it is striking that when the NYT ran a piece on former Mayor Richard M. Daley going to the hospital, it failed to mention Daley's record on the city's pensions, telling readers:

"Mr. Daley, Chicago’s longest-serving mayor with 22 years in office, is credited with giving the city a face lift with new green spaces, a revived theater district and the transformation of Navy Pier into a colorful playground."

Daley is the person most responsible for the underfunding of Chicago's pensions, making him one of the most irresponsible elected leaders in recent history. It would be understandable that the NYT may not want to highlight negative aspects of Mr. Daley's tenure at a moment when he is apparently dealing with serious health issues, but there is no excuse for this sort of whitewashing of his record. Tens of thousands of people who worked for the city for decades may not see the pensions they earned as a result of Daley's recklessness.

 
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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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