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Home Publications Blogs Beat the Press The Post Bombards Readers With Misinformation About Jobs and the Economy

The Post Bombards Readers With Misinformation About Jobs and the Economy

Saturday, 07 May 2011 07:56

The Post once again showed why it is known as "Fox on 15th Street," running an editorial with the subhead, "tackling the specter of structural unemployment," which essentially offers nothing to address the problem.

The piece got off to a bad start early, telling readers:

"The unemployment rate remains stuck at 9 percent of the workforce, up from 8.8 percent in March. But, good news: The higher rate reflects job-seekers reentering the market because their prospects are better."

Actually, this is not the reason that the unemployment rate increased to 9.0 percent. The Labor Department's household survey showed a 205,000 increase in the number of people categorized as unemployed and a drop of 190,000 in the number of people reported as working. So, almost the whole change from March to April is explained by people going from being employed to unemployed, not new entrants to the labor market. This change is likely just a statistical quirk -- it is not statistically significant -- but the Post's assertion is simply wrong as anyone can see who looked at the numbers for a second.

But, as usual, it gets worse. The Post tells readers that we can't try to create jobs through fiscal stimulus:

"The government’s support was truly massive: Even before QE2 and the December 2010 payroll tax cut, the economy had received four times more fiscal and monetary stimulus (as a share of gross domestic product) than in all nine post-1953 recessions combined, according to a J.P. Morgan analysis. But the federal deficit is already huge at 10 percent of GDP, and increasing it substantially could trigger a bond market revolt that would abort the recovery."

Wow, we had a big stimulus -- that's really scary. Well, this was a much bigger downturn than "all nine post-1953 recessions combined." The Post completely ignored the $8 trillion housing bubble as it was growing -- instead filling its news and opinion pages with whining about the budget deficits of those years. It still seems determined to ignore the bubble.

We could recover from 8 of the past 9 recessions (the 2001 stock bubble crash recession being the exception) without substantial fiscal stimulus because they were all brought on by the decision of the Fed to raise interest rates. If the recession was brought on by raising interest rates, then there is a simple way for the Fed to bring on a recovery.

That's right! The Fed can lower interest rates. This is not an option when the recession is brought on by the collapse of an asset bubble, especially when interest rates are already at zero. (We used the growth generated by housing bubble to recover from the last recession.) Doesn't anyone at the Post's editorial board understand this basic issue?

The Post also raises the spector of the bond market vigilantes. Yes, these bond market vigilantes are really scary guys. They are even invisible so no one can see them. The interest rate on 10-year Treasury notes is now 3.14 percent, much lower than it was in the budget surplus days of the late 90s. Still, the Post wants readers to be very scared -- better to force tens of millions of people to be unemployed or underemployed than to take the risk that the bond market vigilantes will attack.

Then the Post warns against more aggressive monetary policy. This could lead to INFLATION!!!!!! The horror, the horror. What planet are these people on? Suppose the core inflation rate rises from its current rate of around 1.5 percent to 2.5 percent, 3.5 percent, or even 4.5 percent? Who gives a damn? Economies around the world, including our own, have for many decades had strong growth in output, productivity, and real wages with these sorts of inflation rates. How could any sane person view the risk of inflation rising to such levels as being worse than the current employment situation?

The Post then forgets where the economy is for a moment when it discusses President Obama's efforts to promote energy conservation and clean energy:

"The Obama administration thinks 'green jobs' are part of the answer, but clean-energy subsidies move jobs around within the economy instead of creating them."

The "move jobs around" line is a plausible claim when the economy is at full employment. It is not plausible now. The people employed weatherizing homes would not have other jobs if government subsidies did not encourage homeowners to make their homes more energy efficient.

The Post then gives us it pure propaganda line:

"Increasing exports, as the administration aims to do, is a promising strategy."

Can someone get these people an intro econ textbook? Increasing exports is not what creates jobs, it is increasing net exports (exports minus imports) that creates jobs.

If GM shuts an assembly plant in Ohio and instead ships its car parts to Mexico to be assembled there, are these parts exports creating jobs? In Washington Post land the answer is apparently "yes." Unfortunately in the real world the answer is no. Since we have been increasing our imports more rapidly than we have increased our exports, the United States has been running a big trade deficit, leading to a large loss of jobs. (The trade deficit also implies negative national savings -- and therefore either large budget deficits or negative private savings or some combination, but we'll leave this issue for another day.)

Finally, the Post conclues by urging patience:

"The costs, human and economic, of high unemployment are heartbreaking. But it will take a measure of patience as well as a sense of urgency to prevent it from becoming a permanent feature of the U.S. economic landscape."

Yes, all the buffoons running economic policy who could not see the largest asset bubble in the history of the world are still there running economic policy. All the Wall Street clowns who made a fortune pushing junk mortgages and packaging them into complex financial instruments are still rich. That's just the way it is. The rest of us just need to be patient.

Comments (18)Add Comment
written by S.D. Jeffries, May 07, 2011 10:13
The truly horrifying thing about such gibberish from WaPo is that much of the general public believes it - not only because it appears in the pages of the newspaper but because congressional blatherers and economists on the payroll of right-wing think tanks are pushing the same misinformation. I'm with Brad DeLong on this question: Why oh why can't we have a better press corps?
written by Jeffrey Stewart, May 07, 2011 10:46
Why do you think the WaPo completely ignores your substantive criticisms?
written by Paine, May 07, 2011 12:29
Superb dean superb

My usual Johnny one note

It's not idiocy it's classonomics

The corporate tower titans want a pure absorption solution to north south trade and bop imbalance

Do you ever get int,o that directly
Go to the heart of the motivation
A rigged forex system that produces profits simply by moving stuff across borders
written by Paine, May 07, 2011 12:32
The real problem is the corporate control of core Democratic voices
In the WH and Congress

The poor pwoggy bottom wing of the party
Is like the bachelor seals barking from a distant rock
As the bull seal porks the laditude
written by cavjam, May 07, 2011 12:41
Was not the "irrational exuberance" equity bubble pricked by St. Alan's series of interest rate hikes? (Which exogenous interference in markets was, of course, entirely unrelated to the then upcoming presidential election.)
written by PeonInChief, May 07, 2011 12:54
I think this article, or a version of it, is going to appear every month when the unemployment figures are released. And in every paper in the country too! See http://www.latimes.com/busines...8541.story
written by skeptonomist, May 07, 2011 2:03
Monetary "stimulus" probably includes the purchase of over $1T of MBS's, the main purpose of which was probably to take mortage institutions off the hook.
written by John Q, May 07, 2011 2:09
"...it will take a measure of patience as well as a sense of urgency ..."

Er - how do you have both at the same time?

(A clear indicator of the blathering thoughtlessness of the Wapo writers.)
written by eric, May 07, 2011 2:36
Thank you, Dean. This kind of garbage is truly infuriating. I heard the lie about how the uptick in UE was due to increasing participation on NPR, too. I wanted to scream. They can't even get the FACTS straight. Grrrr.
Stimulus Spending NEVER Works!!!
written by Paul, May 07, 2011 2:45
Just look at what happened with Cash-4-Clunkers less than 2 years ago: major auto makers bankrupt, laying off thousands of workers and closing factories every week with auto sales below levels of 20 years ago. And then C-4-C happened and . . . oh wait, something is wrong here. Never mind.
Politcal Aspecs of Full Employment
written by Sandwichman, May 07, 2011 8:06
Michal Kalecki, "The Political Aspects of Full Employment," 1942/43:

"Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense. Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of 'sound finance' is to make the level of employment dependent on the state of confidence."


written by paine, May 07, 2011 9:03
thanx sandy
that passage from that paper
by mr k
is immortal
never a time when its not relevent
when scoping out
class based macronautics
Job rejection.
written by denim, May 08, 2011 9:35
I understand that the unemployment numbers come from statistical surveys. Why not ask during the survery, what reasons are given to them for continued rejection of being hired. Also sounds like a good poll to take among human resources professionals.
OH Stimulous is being entirely successfull in creating inflation...
written by Attitude_Check, May 08, 2011 11:39
... just not in the area's desired. The horror is the energy and food inflation. In the the whole concept of quoting "core" CPI with energy and food excluded is a cynical farce. The two area's that the poorest spend a very large percentage of their income on, and who have the fewest options to deal with is "non-core".

The idea that debt-financed stimulus, to solve the problems caused by a credit bubble created by too much debt would be a howler if it wasn't so destructive. Minsky was right, and we are deeply into a Ponzi-speculative economy that destroys wealth.
written by Richard Carnes, May 08, 2011 11:43
Fine post but the word is "specter," not "spector" (except across the pond where a "spectre" haunts).
The Bubble
written by Fred Beloit, May 08, 2011 11:56
Dean writes: "The Post completely ignored the $8 trillion housing bubble as it was growing -- instead filling its news and opinion pages with whining about the budget deficits of those years. It still seems determined to ignore the bubble."

You are referring to the Dodd/Frank bubble I imagine.
written by liberal, May 08, 2011 12:14
Fred Beloit wrote,
You are referring to the Dodd/Frank bubble I imagine.

Actually, he's referring to the Greenspan/Reagan/Rubin/et al. bubble.
Fox on 15th
written by Randy Fritz, May 11, 2011 12:53
"take a measure of patience as well as a sense of urgency . . ." Dean: you should have made fun of this comment alone.

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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.