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Home Publications Blogs Beat the Press The Washington Post Doesn't Have Access to Data on the Labor Market or Government Finances

The Washington Post Doesn't Have Access to Data on the Labor Market or Government Finances

Wednesday, 05 September 2012 05:12

That is what readers of its lead editorial demanding that President Obama move to the right will undoubtedly conclude. After all, it begins by telling readers:

"THE BIGGEST CHALLENGE for the next president will be putting the nation’s long-term finances on sounder footing. The failure to do so is the biggest shortcoming of President Obama’s first term [capitalization in original]."

After all, people who had access to data on the labor market would have to believe that the fact that tens of millions of people are still unemployed or underemployed is the biggest failure of President Obama's first term. These people and their families are seeing their lives ruined.

The worst part is that the devastation they are suffering is not due to their own failings. It's due to the incompetence of people with names like Alan Greenspan, Ben Bernanke and Robert Rubin and the people who have the opportunity to express themselves in major media outlets like the Washington Post. This disaster would have been 100 percent preventable, if anyone in a position of authority had been able to recognize an $8 trillion housing bubble and understand that its collapse would have a devastating impact on the economy. 

Unfortunately, in modern America, people rarely suffer the consequences of their own failures. As a result, the people responsible for this disaster have granted themselves a collective "who have known?" amnesty. Virtually all of them still hold their jobs.

The other part of the Post's story is also wide of the mark. Rather than suffering from an imminent fiscal crisis, the ratio of interest payments to GDP is near a post-war low.


                                  Source: Congressional Budget Office.


Comments (13)Add Comment
no compassion
written by David, September 05, 2012 8:41
This graph only extends to 2009, but you can see, we're doing pretty well as far as public debt to gdp ratio too. There has been a spike these last two years, but it doesn't take a genius to figure out that lost jobs is exacerbating the matter. That, and overpaying our private sector health care system by 100% -- markup from fantasy-land.

written by David, September 05, 2012 9:58
... this chart does show that strong efforts on debt reduction have been made since the bottom dropped out. And who's administration really drove the debt expansion.

Why Are Federal Finances a Challenge At All?
written by Paul, September 05, 2012 10:04
"THE BIGGEST CHALLENGE for the next president will be putting the nation’s long-term finances on sounder footing."

Yesterday, the total federal debt topped $16 trillion. So what? Did interest rates jump? Did inflation accelerate? What exactly was the consequence of this milestone? Absolutely nothing of course.

What if somehow the federal debt were cut in half tomorrow? What would be the benefit to the economy? Absolutely nothing of course.

All the empty talk about the federal debt over the past 3 years has had one consequence: fiscal policy to reduce unemployment has been completely hamstrung and millions of Americans are needlessly suffering.

Thanks for that WaPo!
The real rate paid on govt debt is zero.
written by Ralph Musgrave, September 05, 2012 10:35

I assume the graph which shows interest as a percent of GDP is calculated in nominal rather than real terms. In other words after adjusting for inflation, the REAL rate of interest paid on government debt is about zero. I.e. the alleged “problem” is even more of an irrelevance that Dean and some of the above comments suggest.
written by Nick, September 05, 2012 10:36
"Unfortunately, in modern America, *powerful* people rarely suffer the consequences of their own failures."

Fixed it for you. Ordinary people who screw up are devastated by the consequences for decades.
written by S.D. Jeffries, September 05, 2012 11:39
If we are indicting players that prolong suffering of the masses for the benefit of the few, we should mention Timothy Geithner, near the top of the list. And also add that member of the morality police Ed Demarco, acting director of Federal Housing Finance Agency (Fannie Mae and Freddie Mac). Yesterday Demarco announced he would be increasing the fees paid to FHFA, which will average 0.1 percent of the loan amount (10 basis points), increase to go into effect on Nov. 1. The current guarantee fee averages 28 basis points, or 0.28 percent of the loan amount.

"The increase is intended to attract more private funds into the mortgage market by reducing the pricing advantage held by Fannie Mae- and Freddie Mac-backed mortgages," according to Demarco.

Last month Demarco was tasked by the White House to reduce the principal amount on underwater loans held by Fannie and Freddie. He refused, citing "moral hazard." Instead of Demarco being fired, Geithner sent him a sternly worded letter.

That's just great. When the economy needs stimulus, particularly those mortgage holders who have seen the equity in their homes take a dive, they get a moral lecture, the economy gets an even longer recovery time and the FHFA gets a raise.
of course
written by joe, September 05, 2012 3:37
Since the US govt is the issuer of the dollar, they can come from no where else, the US has absolutely no long term fiscal problems. The US does NOT truly borrow money. Seriously, what can bernanke do? People have balance sheet problems and don't want to borrow (private debt is the problem, not public debt), only fiscal policy can help now. Pretty basic stuff. All this talk about credible threats of inflation is just different forms of the confidence fairy. Your income is someone else's spending. Govt deficit = private sector surplus. It's mathematical fact, deal with it.
hey joe, where you going with that logic in your hand?
written by David, September 05, 2012 5:52
The big picture on balance sheets and personal savings rate.


The latest data points were released last Friday.
our sad state of affairs
written by mel in oregon, September 05, 2012 6:55
makes you wonder why cepr writers read the editorials of the wa post or ny times. but nothing has changed really. during the viet nam war, conservatives said the no.1 problem in america was inflation, overlooking the thousands of americans killed or loser of limbs or sight. or the millions of dead asians we killed. conservatives & their media toadies have always been full of bull, showing how insensitive & corrupt they are. things only seem bad now because we had such a prosperous country for more than half a century, but those days are gone, get used to it.
what are they including in savings and net worth
written by joe, September 06, 2012 12:15
I'm a bit skeptical of the net worth chart. There was a big decline in 2009, but not everyone got thrown out of their house, the net worth was never really there. The savings rate graph there must only be households, business debt probably isn't included. All flows go from somewhere to somewhere else. System wide surplus = system wide deficits still holds. This is even embedded in the national accounting equations dean tried to school robert samuelson on. http://neweconomicperspectives...locks.html
net worth
written by joe, September 06, 2012 12:20
You have a house as an asset and the increase in market rates for housing would indicate an increase in your net worth. But that increase isn't actually realized until it's sold. Then someone must spend that money for you to get it. How exactly is the personal savings rate calculated??? For example, if you spent everything you earned but your house increased in value, would that count as accumulating savings?
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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.