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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Glenn Kessler, the Washington Post's fact checker, gave President Obama four Pinocchios for telling people that under the Affordable Care Act (ACA) they would be able to keep their insurance plan, if they liked it. Kessler points out that many plans are being terminated because they do not comply with the minimum standards laid out by the ACA. The people on these plans are not able to keep their insurance.

Kessler notes that the plans in existence as of the time the ACA was passed would be grand-fathered, which would mean that the plans in effect at the time that President Obama was pushing the bill could still be offered even if they did not meet all the standards laid out in the ACA. The plans being terminated because they don't meet the minimal standards were all plans that insurers introduced after the passage of the ACA, knowing that they would not meet the standards that would be put into law in 2014.

However Kessler points out that the ACA sharply restricts the ability of insurers to alter the grandfathered plans and still maintain their status. For example, they can only raise their premiums or deductibles by a small amount above the rate of medical inflation.

Kessler interprets this as a narrow restriction that would cause many plans to lose their grandfathered status. However, the price increases charged by insurers are not events outside of the control of insurers. If an insurer offers a plan which has many committed buyers, then presumably it would be able to structure its changes in ways that are consistent with the ACA. If it decides not to do so, this is presumably because the insurer has decided that it is not interested in continuing to offer the plan.

Whether such a decision can be blamed on the ACA and interpreted as a violation of President Obama's pledge depends on how people think about the commitment. Insurers change and drop their plans all the time. (As the co-director of a small business, I can give personal testimony on that one.) If people thought that Obama's pledge meant that he would freeze the insurance market -- in effect have the government take over the industry and prohibit any changes to existing policies -- then Kessler is absolutely right, Obama broke the pledge. Under the ACA insurers still can change and eliminate plans.

However, if people interpreted the pledge as meaning that the ACA would not directly eliminate the insurance plans that people had at the time, then Obama was being honest. The ACA did not end plans that were in effect at the time the plan was being passed.

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Most people have no clue how much the government will spend this year and even less idea of how much money it will spend over the next decade. That is true even of the highly educated people who listen to National Public Radio. That is why it is just awful reporting on NPR's part when it tells listeners about a $5 billion cut to food stamps this year or a Republican proposal to cut benefits by $40 billion over the next decade.

This provides no information whatsoever to the overwhelming majority of NPR's listeners. On the other hand, it would be informative to tell listeners about a cut to food stamps equal to 0.14 percent of the budget this year and the Republican proposal to cut benefits by an amount equal to 0.09 percent of projected spending over the next decade. (Both numbers immediately available through use of CEPR's extraordinary Responsible Budget Calculator.)

The key point that many NPR listeners likely missed is that these cuts could be a big deal for food stamp beneficiaries, but they are trivial in terms of total federal spending. Many NPR listeners may wrongly been led to believe that the decision on these cuts will have a substantial impact on the budget and the deficit.

Unlike NPR, the New York Times recognizes this problem and has committed itself to present big numbers in a way that are understandable to its audience. Maybe one day NPR will begin to take news reporting seriously.

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It's rare that people involved in public debates openly acknowledge that they were wrong and change their position. (I'm sure that I would if it ever happened.) For this reason David Crane deserves enormous credit for acknowledging in his Bloomberg column that pension funds should fully disclose the fees and returns from their alternative investments.

This acknowledgement came about as a result of an exchange with David Sirota. Sirota had criticized a number of public pension funds (especially Rhode Island's pension fund) for turning over a substantial portion of their assets to hedge funds. The managers of these hedge funds charge high fees for managing pension assets, often taking 2 percent off the top and then a share of the earnings.

Crane argues that this arrangement benefits the pension funds because the hedge fund managers are able to outpace the market by enough to cover these fees and still leave the pensions coming out ahead. Sirota disputed this claim, but noted that we don't have the information that would allow us to answer this question.

It was in this context that Crane acknowledged that most pension funds don't disclose enough information for the public to be able to determine whether they are benefiting from their investments with hedge funds. There is no excuse for not making this information available to the public and it's good to see that Crane agrees with this position. 

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I try not to use BTP to carry on personal exchanges, but I can't resist this one. I see that Nick Gwiazda takes issue with me in the International Business Times arguing that Alan Greenspan does not owe the United States and the world an apology for allowing the housing bubble to grow large enough that its collapse would destroy the economy.

Apparently, Mr. Gwiazda thinks that I am Monday morning quarterbacking on this one. That is 180 degrees at odds with reality. I was warning about the bubble from the summer of 2002 and yelling at the top of my lungs. I was also telling Alan Greenspan what he should do about it. Here's a brief summary from a few weeks back.

The point here is that Greenspan had no excuse. It was easy to see the bubble for anyone with open eyes and easy to see that its inevitable collapse would be a disaster for the economy.

As an economist I think that we have to reward workers when they do their jobs well and sanction them when they perform poorly. Few workers have ever performed their job more poorly than Alan Greenspan. He indeed owes us a big apology and should stop wasting our time by trying to tell us that the dog ate his homework.

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It's always fun to follow the Washington Post columnist on his expedition in economic confusion as he mangles one topic after another. Today we go with Samuelson to visit the claim that the Affordable Care Act (ACA) is a job killer.

Samuelson notes the evidence produced by the White House showing that there has been no rise in part-time employment as a result of the ACA. (CEPR produced a study confirming this claim. The share of workers putting in less than 30 hours a week was lower in the first half of 2013 than in 2012.) However he then turns to a study from the San Francisco Federal Reserve bank, which he says "fortifies my convictions:"

"It’s usually cited in the ACA’s favor, concluding that the law won’t erode full-time work much. The increase in part-time jobs “is likely to be small, on the order of a 1 to 2 percentage [points] or less.” But that few percentage points amounts to between 1.4 million and 2.8 million more part-time jobs. Not trivial."

In fact, the study does not conclude that the ACA will increase part-time employment, rather it refers to another study that found this impact. That sudy examined the impact of an employer mandate in Hawaii. It found zero impact after the law had been in effect for more than a decade. The 1-2 percentage point increase in part-time employment was only evident more than 20 years after the employer mandate went into effect.

It's also worth noting that the vast majority of part-time workers are employed part-time voluntarily. Even now more than two-thirds of part-time workers only want part-time employment. In more normal times this figure is over 80 percent. It is entirely possible that any rise in part-time employment over the next two decades as a result of the ACA will be filled mostly by workers who want to work part-time. This is especially likely to be true if part-time workers are able to get health care insurance as a result of the ACA.

 

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In an article about congressional negotiations aimed at reducing the deficit and eliminating jobs, the Washington Post explained that there had been a sharp drop in the size of the deficit since the Republicans took over Congress in 2011:

"Since then [January, 2011], a series of budget deals — and an improving economy — have dramatically slowed federal borrowing. On Wednesday, the White House budget office announced that the government recorded a $680­ billion deficit in the fiscal year that ended in September, less than half the size of the shortfall President Obama inherited in 2009 when measured as a percentage of the economy."

Actually, the sharp drop in the deficit cannot be explained by economic growth over the last three years. In January of 2011, the Congressional Budget Office projected year over year growth for 2011, 2012, and 2013 of 2.7 percent, 3.1 percent, and 3.1 percent, respectively. In fact growth was 1.8 percent in 2011, and 2.8 percent in 2012. We don't yet have full year data for 2013, but GDP growth is virtually certain to be under 2.0 percent.

Since the economy has grown considerably slower than was predicted, growth cannot explain the lower than projected deficits. The explanation instead is the cuts made to the budget, as well as the ending of the Bush tax cuts for high income households. The upward redistribution of income, along with the sharp rise in the stock market, has also increased revenue.

This impact shows up not just as additional capital gains taxes, but also as a result of capital gains income being recorded as normal income. This happens every time there is a sharp increase in asset values. Growth in national income has exceeded growth in output by almost 1.5 percentage points since 2010, which is the sort of gap that would be expected given the sharp rise in the stock market over this period.

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Eduardo Porter does a nice job laying out the case explaining how the budget cutters have slowed growth and thrown people out of work (and they are proud).

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That is what the NYT told readers in its budget piece today. Apparently because people who matter in Washington have little concern about large numbers of unemployed and underemployed people, as well as the upward redistribution of income, the NYT said that members negotiating over the budget feel no need to create jobs and boost economic growth. While business groups and their allies at major news outlets like the Washington Post and National Public Radio are placing enormous pressure on members of Congress to cut Social Security and Medicare, there are no important lobbies to push for policies to restore full employment and normal wage growth. 

As a result, this piece presented no views from an economic perspective, which would have pointed out that the drive to reduce the budget deficit is a drive to slow the economy, increase unemployment, and lower wages. There is no plausible story whereby private sector demand will replace demand from the government in the current economy. This means that if the government cuts spending by $100 billion, then we will see roughly $100 billion less in demand. Since much of this money would have been respent (workers spend their wages), this implies a reduction in GDP of around $150 billion, a bit less than 1 percent. The job loss associated with this cut would be around 1.3 million.

It would have been useful to include some discussion from an economic perspective so NYT readers would realize that both parties are debating proposals to slow the economy and throw people out of work.

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When Morning Edition had former Treasury Secretary Larry Summers on saying that we may not have to focus so much on reducing the deficit, it immediately followed up with a discussion from Wall Street Journal editor Mike Wessell, which told people that Summers position was not politically serious. In Washington we have to talk about reducing the deficit.

Apparently feeling the need to further refute the idea that the deficit is not a problem, Morning Edition invited Maya MacGuineas, the President of the business backed group Fix the Debt (correctly identified on the show) to explain why the deficit is such a big problem. In the course of her interview she dismissed Paul Krugman's correct claim that she and her group have been wrong about every single prediction they have made since the crisis began. Most importantly, they have repeatedly asserted that interest rates would skyrocket because of the deficit.

She also wrongly asserted that the debt to GDP ratio is rising. The Congressional Budget Office numbers show that the debt to GDP ratio is falling. While it does reverse direction by the end of the decade, the latest projections show that the debt to GDP ratio will be lower in 2023 than it is today.

 

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                      Source: Congressional Budget Office.

This piece might have caused listeners to be confused about the fact that tens of millions of people are needlessly unemployed, underemployed, or out of the work force altogether because of the efforts of deficit hawks to prevent the government from spending the money necessary to put people back to work. The deficit hawks' efforts to keep the economy below its full employment level of output also has the effect of reducing wages of the bottom 50-80 percent of the workforce.

 

Note: links fixed.

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The Washington Post joined Republicans in hyping the fact that many individual insurance policies are being cancelled with insurers telling people that the reason is the Affordable Care Act (ACA). The second paragraph comments on this fact:

"The notices [of plan cancellation] appear to contradict President Obama’s promise that despite the changes resulting from the law, Americans can keep their health insurance if they like it."

It would have been useful to point out that the plans that were in effect as of the passage of the ACA were grandfathered. This means that any insurers that cancel plans that were in effect prior to 2010 are being misleading if they tell their customers that the cancellation was due to the ACA. It was not a mandate of the ACA that led to the cancellation of the plan, but rather a decision of the insurer based on market conditions.

This is almost certainly the case with one of the plans described in the article. It refers to a "special plan for the hardest to insure" run by Highmark Blue Shield of Pennsylvania. This plan, which the article says covers 40,000 people, is being cancelled.

Highmark Blue Shield likely decided to cancel this plan because its customers would almost certainly be able to buy cheaper insurance through the exchanges. The main point of the ACA is to create a system of insurance in which the "hardest to insure" can buy insurance at the same price as everyone else. In contrast, Highmark Blue Shield was undoubtedly charging them a considerable premium to cover their larger than normal expected health care costs. Contrary to the theme of the article, it is unlikely that many customers of the Highmark Blue Shield plan will be unhappy about losing the opportunity to pay more for their insurance as a result of the ACA. 

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