Beat the Press is Dean Baker's commentary on economic reporting. He is a Senior Economist at the Center for Economic and Policy Research (CEPR). To never miss a post, subscribe to a weekly email roundup of Beat the Press.

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The NYT had an article on a conference at the International Monetary Fund with the headline, "Candid Criticism of the Fed That Wasn't On the Agenda." The piece promises blunt criticism of the Fed from former Treasury Secretary and top Obama adviser Larry Summers:

"Now that he is no longer a candidate to head the Federal Reserve, Mr. Summers — who withdrew from consideration this fall in the face of stiff resistance in Congress, with the White House ultimately nominating Janet L. Yellen — was perhaps freer to speak in his trademark blunt style. And he didn’t disappoint, arguing that by many important metrics, policy has failed.

"Mr. Summers underscored how weak the economy remains, despite the extensive stimulus and the Fed’s continuing campaign of asset purchases, with the labor market slack and inflation subdued.

"'My lesson from this crisis is, my overarching lesson is that it’s not over until it is over, and that is surely not right now,' he said.

"He noted that short-term interest rates had remained close to zero for years, with no end in sight: 'We may well need in the years ahead to think about how we manage an economy in which the zero nominal interest rate is a chronic and systemic inhibitor of economic activity.'

"'There’s no evidence of growth that is restoring equilibrium,' Mr. Summers added. 'One has to be concerned about a policy agenda that is doing less with monetary policy than has been done before, doing less with fiscal policy than has been done before,' and is 'taking steps whose basic purpose is to cause there to be less lending, borrowing and inflated asset prices than there was before.'"

This appears to be more a criticism of the Obama administration and Congress for failing to run more aggressive fiscal policy than a criticism of the Fed. The Fed is clearly in uncharted territory in using monetary policy to try to boost the economy out of a severe slump. If Summers suggested a way in which the Fed could be more effective in boosting demand this NYT article neglected to mention it.

That would seem to imply that Summers directed the criticism at himself and his former colleagues for failing to push for more aggressive fiscal policy. Presumably he also regrets allowing bubbles to develop in his reign as Treasury Secretary, the eventual collapse of which led to the downturn. Summers likely also now would recognize that the high dollar policy that he and his predecessor pushed in the Clinton years was a serious mistake since the over-valued dollar led to a huge trade deficit. That in turn created a shortfall in demand that could only be filled by bubble generated demand.

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Along with Alan Greenspan, Robert Rubin is the person most responsible for the country's economic downturn. He helped steer the country on a path of bubble-driven growth and massive trade deficits. The latter was the result of the IMF engineered bailout from the East Asian financial crisis. The outcome of this bailout was a rush by developing countries to accumulate dollar reserves in order never to have to be in the situation that the East Asian countries faced in dealing with the IMF. This sent the dollar soaring, making U.S. goods and services uncompetitive internationally, causing the trade deficit to explode.

The lost demand from the trade deficit was offset in the 1990s by the stock bubble. The wealth created by the bubble led to a boom in consumption. Also, the ability for hare-brained Internet start-ups to raise billions by issuing stock led to an investment boom in hare-brained Internet start-ups. The bursting of the stock bubble gave us the longest period without job growth since the Great Depression. However the economy did eventually recover on the back of the housing bubble. The collapse of that bubble has given us an even longer stretch without job growth, ruined millions of lives, and will likely cost us tens of trillions of dollars in lost output.

In addition to steering the country to disaster, unlike Alan Greenspan, Robert Rubin managed to directly profit from the calamity. He personally pocketed over $100 million from his stint as a top executive at Citigroup. Citigroup was at the center of the housing bubble and meltdown. It required hundreds of billions in below market loans from the government, along with implicit and explicit guarantees to stay afloat. Naturally we should value the economic opinions of such a person, hence the Washington Post gave him space for a column telling us how China and the United States can have a mutually beneficial relationship. 

Not surprisingly much of what Rubin says is just flat out wrong. He tells readers:

"The United States criticizes Chinese interest-rate, land and other subsidies that support investment and exports, including a managed exchange rate (though that has less effect, for now, because China’s current-account surplus has declined substantially). U.S. officials also fault significant shortfalls in China’s protection of intellectual property rights, including cyber-appropriation.

"China has long expressed strong concern that U.S. fiscal deficits could lead to unduly high interest rates, a U.S. or global financial destabilization or, alternatively, serious inflation."

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Folks at the Washington Post generally don't like to have facts interfere with their stories about the world. We got another example of this behavior in its article on the Labor Department's job numbers for October. The Post told readers:

"In addition, Chudars [Judy, Chudars, the president of a job placement firm in Washington] said, more people are voluntarily leaving their jobs for lateral positions — a key characteristic of a healthy labor market that economists call 'churn.'"

Contrary to Ms. Chudars assertion, the Labor Department's report showed a sharp drop in the share of unemployment due to people who had voluntarily quit their jobs, which would imply a decline in churn.

The article then repeated comments from Labor Department Secretary Thomas Perez:

"“I’m heartened by the numerous conversations I have with employers who say, "I want to grow my business,"' Perez said. But they often add that 'too many people coming through the door don’t have the skills that I need.'"

In fact the data show no evidence of any major skills shortage. Since the beginning of the downturn wages of non-production supervisory workers have actually risen on average somewhat more slowly than the generally less-skilled production and non-supervisory workers. In other words, the data imply that we just have a shortage of demand, not the skills shortage claimed by the WaPo's friends.

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The news media have been eagerly joining in Republican attacks on President Obama for having broken his pledge that people could keep their insurance if they liked it. Of course people can keep plans in existence as of 2010, if the insurers opt to offer them. However many insurance companies have cancelled these plans because they no longer consider them profitable.

This outcome can be seen as a violation of President Obama's pledge if people understood him as pledging to effectively take over the industry and require insurers to offer plans even if they were losing money. Is this what the media is claiming was the understanding conveyed by Obama? If so, it should tell us that the public is angry that President Obama is not nationalizing the insurance industry. (President Obama also said that people could keep their doctors. Did people think that Obama was going to prohibit doctors from retiring or dying?)

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Most economists probably would not put France as one of the worst basket cases in the euro zone. While its unemployment rate is over 11 percent, it still less than half of the 20 percent plus unemployment rates being experienced by Spain and Greece. In fact if we focus on employment rates, the percentage of prime age workers who have jobs, France is doing considerably better than the United States. Its employment rate is down by less than 1.0 percentage point from the pre-recession level, while in the United States it is down by more than 4.0 percentage points.

And, unlike many countries in the euro zone, France has at least seen some growth over the last five years. By contrast, the countries under the tutelage of the troika (the IMF, the ECB, and the EU) all have lower output today than they did before the crisis. Even worse, the IMF thinks that their potential output is less today than what they actually produced in 2007.

Given this reality, readers of a NYT article on Standard & Poor's decision to downgrade France's credit rating must have been surprised to read the view of Holger Schmieding, the chief economist at the German Bank, Berenberg:

"there had been 'hardly any progress at all in France' and that the country 'urgently needs to reform its economy if it does not want to fall ever further behind Germany.' ...

The ongoing progress in countries like Spain, Portugal, Ireland and Greece, Mr. Schmieding said, 'makes it ever more obvious that France is Europe’s real problem.'"

I guess it's useful to know that the NYT could find an economist who would trash the state of France's economy. Of course Mr. Schmieding's view is probably not shared by many economists since it is not supported by the data.

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Does that seem surprising? After all, people do choose to buy into the market voluntarily, why would African Americans and Hispanics buy stocks if the result was just to make white people richer? Well, I'm not talking about market manipulations, which may well have this result. I'm actually referring to an Urban Institute analysis of Social Security which was highlighted in an Economix blog post by Eduardo Porter.

This methodology compares the benefits that each group receives by decade, starting in the 1970s, with the taxes they pay into the system. It ignores the taxes that they paid into the system in prior decades. The result is that whites, primarily because they are older, receive more back relative to what they pay in each of the decades from the 1970s to 2030s.

While this is presented as a surprising result, it really should have been pretty self-evident. Imagine that we did the exact same sort of analysis with the stock market starting in the 1970s. We counted every dollar that a group received in dividends as a benefit as well as any net sales of stocks. In other words, the benefits for whites in the 1970s would be their dividends receipts, plus their net sales of stocks. Their payments into the system would be the net purchases of stocks.

Since whites already held large amounts of stock by the 1970s, their net purchases were probably small. It's possible they were even negative. In this case, whites would be getting money back from the stock market even though they paid nothing into it. For both African Americans and Hispanics it is likely that they were net purchasers of stock, since relatively few African Americans and Hispanics owned much stock before 1970. Their dividend payouts in the 1970s would also be quite small.

If we looked at this ratio of benefits to payments into the system through the purchase of stock, it is virtually certain that the trade-off for whites would look much better for non-whites through the present and long into the future. By the Urban Institute methodology, non-whites are getting a bad deal from the stock market.

Is the comparison between the stock market and Social Security inappropriate? Suppose we had a privatized system where people were required to put 6.2 percent of their wages in a private account. We would be telling the exact same story.

Unfortunately there are many real issues of discrimination against African Americans and Hispanics in today's economy. This story with Social Security is not one of them.


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NPR did a piece on the pattern of subsidies created by Obamacare. It rightly noted that the Affordable Care Act restructures the individual market so that healthy people will subsidize less healthy people, just as is now the case in the market for employer provided insurance.

However it may have misled listeners about the size of the subsidies. It gave an example of a person who is being made worse off by the change in the structure of insurance under Obamacare:

"Dentist Aaron McLemore of Louisville, Ky., makes more than $100,000 a year and doesn't qualify for any subsidy on the Obamacare exchange. The 31-year-old's current policy is being canceled. A new policy from the exchange will more than double his monthly premium and boost his annual deductible to $7,000."

Okay, the problem here is that the piece is telling us Mr. McLemore's deductible, not his premium. If we assume that Mr. McLemore is healthy (he is supposed to be an example of a healthy person subsidizing the less healthy), then the size of the deductible is not likely to be of much relevance. He will most likely not incur expenses that would push him over a deductible floor. The item that would be most relevant to McLemore would be the premium he pays, since this is the money that actually comes out of his pocket.

Kentucky's exchange will not give prices unless you actually register, but DC's exchange lists bronze plans available for as little as $125 a month or $1,500 a year. While this may be more than McLemore was paying with his current plan, it still implies that he will be paying less than 1.5 percent of his annual income for health insurance. It would have been useful to report the premium on the plan that McLemore chose, since that would be the upper limit on the amount that he would subsidizing less healthy people -- if he did not value the insurance at all.

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That's what a NYT article told readers this morning. Of course that is not exactly what the article told readers. Instead it said that billionaires received a total of $11.3 million in farm subsidies between 1995 to 2012. This is yet another example where the intent is to mislead people by using large numbers that they are not likely to understand.

In fact, the subsidies paid to billionaires were trivial in terms of the federal budget, spending on the program, or even as income to these billioniaires. (According to the piece, their collective net worth is $316 billion which means that the total payments over this 17 year period would be less than 0.004 percent of their net worth. The subsidies would mean the same to these billionaires as getting $20 over a 17 year period would mean to middle income family with $500,000 in assets.

The merits of the farm subsidy programs are not in any obvious way affected by these payments to billionaires. If the NYT is going to devote a piece to the issue of farm subsidies, the money going to billionaires should not be the main focus.


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That would have been a more appropriate headline to a NYT article discussing politicians' reactions to the troubles facing Obamacare. The piece notes several Democrats expressing concern about the program's rollout. At one point it refers to Senator Landrieu's proposed bill which would, "force insurance companies to reissue the health plans they have been canceling by the thousands."

Such legislation would imply that insurers had to issue plans even if they were losing money on them, for example if the plans were unable to compete with insurance available in the exchanges. This would be an extraordinary intervention in the insurance market. It would have been more appropriate to highlight this extreme action by a senior senator than the actual headline of the piece "despite fumbles, Obama defends health care law."

Presumably Senator Landrieu does not expect this bill to be taken seriously as legislation and is just introducing it for political purposes. (Copies of the text are not currently available on the web.) However it is not the NYT's job to assist Landrieu in such political theater.

The article attempts to make the case that the Affordable Care Act is posing a serious problem for Democratic politicians, most importantly by leading to a less than expected victory margin for Terry McAuliffe in the gubernatorial race in Virginia. The evidence for this effect is at best ambiguous. It tells readers that 27 percent of voters identified health care as the most important issue. These people voted for Mr. McAulifie's opponent by a margin of 49-45. However the same polls found that 45 percent identified the economy as the most important issue. This group broke for the Republican candidate by the same margin. In short, there is not much evidence that the problems with Obamacare played a major role in the Virginia gubernatorial race and there is even less reason to believe that the problems to date will affect the elections in November of 2014.

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The Trans-Pacific Partnership (TPP) is a trade deal that is being negotiated completely in secret. The main actors at the table are large corporate interests like Wall Street banks, multinational drug companies, and oil and gas companies. This might lead one to think that the end product will be an agreement that furthers the upward redistribution of income rather than benefits the bulk of the population. That seems especially likely since this is a "next generation" trade agreement that is primarily about regulations, not reducing traditional trade barriers like tariffs and quotas.

The result is likely to be a deal where corporations will use the trade agreement to block restrictions on their behavior that might otherwise be imposed by democratically elected governments. For example, the financial industry might use the deal to prohibit Dodd-Frank type restrictions that prevent the sort of abuses that led to the financial crisis. The oil and gas industries might use the deal to prohibit environmental restrictions on fracking. And the pharmaceutical industry might push for stronger patent-type protections. These will raise the price of drugs (like a tax) and slow economic growth.

Bizarrely, the NYT editorialized in favor of the TPP, concluding its piece:

"A good agreement would lower duties and trade barriers on most products and services, strengthen labor and environmental protections, limit the ability of governments to tilt the playing field in favor of state-owned firms and balance the interests of consumers and creators of intellectual property. Such a deal will not only help individual countries but set an example for global trade talks."

Yes, boys and girls, Goldman Sachs, Exxon-Mobil and Pfizer will put together a deal that does all these things. This is serious? 

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