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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That would have been an appropriate headline for a Christian Science Monitor article on a poll of businesses sponsored by the Chamber of Commerce. The poll found:

"Some 31 percent of franchise businesses and 12 percent of non-franchise businesses say they have already reduced worker hours because of the law.

"About 27 percent of franchise businesses and 12 percent of non-franchise businesses have already replaced full-time workers with part-time employees because of the law."

Of course this is what the businesses say they are doing. However the data say the opposite. The data say that businesses have actually reduced somewhat the share of their workforce employed for less than 30 hours a week.

This is not the only case where the businesses answering this survey seem to be contradicting the data. The survey finds:

"Some 41 percent of the non-franchise firms say they already see health-care costs rising because of the law."

By contrast, the Kaiser Family Foundation found that the rate of increase in employer health insurance costs has slowed in recent years.

 

Note: typo corrected, thanks Mark.

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Those of us who are old enough recall the origins of the euro crisis remember that countries like Spain and Ireland had enormous housing bubbles, which were fueled by lending by incompetent bankers in countries like Germany and the Netherlands. When these bubbles burst, trillions of dollars in loans lost much of their value. In addition, the driving force for economies across Europe disappeared throwing them into severe recessions.

And, as budget fans everywhere know, government budgets shift towards deficits when an economy goes into recession. The reason is that governments spend more money on things like unemployment benefits. They also lose tax revenue when people lose jobs and income. In short, in the real world, the euro crisis is about a collapsed housing bubble leading to a severe recession. The budget deficits were an outcome of this collapse.

But the NYT has decided to reinvent the history of the crisis. It told readers that the problem in the euro zone was overspending. In an article on a set of budget reviews issued by the European Commission, the NYT told readers:

"The announcement, by Olli Rehn, the European Union’s commissioner for economics and monetary policy, is aimed at keeping tighter reins on national finances to stave off the kind of overspending that fed a crisis that nearly destroyed the euro."

In fact, of the current group of euro crisis countries, only Greece, and arguably Portugal, had a major deficit problem prior to the collapse. Italy's deficits were not especially large and Cyprus, Ireland, and Spain all had budget surpluses on the eve of the collapse.

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Things seem to be spinning off the rails very fast here in Washington. The NYT has an article today explicitly comparing the rollout of the health insurance exchanges to President Bush's response to Hurricane Katrina.

There is no doubt that the rollout of the exchanges has gone very badly, with people having great difficulty getting on the Obamacare website and buying insurance. And the opponents of Obamacare have been very effective in hyping stories, real or unreal, of people losing their insurance due to the Affordable Care Act. But the comparison to the response to Hurricane Katrina has to qualify as more than a bit over the top.

People died because of the failed response to Katrina. For whatever reason, President Bush was unable to organize a response to a hurricane hitting a major American city even though its course and ferocity had been accurately predicted a week in advance. People in New Orleans died because they could not get access to food, water, and medical care. It seems more than a bit over the top to compare the difficulties that people are facing arranging for insurance to this sort of catastrophe.

 

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Ezra Klein warned readers that "Obamacare is in much more trouble than it was a week ago." The main reason is a bill being push by Senator Mary Landrieu that would require insurers to continue to offer plans that are in effect at the end of 2013.This bill is drawing support from a number of centrists and even liberal Democrats. Klein argues that this bill would risk seriously skewing the individual insurance market that would create a major problem of adverse selection, with healthy people staying on private plans outside of the exchanges.

There is actually much less risk here than appears. First, Republicans would be highly unlikely to support Landrieu's bill since it would require insurers to continue to offer plans even if it is not profitable to do so. It is unlikely that the Republican House would approve a bill that could lead to major losses for many insurers.

The other factor to consider is that even if the bill were to be passed into law, the number of policies protected would be limited. As Klein's colleague Glenn Kessler showed, almost two thirds of the plans that people hold in the individual market are typically in effect for less than a year. This means that whatever skewing might result from its passage into law would be relatively limited and gradually go to zero as these people's circumstances changed (e.g. they get hired by companies with employer provided insurance).

 

Note: Robert Salzberg pointed out to me that the Landrieu bill would make the date where a plan must be in effect to be grandfathered December 31 of 2013, not January 1 as I had previously written.

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That is what readers of a NYT piece on criticisms of German government policies from the European Union and the German Council of Economic Experts, a panel of economists that advises the government might conclude. Unfortunately the piece did not make clear that the criticisms were coming from opposite directions.

The European Union is criticizing Germany for refusing to take measures that would help to correct its huge trade surplus with other euro zone countries. The list of policies that would help bring about this adjustment would include stimulatory fiscal policy (i.e. larger deficits) and policies that would lead to higher German wages, such as a national minimum wage and measures that would increase the bargaining power of unions.

By contrast, the Council of Economic Experts was critical of measures that would raise wages. It wants Germans to suffer in the same way as other Europeans.

As a practical matter, if Germany does not take steps to raise the price of its goods relative to prices in other euro zone countries then it will continue to run large surpluses with those countries. It is likely that many of the loans needed to allow countries like Greece to pay for its imports will have to be written down in the future as has been the case in the past.

Apparently Germans prefer to give away their goods rather than sell them. That is a strange economic view, but it seems to be the preferred approach in Germany. It would have been helpful if the piece had made this point more clearly.

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In an interesting column discussing the splits on economic issues in the Democratic Party and how they affect Hillary Clinton's prospects for 2016, Harold Meyerson noted progressives opposition to Larry Summers as Fed chair. He told readers:

"To the liberals, Summers’s sin was his central role in deregulating derivatives when he served as Bill Clinton’s Treasury secretary as well as his support for repealing the Glass-Steagall Act, a change that allowed previously safe depositor banks to use those funds for speculative investments."

Actually the negative impact of the soaring dollar, which was a direct result of the bailout from the East Asian financial crisis that Summers helped engineer, dwarfed the impact of deregulating derivatives and repealing Glass-Steagall. The harsh terms of the bailout led countries throughout the developing world to begin a massive accumulation of dollar reserves to avoid ever being in the same situation.

The resulting trade deficit created an enormous hole in demand in the economy. This hole was filled by demand generated by the stock bubble in the 1990s. When that bubble burst it gave the U.S. economy the longest period without job growth since the Great Depression. The economy only started creating jobs again when the housing bubble picked up steam and filled the demand gap created by the trade deficit.

While the decline in the dollar since 2002 has partially closed the trade deficit, it is still creating a demand gap of more than $500 billion a year. Absent another bubble, this gap can only be filled by large budget deficits. Since almost no one in a position of responsibility in Washington is prepared to advocate larger deficits, this means that Summers high dollar policy is likely to condemn the country to high rates of unemployment long into the future.

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A NYT article on growing Congressional opposition to the Trans-Pacific Partnership (TPP) told readers;

"The T.P.P. as outlined is aimed at reducing barriers, cutting red tape and harmonizing international regulations,.."

It is not true that the TPP is designed simply to reduce barriers. The provisions on patent monopolies for prescription drugs and related protections like data exclusivity will almost certainly increase barriers and raise prices. This is likely to be the case with its copyright related provisions as well. The additional costs associated with increased protectionism in these areas may well exceed any savings associated with lower barriers elsewhere. Protectionism in the prescription drug industry in the United States add close to $270 billion a year (@1.6 percent of GDP) to drug costs.

The piece also refers to the opposition to TPP to the agreement as coming "sight unseen." This is not quite right. While the Obama has been negotiating the TPP largely in secret, many members have seen portions of the draft text. Also portions have been leaked and are available on the web.

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That probably wasn't his intention, but in a column where he tells readers:

"by historical standards, the United States is doing well domestically and internationally. And by any objective measure, the trend lines are positive, not negative,"

he shows the opposite.

His list of positives begins in the first paragraph:

"The economy is growing much more quickly than expected. Inflation is basically nonexistent. The federal budget deficit has been slashed dramatically. The stock market is reaching all-time highs. One of our long-running wars is over, and the other is winding down. The status of the United States as the world’s preeminent economic and military power is unchallenged."

Okay, just about everything here is wrong. The economy grew 2.8 percent in the last quarter. According to the Congressional Budget Office we're are 6 percentage points below potential GDP. They estimate the rate of growth of potential GDP as between 2.2 percent and 2.4 percent. This means that at the third quarter growth rate we will close the output gap and get back to full employment somewhere between 2023 and 2028.

But wait, it gets worse. The reason why the third quarter growth rate came in higher than expected was that inventories accumulated at a rapid pace. This means that cars were accumulated unsold on dealers' lots and clothes were accumulating on store shelves. This means that production will almost certainly be cut back in the fourth quarter. That is not a positive story.

Even if the actual growth rate were 2.8 percent that would still be pathetic for a country with a severely depressed economy. We should be seeing growth in the range of 5-6 percent to make up lost ground. That is the sort of growth we saw in prior recoveries.

The other economic success stories are equally off base. We should want a higher inflation rate. That would mean lower real interest rates and reduced debt burdens for homeowners who took a hit in the housing crash. If Robinson has a story as to why the low inflation rate is good news he should write it out. It would win him a Nobel prize in economics.

The same is the case with his boast about the lower budget deficit. This means less demand in the economy and therefore slower growth and higher unemployment. Hey, let's balance the budget and throw another 6 million people out of work. Then we can really celebrate!

It's not clear why anyone would give a damn that the stock market is at a record high unless they are among the 20 percent of the population who own a substantial amount of stock. The value of stock is not an indicator of the well-being of the economy; it is a measure of the wealth of people who own stock. Why should the bulk of the population be happy that Bill Gates and Jeff Bezos are now much wealthier and can command a much larger share of the country's output than was the case last year.

When Robinson tells us that by historical standards the United States is doing well he is using a history that he has invented. We are experiencing a downturn with a length and severity only exceeded by the Great Depression. The median household income in 2012 was below its 1997 level (Table A-1) meaning that the typical household has nothing to show for the last 15 years of economic growth.

It's not clear if Robinson thought his column would really cheer people up, but to anyone familiar with the reality in America today, it is just depressing. 

Oh, and China is about to pass the United States as the world's largest economy for people who care about such things.

 

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Charles Lane used his column today to take potshots at Tesla, the electric car company. While I actually share much of Lane's skepticism on Tesla (I suspect Tesla is taking lots of people for a ride, but not in their cars) his dismissal of liberals' interest in Tesla type projects is off the mark. He starts his piece by telling readers:

"Tesla epitomizes the mutation of modern American liberalism. Once an ideology whose central concern was the plight of lunch-bucket working stiffs and oppressed minorities, liberalism is increasingly about environmentalism and related 'quality of life' issues."

Lane's distinction between issues concerning lunch-bucket working stiffs and oppressed minorities and environmentalism is just silly. When Sandy hit New York and New Jersey last year a lot of people who looked like lunch-bucket working stiffs had their homes and businesses destroyed. This will be largely the story of global warming. The rich mostly have their homes on more protected areas and when their property does get hit they have insurance that protects them financially from the impact. The people who will mostly risk life, injury, and homelessness from rising oceans and extreme weather event will be lunch-bucket working stiffs and oppressed minorities.

Furthermore, spending on measures to counter global warming are essentially costless in an economy that is below full employment, which all projections show will be the case for many years into the future. (I am referring to real world accounting, not to the nutty deficit hysterics we get in Washington.) This means that spending money on measures to slow global warming are a way to give jobs to lunch-bucket working stiffs and oppressed minorities who would otherwise be left unemployed by the economic policies of the Washington crew.

Lane isn't clear what "quality of life" issues he has in mind, but if these are items like paid family and sick leave, these are also very much issues for the benefit of lunch-bucket working stiffs and oppressed minorities. Lunch-bucket working stiffs and oppressed minorities, especially of the female persuasion, often lose their jobs because they have to care for a sick child or relative and the boss refuses to give them a day off. This is about as bread and butter an issue as you can get. The concern of liberals over such issues reflects a change in the reality of the workplace, not a change in their priorities.

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That's the question that readers of Lori Gottlieb's column must be asking. Ms. Gottlieb claims that her Blue Cross policy was cancelled and that now she would have to pay an additional $5,400 a year for insurance that complied with the Affordable Care Act. Really?

Unless the Kaiser Family Foundation got its numbers badly messed up, Ms. Gottlieb is just making stuff up. Its website shows that a silver plan, which is mid-grade, not lowest cost, would cost a person living in Los Angeles with one kid $5,244 a year. That is less than $5,400 addition to her health care costs claimed in the piece. Let's assume that Blue Cross in California does not give away insurance to people who are 46, even if they are in excellent health. If Blue Cross charges $250 a month for insurance for a healthy 46 year-old with one kid then Ms. Gottlieb is currently paying $3,000 a year for insurance.

That means that Obamacare is raising Ms. Gottlieb's insurance costs by just over $2,200 a year or less than half of the amount claimed in her piece. It would be nice if the NYT would have fact checkers examine the claims made in its op-eds instead of just giving them a license to make facts up to advance their argument. 

Note: cost of insurance numbers under Obamacare corrected. Thanks to Robert Salzberg.

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