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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Fool or liar? That is the only question that needs to be asked of anyone saying that they want to promote domestic oil production in order to bring down the price of gas.

The simple fact is that there is not enough oil in the United States to bring down the price of gas to any noticeable degree. This is not a debatable point, the United States has 22.3 billion barrels of proven reserves. The U.S. consumes around 20 million barrels a day. This means that we could supply the country for 3 three years with domestic production.

Of course, from the standpoint of domestic oil prices what matters is the U.S. contribution to world production. This is around 90 million barrels a day. In an incredibly optimistic scenario the U.S. could increase its domestic production by 2 million barrels a day, this would increase output by a bit more than 2 percent [thanks Rogermac]. The net effect might be a reduction in price @5-6 percent. Even this price decline would take around 8-10 years to realize.

There is not much basis to dispute these basic facts. Therefore when AP reported that Doc Hastings, the Chairman of the House Natural Resources Committee, said:

"The president is finally admitting what Republicans have known all along, that increasing the supply of American energy will help lower prices and create jobs."

It should have pointed out to readers that increasing domestic supplies will not lead to noticeable effect on prices. Readers may not have the time to discover this fact for themselves.

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The NYT told readers:

"The Federal Statistics Office in Germany reported on Friday that gross domestic product grew 1.5 percent over the previous quarter, when harsh winter weather had held growth to just 0.4 percent."

Let's see, GDP growth in the United States was 1.8 percent in the first quarter, so I guess we're doing a bit better than Germany at this point.

Wrong!!!! The growth figure reported by in this article is a quarterly rate of growth. The annual rate of growth in Germany in the first quarter was a very solid 6.1 percent.

It is difficult to understand why the media insist on reporting quarterly rates of growth when the standard in the United States is to report GDP growth as an annual rate. Often it is not even clear that the growth being reported is a quarterly rate. For example, later in this piece the NYT tells us:

"France, too, surpassed expectations with growth of 1 percent, the steepest increase since spring 2006, according to the statistics office Insee in Paris. That compared to an increase of just 0.3 percent in the last quarter of 2010, and a median forecast of economists surveyed by Reuters and Bloomberg News of 0.6 percent."

This is like reporting the temperature in a European country as being 20 degrees without bothering to tell readers that this is the temperature measured on the Centigrade system. Presumably the point of this article is to convey information to readers. If we want to let people in the United States know how hot it is in France then the proper way to do this is to convert the Centigrade measure into a Fahrenheit measure.

If the point is to let people in the United States know how fast Germany and France are growing then the growth rates should be reported as annual rates. It's that simple.

[Addendum: I corrected the German growth figure from 4.9 percent that I had gotten from a Wall Street Journal article. What I took to be an annual rate of growth for the first quarter was in fact a year over year rate of growth. Stefan Karlsson had the correct number.]

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Just kidding. Buried in their business digest section we learn:

"Other reports showed that the number of workers filing claims for unemployment insurance dropped less than forecast last week and that wholesale prices climbed more than projected in April.

Applications for jobless benefits decreased 44,000 in the week ended May 7, to 434,000, Labor Department figures showed."

I couldn't find even this much in the NYT. (Here's the bad news story.)

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It does according to Marketplace Radio. It told listeners this morning that Medicare beneficiaries were getting a good deal because Medicare benefits cost almost three times as much as beneficiaries paid into the program in taxes. The main reason for this gap is the United States pays more than twice as much per person for its health care as the average for people in other wealthy countries. It has no obvious benefit from this added spending in the form of improved outcomes.

The main reason for the extra costs in the United States is higher payments to drug companies, doctors, medical supply companies and other health care companies. It is peculiar to claim that beneficiaries are getting a good deal because the government overpays health care providers.

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Actually the Washington Post never mentioned patent monopolies in an article reporting that Google is likely to pay a $500 million fine for running ads from illegal pharmacies. The main reason that there is a market for illegal pharmacies is that government granted patent monopolies allow drug companies to charge prices that are several thousand percent above their free market price.

This fact should have been mentioned. This would be like reporting on illegal efforts to circumvent tariff barriers without effort referring to the tariffs. In the absence of patent monopolies, these rogue pharmacies and the resulting enforcement issues would not exist.

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That what readers of today's column, "Let's Go Caps!," are asking. The article begins by telling readers that he is excited over the possibility that there may be a deal to address the "nation’s ruinous debt problem."

This raises the obvious question of how he determined that the debt problem is "ruinous." Is it the 3.2 percent interest rate on government bonds? That is certainly a much lower interest rate than we have seen through most of post-World War II era.

Is it because of the $110 billion (0.7 percent of GDP) in interest that the government paid out last year, net of the money refunded by the Fed to the Treasury? This is a much lower share of GDP paid out in interest than the average for the post World War II era. 

There is no obvious event in the world that could justify calling the debt problem ruinous. The country does face a risk of exploding private sector health care costs, which is projected to lead to large budget deficits in the long-term. However it would be peculiar to call this health care problem a debt problem and if we fixed the health care system the deficit would be a non-issue

Since there is no evidence in the world that would justify calling the debt problem "ruinous," we can assume that this is just the sort of belief that was passed on to Brooks by his parents, in the same way that religious beliefs can be passed on. People can hold these views in a way that is not susceptible to logic and evidence in the same way as other beliefs might be.

Of course, there is also the alternative that Brooks may just be excited about the possibility that there will be cuts to programs that the elderly depend upon, like Social Security, Medicare, and Medicaid. Readers will no doubt be debating this question for some time.

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The Washington Post had a piece reporting on the Senate Republicans' positions on the debt ceiling. At one point the article tells readers:

"McConnell’s assistance is also critical to Senate Democrats. Unless they can win Republican votes, they would have to approve one of the largest debt-limit increases in U.S. history entirely on their own — an unappetizing prospect for up to a dozen potentially vulnerable incumbents who are up for reelection next year."

Actually, almost all of the cuts that McConnell would insist upon as part of a deal to increase the debt ceiling are likely to pose far more political problems for Democrats up for re-election than voting for a higher debt ceiling. The vast majority of voters have no idea of what the debt ceiling is nor how large any particular increase is relative to anything in the world. This is largely due to the fact that the media almost never puts this issue into any context, for example pointing out that the main reason the debt has soared is due to the recession caused by the collapse of the housing bubble.

To most voters, a politician voting to raise the debt ceiling by any amount simply means that he/she voted to allow increased borrowing of "a really big number." By contrast, a deal with Senator McConnell would mean cutting Medicare, Medicaid, unemployment insurance and/or other programs that enjoy the overwhelming support of the electorate. It is far from clear that Democratic politicians would do better in the next election if they take the Post's advice and agree to these cuts in order to get Senator McConnell's support on raising the debt ceiling.

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For the fifth week in a row new unemployment insurance (UI) claims came in over 400,000. The number for last week was 434,000, bringing the 4-week moving average to 436,750, the highest it has been since November.

(CLICK FOR LARGER IMAGE)

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Source: Department of Labor.

This should be real news. There were a lot of explanations for increases in the prior weeks based on administrative issues or the timing of Easter. These factors can explain a one-week jump, but they imply lower claims in the preceding or following week.

At this point, the data are clearly giving a warning of weakness in the labor market. It is also worth noting that many newly unemployed workers will not be eligible for benefits since they have been unemployed for much of the last two years. (Eligibility for benefits is based on recent work history. Someone who was unemployed for 8 months, and then employed at a low-paying job for 4 months, and then laid off, likely will not have an earnings history that qualifies them for benefits.) If ineligible workers generally do not apply for benefits, then 434,000 new claims in 2011 would correspond to more layoffs than 434,000 claims in May of 2008.

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In the New York Times they don't. In a piece on protests in Greece against austerity plans, the NYT three times referred to the opinions of unnamed "experts."

It would be helpful to identify the people whose opinions are being cited. Not all experts agree on the situation in Greece.

Also, many of the people who claim the title of "expert" have an especially bad track record in understanding the economy. They held the view that everything was fine as the housing bubble was building up in the United States, Spain, Ireland and elsewhere. Readers may want to know if the experts whose opinions are presented in this article are among this group.

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George Will is very proud of himself because he found an anti-Ryan protester who didn't know that the 18th century refers to the 1700s and not the 1800s. This provides the basis for his lecture to progressive baby boomers, including President Obama, who think that the security provided by Medicare and Social Security is somehow intrinsic to the country.

Will rightly points out that these programs are relatively new to the country. After all, Social Security has been around for less than a third of the country's existence (dated from 1776) and Medicare for less than a quarter.

Of course Will could have pointed out that it is a relatively new phenomenon for people to have a life expectancy beyond age 60. For the vast majority of the country's history life expectancy was considerably shorter. He can include the expectation that people will live into their 80s and 90s into his list of progressive conceits that ignore history.

If he wanted to look at the actual proposal on the table, the Congressional Budget Office's analysis of the Ryan plan shows that it will hugely increase the cost of buying Medicare equivalent policies. Its projections show that the cost of such plans would rise by more than $34 trillion over the program's 75-year planning period. This is equivalent to almost 7 times the size of the projected Social Security shortfall. This projected additional cost comes to $110,000 for every man, woman, and child in the country.

But, this is talking about the impact of a policy going forward, not history, so Will is not interested.

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Alan Greenspan, the central banker who gained international notoriety for being unable to see the largest asset bubble in the history of the world, is again giving advice on the economy. Bloomberg News tells us that:

"Greenspan said the deficit is one reason that corporate investment as a share of profits is lower than historical patterns, in an interview on CNBC’s Squawk Box on Dec. 3, 2010.

'Approximately one-third of the decline in capital investment as a share of cash flow is directly attributable to” the “crowding out by U.S. Treasury borrowing.'"

Greenspan is right that investment as a share of profits is below its historic average, but this was also true for most of his tenure as Federal Reserve Board chairman.

Click for a Larger Version

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Source: Bureau of Economic Analysis.

It is also worth noting that investment is depressed right now in part because of the bubble in non-residential real estate. This led to enormous overbuilding in most areas of non-residential construction leading to very high vacancy rates. As a result, non-residential construction is at extraordinarily low levels. Apparently Mr. Greenspan is still unaware of this bubble.

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This is what the Washington Post reported in an article on a set of agreements negotiated by Treasury Secretary Timothy Geithner and the Chinese government, although it did not explain this point to readers. The article told readers that:

"The agreement included action on some long-standing issues — including initial moves by China toward opening its financial sector by allowing U.S. and other foreign firms to sell auto insurance, sell mutual funds and other investments, and underwrite corporate bonds."

The United States has also been pushing for China to raise the value of its currency against the dollar [thanks Downpuppy]. The over-valuation of the dollar against the yuan is the reason that the United States borrows money from China.

The high value of the dollar makes imports cheap, causing people in the United States to buy more imports from China. It also makes U.S. exports more expensive to people living in China, leading them to buy less of our exports. The resulting trade deficit is financed by borrowing from China.

Many politicians have sought to appeal to racist sentiments by citing this borrowing from China in their push to reduce budget deficits. The Washington Post has also followed this path in both its news and opinion pages. As long as the dollar remains over-valued, the United States will continue to run large trade deficits and continue to borrow from abroad, whether or not it has a budget deficit. (The foreign borrowing would be in the form of purchases of private assets or outstanding government debt, if the United States did not run a budget deficit in future years.)

When Secretary Geithner or other U.S. officials negotiate with the Chinese government they place priorities on their agenda items. Obviously Mr. Geithner placed a greater priority on gaining increased access for the financial industry (i.e. the big Wall Street banks) than he did on lowering the value of the dollar and reducing foreign borrowing.

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In its lead front page article, the Washington Post (a.k.a. Fox on 15th Street) referred to a proposal by the "the bipartisan commission" that President Obama appointed to deal with the deficit. In fact, there was no proposal by the commission. The commission never even voted on a plan because it did not have the required majority.

The proposal referred to in this article was in fact a plan put forward by the commission's co-chairs, former Senator Alan Simpson and Morgan Stanley Director Erskine Bowles. The Post badly misleads readers by implying that this plan had the support of the commission.

It is also worth noting that Post has chosen to completely ignore numerous public statements by Mr. Simpson in which he indicates that he has very little knowledge of the Social Security program and the budget issues facing the country. The public would likely give less credence to a deficit plan co-authored by someone with little knowledge of many of the issues addressed by the plan. The Bowles-Simpson plan does coincide with many of the positions argued in Washington Post editorials.

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The non-partisan Congressional Budget Office projects that the Ryan plan will cause the cost of buying Medicare-equivalent insurance policies to exceed the median income of retirees shortly after it is implemented. This means that an independent analyst has determined that the plan poses a risk to the security of those under age 55 who would be subject to Ryan's Medicare program.

Therefore the NYT is inaccurate when it reports that:

"Ms. Hochul, the Erie County clerk [a Democratic congressional candidate in a special election in upstate New York], argues that the Republican plan poses a risk to older residents."

This "risk" is not just something that Ms. Hochul argues, it is something that she is calling attention to, since this is a fact that has been determined by independent analysts. However the risk is actually to younger residents (those under age 55), not to  older residents who would be less affected by the Ryan plan. (It does leave in place the donut hole in the prescription drug benefit.)

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A front page Washington Post article included an assertion from Roger Altman, who is identified as "a private-equity investor who served in the Clinton Treasury Department," that defaulting on the national debt would be the "financial equivalent of suicide."

It is worth noting that Wall Street would be especially hard hit by a debt default. While a default would almost certainly lead to a severe financial crisis, even worse than the one in the fall of 2008, the rest of the economy would most certainly recover. We would have the same capital stock, infrastructure, state of technical knowledge and skilled labor force after the crisis as before.

However, the Wall Street banks would almost certainly not recover. They would almost certainly end up in bankruptcy. Their successors would probably never be as powerful in international finance as the current group of institutions. For this reason, Altman and other Wall Street financiers have far more to fear from a default than does the rest of the country. It would have been useful to include a wider range of perspectives on the impact of a debt default.

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This assertion is strange for two reasons. First, since prices generally rise through time (we have modest rates of inflation, not deflation), most prices will be at record highs most of the time. In other words, it is likely that the price of tables, hair cuts, bread and most other goods and services are at or near record highs.

The other reason why the assertion is strange is that it does not appear to be true. The Bureau of Labor Statistics (BLS) price index for used cars actually shows that they are lower, in nominal terms, than they had been in the late 90s (the graph shows nominal prices).

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It is possible that the measures followed by USA Today do not track the BLS data closely because BLS makes quality adjustments in comparing prices. For example, if a car comes with a better braking system or sound system than the prior year's model, this will be factored into the price. A straight price comparison of the newer car with the older car may show a price increase, but when a value is assigned to these improved features, it may turn out that the price has remained the same or even fallen.

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NPR did a classic he said/she said piece on the battle over debit card swipe fees. It gave people the line from the banks about how they will have to cut back on services to customers if fees are reduced. It also presented the line from retailers on how most of the savings will be passed on to consumers. It presented no independent analysis. (It is likely that most of the $12 billion in savings will be passed on to consumers.) This would have been useful since most listeners do not have more time to evaluate this issue than NPR's reporters.

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David Brooks is very angry that Democrats are relying on the Congressional Budget Office's analysis of the Medicare privatization plan put forward by Representative Paul Ryan and approved by the Republican House. This analysis shows that the Ryan plan would increase the cost of buying Medicare-equivalent policies by $34 trillion over the program's 75-year planning period. This increased cost is almost 7 times the size of the projected Social Security shortfall.

Brooks wants Democrats to ignore the evidence that shifting from a public Medicare program to private insurers will increase costs and instead accept his claims that Ryan's plan will save money. He describes their refusal to follow his faith-based policy as "mendacity."

Interestingly, Brooks discusses the increasing number of prime age men who are not employed without ever once mentioning the criminal justice system. A hugely disproportionate share of non-employed prime age men have spent time in jail or prison. The enormous growth in incarceration rates over the last three decades (the number of prisoners has more than quadrupled since 1980) is almost certainly an important factor in declining employment rates.

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Robert Samuelson pulled a Washington Post special, reporting that:

"Young buyers 'will be able to enter the housing market at bargain prices,' argues NAR [National Association of Realtors] economist Lawrence Yun. When home prices again rise, increases will parallel income gains, meaning that the relative burden of housing costs will remain roughly stable, Yun says."

Actually, home price increases do not "parallel income gains." They track the overall rate of inflation, as has been shown with a century of data compiled by Yale University Professor Robert Shiller.

Relying on the NAR for predictions on the housing market is the standard practice at the Washington Post. All through the build up of the housing bubble, its main source on the housing market was then NAR chief economist David Lereah, who was also the author of the 2006 best seller, Why the Real Estate Boom Will Not Bust and How You Can Profit From It.

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The NYT tells us that the states are competing with each other and Bermuda to attract shell insurance companies with weak regulation. The deal is that insurers will establish a legal entity in your state, which can then be taxed, if you don't make them hold much in reserve. (AIG is one of the beneficiaries of this type of deal.) 

Haven't we seen this movie before?

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The NYT reported on the effort by congressional Democrats to take back $20 billion in tax breaks for the oil industry over the next decade. The article tells readers that this is an effort to reduce the budget deficit. It would have been helpful to point out that this amount comes to less than 0.3 percent of the deficit projected over this period.

These tax breaks are arguably an unwarranted subsidy to hugely profitable oil companies, however it is not plausible that they will have a notable effect on the deficit over the next decade. This fact should have been pointed out to readers, just as reporters should point out that Republican efforts to increase drilling cannot plausibly be expected to have a noticeable impact on gas prices.

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