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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This point should have been mentioned in a NYT article on the risk of sexual assault/harassment that housekeepers face in hotels. As the article notes, many housekeepers are reluctant to bring such attacks to the attention of their supervisors and/or law enforcement both out of embarrassment, but also out of fear of losing their jobs.

In this particular case, the housekeeper belonged to a union that has provisions in its contract that explicitly require the management to take cases of sexual assault or harassment seriously. This meant the housekeeper knew that she could make a complaint to management and not worry about being ridiculed or putting her job at risk. This fact would have been worth mentioning in the article. 

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The Washington Post had a front page piece reporting on how Senate Democrats find themselves taking a back seat in current political debate in Washington. At one point the article refers to Senate Minority Leader Mitch McConnell's plan to bring President Obama's budget to a vote, adding:

"which both parties lambasted as being far too timid in dealing with the nation’s swelling deficit."

Of course this assertion is just an invention of the folks at Fox on 15th Street. While there may be some business-associated Democrats who have lambasted President Obama's budget for being too "timid," the vast majority of congressional Democrats have made no such criticism. Needless to say, this statement does reflect the Washington Post's editorial position on the budget.

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That is the conclusion that readers of a Politico article headlined, "budget surplus to deficit: how we got here," must conclude. This article attributes the increase in the deficit in the Obama years to increased spending coupled with tax cuts, only mentioning in passing at the end of the article that the single biggest factor in the rise of the deficit was the economic collapse. It fails to point out that virtually all of the additional spending and tax cuts by President Obama was carried through for the explicit purpose of counteracting the loss of private sector demand due to the collapse of the bubble.

It is absolutely inexcusable for a serious news organization to run a piece like this. The collapse of the housing bubble was by far the biggest economic disaster since the Great Depression. Complaining about the size of the deficit under President Obama, while only mentioning in passing the reason for the deficit, is like complaining about a city's use of water without mentioning that it had been trying to extinguish a massive fire.

If reporters and editors were held accountable for the quality of their work in the same way as dishwashers and schoolteachers, people would be fired for this piece.

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Michael Leavitt, the Secretary for Health and Human Services under President Bush, touted the Medicare Part D model in an oped in the Washington Post. Leavitt argued that this model, which provided a prescription drug benefit through private insurers, has been effective in providing a wide range of choices to beneficiaries and holding down costs. He notes that the cost of the program has been far lower than the Congressional Budget Office had projected.

While Leavitt is correct in pointing out that the drug benefit has cost much less than had been projected, it is important to note that drug prices in general have risen much less rapidly than was projected when the benefit was introduced in 2006. The obvious explanation for the lower than expected increase in drug prices is a much slower rate of innovation.

In the years since 2005, the Food and Drug Administration has been granting approvals for new drugs that it assigns priority reviews, meaning that they provide a qualitative improvement over existing drugs, at roughly half of the rate that it did in the 1990s. The number of priority approvals averaged just 10 between 2005-2009 compared to 19.9 in the 1990s.

 

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Source: FDA and Knowledge Ecology International.

 

These new drugs, which supposedly provide much greater medical benefits than existing drugs, are the major factor driving cost increases. Therefore, it is not surprising that a slowdown innovation would be associated with a slower rate of increase in the cost of drugs, including the cost of drugs provided through Medicare Part D.

According to the Center for Medicare and Medicaid Services, we are spending almost 4 times as much on prescription drugs today (adjusted for inflation) as we did in 1990. Given this increase in spending, it would be reasonable to expect the rate of drug development to increase.

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Ezra Klein apparently thinks so. He turned to Mr. Rubin to get his assessment of the risks of letting the country default on its debt.

As Treasury Secretary, Rubin pushed the high dollar policy that created the enormous trade imbalance that still afflicts the U.S. economy. He also stood by as the stock bubble rose to ever more dangerous levels. He insisted on removing restrictions on financial industry risk-taking, over-riding efforts by other regulators.

After leaving the Clinton administration he became a top official at Citigroup. Citigroup packaged hundreds of billions of dollars of bad mortgages into mortgage backed securities, helping to inflate the housing bubble. The bank was only saved from collapse with a massive government bailout. Mr. Rubin pocketed over $100 million for his work with the bank.

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Apparently it is, according to a front page news story in the Washington Post on a budget provision approved by the Montgomery County Council that would require county employees to pay much more for their health care. The article notes that range of salaries for county employees, beginning with bus drivers who earn $38,000 a year.

It then tells readers:

"But the way they [the increased employee payments for health care] were passed shows what happens when a wealthy, liberal county is forced to confront years of political accommodation and generous spending."

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The NYT tells us that working conditions and wages are improving for nannies in Brazil. In fact, even some of the nannies now have nannies. It would be useful if this piece included some information on the number of people who work as nannies. Add a comment
The Washington Post has a practice of granting oped space to almost anyone who is prepared to advance its agenda of deficit reduction. Today it opens its pages to Senator Tom Coburn who begins his piece by telling readers that:

"Any honest view of our debt, deficits, size of government and demographic challenges shows we must make major changes if we are going to pass on the American way of life to our children. Each week seems to bring new warning signs: slower-than-expected growth (already as much as 25 to 33 percent every year, some estimate), higher-than-expected unemployment numbers."

Actually the current period of high unemployment and slow growth has nothing to do with the budget deficit. It is the result of the collapse of the $8 trillion housing bubble. Unfortunately, Federal Reserve Board chairs Alan Greenspan, Ben Bernanke and other policymakers overlooked this enormous bubble as it was growing. Apparently, Mr. Coburn has not noticed the bubble even now that its collapse has wrecked the economy.

At one point, Coburn cites Morgan Stanley Director Erskine Bowles calling the deficit situation, "... the most predictable economic crisis in history." Actually, the housing bubble was probably the most predictable economic crisis in history. Unfortunately, almost no one in a policy position was able to predict it.

Contrary to Mr. Coburn's assertion at the beginning of his, any honest view of the debt, deficits, size of government and demographic challenges shows that we have to fix our health care system. If per person health care expenditures were comparable to what they are in Germany, Canada, or any other wealthy country with a longer life expectancy than the United States we would be looking at budget surpluses, not deficits.

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The Democrats want to take away tax breaks from the big oil companies, the Republicans want to let them drill more places. These may be good or bad policies, but neither will have any noticeable effect on the price of gas.

Let's say that 20,000 times. Neither of these policies will have a noticeable impact on the price of gas. This is not a disputable point.

Getting more tax revenue from the oil industry may be a good idea, especially in a context where Congress is obsessed with reducing the deficit, but it will not reduce the price of gas.

Similarly, the opening of new areas off the coast to drilling cannot possible generate enough additional oil to have any noticeable effect on the world price of oil. When politicians say that they want to increase drilling to bring down gas prices they either do not know what they are talking about or they are not being truthful. 

Either way, this assertion should be treated as a gaffe. (You know, like then Senator Obama's comment about guns and religion during the presidential primaries.) Politicians who make such inaccurate assertions should be pressed on them. The media should try to determine whether they are really completely ignorant of the dynamics of the world oil market or they are just trying to deceive the public.

It should not just imply that opening new areas to drilling is a plausible way to reduce gas prices, as is done in this article

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On Marketplace radio this morning Chris Farrell told listeners that state pension funds will only get 4-5 percent nominal returns in the years ahead, not the 8 percent that many have assumed. This is wrong. Given the mix of assets held by these funds, current stock market valuations, and projected economic growth, 8 percent is the expected rate of return on these funds. It is virtually impossible to describe a scenario in which returns will only be the 4-5 percent rate suggested by Mr. Farrell.

Many people who want to see the benefits of public employees reduced are complaining now that current assumptions on returns are excessive. In fact, they should have complained in the late 90s, during the stock bubble years, when the assumptions of returns were demonstrably excessive. It is striking that many of the same economists, who completely missed the stock bubble and then the housing bubble, are now the experts that the media turn to when assessing the market's prospects going forward. 

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When the United States negotiates trade agreements with countries in Latin America, it likes to call them "free trade agreements." Apparently this makes them more salable than simply calling them "trade agreements."

These deals do not actually lead to free trade. They generally do almost nothing to remove the barriers that protect highly paid professionals, like doctors and lawyers, from foreign competition. More importantly they increase many protectionist barriers, like patent and copyright protection, which raises prices by several thousand percent above the free market price.

For this reason, in this article on relationships with Latin America, the NYT should either have simply called the agreements negotiated with Panama and Colombia "trade agreement" or used quotation marks in describing them as "free trade" agreements.

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NYT columnist Nicholas Kristof does not have a very good track record in identifying effective ways to help poor people in the developing world. (He was a big promoter of Greg Mortenson, the best-selling author of Three Cups of Tea, whose aid project now appears to be largely a fraud.) His column today indicates that his track record is not about to improve.

He urges people who want to help the world's poor to study economics and points to useful results that economists have uncovered. While the results he mentions are intriguing, Kristof somehow manages to ignore all the harm that economists have done in the developing world.

For example, the economists at the International Monetary Fund had routinely imposed structural adjustment programs that required that parents pay fees for their children to attend primary school. These agreement also often required fees for the provision of basic health services. This practice kept millions of children out of school and denied them basic preventive health care, since even small fees were unaffordable to many poor parents.   

The practice was not changed voluntarily by the economists at the IMF. Rather it was a change that was forced on the institution by activists who were able to use their influence in Congress to require that the IMF stop making these fees a condition of getting loans. 

At present, virtually all economists are making a point of not noticing the efforts of the United States and other wealthy countries to raise the price of medicine to people in the developing world by imposing patent protection. All the "free-trade" agreements that the United States has negotiated with developing countries have imposed stronger patent protection or other monopolistic restrictions (e.g. data exclusivity for tests used to get drugs approved) that typically raise the price of drugs by several thousand percent above their free market price. The TRIPS provisions of the WTO (which were drafted by the U.S. pharmaceutical industry) also were intended to have this effect.

While any economist (and most non-economists) should possess the ability to recognize the potential harm that these provisions can imply for the world's poor, very few have tried to call attention to these protectionist measures. It is worth noting that very powerful forces, most notably the pharmaceutical industry and the Gates Foundation, stand behind these sorts of measures. That could explain the reluctance of economists to apply economics to these issues.

Contrary to what Mr. Kristof suggests, the biggest obstacle to improving the lot of the poor in the developing world is probably not a lack of knowledge of economics, but rather the efforts of the powerful from preventing the teachings from economics from being applied in situations where it would hurt their interests.

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In an article on the poor employment prospects for recent college grads, the NYT told readers:

"Now evidence is emerging that the damage wrought by the sour economy is more widespread than just a few careers led astray or postponed."

This is actually a good article that includes some new evidence on the extent to which recent college grads are either working at jobs that do not require a college degree or out of work altogether. (The graph accompanying the article shows that 22.4 percent are out of work altogether and 22.0 percent are working at jobs that don't require a degree.)

It's just striking that a sentence like this appeared near the top of the article. We're just now discovering that there is serious damage from this downturn? Some editor was asleep at the wheel on this one.

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Home sales fell through the floor last May as the first time home buyers tax credit ended in April. The expiration of the credit pulled a lot of sales forward, so that few people were buying in May.

This is why it should have people very concerned that purchase mortgage applications for last week were actually slightly below the level for the same week last year. The same was true for the prior week also. These are weekly data, which means that the numbers will be erratic, but this is not a good sign.

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USA Today is now telling us that used car prices may not stay at their record highs. As I explained last week, we expect most items to be hitting record-high prices most of the time, since the economy is seeing moderate rates of inflation, not deflation. However, it turns out that we are not actually seeing record high car prices rights now, at least not according to the Bureau of Labor Statistics. The difference between the indexes referred to in the article and the index shown in the graph is that the Bureau of Labor Statistics adjusts for changes in quality.

 

 

 

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This basic fact should have been included in a Washington Post piece that talked about plans to require federal employees to contribute more from their paychecks to their retirement plan. Economists of all political persuasions view workers' pay as a total compensation package. When comparing pay in different jobs or industries economists include employer payments for health insurance, pensions, and other benefits, along with straight wages.

This means that when political figures call for federal employers to pay more money out of their paycheck into their pensions, they are calling for these workers to get a pay cut. This is not a debatable point in a he said/she said as this article implies. It is true.

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Ezra Klein makes the case that the United States needs a weaker dollar in order to increase net exports and move towards more balanced trade. (Former Senator Ernest Hollings referred to the weaker dollar as a "competitive" dollar.) However it wrongly thinks the need is temporary and that China' currency policy is the sole problem.

In fact, the problem of the over-valued dollar is longstanding and dates back to Robert Rubin's days as Treasury Secretary. When Rubin took over as Treasury Secretary he reversed his predecessor's position that the dollar should be allowed to drift downward.

In fact, the decline in the value of the dollar was supposed to be one of the fruits of President Clinton's deficit reduction policy. A lower valued dollar was suppose to boost U.S. net exports and turn our trade deficit into a trade surplus. In standard economic theory rich countries are supposed to run trade surpluses, lending capital to poorer developing countries.

Rubin instead insisted that the United States wanted a high dollar. He put muscle behind this view in 1997 East Asian financial crisis. He used the Treasury Department's control over the IMF to force the crisis countries to repay their debts in full, instead of allowing for defaults and write--downs. The repayment was financed by a massive boost in exports from the region. This was made possible by sharply lower values of their currencies against the dollar. In other words, the value of the dollar rose.

The harsh conditions imposed by the IMF in the East Asian crisis led countries throughout the developing world to begin to accumulate reserves on a massive basis in order to avoid ever being forced to deal with the IMF. This meant deliberately depressing the value of their currency against the dollar.

The huge U.S. trade deficit in the late 90s and the last decade was a major source of the imbalances of these years. A trade deficit logically implies (i.e. there is no damn way around it) either a large budget deficit or negative private savings, or some combination.

In the late 90s, the country had a budget surplus, but negative private savings. This was the result of the stock bubble. The wealth created by that bubble led to a consumption boom which pushed savings rates to levels that were at the time record lows.

After the stock bubble collapsed, the budget deficit returned. While the deficit fell back to more normal levels in 2006 and 2007, this was associated with private savings again becoming highly negative as the household saving rate fell to near zero in the years 2004-2007. The culprit in this case was the wealth created by the housing bubble.

Klein misses this story. The over-valued dollar is not a side-bar, nor is China a lonely culprit in this story. The over-valued dollar is central to any understanding of the U.S. economy over the last 15 years. 

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That is the only thing that readers can conclude from a classic he said/she said piece about the Ryan budget plan approved by House Republicans last month. The piece simply repeated assertions about his budget from Representative Ryan and responses from House Minority Leader Nancy Pelosi and other Democrats.

It did not, for example, point out that the Congressional Budget Office projects that the Ryan plan would increase the cost of buying Medicare equivalent policies by $34 trillion (5 times the projected Social Security shortfall) over the program's 75-year planning period. Nor did it point out that the Republican proposal envisions that by 2050, most areas of government spending, including the military budget, will shrink to a size that is less than two-third the current size of the military budget.

The Post readers generally will not have time to look such things up for themselves. Post reporters should.

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Of course the Post does not have a clue as to how Republican politicians actually "regard" the health insurance exchanges established under President Obama's health care plan. All the Post can know is what these politicians say. It has no idea what, if anything, they actually believe about this system. This should cause readers to question why it asserted:

"Republicans, however, regard it [the insurance exchange system] as a likely first step down the road to a government-controlled insurance system."

The people in question are politicians, not political philosophers. They do not get their jobs for their refined views on social and economic issues. They get their jobs for appealing to important interest groups. The Post should understand this fact.

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Timothy Egan understated the extent to which the Ryan plan would raise costs for Medicare beneficiaries. He reports that it would double the amount that the typical beneficiary would have to pay for their care. Actually, the Congressional Budget Office projects that it would triple the cost for retirees by 2030, with the ratio rising even higher in later years. (This doesn't take account of the increase in the eligibility age to 67.)

It's worth noting that the vast majority of this additional cost is due to increased payments to the insurance industry and health care industry. The CBO projections imply that only about one-fifth of the increased cost to beneficiaries will be savings to the government.

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Fortunately for Samuelson, his job as a columnist for the Washington Post doesn't require him to know anything about income distribution among the elderly, even though according to his own claim, he has been writing about it for decades. Samuelson has another big push for means-testing of Social Security and Medicare, telling us how wealthy the elderly are.

Samuelson's piece is full of comments that are either deliberately misleading or profoundly ignorant. For example, he tells readers:

"From 1959 to 2007, the proportion of the 65-plus population with incomes under the government’s poverty line ($12,968 for a couple in 2009) dropped from 35.2 percent to 9.7 percent, which was half the poverty rate for children under 18 (18 percent)."

It's true that the elderly poverty rate has fallen from what had been very high levels to roughly the same rate as for the adult population as a whole. It's not clear why Samuelson thinks it is appropriate to compare their poverty rate to that of children. Would he also compare the poverty rate for African Americans to the poverty rate for children to tell us that it's not that bad?

Furthermore, there are serious questions about the methodology for calculating poverty among the elderly. The methodology designed by the National Academy of Sciences shows the poverty rate for the elderly is about 10 percent (@1.1 percentage point) higher than for the prime age adult population.

Samuelson also quotes a government report telling us that:

"Most older people are enjoying greater prosperity than any previous generation."

This would actually be true of any age group, at least before the recession. Per capita income is growing at roughly a 2.0 percent annual rate. It has nearly doubled since 1980. Even with substantial upward redistribution, most people at most points in the income distribution have seen some gains over this period.

Most importantly, if Samuelson did know anything about income distribution among the elderly he would know that means-testing of Social Security and Medicare is not likely to save much money unless the intention is to take benefits away from middle-income people. The problem is that the portion of the benefits going to the wealthy (as opposed to the portion of income) is not very large.

Means-testing cannot be a cliff where everyone earning over some amount (e.g. $100k or $200k) gets zero. It has to involve a phase out. Unless these phase outs start at incomes around $40k (Samuelson's definition of wealthy?) and are very steep, they will not save much more than they would cost to administer.

Fortunately for Samuelson, his job does not require him to know anything about income distribution among the elderly.

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