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 NYT Magazine piece providing the inside story on President Obama's economic team in his first two years is littered with conservative talking points. For beginners we get the hoary myth that businesses are not hiring because they are "uncertain about government policy."

While businesses like to blame uncertainties over tax policy or regulation, there is zero evidence to support this assertion. If firms were seeing demand for labor that would cause them to hire, except for their uncertainty, then we should expect to see large upticks in average hours per worker and increased hiring of temps. In fact, average weekly hours is still down from its pre-recession level. Temp employment is down almost 15 percent from its pre-recession level. This suggests that the problem is lack of demand pure and simple, not uncertainty about regulation and taxes.

It is also worth noting that investment in equipment and software has been rising at almost a 20 percent annual rate over the last four quarters, so it's not accurate to say that businesses are not investing. It is also important to recognize that this component of the economy is only 7 percent of GDP, so if Obama's economic team is counting on business investment to boost the economy out of its slump, they are not very good at arithmetic.

The second business myth is the assertion that trade: "represents one of the 'solutions on the cheap' the president wanted, a way of promoting growth without deficit spending." This comment is made in reference to the South Korea trade agreement. In fact, in both theory and practice these trade deals are projected to have a minimal effect on jobs. U.S. trade deficits have in fact risen with many countries, such as Mexico, following the signing of trade agreements, meaning that they have been in the short-run job losers, not job gainers.

Finally, the piece tells readers that:

"Republicans have made shrinking government the core of their economic message."

Of course they are not really for shrinking government. Most of the Republican leadership supported the bank bailouts. They also support strong patent and copyright protection, which would have the government policing every aspect of people's lives. (One effort at copyright enforcement sought to make the Girl Scouts pay for the songs they sing around camp fires.) The Republicans also supported the 2005 bankruptcy reform that would have the government provide business with a much greater role in acting as a bill collector. The reality is that the Republicans are not interested in shrinking the role of government, even if this is what they say. They are interested in shrinking the government functions that help low and middle income people.

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Suppose that President Obama had a press conference where he announced that he had found a quarter. Once the press corps realized that he was not joking and that this was actually the point of his press conference, they would immediately rush out pieces about how the president was off his rocker.

Well President Obama has not, thus far, had a press conference on the topic, but a "senior administration official" reportedly touted an agreement with China to buy $45 billion in U.S. exports. The Post article provided no information about the time period over which these goods would be purchased (e.g. 2 years? 10 years?), nor is there any reason to believe that the deal actually involves new exports. (One of the items in the Post article is planes being sold by Boeing, the sale of which had already been announced.)

While $45 billion may sound like a big commitment, senior administration officials know that it is not. The United States had a trade deficit with China of more than $250 billion over the first 11 months of 2010. Exports of $45 billion over some indefinite number of future years, many of which were already in the pipeline, will not affect this in any noticeable way.

In other words, it's great that President Obama found a quarter, but he should not be wasting the public's time by telling us about his good luck. The media should be ridiculing him for implying that this is an economically meaningful event.

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The Washington Post had a front page article touting the growth of investment by Chinese firms in the United States as a way of creating jobs. In fact, as the chart accompanying the article shows, the vast majority of the investment involves buying up existing firms. In most cases, this will not create any jobs.

The amount of new investment has averaged less than $1 billion a year. This is less than 0.5 percent of the U.S. trade deficit with China and not the sort of economic development that would ordinarily merit a front page article.

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David Leonhardt has a nice piece pointing out that the difference between the unemployment rate in the United States and most European countries is due to the structure of the labor market, not the rate of GDP. The United States has actually done better in terms of GDP than Germany and most other European countries, yet it has a far worse problem of unemployment. (Germany's unemployment rate is below its pre-recession level.) Germany has encouraged companies to keep workers on working shorter hours. It is also more difficult in general to just lay off workers in Europe. These differences explain the better labor market outcomes in Europe. Add a comment

The Republicans have been ranting for most of the last year about the "job killing" health care bill (now changed to "job destroying" in an effort at promoting comity). As I noted yesterday, reporters are supposed to attempt to verify such accusations, not just repeat them.

The Associated Press made precisely the sort of effort at verification that reporters are supposed to do. They found the Republicans came up a bit short in the evidence department. The best they could do was an analysis from the Congressional Budget Office that estimated that around 600,000 people would opt out of the labor force if they could get health insurance through the new health care system. The reason is that they would no longer need to work for their health care coverage. This is not exactly "job killing" or "job destroying" – after all, the jobs will still be there, it's just that people will opt not to take them.

In this way we can think of the bill as being job destroying in the same way that winning the lottery might be job destroying. Many people who take home multi-million dollar jackpots opt not to work because they no longer need the money. The Republican methodology would have us worried about "job killing" lottery jackpots.

AP deserves credit for doing the sort of basic fact checking that good reporters do. This sort of reporting provides valuable information to the public.

Addendum:

McClatchey also did its homework.

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Harvard Law Professor Mark Wu argued that the value of the yuan against the dollar is no big deal in determining the U.S. trade balance in China in an NYT column. His argument is bizarre to say the least.

First he argues that the value of the yuan has little to do with the ability of the U.S. to export to China. He points out that exports to China grew at a more rapid rate in the years from 2002 to 2005 when the yuan did not appreciate than in the years from 2005 to 2008 when the value of the yuan rose by almost 20 percent against the dollar.

This is true, but the problem is that the very low base in 2002 makes percent change a very misleading measure. The increase in exports from 2002 to 2005 was $19.1 billion, from $22.1 billion to $41.2 billion. Exports increased by $28.5 billion from 2005 to 2008 to $69.7 billion. The more obvious metric would be the increase as a percent of U.S. GDP, which was considerably larger in the second period.

If one was just looking at percent changes then the near doubling of imports in the three years when the yuan did not rise in value is a striking contrast to the increase of just over 40 percent in the three years in which the yuan rose by 20 percent. Of course a full model would consider relative price changes and other factors, but it takes some serious data abuse to use export volumes to argue that exchange rates don't matter.

The other arguments are equally off-base. Wu claims that if the yuan rose against the dollar then we would simply import more from Cambodia, Vietnam and other countries. There are two problems with this argument. First the list of competing countries is not nearly large enough to replace China as a source of imports. If imports from China fell by a third, this would be roughly equal to Vietnam and Cambodia's combined GDP. The other flaw in this logic is that countries like Vietnam and Cambodia target the value of their currency against the yuan. When China abruptly raised the value of the yuan in 2005, a wide range of countries followed suit. It is likely that further increases in the yuan would also be matched by rises in other currencies leaving the relative valuation of their exports little changed. (If these countries were just interested in gaining more of a competitive advantage of the yuan, they could devalue their currency any day of the week.) 

The final point that Wu makes is that only 15 percent of our exports compete directly against Chinese exports in third markets. This is likely true, but by itself this is already a large volume of trade. Furthermore, this percentage is rising rapidly as China moves into more upscale manufacturing sectors. The share of exports that compete with Chinese goods likely would have been close to zero five years ago.

In short, there is not much of a case here. Economists generally believe that relative prices matter and the exchange rate is a major determinant of relative prices. (Do tariffs of 20 percent matter? The Chinese sure think so.) Mr. Wu's column gives us little reason to discard standard economics.

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The United States remains the world's number one economic and military power. This means that when President Obama sits down with many heads of state, the list of concerns that he presents is essentially a shopping list that he expects his counterpart to make good on. In many cases, the head of state of a country heavily dependent on the United States will have little choice but to deliver on the items on the list.

This is not true with China. While not yet the equal of the United States in either economic or military power, it is certainly a formidable enough power that the United States cannot simply dictate to it. This means that when it gives China a list of issues, it cannot reasonable expect China to agree to U.S. terms on all them. Therefore, when President Obama meets with China's President Hu Jintao this week, he will have to emphasize some things on the U.S. list while downgrading the importance of others.

For example, President Obama may emphasize enforcement of the patents and copyrights of U.S. companies like Pfizer and Microsoft. Or he may emphasize market access for financial service companies like Goldman Sachs and Citigroup. The emphasis on these issues may imply that concerns over items, like the value of the yuan, get less attention.

The issue of trade-offs is not mentioned in the NYT's stage setting for the meetings. This omission is striking since this priority setting obviously must be central in the administration's preparations. Surely the NYT could have contacted some experts on U.S.-China relations even if it could not find anyone in the administration who was prepared to discuss its priorities.

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USA Today had a piece today noting the rise in temporary unemployment and warning that it may be permanent. It is worth noting that temp employment had fallen by more than 30 percent in the downturn. While there has been some upturn in temp employment in recent months, it is still down by more than 15 percent from pre-recession levels. Add a comment

The NYT reported on the austerity agenda being imposed across Europe:

"governments must get their costs down by reducing wages, compensation and income, while cutting spending and raising taxes."

That's all a very good way to make a downturn even deeper, slowing growth and raising unemployment. Of course European governments actually do have options.

They could leave the euro. Yes, the process would be disruptive, but it likely promises a much better growth path than the path prescribed by the geniuses of euro austerity. The Argentine 2001-2002 default/devaluation is the model here. Of course the threat of Ireland, Spain, Portugal, Greece and other troubled economies leaving the euro may be sufficient to prompt the core euro nations and the European Central Bank to adopt more expansionary monetary policy, which would be the best possible outcome.

However, it is bizarre that that the NYT would devote a lengthy piece to a discussion of European austerity without even mentioned the opt-out option. This is certainly being discussed by many Europeans.

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That's what Representative Vicky Hartzler (R-Missouri) claims is going on in her district. The article could have noted that no evidence supports this claim. In other words, there is no increase in average hours per worker, no surge in temp employment, nor are the businesses most affected by the law (those with around 50 employees) in any apparent way less prone to add workers than larger or smaller firms.

It is also worth noting that most of the requirements of business, like buying insurance for workers or paying a penalty, don't kick in until 2014. Four million workers leave their jobs every month. If a firm is worried that a requirement that kicks in 2014 will make it unprofitable for it to have additional workers on its payroll at that time, there would be little reason for it not to hire in 2011, since it will almost certainly lose workers between now and 2014 which will allow it to get back to the size it desires when the new requirements go into effect.

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Fox on 15th went Utopian on its readers today, ridiculing the suggestion by James Galbraith to temporarily lower the age at which workers can receive full Social Security benefits to 62. The plan, which also was put forward in a bill by Representative Dennis Kucinich, would pull some number of older workers out of the labor force and thereby create more jobs for unemployed younger workers.

The Post disses the plan. In addition to telling readers that it baffled financial journalists (are financial journalists really so thick that they had problems understanding this one?) it goes on:

"The proposals echo a familiar, and questionable, notion on the left: that we should find ways to better parcel out existing jobs. It's the same logic that leads some countries to consider cutting the number of hours or days someone can work each week, so that more people can share the work pool. In reality, the true challenge is to figure out how to create new jobs."

This one really is too delicious to believe that it actually appeared in print. Let's go in order.

The first part describes the idea that we might want to redistribute work by cutting the number of hours each person works as a "notion on the left." Wow, according to the Washington Post, Germany's Christian Democratic government is now on the left. German Chancellor Angela Merkel has been a big supporter of the country's work sharing program, although the idea originated with a Social Democratic minister in the previous unity government. These stupid leftists think they should be happy just because Germany's unemployment rate is just 6.7 percent, in spite of the fact that its GDP has taken a bigger hit than the U.S. in this downturn. In fact, many other countries across the OECD also have work sharing policies and most of these countries are not run by politicians who are viewed as leftists by anyone other than the Washington Post.

Okay, now for part II: "In reality, the true challenge is to figure out how to create new jobs." Oh yeah! And, let's see what are the ideas that the Washington Post has for putting 15 million people back to work. Hmmmm, I looked through the rest of the Outlook section, I didn't see any. I looked through the rest of the paper, and yesterday's too, didn't see any there either. In fact, I did a search of the paper over the last two months and I can't say that I saw anything that resembled a proposal to put 15 million people back to work. A naive reader might think that the Washington Post, and the group of policy wonks it considers respectable, just don't have ideas for creating "new jobs" and putting 15 million people back to work.

It sure would be wonderful if these respectable people did rise to the "true challenge" and come up with a way to put millions of people back to work, but they seem to be spending most of their time thinking of ways to reduce the deficit. It appears that our choices at the moment might be sharing the available work or having near double-digit unemployment.

The Post concludes by telling readers:

"sometimes the conventional wisdom is not only conventional, but wise as well."

That might be true, but this doesn't seem like one of those times.

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The Washington Post wrongly asserted that Bruce Reed, who will be Vice President Joe Biden's chief of staff: "encouraged free trade and deficit reduction during the economic boom years of the 1990s."

This is not true. Reed, along with Gene Sperling and William Daley, the other recent Obama picks mentioned in the article, pushed for trade agreements that had the effect of putting manufacturing workers in more direct competition with low-paid workers in Mexico and other developing countries. Such deals had the predicted and actual effect of lowering the wages of manufacturing workers and non-college educated workers more generally.

None of these people have been associated with a larger free trade agenda, which would include efforts to eliminate the professional and licensing barriers that protect highly educated professionals like doctors and lawyers from foreign competition. And all three have been supportive of the protectionist portions of recent trade deals that increase the strength of copyright and patent protections. For these reasons, it is totally inaccurate to describe Reed, as well as the other Obama officials, as supporters of "free trade." 

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The key to being an effective politician is making the most damning charge possible about your opponent that the media will view as credible. The Republicans have been very effective in this respect because they routinely refer to President Obama's health care bill as "job killing" and use similar language to refer to other measures that he has pushed.

Serious reporters would ask the Republicans for evidence that the bill has actually killed any jobs. If the charge was true then the Republicans should be able to point to a sharp upturn in average hours worked per worker, as firms worked their existing employees harder rather than risk the cost of taking on a new worker. The Republicans would also be calling attention to the huge surge in temporary employment, as firms looked to temp firms for their workers rather than put workers on their own payroll. And, Republicans would note that the firms most affected, those employing near 50 workers (bigger firms almost all already provide health care and smaller firms are largely unaffected) are lagging other firms in employment.

Of course the Republicans do not provide this evidence because it does not exist. Average hours per worker is up somewhat from its low-point in the downturn, but it is still far below its pre-recession level. Employment of temps is also up slightly from the trough of the downturn, but it is still more than 20 percent below the pre-recession level. And it would be very difficult to find any evidence in the data on employment by firm size that mid-size firms are any more reluctant to hire than the larger or smaller firms that are less affected by the health care bill.

In principle, reporters have the time to investigate allegations like the claim that the health care bill is costing jobs. Readers on the other hand do not. If the Republicans can make an untrue assertion and simply have it passed along as a credible statement, because reporters do not do their jobs, then we should expect them to make even stronger statements. Perhaps we will soon be reading accusations from Republicans that President Obama and the Democrats are baby killers. After all, given the current practice of the national media, they would likely just pass the charge along as a reasonable statement about events in the world.

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Yeah, well it's not really very funny, but you should have been able to read about the big jump in UI claims last week. These data are erratic, and it is only one week, but after a couple of weeks in which news outlets were eagerly touting lower claims numbers, to be consistent they should have given this jump some attention.

Claims had hit a low for the upturn of 391,000 in the week after Christmas before rising back to 410,000 last week. This was still good news compared to the 450,000 levels we had been seeing in the summer and early fall. After the last recession, the economy was not creating any jobs until weekly claims fell below 400,000. Certainly claims in the 450,000 range would not be consistent with robust jobs growth.

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In most newspapers "news" is something that happens. However, the Washington Post chose to make one of its major news stories the fact that President Obama doesn't seem as concerned about reducing the deficit as it wants. Since there is no real event in the world that is highlighted, this is the only real way to describe this piece. (The article does refer in passing to the fact that the bond-rating agencies, who rated hundreds of billions of dollars of subprime mortgage backed securities as investment grade, threatened to downgrade the government's debt. However these warnings are just mentioned in passing.)

One might think that it is also news that President Obama does not have any plan to reduce the 9.4 percent unemployment rate. However, this is apparently not as big a concern at the Post.

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That appears to be the case. The NYT had an article discussing the warnings about downgrading U.S. government debt from S&P and Moody's, both of whom rated hundreds of billions worth of mortgage-backed securities backed by subprime mortgages as investment grade. 

At one point the article notes that Moody's emphasized the deficit in the medium term, not the current deficit. It then tells readers that:

"For some economists, the failure to rein in the deficit now could spell trouble, not immediately but in 10 or 20 years."

However, the two people then cited are Peter G. Peterson, a wealthy investment banker, and David M. Walker, an accountant who has worked for organizations funded by Mr. Peterson. While both Mr. Peterson and Mr. Walker stressed the need to reduce the deficit, if the article had talked to an economist they might have pointed out that the projections of large long-term budget deficits are attributable to projections of exploding private sector health care costs. If per person health care costs in the United States were comparable to those in other wealthy countries the projections would show large surpluses rather than deficits.

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The NYT told readers that Ford's labor cost for a worker is now $59 an hour, which is says is down 20 percent from what it used to be. It is important to recognize that this number is not what Ford is paying for current workers' pay and benefits. This includes all payments that Ford makes for labor, including contributions to its pension and health funds for workers who are already retired.

This is an important distinction. Unionized auto workers are paid more than the typical worker, but their pay is not as out of line as this figure implies.

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This would have been an appropriate headline for an article about warnings from S&P and Moody's that they might downgrade U.S. debt. These credit agencies rated hundreds of billions of dollars worth of mortgage backed securities that were backed largely by subprime and Alt-A loans as investment grade. Of course they were paid large amounts of money by investment banks for these ratings.

It would be appropriate to provide readers with background information so that they can better assess these sorts of warnings. It also is worth noting that Japan's debt was downgraded by S&P back in 2001 and in 1998 by Moody's. The interest rate on Japan's 10-year Treasury bonds is currently a bit over 1.0 percent. Clearly the downgrading by these credit rating agencies have not had much effect on Japan's ability to borrow.

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Otherwise the NYT would have told readers that the legislature had supported an infinite percentage increase in the state income tax. Telling readers that Illinois increased its income tax by 66 percent provides little information to most readers, since they are not likely to know Illinois's current tax rate. (This does appear lower down in the article for those who read far enough.) Furthermore, "66 percent" invites confusion with 66 percentage points, which would be a devastating tax increase.

As it stands, the increase in the tax rate was 2 percentage points, from 3 percent to 5 percent. It would have been more informative to readers if this information was provided at the top of the article.

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Paul Krugman does a very good job laying out the issues behind the euro zone crisis in his NYT Magazine piece. There are two additional points that would have been worth noting.

First, there are powerful forces who are working hard to prevent the partial or full Argentinification (partial default or a departure from the euro) of any euro zone country. After all, it does mean that banks and other creditors don't get back all of their money. They will lie, cheat, and steal to try to prevent such a route from even being considered. We know this because of the efforts of the international financial community to punish Argentina when it went the route of Argentinification back in 2002.

The IMF did everything it could to strangle Argentina (it was known internally as the "A" word) including the publication of consistently over-pessimistic growth projections in order to undermine confidence in its economy. Given that many of the same people who were shooting at Argentina in 2002 are still around in positions of responsibility today, it is reasonable to believe that any country that tried to follow the same path would face similar efforts at economic sabotage.

The other important point is that the "revived Europeanism" route that Krugman outlines would essentially be costless right now to the core countries who would ostensibly be financing it. This is the route that would have the European Union and/or European Central Bank provide the funding necessary to get Ireland, Greece, Spain and other peripheral countries through the crisis. 

This route would be largely costless because Europe, like the United States, has huge amounts of excess capacity and idle resources. The ECB could essentially finance the transfers by buying bonds (i.e. printing money) just as the Fed can (and to some extent is) finance the U.S. deficit by buying bonds. While printing money at other times would raise the risk of inflation, this is not the case in the middle of a steep downturn like the current one. Of course a modest increase in the rate of inflation (e.g. 3-4 percent) would be desirable in any case since it would lower real interest rates and reduce real debt burdens.

In the longer term, when the economy does recover, the ECB or the Fed could raise reserve requirements to ensure that the reserves placed into the system in a period of economic crisis do not lead to excessive inflation. This scenario would allow Germany, France and other core countries to bail out Europe's periphery without any burden on their own taxpayers.

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Individuals are generally risk-averse. This is why they buy items like life insurance and health insurance. On average, people pay more for these protections than they get in benefits. This means that they fear bad outcomes (e.g. early death or severe illness) and that they are willing to forgo income to protect against this situation.

The fact that individuals are risk averse explains why state and local governments can benefit by offering workers defined benefit pensions. Since governments generally do not go out of business, they can provide pensions that smooth out fluctuations in the market. This is of great value to individual workers, who do not want to take the risk that the stock market will be down at the point when they retire.

Therefore, state and local governments can offer workers defined benefit pensions that impose little risk, if properly managed. Since the guarantee is of considerable value to workers, it means that these governments will have to pay workers somewhat less than would otherwise be the case. Therefore a defined benefit pension should save state and local governments money. 

Washington Post columnist Steven Pearlstein has apparently never learned this basic economics lesson, hence his diatribe in the paper today.

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