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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Max Ehrenfreund features a rather silly debate among economists about explanations for the housing bubble (wrongly described as the "financial" crisis) in a Wonkblog piece. The debate is over whether subprime mortgages were central to the bubble. Of course, subprime played an important role, but the focus of the piece is on new research showing that most of the bad debt was on prime mortgages taken out by people with good credit records.

I sort of thought everyone knew this, but whatever. The more important point is that economists continue to treat the housing bubble as something that snuck up on us in the dark and only someone with an incredibly keen sense of the housing market would have seen it. (I focus on the bubble and not the financial crisis, because the latter was very much secondary and really a distraction. By 2011, our financial system had been pretty much fully mended, yet the weak economy persisted. This was due to the fact that we had no source of demand in the economy to replace the demand generated by the housing bubble.)

Anyhow, there was nothing mysterious about the housing bubble. We had an unprecedented run-up in real house prices with no remotely plausible explanation in the fundamentals of the housing market. This could be clearly seen by the fact that rents were just following in step with the overall rate of inflation, as they have generally for as long as we have data. (This is nationwide, rents have outpaced inflation in many local markets, as have house prices.) The bubble should also have been apparent as we had record vacancy rates as early as 2002. The vacancy rate eventually rose much higher by the peak of the market in 2006.

It should also have been clear that the collapse of the bubble would be bad news for the economy. Residential construction reached a peak of 6.5 percent of GDP, about 2.5 percentage points more than normal. (When the bubble burst it fell to less than 2.0 percent of GDP due to massive overbuilding.) Also, the housing wealth effect led to an enormous consumption boom as people spent based on $8 trillion in ephemeral housing wealth.

In short, there was really no excuse for economists missing the bubble or not recognizing the fact that its collapse would lead to a severe recession. The signs were very visible to any competent observer.

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Readers of the NYT article on Donald Trump's pick to be Secretary of Health and Human Services might have gotten this impression. The piece told readers:

"His [Price's] resentment of government intervention in medicine drove Mr. Price to become involved in the Medical Association of Georgia early in his career, and his work there led him to run for office in 1995, when the House seat in his district opened up."

If Mr. Price really does resent government intervention then surely he would be outraged by protectionist rules that prohibit hundreds of thousands of qualified doctors from practicing medicine in the United States and bringing doctors' pay in line with pay in other wealthy countries. (Doctors can't practice medicine in the United States unless they complete a U.S. residency program.)

Presumably, Mr. Price is also outraged by government granted patent monopolies that raise drugs by ten or even a hundred times their free market price. These protections are equivalent to tariffs of several thousand percent. The story is the same with medical equipment which is also made expensive by these government interventions. (We need a mechanism to pay for innovation, but there are more efficient routes. See Rigged, chapter 5 [it's free]).

If Mr. Price doesn't object to protectionism for doctors and drug companies then the NYT is wrong in saying that he has resentment of government intervention in medicine. It seems more plausible that Price resents government actions that reduce the incomes of doctors. It would be helpful if the Times did not confuse these issues.

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The NYT decided to tout the risks that higher tariffs could cause serious damage to industry in the UK following Brexit:

"For Mr. Magal [the CEO of an engineering company that makes parts for the car industry], the threat of trade tariffs is forcing him to rethink the structure of his business. The company assembles thermostatic control units for car manufacturers, including Jaguar Land Rover in Britain and Daimler in Germany.

"Tariffs could add anything up to 10 percent to the price of some of his products, an increase he can neither afford to absorb nor pass on. 'We don’t make 10 percent profit — that’s for sure,' he said, adding, 'We won’t be able to increase the price, because the customer will say, "We will buy from the competition.'"

The problem with this story, as conveyed by Mr. Magal, is that the British pound has already fallen by close to 10 percent against the euro since Brexit. This means that even if the EU places a 10 percent tariff on goods from the UK (the highest allowable under the WTO), his company will be in roughly the same position as it was before Brexit. It is also worth noting that the pound rose by roughly 10 percent against the euro over the couse of 2015. This should have seriously hurt Mr. Magal's business in the UK if it is as sensitive to relative prices as he claims.

Image result for british pound vs euro

It is likely that Brexit will be harmful to the UK economy if it does occur, but many of the claims made before the vote were wrong, most notably there was not an immediate recession. It seems many of the claims being made now are also false.

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I blogged yesterday on how "Davos Man," the world's super-rich, is very supportive of all sorts of protectionist measures in spite of his reputation as a free trader. I pointed out that Davos Man is fond of items like ever stronger and longer patent and copyright protections and measures that protect doctors, dentists, and other highly paid professionals. Davos Man only dislikes protectionism when it might benefit folks like autoworkers or textile workers.

I thought it was worth pointing out that the protectionism supported by the Davos set is real money. The chart below shows the additional amount we pay for prescription drugs each year as a result of patent and related protections, the additional amount we pay for physicians as a result of excluding qualified foreign doctors, and the total annual wage income for the bottom 50 percent of wage earners. (I added 5 percent to the 2015 wage numbers to incorporate wage growth in the last year.)

Book7 1843 image001Source: Baker 2016 and Social Security Administration.

As can be seen, the extra amount we pay for doctors as a result of excluding foreign competition is more than 7 percent of the total wage bill for the bottom half of all wage earners. The extra amount we pay for drugs as a result of patent protection is roughly one third of the total wage bill for the bottom half of wage earners. Of course, we would have to pay for the research through another mechanism, but we also pay higher prices for medical equipment, software, and a wide variety of other products as a result of patent and copyright protections. In other words, there is real money here.

Davos Man isn't interested in nickel and dime protectionism, he wants to rake in the big bucks. And, the whole time he will run around saying he is a free trader (and get most of the media to believe him). 


Note: This is corrected from an earlier version which used a much lower figure for the wage bill for the bottom half of the workforce. Thanks to Nate Fritz for calling this to my attention.

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Folks looking at the NYT charts comparing the nation's performance by various measures under President Bush and President Obama may be misled by the health care chart. The chart shows health care spending as a share of GDP rising from 14.0 percent in 2001 to 16.3 percent in 2008, which it describes as the "Bush years." It shows a further increase to 18.1 percent in 2016, which are the "Obama years." By this measure we see a modest slowing of health care cost growth as a share of GDP, with a rise of 2.3 percentage points in the Bush years compared with 1.8 percentage points in the Obama years.

The problem here is that the chart puts the end of the Bush years at 2008. Note that the start of the Bush years in 2001, which is of course when he actually took office. If we go out eight years, that puts us at 2009. In that year health care costs were 17.3 percent of GDP. Using this as an endpoint, costs grew by 3.3 percentage points of GDP in the eight years of the Bush administration. They grew by just 0.8 percentage points in the first seven years of the Obama administration. We will need data for 2017 before we can draw the full picture, but we will almost certainly still see a sharp slowing of health care costs under President Obama. Of course, we can argue about the extent to which the Obama administration deserves credit for this slowing of cost growth, but the fact it took place is not disputable.

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The NYT had an article on the annual meeting of the world's super-rich at Davos, Switzerland. It refers to Davos Man as "an economic elite who built unheard-of fortunes on the seemingly high-minded notions of free trade, low taxes and low regulation that they championed." While "Davos Man" may like to be described this way, it is not an accurate description.

Davos Man is actually totally supportive of protectionism that redistributes income upward. In particular, Davos Man supports stronger and longer patent and copyright protection. These forms of protection raise the price of protected items by factors of tens or hundreds, making them equivalent to tariffs of several thousand percent or even tens of thousands of percent. In the case of prescription drugs, these protections force us to spend more than $430 billion a year (2.3 percent of GDP) on drugs that would likely cost one tenth of this amount if they were sold in a free market. (Yes, we need alternative mechanisms to finance the development of new drugs. These are discussed in my free book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.)

Davos Man is also just fine with protectionist barriers that raise the cost of physicians services as well as pay of other highly educated professionals. For example, Davos Man has never been known to object to the ban on foreign doctors practicing in the United States unless they complete a U.S. residency program or the ban on foreign dentists who did not complete a U.S. dental school (or recently a Canadian school). Davos Man is only bothered by protectionist barriers that raise the incomes of autoworkers, textile workers, or other non-college educated workers.

Davos Man is also fine with government regulations that reduce the bargaining power of ordinary workers. For example, Davos Man has not objected to central bank rules that target low inflation even at the cost of raising unemployment. Nor has Davos Man objected to meaningless caps on budget deficits, like those in the European Union, that have kept millions of workers from getting jobs.

Davos Man also strongly supported the bank bailouts in which governments provided trillions of dollars in loans and guarantees to the world's largest banks in order to protect them from the market. This kept too big to fail banks in business and protected the huge salaries received by their top executives.

In short, Davos Man has no particular interest in a free market or unregulated economic system. They only object to interventions that reduce their income. Of course, Davos Man is happy to have the New York Times and other news outlets describe him as a devotee of the free market, as opposed to simply getting incredibly rich.

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This is what the NYT article and the underlying study both concluded. While families on food stamps did spend a somewhat larger share of their food budget on soft drinks and other unhealthy foods, there was not a big difference in their behavior compared with families not receiving food stamps. The headline likely gave readers the opposite impression, telling readers:

"In the shopping cart of a food stamp household: lots of soda."

Come on folks, try to have your headlines reflect what the article says.

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David Brooks has apparently not heard of the Affordable Care Act (ACA) since he thinks he is providing new information in telling readers that markets can work in health care. If he was familiar with the law, then he would realize that the ACA was quite explicitly designed with the idea that patients should share in costs, and therefore have incentives to seek lower cost care.

As a practical matter, this has not worked out very well, since patients tend not to do comparative shopping for health care services. This means that giving them more control does little to hold down health care costs. A recent study by the Rand Corporation found that patients with high deductible plans did spend less on health care but also tended to avoid recommended preventive procedures such as cancer screenings. Since this was a relatively short-term study, it did not include the higher long-term costs that may result from patients not receiving preventive care.

It is worth noting that Brooks seems uninterested in ways in which obstacles to a well-working market may raise costs but also raise the income of highly paid people. For example, in most markets there is very little competition between insurers. This means that patients have few options if their insurers give them a bad time paying bills — in effect stealing patients' money. (Personal note: I had to spend two hours on the phone, in three separate calls, to get my insurer [United Health Care] to pay a bill that was for a procedure that was completely standard, prescribed by my doctor, and obtained at an in-network provider. The value of the time I wasted, and that other patients must waste, are not generally included in calculations of health care costs.)

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The NYT devoted an article to Amazon's plans for building out its warehouse network and managed to completely avoid any reference to Amazon's efforts to avoid having to collect sales tax. For years, Amazon pursued a strategy of trying not to maintain a physical presence in states so that it could argue that it did not have to collect sales tax. This effectively gave Amazon an enormous taxpayer subsidy at the expense of conventional retailers.

Jeff Bezos has effectively been handed millions of years worth of food stamps by government regulations that allowed him to avoid collecting sales tax. The savings from not having to collect sales tax almost certainly exceeds Amazon's cumulative profits since it was founded.

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It really is shameful how so many people, who certainly should know better, argue that automation is the factor depressing the wages of large segments of the workforce and that education (i.e. blame the ignorant workers) is the solution. President Obama takes center stage in this picture since he said almost exactly this in his farewell address earlier in the week. This misconception is repeated in a Claire Cain Miller's NYT column today. Just about every part of the story is wrong.

Starting with the basic story of automation replacing workers, we have a simple way of measuring this process, it's called "productivity growth." And contrary to what the automation folks tell you, productivity growth has actually been very slow lately.  

Book2 9104 image001

Source: Bureau of Labor Statistics.

The figure above shows average annual rates of productivity growth for five year periods, going back to 1952. As can be seen, the pace of automation (productivity growth) has actually been quite slow in recent years. It is also projected by the Congressional Budget Office and most other forecasters to remain slow for the foreseeable future, so the prospect of mass displacement of jobs by automation runs completely counter to what we have been seeing in the labor market.

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An NYT article on Robert Lighthizer, Donald Trump's pick to be trade representative, left out some important background information. It notes that Lighthizer wants to reduce the size of the U.S. trade deficit with China. It then told readers that this could lead to major conflicts with China:

"Exports are important for China. It consistently sells $4 worth of goods to the United States for each $1 of imports. That mismatch has produced a bilateral trade surplus for China equal to about 3 percent of the country’s entire economy, creating tens of millions of jobs.

"The benefits to China from that surplus have been increasing rapidly in the past few years."

It is worth noting that China has actually sharply reduced its trade surplus in prior years. According to the I.M.F. it peaked at 9.9 percent of GDP in 2007. It then declined sharply to just 1.8 percent of GDP in 2011. It has since edged slightly higher, but it is still less than 3.0 percent of GDP.

Ordinarily, we would expect that a fast growing developing country like China would be running a trade deficit, as capital flows into the country to take advantage of higher returns. This has not happened in China's case as the government has offset inflows of private capital by buying up trillions of dollars of foreign assets. It now holds more than $3 trillion in reserves in addition to another $1.5 trillion in foreign assets in the form of sovereign wealth funds.

Reportedly China has recently been trying to raise the value of its currency. This would suggest an obvious path of agreement between the U.S. and China under which the two countries could act jointly to raise the value of China's currency against the dollar, thereby putting downward pressure on the trade deficit.

The piece also notes Lighthizer's advocacy of the efforts of the Reagan administration to pressure Japanese manufacturers to "voluntarily" limit their exports to the United States. It would have been worth mentioning that these restrictions on exports led the Japanese manufacturers to begin to set up factories in the United States. Today, most of the cars that Japanese auto companies sell in the United States are assembled here, although they still do include a substantial amount of foreign content.

This piece seriously misrepresents a proposal for corporate tax reform advocated by Republicans in Congress as a route to tax imports. In fact, the tax has been developed by economists who are very much conventional free traders. The purpose is to simplify the tax code and eliminate the enormous waste associated with the gaming of our current system. The treatment of imports and exports is intended to make the tax symmetric with the treatment of value-added taxes in many U.S. trading partners. It is not intended as a protectionist measure to reduce the trade deficit.

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As the protectionist supporters of the Trans-Pacific Partnership (TPP) desperately try to regroup, it's entertaining to see how they think that China-bashing is their best hope for success. (Yes, supporters of the TPP are protectionist. A major thrust of the deal is to impose longer and stronger patent and copyright and related protections on the member countries. These are by definition forms of protectionism, even if economists and reporters tend to like them.)

Anyhow, we got an example of the China bashing of a TPP supporter in a Washington Post column by Fareed Zakaria, in which he warned readers that China would be the main beneficiary from a decision by Donald Trump not to pursue the TPP as president. The economists at the Peterson Institute for International Economics are also among those making the argument for the TPP as an obstacle to China's growing political strength in the region. Many of these same people argued vociferously for allowing China to enter the WTO in 2000 without imposing conditions like respect for human rights or labor rights, which may have fundamentally altered China's path of political development. It is striking that they now think the U.S. public should now be concerned about the growing power of a country with little respect for these rights.

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Reporters always complain about not having enough space to give the full story, which makes it a mystery as to why they so frequently add the word "free" to references to trade policy. We got an example of this wasteful wordiness in a NYT article on Donald Trump's decision to ignore nepotism and conflict-of-interest rules and appoint his son-in-law Jared Kushner as a top adviser.

The piece told readers that Kushner, along with other responsibilities, would work on "matters involving free trade." The use of "free" in this context is misleading since much of the U.S. trade agenda is about increasing protectionism in the form of longer and stronger patent, copyright, and related protections. These protections are equivalent to tariffs of many thousand percent in the economic distortions they produce. They are 180 degrees at odds with free trade. There also has been little, if any, effort to remove protectionists barriers that benefit highly paid professionals, such as the ban on foreign doctors who have not completed a U.S. residency program.

For these reasons, it is inaccurate to include the word "free" in reference to U.S. trade policy. It is difficult to see why the NYT and other news outlets feel the need to do it. 

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One positive item that is on the agenda of the Republican Congress is an overhaul of the corporate tax code. The basic plan is to hugely simplify the tax in a way that would eliminate almost all deductions, most importantly the deduction for interest payments.

I am big fan of this change because the tax shelter industry is both an enormous source of waste in the economy and major generator of inequality. In particular, the private equity (PE) industry is largely about tax arbitrage, with much of the profits in the sector due to the fact that PE companies can radically reduce the liability of the companies they buy. This allows them to make a fortune when they resell them to the public, typically within a few years after they buy them. (See the book by my colleague Eileen Appelbaum and Rose Batt, Private Equity at Work: When Wall Street Manages Main Street.)

PE is the source of many of the biggest incomes in the country. Think of folks like Mitt Romney and Peter Peterson. PE partners often make tens of millions of dollars a year, and paychecks in excess of a hundred million are not uncommon. Eliminating this sort of tax arbitrage, as the Republican tax reform would do, would get rid of this source of waste generated enormous inequality.

For some reason, this part of the story has barely been mentioned. Ironically, the issue that has been highlighted is the treatment of imports and exports. While the tax is not directly a value-added tax like the ones in place in European countries, it has many features of a value-added tax. (A value-added tax is essentially a sales tax.) The proposed tax can be thought of as a hybrid between a value-added tax and an income tax.

Anyhow, the proposal would treat the tax in the same way that countries treat a value-added tax. It is applied to all imported items and refunded on exported items. Some proponents of the tax argue that this tax treatment is one of the great advantages of the tax since it would promote U.S. exports. The econ theorist types dismiss the argument by saying that changes in currency values, specifically a rise in the value of the dollar, would offset any gains in the competitiveness of U.S. goods and services from the tax.

Color me as skeptical on the full offset argument, but ironically the prospect of a full offset is being put forward as an argument against the tax. Neil Irwin makes the case in his column in the NYT this morning.

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Politico badly misled readers this morning in an article that said Trump "can't simply divest from his businesses." The article cited a number of experts who explained how difficult and complicated it would be for Trump to sell off his various businesses, many of which have complex ownership arrangements, along with debts and other legal obligations.

While selling Trump's business enterprises in short order would be complicated, as I explained shortly after the election, this is not what is necessary for Donald Trump to avoid conflicts of interest. The key to the process I outline in that piece is that Trump arrange to get independent teams of auditors to provide assessments of the property. I suggested he go with the middle assessment provided by three teams of auditors. This would limit the likelihood of a major error in the assessment. 

Trump would then buy an insurance policy that would guarantee him the estimate from this middle audit. The enterprises would then be turned over to an executor who would run and offload the businesses with the goal of maximizing the value. When the businesses are sold off the proceeds would be placed in a blind trust. If the cumulative value from the sales exceeds the estimate, then the proceeds go to a charity of Trump's choosing, but not under his control. If the proceeds from the sales are less than the value of the estimate he collects on the insurance policy.

This is a process that should be fair to Donald Trump and can be done quickly. It eliminates his conflicts of interest as soon he buys the insurance policy. Trump should have been going in this direction the day after the election, in which case he surely would have an insurance policy in force by now. However, if he were to take steps to come clean now, he should still be able to end his conflicts in the first weeks of his presidency. 

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December's employment report showed that the average hourly wage has risen by 2.9 percent over the last year. This was widely reported as evidence that wage growth was accelerating. While the pace of wage growth may have picked up somewhat in recent months, it is not necessarily the case that the pace of compensation growth has risen to the same extent.

In recent years, the pace of benefit growth has been trailing the rate of wage growth, as employers cut back on the amount they pay for their workers' health insurance. As a result, at least through the third quarter of the 2016 (4th quarter data are not yet available), the acceleration in compensation growth was less noticeable than the acceleration recently reported in wage growth. The year-over-year increase for the third quarter was 2.4 percent. This is up by roughly a percentage point from the lows hit in 2009, but down from 2.6 percent year-over-year pace in the fourth quarter of 2014. 

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Neil Irwin gave a reasonable assessment of the Obama administration's record on job creation and wage growth, but there is one item that could use clarification. He notes the decline in prime-age male labor force participation, but then dismisses it as part of a long-term trend.

There are two points here that are worth noting. The participation rate of prime-age women had been rising prior to the recessions in 2001 and 2008–09. In both cases it was projected to continue to rise. Economists are happy to now say that the lower current rate is simply due to more prime-age women choosing not to work, but it is not obvious to me that economists today are better able to determine the underlying rate of labor force participation for prime-age women than economists working in 2000 or 2006. In other words, I don't buy that the drop in women's labor force participation is not the result of weak demand.

The other point is that labor force participation is actually an imperfect measure since the decision of someone to look for work, and therefore be classified as part of the labor force, depends in part on the generosity of unemployment insurance (UI) benefits. (To qualify for benefits you have to say you are looking for work.) As requirements for UI have gotten stricter more people give up looking for work and drop out of the labor force.

If we look at prime-age employment rates (EPOP) we get a measure that is not sensitive to this problem. So, while Irwin tells us:

"The proportion of men 25 to 54 who are part of the labor force has fallen by 1.4 percentage points during the last eight years.

"What is less widely understood, though, is that this shift isn’t some new phenomenon of the Obama era. That same measure fell by 1.7 percentage points during the eight years of George W. Bush’s presidency. Even during the boom years of the Clinton administration, it fell by 0.9 percentage points."

If we look at EPOPs we got a somewhat different picture, most notably during the Clinton years. From January 1993 to January of 2001 the EPOP for prime-age men rose by 2.1 percentage points. Even if we take the more reasonable peak to peak comparison we see little evidence of a downward trend with a peak in February of 1990 of 90.1 percent compared to a peak in January of 1999 of 89.7 percent. In other words, if we look at EPOPs, there is not much evidence of a downward trend in EPOPs in the decade prior to the 2001 recession.  

The point is important since there are many people in policy positions who want to say that the current level of unemployment and employment rates is the best we can do and that the Fed should jack up rates to prevent the labor market from tightening further. (The same was true when the unemployment rate fell below 6.0 percent in 1995.)

If in fact there are still millions of people who would work if they saw jobs available, then we are needlessly depriving them of employment. Furthermore, by weakening the labor market, the Fed would be preventing tens of millions of workers from having sufficient bargaining power to secure rate increases and make up the ground loss in the recession.

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I see from the Twitterverse that this NYT column by Robert Leonard, on why rural voters don't like Democrats, touched some nerves. The main complaint stems from Leonard's comment that rural voters see themselves as subsidizing the big cities:

"In this view, blue counties are where most of our tax dollars are spent, and that’s where all of our laws are written and passed. To rural Americans, sometimes it seems our taxes mostly go to making city residents live better. We recognize that the truth is more complex, particularly when it comes to social programs, but it’s the perception that matters — certainly to the way most people vote."

The gist of the angry Twitter comments was effectively "who cares about the hicks' perceptions, the reality is that the tax subsidies go the other way."

Well, this might a good teaching moment. Only the ignorati would focus exclusively on tax and spending flows. As everyone who has read the good book (Rigged — it's free) knows, the government directs income flows in a wide variety of ways that go beyond normal tax and spending flows.

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Yet again the Washington Post tries to tell readers that trade has not been a major factor in the loss of manufacturing jobs in this century. It concluded an interesting piece on Ford's decision to cancel plans for a plant in Mexico by telling readers:

"The president-elect has argued that trade policy has quashed American livelihoods, encouraging businesses to seek cheaper labor in other countries. He has criticized Ford, General Motors and Carrier on Twitter for shuttling work south of the border.

"A study last year from the Center for Business and Economic Research at Ball State University, a school in the manufacturing heartland, tells a different story. Co-author Michael Hicks, an economics professor, found that advances in technology caused far more job loss. That’s because automation has enabled factories to produce more goods with fewer people."

Actually, automation is not new. It's called "productivity growth" and has been going on for centuries, often much faster than it is today. As we can see, manufacturing employment remained roughly even, with cyclical ups and downs, from 1970 to 2000. It then plunged as the trade deficit exploded to almost 6.0 percent of GDP in 2005 and 2006 ($1.1 trillion in today's economy).

Manufacturing Employment

manu empl

Source: Bureau of Labor Statistics.

The basic story is that manufacturing employment was declining as a share of total employment through this whole period and undoubtedly would have continued to do so regardless of what happened with trade. However, the sharp plunge in employment that we saw in the years 2000 to 2007 (pre-crash) was due to the trade deficit.

It is remarkable that the Washington Post feels so much need to deny this simple fact. It is in the same vein as its refusal to correct its 2007 editorial claiming that NAFTA had led Mexico's GDP to quadruple between 1987 and 2007. The actual number is 83 percent according to I.M.F data. A serious newspaper would correct such an egregious error.

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This fact was implicit in a NYT piece that discussed the extent to which U.S. medical schools are expanding enrollments. The piece notes that the number of doctors in the United States is limited by the requirement that they complete a U.S. residency program. It doesn't give any indication that this protectionist restriction might be removed or weakened in the years ahead.

As a result of this protectionism, U.S. doctors earn on average more than twice as much as their counterparts in Germany, France, and other wealthy countries. This costs the country close to $100 billion a year in higher health care costs. Because of the political power of doctors, there is little public debate over this protectionism and news outlets like the NYT rarely even mention it.

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Yes, I know Peter Peterson is a major source of employment in Washington and that the Washington Post editors and many pundits would have to look for substantive issues to talk about if they couldn't whine about the debt, but really it is time for these folks to grow up. The immediate provocation here is Steven Rattner's NYT column giving "2016 in Charts."

Most of the charts are actually quite interesting and useful, but then he ends the piece with a tirade about the prospects for the national debt under a Trump administration. Rattner warns:

"These huge tax giveaways — along with Mr. Trump’s promises to increase infrastructure spending and not touch Social Security and Medicare — would blow up the deficit and add $4 trillion to the national debt over the next 10 years over and above current projections."

Just to be clear, there is no reason to be giving more money to Donald Trump's billionaire friends as he proposes, but the argument is not that it will "blow up" the deficit and add to the debt. The argument is that this money could be much better used educating our children, improving our infrastructure, and making health care affordable, among other things.

The debt stuff is just silliness that we really need to get over. The problem of an actually excessive debt would show itself in high interest rates and high inflation rates. Have you checked those measures lately? Long-term interest rates are still way below their levels from the late 1990s when the government was running surpluses. And inflation remains persistently below the Fed's 2.0 percent target and in recent months has edged downward. (And, for those keeping score at home, the government's ratio of interest payments to GDP is near a post-World War II low.)

Furthermore, the whole focus on the debt encourages sloppy thinking that has no place in serious policy discussions. The government makes obligations for us all the time that don't take the form of explicit debt. Donald Trump wants to have private companies spend a trillion dollars building infrastructure that they will then recoup in tolls. How do these tolls differ from taxes? So we would be doing bad things to our kids if we financed infrastructure with debt, but then taxed to repay the bonds, but if private companies charge the same amount (most likely much more) in tolls, everything is cool? 

To take a much more important example, grants of patent and copyright monopolies are ways in which the government finances innovation and creative work. We pay $430 billion a year for prescription drugs that would likely cost around $60 billion in a free market without patents and related protection. (Yes, you can read more in my [free] book, Rigged.) If the government imposed a tax of $370 billion a year on drugs being sold in a free market the deficit hawks would be yelling and screaming about high taxes, but when we give drug companies a legal monopoly so that they can add this amount to the price of drugs it's no big deal?

Okay, this is just silliness. We need discussions of the economy that are serious. When people scream about debt and deficits they are not being serious. The national debt is not a real measure of anything and folks should know that even if the "experts" don't.

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