The Washington Post had an article that touted Ireland's success with its austerity program, which has allowed it to sell long-term bonds in financial markets at reasonable interest rates. The article questions whether Ireland can be an example for the rest of Europe with the first sentence posing the question:

"In Europe’s grand battle over growth vs. austerity, has Ireland proved that austerity works?"

While it is undoubtedly good news that the Irish government can re-enter credit markets, it is worth noting that the unemployment rate in Ireland is still 14.7 percent, down very slightly from its recession peak. This is still 10 full percentage points above the pre-recession level. This is supposed to prove that austerity works?

Paul Howard celebrates the lower than projected cost of the Medicare prescription drug program and attributes it to the role of private insurers. In fact, the main reason that Part D has cost less than projected is that the rate of increase in drug prices overall has been far less than projected. This in turn is attributable to a sharp fall in the number of breakthrough drugs.

If Howard wants to blame the collapse of innovation on the use of private insurers to deliver the Medicare drug benefit then he may have a case that the private insurers were central to controlling costs. Otherwise, he's killing electrons for nothing.

Thanks to Robert Salzberg for calling this one to my attention.

Given the disastrous failure of the economics profession to warn of the housing bubble, it is amazing that the country has not rounded up the lot of us (I'll go too) and chased us out of the country. Unfortunately, we still have a profession continuing to use its authority to spread confusion rather than enlightenment. 

Thomas Edsall and his readers are the victims today. In an interesting discussion of trends in poverty, Edsall includes a reference to work by Bruce Meyer and James Sullivan that shows poverty among the elderly has fallen to just 3.2 percent using a consumption based measure of poverty. There are many issues that can be raised about this analysis, as my colleague Shawn Fremstad has pointed out.

However perhaps the most fundamental point for purposes of Edsall's analysis, which explicitly compares poverty rates among the young and the old, is the fact that Meyer and Sullivan:

"report results using an adjusted CPIU-RS that subtracts 0.8 percentage points from the growth in the CPI-U-RS index each year (p 17)."

Okay, if the meaning of this line is not immediately clear, Meyer and Sullivan are assuming that actual rate of annual inflation is 0.8 percentage points less than official data show. This claim is debatable, but its implications are not. If we have been overstating inflation by 0.8 percentage point each year, then we have been understating real income growth by 0.8 percentage points.

This claim lies at the center of Meyer and Sullivan's claim that poverty has fallen sharply. Their adjustment would mean that income has risen by roughly 8 percent more over the last decade than official data show and 16 percent more over the last two decades. (I'm ignoring compounding to keep this simple.) This additional rise in income (or consumption) gets a lot of people over the poverty line.

The Meyer and Sullivan assumption has another important implication which they do not discuss in this paper and apparently did not discuss in their conversations with Mr. Edsall. If income is growing more rapidly than the official data indicate then people were much poorer in the recent past than official data indicate.

Good complaint, maybe she can talk to the Washington Post's editorial board who are such huge supporters of NAFTA that they decided that Mexico's GDP had quadrupled from 1987 to 2007. The data show a rise of just 83 percent. It would be great if the country had newspapers that didn't insist on inventing their own reality to advance their agenda.

Ezra Klein looked at Paul Ryan's latest budget and told readers:

"Ryan’s budget is intended to do nothing less than fundamentally transform the relationship between Americans and their government. That, and not deficit reduction, is its real point, as it has been Ryan’s real point throughout his career."

Well, that is one possibility. There is another option: Paul Ryan wants to makes rich people richer. I think the evidence supports the latter view.

Let's look at some of Ryan's trademark policies. Ryan repeatedly has proposed replacing Medicare with a voucher system or "premium support" as he likes to say. Note that Ryan has not proposed just eliminating Medicare and telling people when they turn age 65 (or 67) that they are on their own. 

What's the difference between handing people a voucher to buy insurance from private insurers and giving them access to a government-run Medicare system when they turn age 65? Over Medicare's 75-year planning period the difference is tens of trillions of dollars in additional money for private insurers and the health care industry, according to the Congressional Budget Office (CBO). 

As CBO and many other independent analysts have documented, using private insurers raises rather than lowers costs. We can believe that Representative Ryan is ignorant of this research or alternatively we can believe he knows and understands the findings, but still wants to use private insurers anyhow.

That's what the Washington Post told readers. There is a small problem here since China only has 1.35 billion people. Buy hey, what 250 million people more or less when you're the Washington Post.

(Typo corrected -- thanks Kat.)

New York Governor Andrew Cuomo has been bragging about job growth on his watch. The NYT has a piece challenging Cuomo's claims. It tells readers:

"The number of private-sector jobs increased by 4 percent in New York State from January 2011 to January 2013, according to the State Labor Department. Nationwide, over the same period, private sector jobs grew by 4.4 percent.

"Those figures come despite the fact that New York State lost fewer jobs, as a percentage, than the nation did in the Great Recession."

Actually the fact that New York lost fewer jobs in the downturn would be an argument as to why it would create fewer jobs in the upturn.

Every state will have some amount of normal job growth consistent with the growth of the labor force. It will also have additional job growth associated with a backlog of unemployed workers who are looking to find work. In the extreme case where a state lost no jobs in the downturn this backlog would be zero. In that case, the only source of job growth will be the normal growth of the labor force.

Obviously New York did lose jobs in the downturn, but the fact that it lost a smaller number relative to the size of its labor force would be argument as to why we would expect slower job growth now, not an argument as to why growth would be faster.

I'll let Cuomo's crew argue their own case on their record, but on this particular point the NYT got it wrong.

Glenn Kessler has been doing a good job scrutinizing the claims of horrors of sequester in his job as the Washington Post fact checker. For example, in this piece on the Obama administration's claim of the number of children who would be denied vaccines because of the sequester, he questions how many otherwise would have gotten vaccines and whether there were sources of flexibility in the program's funding that would allow vaccines to continue to be offered to eligible children.

These are reasonable points to raise. They imply that steps can be taken to prevent the sequester from being as harmful as simple across the board cuts may first appear.

In fact, this is a reasonable way to assess any claim about budgets. Unfortunately this critical approach does not get applied to standard framework in which Washington budget debates are taking place.

This framework holds that we must commit the country now to achieving some debt target (e.g. 73 percent of GDP) as of 2023, with the country then on a stable path of a debt to GDP ratio, or something really bad will happen. The implicit counter-factual in this framework is that even as the budget situation deteriorates later in this decade and early in the next decade, and financial markets get ever more antsy demanding ever higher interest rates, Congress does nothing.

This has never happened in U.S. history. There has never been a prolonged stretch in which the budget situation has deteriorated without a response from Congress. Nor have the financial markets ever panicked to the point where the government had any difficulty selling its debt.

In other words, the horror stories of exploding deficits and debt and resulting financial market panic have no historical precedent. They assume that future congresses will be far more irresponsible that any we have seen in the past.

This is of course possible, but it is a very strong assumption. It certainly would be worth pointing out to readers. Many Post readers have probably been led to believe that if the country does not do something about its deficit now there will be a problem as opposed to a situation where the deficit begins to pose major problems over the next decade and Congress still doesn't do anything. This confusion is far more important to current policy debates than the exact number of vaccines that will not be given due to the sequester.

Bruce Bartlett has an interesting blog post in the NYT talking about changes in patterns of wealth distribution in recent years. Bartlett points out that the recent rise in the stock market is likely to provide little benefit to most middle income families since they have little, if any, wealth in the stock market. By contrast, the value of the housing stock is still far below its pre-recession level, at $17.7 trillion at the end of 2012 compared to a peak of $22.7 trillion in 2006. Bartlett notes that this is likely to have a large impact on consumption and the economy, citing recent work by Karl Case, John Quigley, and Robert Shiller showing that a $1 decline in housing wealth is associated with a 10 cent drop in annual consumption. 

It is worth noting that the drop in the nominal value of the housing stock understates the impact of the housing crash on consumption. Potential GDP was almost 30 percent higher in 2012 than in 2006. This means that to provide the same spark to the economy as it did in 2006, the value of the housing stock in 2012 would have to be almost $30 trillion in 2012.

Andrew Ross Sorkin's piece arguing against the prosecution of large banks and other large companies might have led readers to believe that 28,000 people were out of work as a result of Arthur Anderson's bankruptcy, following its prosecution. Of course this is not true.

There is no reason to believe that the demand for accounting services fell as a result of Arthur Anderson's prosecution. While the people who had been working at Arthur Anderson lost their jobs when the company folded, the companies and individuals who were doing business with Arthur Anderson still needed accountants after the firm went out of business. This means that they would have turned to other firms with their business.

The firms who got the business lost by Arthur Anderson presumably hired more accountants and support staff to meet the additional demand. On net, there was probably little net change in employment in the accounting industry.

This point is important since banks and other large companies may try to make the same sort of argument as Sorkin to lead people to believe that there is a public interest in not holding them accountable for their crimes because it would lead to job loss. This is not true.