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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The Census Bureau put out some pretty bad numbers on housing yesterday. March starts were down 8.8 percent from the February level and permits were down by 7.7 percent. The drop in starts was across categories and regions. There was no obvious weather-related factors to explain this drop.

Monthly housing data are erratic, but these numbers do deserve some attention. Residential construction is one of the few bright spots in an economy seeing weak consumption growth, stagnating equipment investment, and a rising trade deficit. If this is not just a one-month blip, it would be a very bad sign for the strength of the recovery.

In this respect it is worth noting that the latest number for first quarter growth from the Atlanta Fed 's "GDPNow" estimate is just 0.3 percent. This is not a good story.  

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Okay, he does it against Donald Trump as well, but the theme of his column is to denounce both of them for pushing a "single story" for the difficulties confronting working people. While Sanders blames an economy rigged to favor the rich and Trump blames immigrants and the unfair trading practices of foreign countries, Brooks tells us that the real issue behind wage stagnation is "intricate structural problems."

Get it? Brooks used the words "intricate" and "structural," that means that he is a complex guy not wedded to a single story because these are big words.

Does Brooks happen to have any clue what these intricate structural problems might be? He doesn't give any hint in his piece. Perhaps he was referring to the now disproven story promoted by M.I.T. economist David Autor about the "hollowing out of the middle," which meant the loss of middle class jobs. More recent research shows that the only occupations seeing substantial growth in relative shares since 2000 were at the bottom end of the wage distribution, yet that didn't stop more income from going to the top. In other words, there is no obvious story linking the growth of income inequality and wage stagnation for those at the middle to technology.

The remaining villains are items like trade, restrictive fiscal policy that keeps the unemployment rate unnecessarily high, anti-union policies that undermine workers' bargaining power, and stronger and longer patent and copyright protection that increases the price that ordinary workers must pay for many items.

But Brooks isn't interested in looking at these topics, that could make you a single story sort of person. He'd rather just stick with his intricate structural problems even if there is no coherence to the argument that he might make. This way you can call the people you don't like names in The New York Times.


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The Washington Post had a major article telling readers, "why populist uprisings could end a half-century of greater economic ties." The piece notes the rise of populist sentiment in both Europe and the United States. In the former case it is turning against immigration and also the European Union. In the case of the United States, populist sentiment is directed against trade agreements and immigration (also efforts to cut Social Security and Medicare.)

The piece doesn't give elites the credit they deserve for this backlash to their efforts to construct a system that serves their interest. In both Europe and the United States, elites have pushed policies of fiscal austerity that have the effect of keeping millions of people out of work and depressing the wages of tens of millions more by reducing their bargaining power. Overwhelmingly, the people who are victims of this austerity policy are less educated workers. There are few doctors and dentists thrown out of work by policies to reduce budget deficits. (It is worth noting that in the United States the Federal Reserve Board seems prepared to raise interest rates to throw workers out of work, if they start to get enough bargaining power to make up the ground they lost in the downturn.)

The elites have also structured economic integration to redistribute income upward. This is especially notable in the United States, where protections for doctors, dentists, and other highly paid professionals have been largely left in place, while trade agreements have sought to put U.S. manufacturing workers in direct competition with their low-paid counterparts in the developing world. The predicted and actual effect of this pattern of trade is to increase inequality.

Both Europe and the United States have used trade deals to make patent and copyright protection longer and stronger. The intent of this policy is also to redistribute income upward. They have also put in place extra-judicial mechanisms to provide special protection to businesses that they do not enjoy under national law.

In other words, populists are revolting against policies that are designed to redistribute income from the bulk of the population to the elites. The elites have tried to imply that such policies are necessary for integration. This is not true. It is just as easy to design policies that promote integration that benefit people equally, but elites in Europe and the United States have little interest in integration on these terms.

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I like Jonathan Cohn personally and have great respect for his work as a reporter and writer on health care issues. However, I think he actually told readers the opposite of what he intended in his Huffington Post piece headlined, "this one line sums up the big Clinton-Sanders policy argument."

The big line in Cohn's piece is that Senator Sanders' proposal for a single-payer system would cause a single mother with two children, earning $26,813 a year, to pay $2,314 in payroll taxes rather than getting health insurance for her family free through Medicaid, as would be the case now. Cohn sees this as a major hit to this family, which is a serious problem with Sanders' proposal.

There are several points here worth noting. First, as Cohn points out, Sanders is also proposing a $15 an hour minimum wage. This means that if this single mother were working a full-time job, she would see her pay increase by almost $3,200 a year, even if her pay was only at the new minimum. Of course, since she is earning substantially more than the minimum wage now, it is likely that her pay would increase enough to leave her still well above the minimum. This means that she would be substantially better off with Sanders's agenda. (There are serious questions about whether we can have a $15 an hour minimum wage without a considerable impact on employment, but we'll ignore those for the moment.)

The second point is that Cohn has to be very selective in finding his victim here. Let's suppose that this single mother was getting health care insurance through her employer, as most workers do. If we say the employer was paying $5,000 a year for health care insurance, under standard economics assumptions, this money will find its way into the worker's paycheck. This means that she will be paying an additional $2,314 in payroll taxes, but this will be deducted from the $5,000 a year that her employer used to pay in premiums that now going into her paycheck. (No, this will not happen immediately and not be the story with all workers, but this is what all good economists believe will eventually be the case.) This means that this worker will be $2,686 better off as a result of the Sanders plan.

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Paul Krugman had a good column this morning pointing to a lack of competition as an explanation for relatively weak investment in spite of low interest rates and high corporate profits. His immediate target is Verizon, where workers are now striking, which shows little interest in expanding its Fios high-speed Internet network in spite of soaring profits. Krugman points out that with little competition, Verizon sees little need to invest more to improve the quality of its service. He then argues that this weak investment is a major cause of secular stagnation, the ongoing weakness of demand that prevents the economy from reaching full employment.

I'd agree with virtually everything in the piece (Krugman may be a bit overly optimistic about the interest in the Obama administration in pursuing a serious competition policy), but there is an aspect to the argument that bothers me. While we should perhaps expect investment to be booming in a context of high profits and very low interest rates, investment actually is not low measured as a share of GDP.

At 12.7 percent of GDP in the 4th quarter, it's comparable to its pre-recession peaks. Given the weak growth of demand (yes, this is partly circular — stronger investment would mean stronger demand — but companies make their investment decisions individually, not collectively), investment is certainly not low by historical measures.

On the other hand, we continue to run a trade deficit that is close to 3.0 percent of GDP, or more than $500 billion a year. Suppose that our trade deficits were still in the neighborhood of 1.0 percent of GDP, which was the case before the East Asian financial crisis in 1997.

This difference of 2 percentage points of GDP would have the same impact on demand as increasing investment by 2 percentage points of GDP. That would be a huge increase in investment. If better competition policy could increase demand by even half of this amount everyone would view it as an enormous success.

So the question is, why do Krugman and others highlight the lack of competition in many areas as a cause of secular stagnation, but largely ignore the trade deficit? This question is further aggravating since the trade deficit has featured very prominently in the upward redistribution of income in the last two decades.

Note that contrary to the latest thinking in elite circles, it is not normal for rich countries to run large trade deficits with poor countries. The textbook economics say that capital is supposed to flow in the opposite direction. It is an incredible failure of the international financial system, traceable to the botched bailout from the East Asian financial crisis, that poor countries have been forced to grow by lending capital to rich countries. It certainly is not a necessary path for development and it has had horrible consequences for the working class in the United States and other rich countries.

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The New York Times had an article on the downsizing of Citigroup in the wake of the passage of Dodd-Frank. The piece twice refers to the “vise of regulation” in discussing the pressures created by the law to downsize. While one use of the expression appears in a quote from an industry friendly source, the other use is the paper’s own characterization of the law.

It seems unlikely that the NYT would say that a vise of regulation is preventing Pfizer from marketing unsafe drugs. This is clearly an expression of disapproval implying that the regulations are excessive and unnecessary. That is the sort of thing that belongs in an opinion piece, not a news article.

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Charles Lane used his op-ed column in the Washington Post to repeat the line that is now quite popular in elite circles: the stagnating wages and worsening living standards of large segments of the U.S. working class were a necessary price for lifting hundreds of millions of people in the developing world out of poverty. Oh yeah, and also the richest one percent happened to get unbelievably rich in the process as well. So people like Bernie Sanders, who want trade policies that will help U.S. workers, are actually being selfish. It's the one percent who are really serving the poor. 

This argument is incredibly wrongheaded for many reasons, but let's just focus on its basic structure. The story goes that in the last three and a half decades we have seen substantial growth in the incomes of the poor in the developing world. (Actually the bulk of this story is in East Asia, but we'll leave that aside for the moment.) During this period incomes of ordinary workers in the United States, and to a lesser extent Europe and Japan, have stagnated. Therefore, stagnating wages for rich country workers was a necessary condition for hundreds of millions of people to escape poverty.

Obviously there was a link between these events, but the serious question (okay, that leaves the WaPo folks out) is whether it was a necessary link. Suppose that a natural disaster, like a flood or earthquake, devastates a major city. In response the federal government throws in tens of billions in assistance to rebuild the city. Ten years later, the city has a thriving economy.

In Charles Lane Eliteland the disaster was a good thing, because otherwise the city never would have been revitalized. But that is not the real question. The question is whether we could have had a path that allowed developing countries to prosper without impoverishing U.S. workers. 

The simple answer is we certainly could have gone a different route and most of the story is textbook economics. I lay this out more fully in a piece that was solicited for the Post Outlook/Post Everything section, but never run there because they lost the ability to reply to e-mails.

The basic story is that there is no reason that we had to run large trade deficits with developing countries like China. In the economics textbooks, capital is supposed to flow from rich countries to poor countries to finance their development. That would mean we run trade surpluses with developing countries. Furthermore, the reason that our autoworkers compete with low-paid autoworkers in the developing world, but our doctors don't compete with their much lower paid counterparts (trained to U.S. standards), is that doctors have much more power than autoworkers. And, we enriched our one percent, while making developing countries poorer, by making patent and copyright monopolies stronger and longer.

Anyhow the story that U.S. workers had to suffer to help the world's poor is very comforting for the country's elite, and let's face it, they own the media outlets. This means that we can look forward to hearing it repeated endlessly, no matter how little sense it makes.

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Some readers may have been misled by a statement in a NYT article on the Verizon strike that the union members at Verizon receive an average of $130,000 a year in wages and benefits. This is what the company pays in labor costs per worker. This includes not only straight pay, but also overtime pay, employer-side Social Security and Medicare taxes, health insurance, and pension benefits. The pension payments are everything that Verizon pays into its pension, including payments to cover costs of retired employees, averaged over the size of its current unionized workforce.

While the $130,000 number would imply an average hourly wage of $65. The average non-overtime pay of Verizon's workers is probably in the range of $35 to $40 an hourly. While this is still a relatively good wage in the U.S. economy, it is considerably lower than the $65 an hour that readers may have inferred from too quickly reading the article.

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I'm glad to see that Paul Krugman has the same story about falling oil prices, inflation, and real interest rates as me. He pointed out that to the extent that falling oil prices reduce the overall rate of inflation it should not matter for real interest rates. What matters for the real interest rate is the expected rate of inflation for goods and services in general. Lower oil prices will matter for energy investment, but not for the vast majority of goods and services in the economy.

I made this point a couple of months back, although probably many times before that as well.

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There has been a flurry of recent articles touting recent work by Stanford Business School Professor Joshua Rauh, arguing that state and local pension fund liabilities are far larger than generally reported. Rauh puts the unfunded liabilities of state and local pension funds at $3.4 trillion, more than three times the figures that the pensions themselves calculate. He predicts looming crises with many local governments driven into bankruptcy.

The reason for the difference between Rauh’s $3.4 trillion number and the shortfall of roughly $1 trillion using the pension fund’s methodology is the rate of discount used to evaluate pensions’ liability. Pension funds calculate their liability using their expected rate of return as the rate of discount. This currently averages just over 7.0 percent on their assets. In contrast, Rauh uses the risk-free rate of interest for discounting, using the current 2.5 percent yield on 30-year Treasury bonds. The lower interest rate puts a much higher value on projected funding shortfalls 20-30 years in the future.

While many would like the public to be scared by Rauh’s calculations, there are a few points worth keeping in mind. First, the return numbers that pension funds use are not pulled out of the air. They reflect projections of investment returns based on actual experience and a range of standard economic projections. They will of course not be exactly right, but they are also unlikely to be hugely wrong.

As a recent report from Pew Research Center points out, the main reason that some pension funds are in serious trouble is not that they were overly optimistic about investment returns, the pensions that are into serious trouble were the ones that failed to make their required contributions. In states like New Jersey and Illinois, not making pension contributions became almost a sport among politicians. The same was true for the city of Chicago under Mayor Richard M. Daley. If governments don’t contribute to their pensions, they will be underfunded regardless of what returns are assumed.

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Olivier Blanchard is one of the world’s leading macroeconomists. In addition to a long and distinguished academic career, in his tenure as the chief economist at the I.M.F. he turned its research department into a major producer of cutting edge research. In particular, the research department was instrumental in producing work that undermined the case for austerity that was being widely pushed across the globe. Unfortunately, politics was able to overcome the research, and austerity won.

But that is the past. In an interview with the Telegraph, Blanchard warned that Japan will soon switch from combating deflation to a struggle to contain inflation. The core problem is its debt burden, which now stands at almost 250 percent of GDP.

This concern seems more than a bit bizarre, especially coming from an economist as knowledgeable as Blanchard. The first point is that, in spite of the high ratio of debt to GDP, Japan actually has a low interest burden. According to the OECD, Japan’s net interest payments on its debt were 1.0 percent of GDP in 2015. By contrast, U.S. payments were well over 3.0 percent of GDP in the 1990s.

This matters, not only because the interest payments represent the actual drain on resources, but also because the value of the debt is largely arbitrary. If that sounds strange, it’s worth thinking about what happens to the value of debt when interest rates rise. The current interest rate on a 10-year Japanese government bond is -0.09 percent. On a 30-year bond it’s 0.41 percent. Suppose that the interest rate on a 10-year bond rose to a still historically low 4.0 percent and the 30-year bond to 5.0 percent.

According to my bond calculator, the market price of a newly issued 10-year bond would drop by almost one-third and the price of a newly issued 30-year bond would fall by more than 75 percent. Of course not all Japanese debt is long-term, nor is it all newly issued, but the point is that the market value of its outstanding debt would drop sharply if interest rates rose to even modest levels. If the 30-year rate got as high as 7.0 percent (lower than the U.S. rate in much of the 1990s), then the market price of the newly issued 30-year bond would drop by more than 85 percent from its current level.

The way governments typically keep their books, this plunge in the market price would not affect Japan’s debt to GDP ratio. But if the markets were actually troubled by the high ratio of debt to GDP, Japan could simply issue new debt to buy up old debt at a fraction of its face value. This would quickly send its debt to GDP ratio plunging. (This is why the Reinhart-Rogoff 90 percent cliff story never should have passed the laugh test even before the exposure of the famous Excel spreadsheet error.)

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The Obama administration is starting its full court press to get Congress to approve the Trans-Pacific Partnership. Yesterday, Secretary of State John Kerry gave a speech in support of the pact according to the Washington Post.

According to the Post, in his speech blamed technology rather than trade for eliminating jobs in manufacturing. It is easy to show that this is mistaken. The number of jobs in manufacturing was little changed, apart from cyclical fluctuations from the early 1970s to the late 1990s. From the late 1990s to 2006 we lost more than 3.5 million manufacturing jobs, almost 20 percent of employment in the sector, as the trade deficit exploded.


Manufacturing Employment

manufacturing jobs

Source: Bureau of Labor Statistics.

There had been large gains in productivity due to technology throughout this period. It was only when the trade deficit soared from just over 1.0 percent of GDP in 1996 to almost 6.0 percent of GDP in 2005 that we saw massive job loss in manufacturing. It would have been helpful if the Washington Post had corrected Mr. Kerry's misstatement, as it might have done for other public figures, like Senator Bernie Sanders.

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Eduardo Porter had an interesting piece discussing the extent to which patents can pose an obstacle to the diffusion of technology, especially in the case of drugs and clean energy. The piece points out that some folks have suggested alternatives to patent financing for drug research, generously linking to a CEPR paper. However, the piece only mentions the routes of buying up patents and placing them in the public domain and paying drug makers based on how much their drugs increased quality adjusted life-years.

There is another route preferred by some of us, which would just pay for the research upfront. The United States already does this to a substantial extent with the National Institutes of Health, which funds over $30 billion annually in biomedical research. The advantage of paying for the research upfront is that the results can be fully public and available to other researchers from the beginning. Also, there is no need for complex calculations to determine how important a specific contribution was to the end product.

An obvious point of entry would be to finance clinical trials, which account for more than 60 percent of research costs. The trial results would be fully public with detailed data (consistent with anonymity) on individual outcomes. Also, the drugs themselves would be available as generics from the day they are approved. The trials would be paid for on a contract basis, similar to the way the Department of Defense pays contractors to develop new technologies, with the difference that everything is placed in the public domain.

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A popular theme in the media in recent days is that the world’s poor would face disaster if Bernie Sanders ended up in the White House.[1] The story is that Sanders would try to protect jobs for manufacturing workers in the United States. The loss of these jobs has been a major source of downward pressure on the wages and living standards of a large portion of the working class over the last four decades.

While saving manufacturing jobs here may be good for U.S. workers, the media line is that by trying to block imports from the developing world, Sanders would be denying hundreds of millions of people their route out of poverty. This story may be comforting for elites in the U.S. and Senator Sanders’ political opponents, but it defies basic economics and common sense.

To see the problem in the logic, note that the essence of the Sanders as an enemy of the world’s poor story is that manufacturing workers in the developing world need people in the United States to buy their stuff. If people in the United States didn’t buy their stuff, these workers would be out on the street and growth in the developing world would grind to a halt.

In this story, the problem is that we don’t have enough people in the world to buy stuff — there is a shortage of demand. But is it really true that no one else in the world would buy the stuff produced by people in the developing world if they couldn’t sell it to consumers in the United States? Suppose people in the developing world bought the stuff they produced, you know, raising their living standards by raising their consumption.

That is actually the way the economics is supposed to work. In the standard theory, general shortages of demand are not a problem. Economists have traditionally assumed that economies tended toward full employment. The economic constraint was a lack of supply. The problem was that we couldn’t produce enough goods and services, not that we were producing too much and couldn’t find anyone to buy them.

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In addition to touting House Speaker Paul Ryan's policy wonkiness, the paper also applauded his fundraising prowess, telling readers:

"The National Republican Congressional Committee raised $185,000 from two emails from Mr. Ryan last month, more than the group’s entire haul in March 2014, during the last House races."

This would not be true unless March of 2014 was an extraordinarily bad month for the National Republican Congressional Committee (NRCC). According to its filings with the Federal Election Commission, the NRCC raised $118 million in total over 2013 and 2014, an average of just under $5 million a month. In order for Speaker Ryan's two emails to have beaten March 2014's total, it would have been necessary for the RNCC to have pulled in less than 4 percent of its monthly average over the two-year period. That seems unlikely.

Thanks to Robert Salzberg for calling this to my attention.

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Professor Andrew Levin (Dartmouth College), the former special advisor to Fed Chair Ben Bernanke and then-Vice Chair Janet Yellen, released a proposal for reform of the Federal Reserve Board’s governing structure in a press call sponsored by the Fed Up Campaign. The proposal has a number of important features, but the main point is to make the Fed more accountable to democratically elected officials and to reduce the power of the banking industry in monetary policy.

See the fuller story.



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Some people may have failed to realize this fact when a NYT article profiling Speaker Ryan told readers:

"Mr. Ryan is the architect of his party’s plan to rein in spending on entitlement programs."

"Entitlement programs" is a popular euphemism used by politicians who want to cut Social Security and Medicare. The phrase is likely to mislead many readers.

The piece also asserts that:

"For example, if the Republican nominee does not provide an alternative to the Affordable Care Act — something Republicans have failed to do since it passed in 2010 — Mr. Ryan intends to do so, just as he will lay out an anti-poverty plan."

Actually, the reporter who wrote this article has no idea what Mr. Ryan "intends." Mr. Ryan says that he "intends" to develop an alternative to the Affordable Care Act, whether he actually does, or whether his proposal will actually pass the laugh test remains to be seen. It is important to remember that Mr. Ryan proposed a budget that would eliminate most of the federal government by 2050. This would have been a useful piece of information to provide readers when they are trying to assess his intentions.

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We know that the Washington Post editors really hate Bernie Sanders and rarely miss an opportunity to show it. Dana Milbank got in the act big time today as he once again denounced Sanders (along with Donald Trump and Ted Cruz) in his column

There was much good stuff in the column but my favorite was when he told readers:

"MacGuineas's group [the Committee for a Responsible Federal Budget] calculates that Sanders would increase government spending to unimaginable levels: to as much as 35 percent of gross domestic product, from the current 22 percent."

The key word here is "unimaginable." Most western European governments have ratios of government spending to GDP of more than 40 percent and some have ratios of more than 50 percent. Apparently, Mr. Milbank finds the whole European continent unimaginable.

What is especially striking is that most of the increase in government spending would be the result of the government diverting payments for employer provided health insurance to a government-run universal Medicare system. Apparently, Milbank thinks it intolerable that the money taken out of workers' paychecks to be sent to private insurers would instead be taken out of workers paychecks to be sent to the government, even if it would lead to savings of several hundred billion dollars a year in administrative costs and insurance industry profits. In Dana Milbank-land this is the height of irresponsibility.

What is perhaps most incredible is Milbank's notion of irresponsible. His sole measure of responsibility is the size of the government budget deficit and debt, which are for all practical purposes meaningless numbers. (If the government puts in place patent protection that requires us to pay an extra $400 billion a year for prescription drugs, this adds zero to the budget deficit or debt and therefore doesn't concern Milbank. However, if it borrowed an extra $400 billion a year to pay for developing new drugs, he would be furious.)

On the other hand, forcing millions of people to be out of work because of deficits that are too small apparently does not bother Milbank in the least. Since the crash in 2008 we have needlessly foregone more than $7 trillion in potential output. Millions of people have been kept out of work with their children thereby growing up in families that were in or near poverty levels. We also have the stories like the children in Flint exposed to lead, all because Milbank and his friends want to whine about budget deficits.

Many might view this set of policies as being irresponsible. But in Milbank's worldview, which is widely shared in Washington policy circles, it doesn't matter what you do to the country as long as you keep the deficit down.

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The Washington Post is well known as a hotbed of protectionist sentiment, at least when it comes to policies that redistribute income upward. For that reason it was not altogether surprising that the paper never once mentioned the role of patent monopolies and related protections in a front page article on the difficulties cancer patients face in dealing with the high price of drugs.

The article begins by talking about a patient, Scott Steiner, who needed the cancer drug Gleevec. The manufacturer, Novartis, charges $3,500 a month for the drug. The article tells readers that the Mr. Steiner's insurer was unwilling to pay for the drug and there was no way that he and his family could afford this expense. Fortunately, an oncology social worker (the hero of this article) was able to negotiate a free supply of the drug from the manufacturer.

While this is good news for Mr. Steiner, what the article neglected to mention is that the only reason Gleevec costs $3,500 a month is because the government granted the company a patent monopoly. A high quality of generic version is produced by Indian manufacturers for $2,500 a year.

This difference in prices is equivalent to the United States imposing a 1,600 percent tariff on Gleevec. This patent monopoly leads to all the waste and economic distortions that economists would predict from massive tariffs. Undoubtedly many cancer patients don't get Gleevec because they can't afford its patent protected price and are not as lucky as Mr. Steiner in having a social worker who can work out an arrangement with Novartis.

In addition, the whole struggle to get a drug whose price is artificially inflated is a needless waste that is being imposed on people facing a potentially fatal disease. And of course the time spent by a third party is a total waste of resources that would not be necessary if Gleevec were sold at its free market price. In addition, the enormous mark-up received by Novartis gives it an incentive to oversell its drug, promoting it in cases where it may not be the best treatment. (Yes, we have to finance the research, but there are far more efficient mechanisms than this relic of the middle ages.)

While economists have written endless articles and books on the costs of protectionism, none of this information finds its way into the Post's article. It is probably worth noting that drug companies are a major source of advertising revenue for the Post.

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As we all know, one of the major recreational sports of media outlets is finding new and innovative ways to scare people about Social Security. One of my favorites is "infinite horizon accounting." This is when you project out Social Security spending and revenue into the infinite future and then calculate the difference. It gives you a REALLY BIG NUMBER.

We got an example of the casual use of this infinite horizon accounting in a column by Wharton Business School Professor Olivia Mitchell. The column was actually on a different topic, but towards the end the piece tells readers:

"The Social Security shortfall is enormous. Actuaries have estimated that it’s on the order of $28 trillion in present value. That’s twice the size of the gross domestic product of the U.S."

Note that there is no mention of the time horizon for the $28 trillion shortfall, so readers would have no way of knowing that it is for all future time. The comparison to current GDP is both wrong (GDP in 2016 will be over $18 trillion) and misleading. Why would we compare a deficit measured for all future time to this year's GDP? If we compared the deficit to future GDP it would be 1.3 percent, a bit more than one-third of the annual military budget.

It's also worth noting that the bulk of this deficit is for years after 2100. In other words, we are being cruel to children not yet born by writing down Social Security spending paths that exceed what they are projected to tax themselves. Can you envision anything so cruel? (The big problem is that the projections assume they will live longer and therefore have longer retirements.)

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The problem of deflation just refuses to go away. I don't mean the problem of weak economies with very low inflation rates, I mean the media's obsession with the idea that something really bad happens if the rate of price change crosses zero and turns negative.

We got another example of this strange concern in the NYT this morning. The piece noted the European Central Bank's (ECB) concern:

"Still, the central bank acknowledged its deep concern about the risk that the eurozone’s economic doldrums, characterized by a worrisomely low rate of inflation, could devolve into outright deflation, a vicious circle of falling prices and demand that can undercut corporate profits and cause unemployment to soar. ...

"Deflation sets in when falling prices prompt people to delay purchases because they expect prices to fall even further. Consumer spending and investment collapse, companies dismiss workers, and spending falls even further as people lose their jobs and incomes. Central bankers fear deflation because once it sets in, it is notoriously difficult to reverse."

To see the silliness of this line of argument, consider first what falling prices literally mean. Suppose that the price of shoes is declining at a 0.5 percent annual rate. How long will you put off a purchase of a $100 pair, knowing that it you wait a year it will save you 50 cents?

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