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).
Robert Samuelson put forward what would ordinarily be a very reasonable proposal on Medicaid and Medicare in his column today. He suggested that the federal government take over the portion of Medicaid that deals with low-income elderly and fold it into the Medicare program, while leaving states with full responsibility for dealing with the part of Medicaid that deals with low-income families below retirement age.
While he is right that this sort of consolidation could likely reduce costs and prevent seniors from falling between the cracks in the two systems, there is a basic problem with turning Medicaid over to the states. There are a number of states controlled by Republicans where there is little or no interest in providing health care for low-income families.
This means that if Medicaid were turned completely over to the states, millions of low-income families would lose access to health care. For this reason, people who want to see low-income families get health care, which is the purpose of Medicaid, want to see the program remain partly under the federal government's control.Add a comment
The NYT might have wrongly lead readers to believe that presidents prior to Donald Trump supported free trade in an article noting his refusal to go along with a G-20 statement proclaiming the importance of free trade. This is not true.
Past administrations of both parties have been vigorous supporters of longer and stronger patent and copyright protections. These protections can raise the price of protected items by factors of ten or even a hundred, making them equivalent to tariffs of 1000 and 10,000 percent. These protections lead to the same sorts of economic distortion and corruption that economists would predict from tariffs of this size.
Past administrations have also supported barriers that protect our most highly paid professionals, such as doctors and dentists, from foreign competition. They apparently believed that these professionals lack the skills necessary to compete in the global economy and therefore must be protected from the international competition. The result is that the rest of us pay close to $100 billion more each year for our medical bills ($700 per family).
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A front page Washington Post piece profiled Tamara Estes, a supporter of Donald Trump who is anxious to see undocumented aliens deported, along with a neighboring family, the Corrals. The parents in the Corral family entered the country illegally, while the children were born in the United States and are therefore U.S. citizens.
In describing the situation of Ms. Estes, the piece tells readers that she earns $24,000 a year driving a school bus part-time. It then reports that she does not have health care insurance:
"She earns a bit too much to qualify for most government assistance but too little to buy health insurance, with its high monthly premiums and impossible deductibles."
Actually, her income would qualify her for substantial assistance in buying health care insurance. According to the Kaiser Family Foundation's premium calculator, the government would pay a subsidy of $548 a month for a $678 a month silver plan. This would leave her with a monthly payment of $130.
It is possible that Ms. Estes would still decide not to buy the insurance at this price, but it is wrong to say that she does not qualify for government assistance. The subsidy she could get on her insurance is considerably larger than the TANF benefit that a family of three would receive in Texas.
The Post should have provided correct information to readers on this issue. It might also have been useful to question Ms. Estes further on why she opted not to take advantage of the assistance available to her.
I should have also mentioned that the Bronze plan would cost Ms. Estes $70 a month according to the Kaiser calculator. This also comes free wellness exams and other preventive care.Add a comment
Paul Krugman criticized the Trump administration for its budget, which would cut or eliminate many programs that benefit low- and moderate-income people. In his piece, Krugman points out that the public is incredibly ignorant on the budget, with most people having virtually no idea of where most spending goes.
In particular, he referenced an analysis that found people on average believed we spend more than 30 percent of the budget on foreign aid. The actual figure is less than one percent.
This is the sort of item that inevitably leads people to deplore the ignorance of the masses. While ignorance is deplorable, instead of blaming the masses, we might more appropriately look at the elites.
The overwhelming majority of people are never going to look at a budget document. Insofar as they get any information on the budget, it is from reporters who tell them how much we spend in various areas of the budget. (They may get this information indirectly from their friends who read the newspaper or listen to news.)
When they hear about spending, they will invariably hear things like we spend $40 billion a year on foreign aid or $17.3 billion on Temporary Assistance for Needy Families (TANF). Most people will think these figures are large sums, since they dwarf the sums that people see in their daily lives. In fact, the former is less than one percent of the $4.1 trillion that we will spend in 2017, while the latter is just over 0.4 percent of total spending.
The media could do a much better job of informing the public about spending (i.e. by doing their job) if they made a point of putting these figures in context. As it is, giving people these really huge numbers without context is essentially telling them nothing. As an alternative, they could make a point of always referring to these numbers as a share of the budget and/or expressing them on a per person basis (e.g. the spending on TANF comes to a bit more than $50 per person per year from every person in the country).Add a comment
The politicians who are trying to cut Social Security and Medicare know that these programs are incredibly popular across the political spectrum. For this reason they typically use euphemisms when referring to plans to cut the benefits they provide, like calling for "reform," "modernization," or "slowing the growth."
It is understandable that politicians pushing an unpopular agenda would try to mislead people about their actions, but it's not clear why the NYT is playing the same game, telling readers in an article on the Trump budget:
"But the early reaction from members of his party on Capitol Hill was muted at best, reflecting in part the discomfort among many of the party’s leaders with a budget that makes no progress on tackling the growth of entitlements."
The reference to "no progress on tackling the growth of entitlements" is the NYT's way of saying the budget doesn't cut Social Security and Medicare. This should be an easy one, it's shorter and more informative to just describe the issue directly.Add a comment
NPR had an interesting segment on the difficulties that many families have paying for cancer treatments. The piece points out that even middle-income families with good insurance may still face co-payments of tens of thousands of dollars a year.
One item not mentioned in this piece is that the reason the prices of new cancer drugs is high is that the government grants companies patent monopolies. This is done as a way to finance research. In almost all cases these drugs would be available for less than a thousand dollars for a year's treatment if the drugs were sold in a free market.
While it is necessary to pay for research, there are more modern and efficient mechanisms than patent monopolies (see chapter 5 of Rigged).Add a comment
It is amazing that there is not an effort to have a mass deportation of economists. After all, almost the whole profession completely missed the housing bubble and the economic crisis that resulted from its collapse. They failed to see the weakness of the recovery and now they can't decide whether we will have too few workers or too few jobs. (This is known as the "which way is up?" problem in economics.)
Claire Cain Miller gave us a "too few jobs" story in her NYT column that asked how we can offset the impact of job killing robots. She discusses various ideas that will create jobs or generate incomes for the people displaced by robots.
It is worth noting that if we think the problem really is too few jobs, in effect, that productivity is soaring, then many other commonly discussed economic problems do not really exist. If we have too few jobs then we have no reason to worry about government budget deficits. The problem of government budget deficits (if there is one) is that excessive spending by the government is creating too much demand in an economy that is unable to supply enough goods and services.
Similarly, in the too few jobs story there is no reason to worry about the demographics of retiring baby boomers. That is a story of too few workers to care for a growing population of retirees.
There is also no reason to worry about the burden of excessive regulations stifling growth. The too few jobs story is telling us that the robots are leading to mass displacement of workers in spite of whatever burden is created by regulations. The implication is that we would have even if fewer jobs if not for the burden of regulations (assuming that regulations actually do slow growth).
And of course, if the problem is the robots taking all the jobs there is no reason for the Federal Reserve Board to raise interest rates. The point of higher interest rates is slow the rate of job creation so that the labor market doesn't get too tight and cause inflation. If we are worried that robots are getting rid of all the jobs it doesn't make any sense for the Fed to deliberately make the problem worse by slowing the rate of job creation.
It would be nice if economists could either agree than we face a world of soaring productivity so that scarcity is not a problem or (as the data show) we face a world of weak productivity growth, so that we could face some problems of scarcity. Given the high average pay in the profession, it would be reasonable to think there could be some consensus or at least some clear thinking on the implications of each position.Add a comment
In the years before the Affordable Care Act (ACA) the uninsured population peaked at just over 50 million people. It fell sharply when the main provisions of the ACA took effect, falling to less than 28 million in recent quarters. However, in its effort to make America great again, the Republicans expect to raise the number of uninsured back above 50 million. Serious analysis of their plan shows that they have a good shot at meeting this goal.
While the Republicans are in principle keeping some of the provisions of the ACA that were responsible for lowering the number of uninsured, this effect will be temporary. In most cases, the situation for most people not covered by their employers will be the same or worse than before the ACA took effect.
For example, the plan leaves in place the expansion of Medicaid through 2020. This should be long enough so that most currently serving Republican governors will not have to deal with the effect of the elimination of this provision. After 2020 people benefiting from the expansion will be allowed to remain on Medicaid, but new people will not be added. Since people tend to shift on and off Medicaid (something rarely understood by reporters who cover the ACA), after two or three years the vast majority of the people who benefited from the expansion will no longer be getting Medicaid. By 2025, the impact of the expansion on the number of the uninsured will be trivial.
The plan also allows insurers to charge people with pre-existing conditions higher rates, if they allow their insurance to lapse. While the provision allowing people to avoid being penalized for pre-existing conditions, if they maintain continuous coverage, may appear to provide protection, in reality this is not likely to be the case. Before the ACA workers were allowed to keep employer based coverage for a substantial period of time after they left their employer under COBRA. The take up rate under this law was always low, primarily because most workers could not afford to keep their coverage once they left their jobs. This is likely to be the case when the Republican plan takes effect as well.Add a comment
In an article on the main features of the Republican replacement for Obamacare, the Post told readers:
"At the same time, the shift to take income into account could create a potentially difficult ripple effect for Republicans, who regard a reduction in the federal government’s role in health care as a central reason to abandon the sprawling 2010 health care law (emphasis added)."
This comment is in reference to the decision to phase out the heath care tax credit for couples with incomes over $150,000.
While it is possible that the opposition to this phase out is due to Republicans who somehow see this as excessive federal government involvement in health care, it could also be due to the fact that Republicans just want to give more money to rich people. Fortunately, the Post's mind reading reporters can tell us the true motive.Add a comment
Robert Samuelson devoted his column this week to the issue of government regulation. He refers to an estimate from the industry-funded Competitive Enterprise Institute that "the costs of complying with federal rules and regulations totaled nearly $1.9 trillion in 2015, equal to about half the federal budget ($3.7 trillion in 2015)." It is important to understand the nature of this estimate.
Suppose that I have been in the habit of dumping my sewage on my neighbor's lawn. Now imagine the government puts in place a regulation prohibiting me from doing this so that I have to install a sewage system to dispose of my sewage in a more proper manner. The Competitive Enterprise Institute estimate would count the cost of my sewage system as a cost of regulation.
This is of course not a cost to the economy, it is just a situation where they forced me to stop imposing costs on my neighbors. This is how one can get a figure like $1.9 trillion a year as the cost of regulation.
Anyone seriously looking at regulations would want to know their net cost. Many regulations, such as bans on smoking, which have led to huge reductions in incidents of cancer, bans on leaded gas, which led to large reductions in crime in addition to the direct health benefits, and the 1990 Clean Air Act, have had enormous economic benefits. Honest people would be sure to mention this fact in discussing the impact of regulation.Add a comment
In recognition of the wrongs done by slavery, but not subsequent legal and actual discrimination, NYT columnist Ross Douthat proposes making a one time payment of $10,000 to every person who trace their ancestry to someone who was enslaved. This payment would be in exchange for ending affirmative action in education, employment, or any other area. The idea seems to be that after the descendants of slaves get their check, we're all good.
For anyone interested on how this measures up in the scheme of things, currently the median income for a white household is $71,300. The median income for an black household is $43,300. Since this is for an adjusted household of three people, Douthat's $10,000 per person payment will put the median black household slightly above the median income for white households, in the year they get it.
In subsequent years, they will get nothing to offset the discrimination they experience in schools, hiring, getting mortgages, and even selling baseball cards on eBay. Apparently, Douthat thinks that his one time payment of $10K (only to those with direct ancestors who were enslaved) would make things right. My guess is that this deal wouldn't look too good to people who are better at arithmetic than Mr. Douthat.Add a comment
Donald Trump's business empire appears to be an infinite cesspool of corruption, with his unethical practices continuing into his presidency. Given such a target rich environment for real news stories, it is difficult to see why the NYT would devote space and resources to pursuing a major non-story. The paper apparently thinks that it is some sort of scandal that Trump accepted energy efficiency tax credits for some of his buildings, since he opposes the tax credits and is committed to eliminating them.
Sorry, that makes zero sense. People take advantage all the time of provisions in the tax code they think are wrong. Why shouldn't they?
Warren Buffett has famously complained that it is ridiculous that he can pay a lower tax rate than his secretary, based on the fact that most of his income is taxed at the 20 percent capital gains rate rather than the 25 percent marginal tax rate on ordinary income that his secretary is presumably paying. In spite of making this complaint, Mr. Buffett still opts to take advantage of the lower rate on capital gains.
Like many other economists, I think the mortgage interest deduction in its current form is terrible policy. Nonetheless, we all (or the homeowners among us) use the mortgage interest deduction on our taxes.
It's difficult to see any hypocrisy in following the rules as written, even if one thinks the rules should be changed. This is just a lazy piece on the NYT's part, it should be spending its time reporting real scandals. There is no shortage in this category in the Trump administration.Add a comment
The Washington Post must think that U.S. trade policy is really awful. Why else would they continually lie to their readers and claim that the cause of the sharp job loss in manufacturing in recent years was automation?
For fans of data rather than myths, the basic story is that manufacturing has been declining as a share of total employment since 1970. However there was relatively little change in the number of jobs until the trade deficit exploded in the last decade. Here's the graph.
Source: Bureau of Labor Statistics.
And, there was no great uptick in productivity coinciding with the plunge in employment at the start of the last decade. It would be nice if the Washington Post could discuss trade honestly. This sort of reporting gives fuel to the Donald Trumps of the world.
In this context, it is probably worth once again mentioning that the Washington Post still refuses to correct its pro-NAFTA editorial in which it made the absurd claim that Mexico's GDP quadrupled from 1987 to 2007. The actual figure was 83 percent, according to the International Monetary Fund.Add a comment
Tony Blair, the former Prime Minister of the United Kingdom, who is best known for lying his country into participating in the Iraq War, lectured NYT readers on the evils of populism. Once again he gets many key points wrong.
He criticizes the left for abandoning centrist politicians:
"One element has aligned with the right in revolt against globalization, but with business taking the place of migrants as the chief evil. They agree with the right-wing populists about elites, though for the left the elites are the wealthy, while for the right they’re the liberals."
Blair then tells us:
"The center needs to develop a new policy agenda that shows people they will get support to help them through the change that’s happening around them. At the heart of this has to be an alliance between those driving the technological revolution, in Silicon Valley and elsewhere, and those responsible for public policy in government. At present, there is a chasm of understanding between the two. There will inevitably continue to be a negative impact on jobs from artificial intelligence and big data, but the opportunities to change lives for the better through technology are enormous.
"Any new agenda has to focus on these opportunities for radical change in the way that government and services like health care serve people. This must include how we educate, skill and equip our work forces for the future; how we reform tax and welfare systems to encourage more fair distribution of wealth; and how we replenish our nations’ infrastructures and invest in the communities most harmed by trade and technology."
Blair obviously is unfamilair with the basic facts about the economy. For example, even workers with college degree have seen almost no growth in real wages in this century. And with a large dispersion of earnings among male college grads, the bottom quartile of grads don't really see any premium at all.
But more importantly, Blair is wrong when he treats globalization and technology as natural forces. The decision to put our manufacturing workers in direct competition with low paid workers in the developing world, while leaving doctors, dentists and other highly paid professionals largely protected, is a policy choice. It's predicted and actual effect is to put downward pressure on the wages of most of the workforce, while benefitting the small elite in the protected occupations.Add a comment
Most of us know that politicians don't say what they really believe about the world. Unfortunately, the folks who write for the Washington Post haven't learned this basic fact. This explains why in an article on Donald Trump's plan to cut large parts of the domestic budget:
"To the president and his supporters who see a bloated bureaucracy with lots of duplication and rules that choke jobs, the budget cuts are a necessary first step to make government run more efficiently."
Of course, this is what the president and his supporters say. It may have nothing to do with what they "see." For example, it is well known that reducing enforcement at the Internal Revenue Service will amount to a net loss for the government, as the savings on salaries will be more than offset by a loss of revenue.
Given this fact, we can believe, apparently like the Post, that Trump's people are dumber than rocks, or we can believe that they want to make it easier for their friends to cheat on their taxes. Both are possible, but apparently the Post wants readers to rule out the latter possibility.
This logic applies to the cuts more generally. For example, the reason Republicans may want to cut funding for the Environmental Protection Agency is so that their friends have the option of dumping waste in their neighbors' drinking water rather than having to pay the cost of cleaning it up. They may support reductions in financial regulation so that their friends can make more profits ripping off unsuspecting customers.
It would be best if the paper did not try to tell us people's motives when they have no basis for their assessment.Add a comment
By Dean Baker and Sarah Rawlins
Many of us had very mixed feelings about the Donald Trump Carrier show, where he got the Carrier Air Conditioner company to keep 800 jobs at one of its plants in Indiana instead of shipping them to Mexico. The state of Indiana, under then Governor Mike Pence, promised millions of dollars in tax concessions as an inducement. There were also reports of threats or promises directed towards Carrier's parent company, United Technologies, which is a major military contractor.
While it was good to see these 800 workers keeping their jobs, this is not the way to protect U.S. manufacturing jobs. At the end of the day, 800 jobs is just a drop in the bucket in a labor force of 150 million or even among the 12.3 million people employed in manufacturing.
We can't expect the president of the United States to be running around from factory to factory to make sure that manufacturing jobs stay in the United States. What we need is a policy.
Fortunately, there is a policy that would discourage companies from shutting down the shop and sending jobs elsewhere: it's called "severance pay." That might not sound new and sexy, because it isn't, but it can radically alter the incentives for employers.
Suppose that workers were entitled to two weeks of severance pay for every year they work for a company. This means that workers who have been employed for over twenty years, as was the case with many of the Carrier workers, would be entitled to at least 40 weeks of severance pay.
This won't get someone in their early fifties through to retirement, but it certainly is a nice going away gift. More importantly, it changes the incentives for company. If a company knows that it will be costly to lay off a large number of long-term workers, it might think harder about ways to keep them employed. This could mean continual retraining to maintain their skills and investment in the most modern equipment to ensure high levels of productivity.
Of course, if a company really has no productive use for a worker, it will still pay to lay them off, but this will not be a decision taken lightly. In effect, we are requiring the company to internalize the cost to the worker and society, since there is a high risk that an older worker who loses their job will be unemployed for a long period of time, collecting unemployment insurance and other benefits.Add a comment
It's amazing how it is so acceptable in elite circles to tell outright lies to advance the trade agenda pursued by recent administrations. Everyone remembers when a 2007 Washington Post editorial touting NAFTA claimed that Mexico's economy had quadrupled between 1987 to 2007. According to the I.M.F., the actual figure was 83 percent. The erroneous number can still be found online, since the Post lacks the integrity to correct it.
In this vein we find David Ignatius continuing the Post's denialism, telling readers that workers in the Midwest are wrong to think that trade cost manufacturing jobs.
"Manufacturing employment has indeed declined in America over the past decade, but the major reason is automation, not trade. Robots, not foreign workers, are taking most of the disappearing American jobs. Rather than helping displaced blue-collar workers, Trump’s promises of restoring lost jobs could leave them unprepared for the much bigger wave of automation and job loss that’s ahead.
"The most persuasive numbers were gathered in 2015 by Michael J. Hicks and Srikant Devaraj at Ball State University. They showed that manufacturing has actually experienced something of a revival in the United States. Despite the Great Recession, manufacturing grew by 17.6 percent, or about 2.2 percent a year, from 2006 to 2013. That was only slightly slower than the overall economy.
"But even as manufacturing output was growing, jobs were shrinking. The decade from 2000 to 2010 saw “the largest decline in manufacturing employment in U.S. history,” the Ball State economists concluded. What killed those jobs? For the most part, it wasn’t trade, but productivity gains from automation. Over the decade, the report notes, productivity gains accounted for 87.8 percent of lost manufacturing jobs, while trade was responsible for just 13.4 percent."
The basic story is that we have had automation for a century. Productivity growth has always meant that fewer manufacturing workers could produce the same amount of output. In the decades of the fifties and sixties, when productivity growth was far more rapid than it has been recent years, it was associated with rising wages and low unemployment. Productivity growth is not new and is usually good for workers.
What was new in the years from 2000 to 2007, when we lost over 3 million manufacturing jobs, was the explosion in the trade deficit.Add a comment
That would be news for Republicans in Congress. The vast majority of the tax cuts they are pushing would go to the richest ten percent of the population, with close to half going to the richest one percent. It is very misleading to describe them as proponents of a big middle-class tax cut.Add a comment
The NYT wants us to mourn the plight of business people in Denmark. As the headline tells readers, "Danish companies seek to hire, but everyone is working." The article then gives the assessment of several business owners and managers, as well as the director of labor market policy at the Confederation of Danish Industry, that the country simply doesn't have enough workers.
They all explain that they can't find workers with the skills they need and that this is causing them to lose business, thereby curtailing growth. It even tells us why raising wages won't work, recounting the experience of Peter Enevoldsen, a manager at a company that make precision tractor parts:
"He offered a salary bump of more than 2 percent, but raising wages further would crimp his margins."
Actually, this is the way an economy is supposed to work. If Mr. Enevoldsen can't pay the market wage and still get business, then he should not get that business. Firms that can pay the market wage and still make a profit obviously can use the labor more productively.
This is why most of the U.S. workforce is not still employed in agriculture. Workers had the opportunity to get better paying jobs in manufacturing. If farmers could not pay a comparable wage, then they lost workers and might have to shut down. This is the same sort of story that some Danish firms apparently now face. This is hardly a crisis, it is capitalism.
It also is of little significance that a limited supply of labor might limit growth. There is little reason for people to be concerned about aggregate growth, what they care about is improvements in their standard of living and for most people this will happen more quickly in a tight labor market.
The piece also includes the information that the current 4.3 percent unemployment rate "is about as low as it can go without provoking inflation." It doesn't tell readers where it got this information. It is worth noting that estimates of the non-accelerating inflation rate of unemployment (NAIRU) are hugely unreliable, so there is little reason to assume the source for this number is correct.
The piece also invents some new history to back up this story.
"During an economic boom a decade ago, joblessness fell as low as 2.4 percent, igniting an unsustainable spiral of higher wages and prices that the government desperately wants to avoid today."
According to data from the International Monetary Fund, the inflation rate never got above 2.5 percent in the last decade. It seems a bit hard to describe this as an "unsustainable spiral of higher wages and prices."
I suppose this piece is at least better than some of the NYT's past coverage of Denmark. A few years ago it was warning that no one was working in Denmark because of its overly generous welfare state. An earlier piece warned that Denmark could slip into a Greece-like crisis. So, at least seems to be looking up a bit for the country.Add a comment
The Washington Post left a very important fact out of an article on Republican efforts to ban voluntary state sponsored retirement plans. The Republicans are trying to make such plans impractical by reversing a Labor Department ruling that exempted employers with workers contributing to the plans from being subject to ERISA provisions. The basis for the Labor Department ruling is that the employers are simply mailing in a check on a worker's behalf, not running a plan.
The Republicans in Congress who want to insist that ERISA rules apply to employers, making it a substantial burden on them, say that they are doing it to protect workers' savings. These are the same people who are trying to reverse the Fiduciary Rule, which requires investment advisers act in the best interest of their clients, and to gut the Consumer Financial Protection Bureau.
Anyhow, the Post neglected to mention the difference in fees between 401(k)s and the state-sponsored plans. The average fee on 401(k) is around 1.0 percent of the money in a worker's account. Many plans charge more than 1.5 percent. By contrast, state sponsored plans are likely to have fees in the range of 0.2–0.3 percent.
The difference can easily come to $30,000 over the course of a middle-income worker's career. This is money that is being transferred from workers to the financial industry. Most people would likely consider this a substantial sum of money. It should have been noted in this piece.Add a comment