Beat the Press is Dean Baker's commentary on economic reporting. Dean Baker is co-director of the Center for Economic and Policy Research (CEPR).

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Thomas Friedman once again urged both major parties to compromise to get things done in his NYT column. He argues that compromise is the only way to get things done. To make his case he lists a number of issues where he argues compromise is necessary, leading with:

"How will we improve Obamacare?"

Friedman probably missed it (hard to get information about Washington politics at The New York Times), but the Republicans have made repeal of the Affordable Care Act (ACA) a sacred cause. They routinely demand the destruction of the ACA in their campaigns. They voted dozens of times to repeal the ACA and have celebrated any bad news that could be associated with the program. This is in addition to all the phony stories about the ACA killing jobs and forcing employers to switch to part-time workers that the Republicans have invented.

In this context, at this point doing anything to further Obamacare would amount to complete surrender on core Republican principles, not a compromise. But you would have to know something about Washington politics to be aware of this fact.

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The NYT has a major piece on the skepticism towards Hillary Clinton's job creation proposals in the coal mining regions of Virginia. While there undoubtedly is much ground for skepticism about the prospects for such proposals, it is worth noting that most of the coal mining jobs in this region were lost long ago.

Employment in coal mining in Virginia peaked at just under 25,000 in 1982. By 1992 it was under 14,000 and it was below 10,000 by the end of the decade.

Employment in Mining in Virginia
virginia coal

Source: Bureau of Labor Statistics.

Since 2000, the number of mining jobs has generally stayed close to 10,000, but it has fallen off to 8,300 over the last three years according the Bureau of Labor Statistics new series on mining jobs. While any job loss is a horrible story for the people directly affected, especially when it occurs in an already depressed region, the bulk of the mining jobs had been lost more than two decades ago.

In other words, the loss of mining jobs is not something new due to efforts to slow global warming. It is due to increased productivity in the coal industry, and more recently, competition from low cost natural gas from fracking. 

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We all have come to appreciate the economic wisdom of no one. After all, no one saw the housing bubble and no one expected the recovery to be so weak. So when no one talks, people listen.

That's why people were impressed to see no one make an appearance in Robert Samuelson's column. Samuelson notes the weak 1.2 percent economic growth in the first half of 2016, which he says puts us at the edge of a recession. He contrasts this with the relatively healthy job growth which he inaccurately describes as "booming." (The 200,000 monthly rate of job growth is certainly respectable, but not exactly a boom.) Samuelson then tells readers:

"No one really understands the gap between the GDP and job figures."

No one certainly does understand the gap. First and foremost, no one realizes that the slow growth in the second quarter was simply an inventory story. Final demand grew at a 2.4 percent annual rate in the second quarter. No one also knows that GDP growth is likely to be considerably faster in the third quarter as inventory accumulations raise growth. No one knows that the Atlanta Fed's GDPNow projection shows GDP growth of 3.4 percent for the third quarter. In other words, no one knows that a recession is not now on the horizon.

No one also knows that the gap between relatively weak GDP growth and relatively strong job growth has been a feature of this economy for the last five years. It means that productivity growth has been very weak, averaging less than 1.0 percent annually. No one attributes this weak productivity growth to the weak labor market. Workers have been forced to take jobs at low wages, which means that businesses have incentive to create low wage jobs. (Think of the greeters standing around in Walmart or the people working the midnight shift at a 7-Eleven. These jobs likely would not exist if the companies had to pay $15 an hour.)

No one recognizes that several other points in Robert Samuelson's column are wrong or confused. For example, Samuelson comes up with an wholly implausible story on the difference between the rate of job growth and GDP growth:

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I see that my friends Jared Bernstein and Paul Krugman are worried that the Fed may not have enough ammunition to combat the next recession when it comes. I can’t say I share their concern.

First, we have to remember that recessions aren’t something that just happens (like global warming :)). Recessions are caused by one of two things: either the Fed brings them on as a result of raising interest rates to combat inflation or a bubble bursts throwing the economy into a recession.

Taking these in turn, if the Fed were raising interest rates in response to actual inflation (and not the creative imagination of FOMC members) then we would presumably be looking at a higher interest rate structure throughout the economy. In that case, the Fed should then have more or less as much room to maneuver as it has in prior recessions.

The bubble story could be bad news, but it is important to think a bit about what a bubble bursting recession means. There has been a serious effort in many circles to treat bubbles as really sneaky creatures. They just pop up when no one is looking and then they burst and sink the economy.

That is a convenient view for all the people who were in positions of responsibility in the housing bubble years and ignored the threat the bubble posed to the economy. But the reality is that the housing bubble was easy to see for anyone with their eyes open. We saw an unprecedented run up in house prices with no increase in real rents at all. Vacancy rates were hitting record highs even before the bubble burst.

And the deterioration in loan quality was hardly a secret. The business press was full of stories about “NINJA” loans, which stood for no-income, no job, no assets.

And most importantly it was evident the bubble was moving the economy. If a bubble in the barley or platinum markets burst, it’s no big deal unless you happen to be employed or run a business in these sectors. But the housing bubble had pushed residential construction to a post-war high as a share of GDP at a time when a flood of retiring baby boomers might have suggested it would be unusually low.

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Both parts of the that headline are true, although the Post did not connect them in exactly this way. It's editorial instead highlighted the debt-to-GDP ratio, trying to hide from readers the fact that the real burden of the debt is near a post-World War II low.

This is a classic case of the ends justifying the means. The end here is to cut the Social Security and Medicare benefits of middle income retirees. The Post sees this as the obvious policy option to pursue in a context where there has been a massive upward redistribution of income over the last four decades. And if they have to use a bit of deception to get there, well that's okay.

The piece begins by telling us the horror story that the Congressional Budget Office projects that the deficit will rise this fiscal year from its 2015 level, the paragraph ending:

"The bigger deficit will push the national debt to 77 percent of gross domestic product, the highest level since 1950, this year."

Of course if we didn't have hysterical editorials from the Post and the professional deficit hawks we would never have any clue of the fact that we are seeing the highest debt-to-GDP level since 1950. A large debt can have negative effects in two ways.

First, it can mean a high interest burden. This means that we would be diverting a substantial portion of GDP from other purposes to pay interest to the owners of government bonds. This issue is assessed not by looking at the size of the debt, but rather the size of the interest rate payments. Currently interest payments measured as a share of GDP are a bit less than 0.8 percent, after subtracting the interest payments that are refunded by the Federal Reserve Board to the Treasury. By comparison, the interest burden was over 3.0 percent of GDP in the early and mid-1990s. In other words, that one doesn't come close to passing the laugh test. (This information is available in the same CBO report cited by the Post.)

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The Commerce Department released data on corporate profits along with its preliminary GDP report for the second quarter of 2016. It showed that the profit share of corporate income is continuing to edge downward. The before tax share of corporate profits (net operating surplus) was 24.2 percent in the second quarter of 2016. This is down from a peak of 27.4 percent in the third quarter of 2014, but still well above 20.4 percent average for the four decades prior to the collapse of the housing bubble. With profit data it is always important to include the caution that the numbers are erratic and subject to large revisions.

Book4 28361 image001 Source: Bureau of Economic Analysis.

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The Washington Post reported that Uber is deliberately trying to drive Lyft, its major competitor out of the market, by having temporarily low rates and subsidies to drivers. If the Post's reporting is accurate, and barriers to entry prevent new companies from effectively competing with Uber, then the company is engaging in classic anti-competitive tactics. This is the sort of activity that is supposed bring intervention from the Justice Department, since Uber will be charging higher prices if it succeeds in eliminating Lyft.

The management of Uber is either not aware of the law or counting on its political power to ensure that the law is not enforced. Uber hired David Plouffe, President Obama's top political strategist, to a top position in 2008.

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The New York Times had a good piece about how the Federal Reserve Board is responding to protests of Fed policy and insufficient concern about unemployment by the group Fed Up. (CEPR is affiliated with the Fed Up campaign.) At one point the piece quotes Esther George, the president of the Kansas City Fed, as saying that she is sympathetic to concerns about unemployment, but that if the Fed is too slow in raising interest rates it can lead to inflation and asset bubbles.

It is worth noting that Ms. George has been expressing this concern about inflation for the last three and a half years, a period in which there has been no noticeable increase in the inflation rate. While there are real reasons to be concerned about asset bubbles (like the stock bubble in the 1990s and the housing bubble in the last decade), higher interest rates are a very poor tool for combating bubbles.

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One of the highest principles of the Republican Party is destroying Obamacare. It seems that the Republicans in Tennessee may be making a big step in that direction. According to the state's insurance commissioner, the health care exchange in the state is on the edge of collapse. The number of insurers taking part in the exchange is down to four and the fees they charge are soaring.

That's great news for people committed to keeping people in Tennessee from being able to get health care insurance. Of course, because of Obamacare, even if the exchange in Tennessee collapses, those who can afford to get insurance on their own will still be able to buy it in the individual market without regard to any pre-existing condition. That means that people with heart disease or cancer survivors will be able to get insurance for the same price as everyone else.

But since the subsidies for insurance are only available for people buying insurance on the exchange, if policies are not offered on the exchange, then Tennessee's Republicans will have effectively denied the state's citizens access to the same subsidies that people in every other state can get. Now that is a great accomplishment.

Of course it is not hard to fix the exchanges to make sure there are a substantial number of insurers offering policy. Suppose Tennessee required insurers to offer policies on the exchange as a condition of offering policies outside of the exchange.

The reason the exchanges face problems is that they are attracting a less healthy group of patients. The insurers naturally are happy to insure relatively healthy people — these people are mostly just sending the insurer a check every month. It's the less healthy people who cause problems, they actually cost the insurers money. So, the state can just require that insurers commit to insuring less healthy people on the exchanges as a condition of insuring the more healthy people on the individual market.

That is one possible solution, there are others, if the point is to enable the people of Tennessee to buy health care insurance. But if the goal is to keep the people of Tennessee from being able to benefit from the Affordable Care Act then it sounds like the Republicans in Tennessee are doing a good job.

I suppose that's good news for the rest of us, since we will be sending fewer of our tax dollars to Tennessee to pay for health care. I guess it means that people having trouble paying for insurance in Tennessee will have to move to a neighboring state like Kentucky, where the leadership has not been as effective in blocking people from getting health insurance.

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Sebastian Mallaby had a column in the WaPo on the Fed's 2.0 percent inflation target. Mallaby argues that the 2.0 percent target is arbitrary and makes the case that moving to a higher inflation target, as recently suggested by San Francisco bank president John Williams, would be desirable.

While Mallaby makes some good points, he also gets some items wrong. First, he notes the Fed's decision to ignore the growth of the housing bubble in the last decade. He said that they viewed the issue of financial stability as one appropriately left to regulators, not a concern for monetary policy. This is largely right, but it ignores the point that the Fed also has enormous regulatory power, including the responsibility for oversight on the issuance of mortgages.

Alan Greenspan essentially ignored these responsibilities, seeing them as inconsequential.This is largely because he didn't see bubbles as any big deal, or at least this is what he publicly said in a speech he gave at the American Economics Association convention in January of 2004. In this speech he patted himself on the back for having the good sense to let the stock bubble run its course and then pick up the pieces after it burst. (The next day, Ben Bernanke, who was then a Fed governor, explained why it was necessary to still have a 1.0 percent federal funds rate, more than two years after the recession had officially ended. This suggested it was not easy to pick up the pieces.)

The other area where Mallaby is not exactly on target is in discussing the Fed's tools. While he is correct in arguing that the Fed has more room to lower the federal funds rate in the context of a higher inflation rate, it is not right that this is its only tool. The Fed could target a long-term interest rate. For example, it could set a target of 1.0 percent for the 10-year Treasury rate for the next year.

This sort of targeting of a longer term rate would provide a more direct boost to growth than lowering the federal funds rate. While it might be desirable to rely on a more known tool for monetary policy, it is wrong to imply that there is nothing more the Fed can do to boost growth.

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David Ignatius used his WaPo column to express his concern that Australia will opt to align itself more closely with China at the expense of its ties with the United States. In making the argument that other regional powers may provide an offset to China, Ignatius cites Indonesia, which he notes has seen its per capita income increase by 50 percent while China's economy is slowing.

While Indonesia's growth has been pretty good over this period, China's per capita GDP increased by 136 percent over the same period. Even with its slowdown its economy is still growing more rapidly than Indonesia's. It does not seem likely that Indonesia will gain economic strength relative to China any time soon.

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Of course the NYT didn't actually say this, instead it told readers:

"...the White House and congressional Republican leaders mostly agree on the economic benefits of trade."

Actually, unless the paper has mind readers on staff, its reporters are not in a position to know whether the White House and Republican leaders have the same views on the economic benefits of trade or if they even have views on the economic benefits of trade. It is entirely possible that they are pushing the Trans-Pacific Partnership (TPP) out of a desire to ingratiate themselves with the powerful industries that stand to benefit from the deal. Since the NYT can only know what the White House and Republican leaders say, it would be best if they restrict their reporting to what they know to be true.

The piece also makes a point of noting a study by the footwear industry reporting that the TPP will save the country $4 billion on footwear. It would have been helpful to note that this figure is a projection of savings over the next ten years. The projected savings of $400 million a year comes to 0.0022 percent of GDP or roughly $3 a year per household. According to the study, the TPP will raise the deficit by $1.2 billion as a result of the lower tariffs on imported shoes. The other $2.8 billion in projected savings will come from lower wages and reduced profit in the retail and related industries.

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That seems to be the story according to MarketWatch. It quotes Stanley Fischer the vice-chair of the Federal Reserve Board as saying, "We are close to our targets" for inflation and unemployment. Fischer adds, that the current 1.6 percent inflation rate shown by the core personal consumption expenditure (PCE) deflator is "is within hailing distance" of the Fed's 2.0 percent target.

Actually, this is not true. The 2.0 percent target was always identified as an average, not a ceiling. This means that periods of below 2.0 percent inflation should be averaged out with periods of above 2.0 percent inflation to reach the 2.0 percent target. If the Fed were sticking to prior policy, it should be looking to have an inflation rate somewhat above 2.0 percent for a number of years to offset the long period of below 2.0 percent inflation by this measure.

The figure below shows the year over year measure of the core inflation rate since the beginning of 2011. Not only has it been below 2.0 percent for the last four years, it shows no tendency to increase. Stanley Fischer is of course free to deviate from the Fed's official target in his thinking, but it would have been appropriate to point that fact out. This makes it a much more newsworthy story. Of course, if the Fed does start raising rates the point is to slow the economy and limit the number of people who have jobs. That's a big deal.

PCE core 7997 image001

Source: Bureau of Economic Analysis.

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Ever since NAFTA passed in 1993, the media have been anxious to say how the pact has been a great boon to Mexico, even if its impact on the U.S. might not have been so great. Since Mexico's growth post-NAFTA has actually been pathetic (the gap in per capita income with the United States has increased), the praise has often involved ignoring the data or even just making things up.

The Washington Post gets first prize in the latter category, famously telling readers back in 2007 that NAFTA had caused Mexico's GDP to quadruple in the prior two decades. The actual figure according to the I.M.F. is 83 percent. The Post has never corrected this obvious error, indicating that when it comes to pushing its agenda on trade the Post has as much respect for the truth as Donald Trump.

Anyhow, the promotion of the post-NAFTA Mexican boom continues. The latest guilty party is the Los Angeles Times which devotes a lengthy piece to telling us how the boom is not just good for Mexico, but also the United States. Mexico's per capita GDP growth since 2008 is less than 0.7 percent. This is a growth rate for a developing country that would more typically be described as "pathetic" than a boom.

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Those folks at the Washington Post are so much fun. Now that it looks like the Trans-Pacific Partnership (TPP) might fail, the Post challenges TPP critics, "if not the Trans-Pacific Partnership, then what?"

Let's see, the Obama administration had how many staffers working how many years to craft the TPP? And the critics working in their spare time should come up with the alternative?

Okay, but we'll accept that the critics are much smarter and more competent than the TPP team. I'll at least outline some items I want in my pact.

First, we can accept the actual "free trade" items in the pact. Let's eliminate the tariffs and quota restrictions as provided for in the TPP. That won't have much impact, since in almost all cases they are already very low, but no good reason not to go to zero. 

There is one item worth noting here. If this is really an anti-China deal, which is the main line these days of TPP proponents, then we would probably want to up the country of origin requirements. As it stands, the TPP provides that if 30 percent of the value added of a product is made within the country, then it can get the preferential treatment awarded to TPP members.

This means that if a Chinese company sends a product to Vietnam, where 70 percent of the value comes from China, it can be shipped to the U.S. under TPP rules. And, having more confidence in the private sector than government bureaucrats, my guess is this Chinese firm can probably find a way to get through with 25 percent Vietnamese content and possibly even less. If the point is to in some way lock out China, having a 30 percent country of origin requirement was probably not the way to go.

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That's what readers of a NYT article on support for Trump in West Virginia must be wondering. The piece told readers that Trump was promising to bring back the coal mining jobs to the state. While West Virgina used to have many more jobs in coal mining, that was decades ago.

Employment in coal mining had fallen from a peak of more than 130,000 in 1940 to just over 21,000 in 2000, roughly its current level. Employment did rise somewhat in the last decade, reaching 35,700 in December of 2011. (This was a bit less than 5.0 percent of total employment in the state.) However, it began to decline back to its current level the following year, largely due to the availability of cheap natural gas from fracking.

It's not clear what Trump's reference point is in his promise to bring back mining jobs. He could mean the peak hit during President Obama's first term in office, which would re-employ roughly 14,000 miners. It's not clear who would use the coal — Trump has not indicated that he wants to restrict fracking — but few thought that West Virginia was thriving in 2011.

It is possible that Trump is referring to the more distant past when West Virginia had more than 40,000 jobs in coal mining, but this would mean going back to the 1970s, more than 40 years ago. The main reason for the decline in coal mining jobs over the next decades was increased productivity in the industry, as strip mining replaced underground mining. If Trump intends to restore the number of jobs to the pre-1980 level then perhaps he would ban more efficient strip mining and make the industry rely exclusively on underground mining again.

Note on Source:

Several comments ask about the source for the figure. It comes from the website Appalachian Voices, which I gather is a community organization in West Virgina. Unfortunately, I could not find their source, but since it follows closely data from the BLS for mining employment (which can include mining of other minerals), I felt comfortable using it. (Those data are available in their discontinued data series.) Sorry about leaving it out initially. As far as the years since 2008, these data are available from BLS in the Current Employment Series giving state level data. This series goes up through June of 2016, but only as far back as 1996.

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In his Washington Post business section column Gene Marks made a classic journalistic mistake: he reported what people claim to be the case as fact. Specifically, he reported that employers are curtailing hiring and increasing part-time employment in response to Obamacare. In fact, the basis for this assertion is a survey of 200 business executives by the New York district Federal Reserve Bank.

There are two basic problems here. The business executives may be inclined to say they are cutting jobs or increasing part-time work because of the Affordable Care Act (ACA), even if it's not true, because they don't like the ACA. The other problem is that they may not know the exact effects of the ACA (actually, no one does), so their response may be based on factors that are not attributable to the ACA.

Specifically, the survey indicated that the executives were responding to a large increase in insurance premiums this year. However, the rise in premiums had been quite low in prior years. It would be difficult to determine how the path of health care costs has been changed by the ACA, but it is indisputable that the growth path has been considerably slower than was expected when the ACA was passed in 2010. So unless these executives can somehow determine that they are paying more for insurance today because of the ACA, they actually don't have a basis for saying that their response to the latest rise in premiums is a response to the ACA.

Economists tend to look at what people do rather than what they say. In this category, the data tell a story that is the opposite of what is indicated by the survey. Job growth has been very fast since the ACA went into effect. In addition, the number of people involuntarily working part-time has fallen sharply. It is down by 23.5 percent since the exchanges and Medicaid expansion went into effect in January of 2014.

There has been a substantial increase in the number of people choosing to work part-time, notably young parents. (These are presumably parents of young children, but we only have data on the parents' ages.) This is one of the intended effects of Obamacare. By allowing people to get insurance from outside of employment, Obamacare made it possible for many parents to get insurance without working at a full-time job that provides health care as a benefit.

It is interesting to know what business executives have to say about the impact of Obamacare, but it is a serious error to report this as truth.

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People don't expect to see honest debate on economic issues on the opinion pages of the Washington Post, which is why it is not surprising to find a column from Charles Lane trashing Bernie Sanders and his wife for buying a $575,000 vacation home in Vermont. While Lane indicates that he thinks it is okay that they buy this home, he thinks it somehow contradicts Sanders' self-described socialism. At best, this claim shows how utterly ignorant Lane is of what Sanders said throughout his campaign.

Just to start with the basic economics, Sanders pay as a senator is roughly $175,000 a year. Jane Sanders, his wife, is also a professional can be expected to earn somewhere in that range. This would give them a combined income of $350,000 a year. That is the edge of the 1.0 percent (a bit below), but obviously better off than the vast majority of people in the country. If they took out a $460,000 mortgage (80 percent of purchase price), the monthly payments would be $2,200, certainly well within affordability given their incomes. So there is zero reason to believe that this home purchase implies secret money or some sort of illicit activity.

So the question is whether there is something inconsistent with the Sanders earning $350,000 a year and the views he espoused on the campaign. If so, it is difficult to see what it would be. Sanders said that he wanted to raise taxes on the rich, he never said that he thought everyone should make the same amount of money regardless of how hard they worked or their talents.

It is of course convenient for people who don't want to see the issue of higher taxes on the rich be discussed to convert the debate into one on radical egalitarianism. However, the latter has nothing to do with Sanders' campaign positions. One would hope that the people who write columns for the Washington Post would at least know that much about the Sanders campaign.

Note: For my part, I am less a fan of higher taxes than ending the government interventions (e.g. patent monopolies, corrupt corporate governance system, and Wall Street favoritism) that allow for ridiculous pay checks in the first place. Thanks to rigged markets, partners in hedge funds and private equity funds (think Mitt Romney) can make more in a day than the Sanders earn in a year. But you'll have to wait for my book this fall to get the full story.


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Steve Pearlstein used a Washington Post column to correct an earlier scare story about robots taking all the jobs by fellow columnist David Ignatius. Pearlstein gets the story mostly right. If robots reduce the need for labor then someone will have additional money to spend. Either workers will get higher wages or prices of the goods produced by robots will fall, allowing people to buy more stuff. Most likely it will be some combination, but there is no basis for assuming that there will be no demand for workers. (This is true even if it goes to profits, since rich people will hire more help.)

There are two important qualifications to this argument. First, there is no evidence of massive displacement of workers by robots. This is exactly what productivity is about. Productivity is how much the economy produces for each hour of human (non-robot) labor. If robots were taking jobs in large numbers then productivity growth would be very rapid. In fact, productivity growth has been very slow. It actually has been negative in the last three quarters.

Of course this could change, maybe the robots are lurking just around the corner. But for now, just about all the economists I know are worried about the slow pace of productivity growth, not a huge surge in productivity displacing tens of millions of workers.

The other point that needs to be plastered across the top of Trump tower, is that when people benefit from "owning" technology it is because the government has chosen to subsidize their innovations. The issue here is patent protection, which is a main reason why the benefits of technology often are not widely shared. Patents give their owners monopolies over technology which allows them to charge prices that can be several thousand percent above the free market price.

There is an obvious rationale for patents -- they give individuals and corporations an incentive to innovate. But in the last four decades we have implemented a variety of policies designed to make patent protection stronger and longer. As a result, more money is going to people who own patents. This money comes out of the pockets of the rest of us.

It is possible to argue that the strengthening of patents has been justified by its effect in promoting innovation (weak productivity growth suggests otherwise), but the fact this was a policy choice is not arguable. So when someone says that "technology" has caused inequality they are displaying their ignorance. Insofar as new technologies have been responsible for an upward redistribution of income, it has been the result of the political decision to provide these technologies with patent monopolies.

In other words, it is the folks in Congress and the White House who are responsible, not the robots.

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President Obama is working hard to push the Trans-Pacific Partnership (TPP), going around the country promoting the pact. He must want Congress to approve it before he leaves office.

That much would be obvious to anyone. But Politico uses its incredible mind reading ability to go a step further. It tells us:

"Obama has been unwilling to abandon a deal that he regards as central to his legacy."

The rest of us might be able to know that Obama says that he regards the TPP central to his legacy, but lacking Politico's mind reading skills we wouldn't know that he actually does regard the TPP as central to his legacy. Since President Obama is a politician, we know that he doesn't always say exactly what he thinks, so we may not know whether or not he regards the TPP as central to his legacy.

We could believe that the is pushing the deal as a favor to the powerful business interests that helped to negotiate the deal, like the pharmaceutical industry, the entertainment industry, and the financial industry. These industries are expected to be major donors to Democratic campaigns this fall.

Of course, it would be difficult to get approval for the TPP based on the argument that it would benefit contributors to the Democratic Party. Since President Obama is popular with the country as a whole, and enormously popular among Democrats, it is a much stronger argument to make voting against the deal a personal affront to the president. So it is entirely understandable that President Obama would want the public to have him believe that he sees the TPP as central to his legacy.

Thankfully, we have Politico and the mind readers on its staff who can tell us that President Obama is not acting as a politician but rather he actually believes this claim.

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The NYT's Dealbook section ran an interesting column on the "risks of unfettered capitalism" by St. John University Law Professor Jeff Sovern. The piece lists a number of abuses by corporations, including Volkswagen's diesel scandal, Vioxx, and predatory lending. While Sovern is right in arguing for the need to rein in these abuses, it's questionable whether this is an issue of "unfettered" capitalism.

In the case of Volkswagen, they deliberately lied to their customers about the product they were buying. Many of the people buying Volkswagen's diesel cars were buying them explicitly because they wanted an environmentally friendly cars. It is not clear that it is accurate to call a system of capitalism "unfettered" if companies are allowed to lie to make money from their customers. Would this mean that in "unfettered" capitalism, airlines could charge people in advance for a plane ticket and then not actually give them a seat on the plane? That would be equating unfettered capitalism with legalized fraud.

In the case of Vioxx, Merck was alleged to have deliberately withheld evidence that the arthritis drug posed risks to patients with heart conditions. Its motivation was to increase sales. The reason that Merck had such a large incentive to increase sales was that the government gave them a patent monopoly that allowed it to sell Vioxx at a price that was several thousand percent above its free market price.

Without this patent monopoly, Merck's profit margin on Vioxx would have been comparable to the margins that companies make selling paper cups and pencils. These sorts of profit margins would not likely have provided the sort of incentive to conceal evidence at the risk of patients' health and life. It is hard to see how a government-granted patent monopoly can be seen as unfettered capitalism.

In the case of predatory lending, the question is whether companies can use deceptive practices to get people to take out loans if they do not fully understand the terms. The logic here is that smart people trained in law can write complicated contracts that a typical customer is not likely to be able to understand without spending a great deal of time and effort reviewing it.

If we allow for complex contracts with consumers to be enforceable, then we are providing an incentive for highly trained lawyers to spend a great deal of time figuring out how to design complex, deceptive contracts. We also then will effectively force consumers to spend far more time reviewing contracts to ensure that they are not being ripped off. This is an enormous waste of resources which is also likely to result in an upward redistribution of income. 

As is the case here, in many instances where people claim they are talking about unfettered capitalism, they are actually talking about one person's "right" to dump their sewage on their neighbor's lawn. The dumper is invariably more powerful than the dumpee. It gives the issue way more respect than it deserves to ascribe to it a principle like "unfettered capitalism." It's really just a question of whether we want a system where the rich are allowed to rip off everyone else. 

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