Beat the Press is Dean Baker's commentary on economic reporting. He is a Senior Economist at the Center for Economic and Policy Research (CEPR). To never miss a post, subscribe to a weekly email roundup of Beat the Press.

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The NYT criticized the Republican tax-cutting plans. In particular, it focuses on the plan to apply a 15 percent or 25 percent corporate tax rate for all business pass-through income. This is in place of the current individual income tax rate, which could be as high as 39.6 percent.

The editorial argues that this would be a huge tax break for partners in hedge funds and real estate developers (like Donald Trump), who typically get their income through pass-through corporations. While this is true, it is only part of the story.

Allowing owners of pass-through corporations to just pay the corporate tax rate instead of the individual income tax rate would be a huge loophole that every higher paid person would rush to take advantage of. For example, a highly paid medical specialist would reorganize their business as a pass-through corporation to pay a lower tax rate. The same would be true of other professionals. 

In effect, this would allow the vast majority of high-income individuals to pay a lower tax rate than school teachers or firefighters while creating an enormous tax shelter industry. This is truly awful from the standpoint of policy (increasing inequality while reducing efficiency), but if the point is to give more money to the rich, it gets the job done. 

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Bryce Covert has an interesting column in the NYT arguing that Equifax and the other two private credit agencies be replaced with a public system. There does seem to be a good case here.

After all, what do we get from competition in this story? As Covert points out, the credit agencies don't work for consumers, they work for the people who buy the data. This means that they don't really have much incentive to ensure their information about us is accurate and to make sure their systems are not hacked.

What is difficult understand is how current laws allow these agencies to be profitable. Suppose these credit agencies were held liable for their mistakes. If a person is denied a job or is unable to buy a home because of an erroneous credit report, this would seem to warrant tens of thousands of dollars in damages.

Covert tells us that one in four credit reports contain a major error. Suppose that leads to 100,000 people a year to suffer serious consequences, that would be less than 0.25 percent of the people with serious errors in their report. If the average damages come to $15,000 (including legal fees), this would run to $1.5 billion in annual damage payments. If 1.0 percent of the people with erroneous reports suffered consequences, it would come to $6 billion a year.

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It's good to see the NYT has diverse voices on economic issues. In his "Economic Scene" column on the economy's supposed labor shortage, Porter argued that "raising barriers to imports — inviting retaliation from trading partners — is exactly the wrong approach." Three days ago, the NYT had an editorial arguing strongly for increased protectionism in the form of stronger and longer copyright and patent protections. These forms of protection not only raise prices and slow growth, but they redistribute income upward, taking money from most of the population and giving it to those who stand to gain from patent and copyright protection.

It is worth noting that the assertion that the economy is now or will in the near future be suffering from a labor shortage seems dubious. Employment rates for prime-age men at all levels of educational attainment are still below their 2000 rate. That seems hard to reconcile with the view that we have a labor shortage. In the same vein, the percentage of unemployment due to people voluntarily quitting their jobs is still relatively low, suggesting that workers do not feel very secure about their labor market prospects. And, workers are still far from recovering their share of output, with the profit share still well above the pre-recession level.

For these reasons, we should be skeptical about the existence of a labor shortage. It is also worth noting that a labor shortage is 180 degrees at odds with the often asserted problem that the robots will take all the jobs.

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After screaming about budget deficits throughout the Obama administration, Republicans in Congress are apparently planning to pass tax cuts that will substantially increase the budget deficit from the baseline projections. The NYT decided to help them in this effort by printing without comment their absurd claims about growth.

According to the NYT, Senator Ron Johnson, a member of the Budget Committee, said:

"Just going from 2 to 3 percent growth adds about $14 trillion of economic activity over a decade, $2 to $3 trillion of revenue to the federal government."

This would be like saying that we would have a great baseball team if we just brought Babe Ruth, Lou Gehrig, and Jackie Robinson back to life. Presumably, the NYT would recognize that anyone who said that about baseball was either lying or seriously out of touch with reality and would point this fact out to their readers.

Similarly, the idea that we have a simple route to "just" raise the rate of annual growth from 2 to 3 percent, is equally absurd, but the NYT treated it as though it is a comment that a sane person could have honestly said. That's great stenography, but truly awful reporting.

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Glenn Kessler, the Washington Post's Fact Checker, is trying to be even-handed in assessing the claim by advocates of single-payer health insurance of large potential administrative savings from switching to a universal Medicare-type system. Unfortunately, he gives too much credence to an insurance industry funded report (identified as such in the piece), which whittles away at the difference.

The basic story is that Medicare's administrative costs, as shown in the Medicare Trustees Report come to less than 2.0 percent of annual benefits. (Table II.B1 puts administrative costs for 2016 at $9.2 billion, with total payments at $669.5 billion.) The Centers for Medicare and Medicaid Services puts the administrative costs for private insurance at $216.3 billion for 2016 (Table 2), with total spending of $1,135.4 billion (Table 3) for a ratio administrative expenses as a percent of related outlays of 23.5 percent. (The administrative expenses are deducted from total spending to get health related outlays.)

While there is some room for fudging both of these numbers, it is pretty hard to make the difference go away. The industry funded study ups the Medicare costs to 5.2 percent by allocating a large amount of non-Medicare spending to Medicare administration. For example, it notes that the Treasury Department collects taxes for Medicare and the Justice Department pursues fraud cases in the system. As the report explains to get to this number:

"Medicare unreported costs include parts of salaries for legislators, staff and others working on Medicare, building costs, marketing costs, collection of premiums and taxes, and accounting, including auditing and fraud issues, etc."

While these costs are not detailed carefully, Table 4 in the appendix shows that the study allocated 14.5 percent of the salaries of members of Congress and staff, as well executive branch salaries, to the administrative costs of Medicare. It also allocated 14.5 percent of non-correctional judicial costs.

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Economists usually argue that it's best to tax the things you want discourage, like cigarettes, alcohol, and gasoline, not things you want to encourage, like work. That is why it is striking that that the Washington Post could not find one economist who thought that a plan in London to tax vacant housing units is a good idea. 

The only expert cited in the piece argued that the tax would have little effect on the housing market because the rich would not care if their property taxes were doubled or tripled, they would still leave units vacant. (The piece repeatedly refers to "experts" even though only one is cited by name.) This answer is striking for three reasons.

Whenever tax increases on the rich are proposed, the Washington Post and other newspapers are usually filled with assertions from economists about how it will cause to them work less, move, or take other steps to avoid the tax. Apparently for some reason a tax on vacant property is different from other taxes; the rich don't mind paying it.

The second reason the comment is striking is that it suggests a relatively costless way for the city of London to raise money. If doubling or tripling the property tax for vacant properties won't affect the behavior of the rich then maybe they could quadruple or quintuple the tax. Hey, if the rich don't mind paying a tax on vacant property, why not charge them ten or twenty times the regular property tax? They won't even notice.

The third reason is that the comment comes just before a statement telling us most vacant properties in London are owned by middle-class people, not rich people:

"Most of London’s 20,000 empty units aren’t owned by the super-rich, but by the middle and lower rungs — and studies show that most homes are empty because they are the subjects of inheritance tussles or uninhabitable or in need of repairs."

Taxing these people on vacant units might be just the incentive they need to resolve inheritance disputes or to sell a vacant property to someone who could afford to make the repairs for it to be habitable. Of course, this works from the assumption that we actually want less vacant property.

In arguing the case against the tax, the Post even found someone was happy to live next to a building with many vacant units:

"Plus, there are upsides to living next to absentee neighbors.

"'I would shudder to imagine if this was running at 80 percent occupancy,' said Suruchi Shukla, a 38-year-old consultant, with her head cranked skyward at the building."

So there you have it: a tax on vacant property wouldn't reduce the number of vacant units, and it would be a bad thing if it did. And remember folks, this is supposed to be a news story, not an opinion piece.

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The NYT had an article on the most recent Republican plan to repeal the Affordable Care Act (ACA). It included a quote from Senator Bill Cassady, a co-sponsor of the bill:

"'Right now, 37 percent of the revenue from the Affordable Care Act goes to Americans in four states' — California, New York, Massachusetts and Maryland, Mr. Cassidy said. 'That is frankly not fair.'"

If just four states getting 37 percent of the money sounds unfair to you, it might be worth keeping in mind that these four states account for more than a quarter of the country's population and GDP. That still means that they are getting a disproportionate share of the money from the ACA, but it is not quite the same as if four small or average size states were getting 37 percent of the money.

It is also worth remembering that ACA spending accounts for roughly 1.5 percent of the total budget. Getting a disproportionate share of 1.5 percent of the total budget doesn't seem like all that big a deal, after all southern states have historically gotten a grossly disproportionate share of the military budget.

Then we have to consider the fact that many states don't get much money from the ACA by choice. Specifically, they have chosen not to expand Medicaid to provide more of their residents with health care insurance. They also have not done much to publicize the exchanges, which would have sent more money to their states through subsidies to moderate income people.

So this is the grave injustice that Senator Cassidy is looking to remedy and to do so he wants to have 30 million plus people lose their health care insurance, and to allow  insurers to again discriminate against people based on pre-existing conditions. That may be unfortunate, but at least California, New York, Massachusetts and Maryland won't be getting a disproportionate share of ACA spending.

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We all know how hard it is for people with advanced degrees to compete in the global economy, but how much government help do we have to give them? Apparently, whatever we give them in strong patent and copyright protections (yes folks, this is protectionism, no matter how much you like it) is not enough.

In an editorial on relations with China, the NYT offers this encouraging (to the rich) pronouncement:

"On intellectual property, now that China is putting energy into developing its own technology instead of just stealing America’s, the two could work together on stronger protections."

Isn't that great? We can redistribute more money to people who benefit from patent and copyright monopolies and then say it's just unfortunate that technology leads to an upward redistribution of income. And most of our intellectual class are sufficiently s**t-for-brains to treat that as a serious argument.

And yes folks, there are alternatives to patent and copyright monopolies for financing research and creative work. But, as we all know, intellectuals have a hard time dealing with new ideas.

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Of course, the paper did not actually warn of the cheap trick the Republicans are considering. It just mentioned it in passing as though it was a serious policy proposal:

"House Republicans are considering a key change to 401(k)s as part of their tax overhaul package: Taxing the money that workers place in their savings plans upfront instead of years later when they take it out in retirement."

The only possible rationale for taxing money when it is put into a 401(k) account rather than when it is pulled out is to change the timing of tax collections since there will be little net change in revenue over the long-term. By taxing the payments into the system, the government will collect more revenue during the 10-year horizon over which budget projections are made. However, this will be almost completely offset by lower tax collections in later years.

As policy, this makes zero sense. The point of 401(k)s is supposed to be encouraging people to save. There is much research showing that the prospect of an immediate tax saving gives strong incentive to save. This means that eliminating the immediate tax deduction will almost certainly mean less savings in 401(k)s.

There is the advantage that this change will appear to offset the lost revenue from Republican tax cuts for rich people. Unfortunately, most Post readers might not be aware of this rationale for the policy change.

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Yeah, what else is new. After all, no one thinks that a conservative columnist writing for the country's most important newspaper should have any clue about the topics they cover.

Brooks uses his column today to tell us that workers are getting their share of the economic pie and the real problem is productivity growth.

"The problem of the middle-class squeeze, in short, may not be with how the fruits of productivity are distributed, but the fact that there isn’t much productivity growth at all. It’s not that a rising tide doesn’t lift all boats; it’s that the tide is not rising fast enough."

Sorry Mr. Brooks, but the numbers don't agree with you. Here's the story on average hourly earnings for production and non-supervisory workers since 2007. This is a good proxy for the median wage since it excludes high-end workers like doctors, Wall Street types, and CEOs.

wages production

Source: Bureau of Labor Statistics.

After rising by less than 2.0 percent between 2007 and 2013, real wages have started to grow at a respectable pace in the last four years. Still, they are just 8.0 percent above their 2007 level. By contrast, productivity has risen by 13.7 percent over this period. That's a difference of 5.7 percentage points over the last decade.

For a person earning $40,000 a year, the loss due to the gap between productivity growth and wage growth is equivalent to a tax increase of $2,280 a year. Would Brooks try to tell readers that a tax increase of this magnitude is small change? If we go further back to 1980, when inequality first started to take off, the gap would be closer to 40 percentage points. Anyhow, it's cute that Brooks wants to tell us not to think about all the money going to rich people and just concentrate on productivity growth, but this stuff is too silly even for children's games.

There, however, is one point here worth noting. As unemployment has fallen, workers have been seeing their share of gains from productivity growth. This is a huge deal, which points to the importance of Federal Reserve Board policy.

There were many economists who wanted the Fed to take a tighter stance on monetary policy and keep the unemployment rate from falling as low as it has. The decision by the Fed to be relatively slow in raising interest rates has not only allowed millions of additional workers to get jobs, it has also meant higher pay for those who were already working. This makes an enormous difference to the country's workers, but don't expect to see anything about it in a David Brooks column.

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Ruchir Sharma, the chief global strategist at Morgan Stanley Investment Management, used his NYT column to argue that central banks have to include fighting asset bubbles on their agenda, in addition to promoting high employment and low inflation. As someone who has argued this for two decades, I am sympathetic to the point; however, Sharma gets a couple of big things wrong.

First, the big issue with bubbles is whether they are moving the economy. This is something that is easy to determine for folks familiar with introductory economics. The issue here is whether some component of demand is out of line with its long-term trend.

That was easy to see in the late 1990s as the wealth created by the stock bubble led to a consumption boom, pushing the saving rate to a then-record low. The investment share of GDP also became unusually high, with investment concentrated in the tech sector where stock prices were most out of line with corporate profits. 

The same was true of the housing bubble in the last decade. Residential construction hit a record 6.5 percent share of GDP, a level that clearly did not make sense given the underlying demographics of the country. The wealth effect from the bubble created housing wealth led to an even larger consumption boom than the 1990s stock bubble, as savings rates fell even lower than they had in the late 1990s. It is difficult to understand how the Fed could have missed the impact of the bubble or think that these sources of demand could be easily replaced when the bubble burst.

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Morning Edition had a segment on efforts to counter the Trump administration's proposal to cut foreign aid, including money going to the Global Fund to Fight AIDS, Tuberculosis, and Malaria. The segment featured a comment from Bill Gates, whose foundation also supports this fund.

Gates noted the lack of support for foreign aid and attributed it to the media's tendency to highlight failures, where money is poorly spent or stolen, as opposed to the success stories. While there is undoubtedly some truth to this argument, the more likely problem is the fratboy reporting on budget issues that gives the audience zero context.

In the case of the Global Fund, when people hear about it they are likely to hear that the U.S. will spend up to $4.3 billion this year. This might lead people to think that we are devoting a substantial share of the budget to this fund, at the expense of other programs and/or raising people's taxes.

In fact, this sum is roughly to 0.1 percent of the budget, it comes to roughly $13 per person for everyone in the country. For another comparison, it is roughly 36 times the excess cost (the amount paid beyond what it cost to protect a normal president) of Donald Trump's secret service protection. In other words, it would not be the reason that people are paying taxes they consider high.

Polls consistently show the public grossly overestimates the share of the budget going to foreign aid, with median estimates in the range of 25 to 30 percent of the budget, when the total is less than 1.0 percent, even when being very generous about what counts as aid. This is likely due at least in part to the fratboy reporting on aid, which gives people no information whatsoever.

It is amazing that National Public Radio, the New York Times, and other leading news outlets continue the bizarre practice of reporting large numbers without context, even when everyone knows it is not providing information to the vast majority of their audience. It is a very simple matter to express a budget number as a share of the total budget or to use some other comparison that would give it meaning to listeners and readers. However, news outlets refuse to do this.

They instead engage in mindless fratboy reporting where they carry through the ritual of giving a large number that means absolutely nothing to the people who see it, and then pretend they have done their job. This is a major reason people are hostile to programs like foreign aid, TANF, food stamps and other programs that benefit the poor here and elsewhere.

Yes, I know many people are racist and hate these programs for that reason. But many people who are not especially racist (i.e. they vote for people like Hillary Clinton) also believe that 30 percent of our budget goes to foreign aid or TANF. If these programs actually did cost that much much money, there would be good reasons for not supporting them, since they don't have that much to show.

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The Census Bureau reported that the percentage of people without health insurance fell by 0.3 percentage points in 2016 to 8.8 percent. This puts the cumulative gain in coverage since 2013, when the main Affordable Care Act provisions took effect, at 4.5 percentage points.

By state, the largest drop in the percent of the population that is uninsured was in California, which had a decline of 9.8 percentage points to 7.3 percent. Next was New Mexico with a decline of 9.5 percentage points, giving it an uninsurance rate of 9.2 percent, and Nevada with a drop of 9.3 percentage points to 11.4 percent.

The smallest decline over this period was in Massachusetts, where the percent uninsured fell by just 1.2 percentage points, but this is due to the fact that it had an uninsured rate of just 3.7 percent in 2013. Wyoming had the second smallest decline, with the rate falling by 1.3 percentage points to 11.5 percent.

Texas, Alaska, and Oklahoma had the highest uninsured rate in 2016, at 16.6 percent, 14.0 percent, and 13.8 percent, respectively. The lowest rates were in Massachusetts, 2.5 percent, Hawaii, 3.5 percent, and Vermont, 3.7 percent.

By employment, the biggest increase in coverage was among those working part-time. The percentage uninsured among this group fell by 9.0 percentage points to 14.8 percent. For those who did not work at all, the percent of uninsured fell by 7.4 percentage points to 15.0 percent. For full-time, full-year, workers the drop was 4.1 percentage points to 9.8 percent.

On the whole, these newest numbers indicate that Obamacare has succeeded somewhat more than expected in extending coverage. The biggest beneficiaries have been people who choose to work part-time (80 percent of part-time employment is voluntary), who no longer need to get coverage through an employer as a result of the exchanges and the expansion of Medicaid.


Note: Percent of uninsured for Wyoming has been corrected; thanks, Charles Angevine.

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According to an article in Sunday's paper, employers are now able to find the workers they need by going to cities with large amounts of unemployment or underemployment.

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Readers may have missed this fact, but this is what the NYT said in an article on the prospect for tax reform when it told readers:

"Democrats have also been deeply skeptical of the Trump administration’s plans to repeal the estate tax, which it has said has been harmful to family farmers."

If the Trump administration has been saying the estate tax has been harmful to family farmers it is lying since virtually no family farmers will owe a penny as a result of the estate tax. This would be known to NYT since the paper ran a piece 16 years ago which noted that the American Farm Bureau Federation, a strong opponent of the estate tax, could not identify a single person who had lost a family farm as a result of the estate tax.

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The NYT had a piece on prices being charged by drug companies for new types of treatment for cancer, which can run as high as $1 million a year. While the piece noted the argument of one industry critic, Dr. Aaron Kesselheim, that we don't pay firefighters when they show up at a fire or based on how many lives they save, it didn't carry through the logic of this point.

The alternative implied by Dr. Kesselheim's remark is that we could pay for the research upfront, as we already do to some extent with funding for the National Institutes of Health and the Orphan Drug Tax Credit. If the government paid for research upfront, then in nearly all cases the price of treatment would be trivial, since the cost of manufacturing and delivering the drug is rarely very high. It would have been worth presenting this alternative more clearly in the piece.

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C. Adam Bee and Joshua Mitchell, two economists at the Census Bureau, recently released an analysis of retirement income that qualitatively changes our understanding of the well-being of retirees. The analysis matched administrative data (essentially tax filings) with the reported income in the Current Population Survey (CPS), which has been the standard basis for the measurement of household income, including retirement income.

Bee and Mitchell found that the income of households in the administrative data was substantially higher than what was reported in the CPS. The overall median for households over age 65 in the administrative data was $44,371 in 2012 (the year that was the basis of their analysis), 30.4 percent higher than the $34,037 reported in the CPS for the same households. Their analysis found sharply higher incomes at all points along the income distribution than what was reported in the CPS. They also show a corresponding reduction in poverty rates among older households.

This is good and important news. While there is much room for additional analysis based on the Bee and Mitchell findings, there are two points that jump out. First, defined benefit (DB) pensions have been more effective in supporting retirement incomes than we had realized. This is good news. The second point is not good. There is nothing in the Bee and Mitchell analysis that suggests we had been overly pessimistic about the extent to which defined contribution (DC) pensions will provide adequate income to future retirees.

On the first point, by far the largest single source of the gap between the income as measured in the administrative data and income as measured in the CPS is uncounted income from DB pensions. This is due to both the fact that many people who receive a DB benefit do not report it on the CPS and also that many people who do receive a DB benefit under-report the amount.[1] Bee and Mitchell find that DB pensions make a large contribution to the income of older households for the 3rd decile and above in the income distribution. Their results are shown in the table below.



Administrative Data


CPS Data


Income Decile































































































Source: Bee and Mitchell 2017, Table 9.

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If you thought the pharmaceutical industry couldn't possibly sink any lower in its pursuit of profits, Allergan just proved you wrong. The geniuses at Allergan came up with the brilliant idea of turning over one of its patents on the dry-eye drug Restasis to the Mohawk tribe. The tribe will then lease the patent back to the Allergan.

The reason for this silly trick is that the Mohawk tribe, based on its sovereign status, is disputing the right of generic competitors to pursue a case before the Patent Trial and Appeal Board. This board is supposed to determine whether a patent was appropriately granted in the first place.

The article may have left readers confused about the issues involved when it reported without comment a statement by Allergan's lawyer, which claimed that they were trying to avoid double jeopardy since the company also faces a case in federal court. The additional background here is that there is an enormous asymmetry in legal cases involving patents. The patent holder is fighting for the right to sell a drug in a monopoly market, which means monopoly profits. The challenger(s) is fighting for the right to be able to sell the drug in a competitive market, which means normal profits.

In this context, the patent holder has an enormous incentive to delay and run up the cost of litigation, which may quickly prove unprofitable to the generic competitor. The Patent Trial and Appeal Board was created to allow a quicker lower cost process to challenge invalid patents. It is also worth noting that Allergan's revenue on this drug (more than $1.3 billion annually, according to the article) can be thought of as a tax on the American public. Without this patent, the drug would likely sell for 20 percent or less of its patent-protected price.

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Okay, they haven't written anything about too many iPhones that I know of, but the paper continually displays its irrational fear of too much government borrowing. It did so yet again in a discussion of plans to temporarily raise the debt ceiling and possibly to get rid of it altogether. The piece presents the views of the Peter Peterson-funded Committee for a Responsible Federal Budget that the country faces a serious debt and deficit problem.

The evidence of a problem with debt and deficits would be high interest rates and/or inflation. In fact, interest rates remain extraordinarily low, as does the inflation rate, which has been persistently below the Federal Reserve Board's target of a 2.0 percent average inflation rate. The debt is not even a serious measure of generational balance as it is often used. The austerity that has resulted from concerns over the debt has cost us tens of trillions of dollars of future output, making our children and grandchildren far poorer than if we had pursued sound macroeconomic policies in the years following the Great Recession.

It would be helpful if the Washington Post had economics-based discussions of debts and deficits rather than hyping the irrational fears promoted by a Wall Street billionaire.

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The New York Times told readers this morning that the European Central Bank (ECB) would like to cut back on its quantitative easing program but is reluctant to do so because of the weak dollar. The piece notes that a weak dollar reduces the euro zone's trade surplus with the United States. Also by making low-cost imports available, it undermines the ECB's effort to raise inflation to its 2.0 percent target.

The piece explains the weak dollar:

"There’s not much Mr. Draghi can do about the weak dollar, which analysts say reflects pessimism about the ability of President Trump and Congress to agree on legislation that many economists believe would help goose growth in the United States, such as infrastructure programs or corporate tax reform.

"'Investors no longer trust the American government to push through tax reform and fiscal stimulus,' Alwin Schenk, a portfolio manager at the German bank Sal. Oppenheim, said in a note to clients.

"The dollar’s decline is also an expression of the nervousness investors feel about geopolitics, primarily nuclear saber-rattling by North Korea and bellicose rhetoric from Mr. Trump. The euro is seen as a safe haven from the turmoil."

This would be a compelling story except for the fact that the dollar is actually quite high relative to euro, as can be seen.


The real value of the dollar measured against the euro is well below its average since its creation. It is more than 15 percent below the peaks hit in the middle of the last decade. While the dollar is down from its value last year, this follows a long period in which its value increased by more than 20 percent in value against the euro. (The chart shows the value of the euro, so a drop means a rise in the value of the dollar.) The complaint about a low dollar is especially bizarre since the United States has a trade deficit and the euro zone has a trade surplus.

Hopefully, this confusion about the value of the dollar stems from the NYT's reporting and does not represent the actual thinking at the ECB.

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In listing bad things that Donald Trump is doing for the economy, Washington Post business reporter Heather Long included his threat to end the trade deal with South Korea. The piece noted that U.S. beef exports to South Korea topped $1 billion last year. While this is intended to be a big deal, it is not clear that it is.

This amount is roughly 1.5 percent of total beef production. More importantly, it is wrong to imply that this output would just sit and rot if the trade deal were cancelled. While South Korea might reduce its imports of beef from the United States, it is unlikely they would go to zero even if the deal was cancelled. If the U.S. is the lowest cost provider of beef to South Korea, the government would effectively be punishing its own people by denying access to U.S. beef. Democratically elected governments usually don't think it's good politics to punish their people.

The other point is that insofar as U.S. beef exports to South Korea are replaced by another supplier, it will be opening up a new potential market for the United States. For example, if Brazil, the world's #2 beef producer, began exporting another $500 million in beef to South Korea, by diverting exports that had previously gone to other countries, then these other countries would offer a new potential market to the United States.

It will be the case that the result of Trump cancelling the trade deal will be somewhat lower U.S. beef exports, resulting in beef producers getting slightly lower prices in the United States, but the idea that this would be some sort of catastrophe for them does not make sense. (FWIW, I think it is a bad idea to pull out of the trade deal.)

The piece also attributes the fall in the stock market yesterday to the uncertainties created by Trump's threats on the trade deal, ending DACA, and the risks of war with North Korea. While this is possible, it is also possible that investors are getting concerned that they will not see the promised tax cuts as the recovery from Harvey just increases the congressional agenda for the fall. It is also possible that the fall had nothing to do with anything, which is often the case with stock market fluctuations.



I forgot to add that if the prices received by domestic beef producers falls, this means lower prices to consumers in the United States, which will free up more money to spend on other items. This effect will almost certainly be trivial, but that's because the impact of any changes in exports is likely to be trivial, in spite of the claims of highly paid lobbyists and the promoters of these trade deals in the media.

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