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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I see that I got cited at the top of a NYT column this week. Desmond Lachman, an economist at the American Enterprise Institute (who I know and respect) had a column warning about the rise of bubbles around the world and the risk of their collapse. The first sentence tells us, "no one seemed to have anticipated the world’s worst financial crisis in the postwar period." Yeah, well I realize I wasn't very successful in getting my warnings across, but I sure did try.

Anyhow, I would say that Lachman is about half-right on the current situation. Many economies do seem to be seeing new bubbles. The housing markets in Canada, Australia, and the UK seem especially out of line. The bursting of bubbles in these markets is likely to be bad news for these countries; however, I don't see comparable bubbles in the U.S. and most other major markets. If the more clearly identifiable bubbles burst, it does not look like 2008 all over again and a worldwide recession. (China looks bubbly too, but they have managed to go four decades without a recession, so I wouldn't bet against them at this point.)

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Ryan Avent had a nice piece in the NYT this morning pushing the argument that Jared Bernstein, Josh Bivens, and I (among others) have been making for years, that higher wages can be a force driving more rapid productivity growth. The basic point is straightforward, when labor is expensive, employers have more incentive to find ways to use less of it. In this story, anything we can do to push up wages, like promoting unionization or raising minimum wages, is likely to lead to higher productivity.

The one important point that Ryan misses in this piece is that we may already be seeing a turning point. The tightening of the labor market over the last two years has led to upward pressure on wages, especially for those at the middle and bottom of the wage distribution. As Jared and I noted:

"The real weekly earnings for full-time, low-wage workers are up by more than 3 percent over the past two years. Real weekly earnings for the median African American worker have risen by more than 5 percent over the past two years, while the increase for Hispanics has been more than 4 percent."

This rise in wages is the result of the fact that the Fed allowed the unemployment rate to keep falling to its current 4.1 percent rate rather than hiking interest rates enough to keep it near the 5.0 percent level that most economists considered the best we could do without triggering spiraling inflation.

It also looks as though higher wages may be producing the productivity dividend that we predicted. Productivity grew at a 3.0 percent annual rate in the third quarter, after growing 1.5 percent in the second quarter. With the latest projections showing GDP growth in the fourth quarter at 3.3 percent, productivity growth is likely to come in over 2.0 percent in the fourth quarter. This follows five years in which productivity growth averaged less than 0.7 percent annually.

Productivity data are notoriously erratic, so it is too early to declare the trend of weak growth over, but these are promising signs. And, there is no doubt that workers at the middle and bottom have seen decent wage growth over the last two years. These are important points to add to Ryan's piece.

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This is a frequent mistake in reporting on the tax proposal, as in this Post article telling us:

"Under the Trump plan, pass-through businesses get a substantial reduction in taxes."

This is wrong since pass-through corporations already don't pay any taxes, so their taxes can't be reduced unless we have a negative income tax for them. The tax cut applies to income from pass-through corporations.

This distinction matters for two reasons. First, it means that taxpayers with the same income will pay different tax rates depending on its source. Under the plan passed by the Senate, anyone can get a 23 percent reduction in their tax bill if they arrange for their income to come through a pass-through corporation.

While this tax break is not likely to do much to promote economic growth, it will be rocket fuel for the tax shelter industry. There will be a flood of pass-through corporations created as higher-earning workers, like doctors and lawyers, arrange to have their income paid to them from their pass-through corporations rather than as normal wage income. (Yes, this is supposed to be illegal, but the Republicans have spent two decades gutting the IRS's enforcement capabilities. If you think the IRS, given its current resources, will be able to prevent widespread evasion, please contact me so I can sell you some digital currency.)

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We all know that folks involved in debates on economic policy are not very good at arithmetic. That's why almost no one was able to see the $8 trillion housing bubble that sank the economy. But we can always speculate about what the world would look like if arithmetic mattered.

Right now, the Republicans are claiming that cutting the corporate income tax rate from 35 percent to 20 percent will lead to a huge surge of investment and growth. They claim that the additional growth from this tax cut will produce $1.5 trillion in extra revenue. This is why they say they can have a tax cut that totals to $1.5 trillion without increasing the budget deficit.

While almost no independent economists agree that growth will be large enough to produce this much revenue, it is at least a coherent position. Tax cuts can boost growth, and higher growth does mean more tax revenue. The problem with this story is that the Republicans are apparently no longer talking about reducing the corporate income tax to 20 percent, they are planning just to reduce it to 21 percent. Nonetheless, they are still claiming it will produce enough growth to generate $1.5 trillion in additional revenue.

Fans of arithmetic everywhere should be ridiculing the Republican leadership for flunking third-grade math. If a cut in the tax rate to 20 percent produces enough growth to generate $1.5 trillion in revenue, then a cut to 21 percent must produce somewhat less growth and therefore less revenue. In effect, the Republicans are now saying that they can get the same amount of growth and revenue regardless of the size of the tax cut.

In Republican Tax Cut World, we must have a story that looks something like this:

Size of Tax Cut                                                       Revenue Generated from Additional Growth

15 percentage points to 20 percent                           $1.5 trillion

14 percentage points to 21 percent                           $1.5 trillion

13 percentage points to 22 percent                           $1.5 trillion

12 percentage points to 23 percent                           $1.5 trillion

11 percentage points to 24 percent                           $1.5 trillion

10 percentage points to 25 percent                           $1.5 trillion

9 percentage points to 26 percent                             $1.5 trillion

8 percentage points to 27 percent                             $1.5 trillion

7 percentage points to 28 percent                             $1.5 trillion

6 percentage points to 29 percent                             $1.5 trillion

5 percentage points to 30 percent                             $1.5 trillion

4 percentage points to 31 percent                             $1.5 trillion

3 percentage points to 32 percent                             $1.5 trillion

2 percentage points to 33 percent                             $1.5 trillion

1 percentage points to 34 percent                             $1.5 trillion

Yes, this is pretty damn ridiculous, but fortunately for the Republicans, knowledge of arithmetic is rare in Washington policy circles, so they will likely get away with claiming the same revenue dividend from additional growth, even with a smaller tax cut.

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This line inexplicably appeared in the middle of an NYT article about a contract between the Communications Workers of America and AT&T which provides job protection and pay increases for 20,000 workers. It also apparently includes a commitment from AT&T to bring some jobs back to the United States.

There is nothing in the piece that identifies any policy being pushed by President Trump which would keep more low- and middle-skilled jobs in the United States. His actions to date do not demonstrate this sort of commitment. For example, he has displayed little interest in reducing the value of the dollar against currencies, which is the most immediate determinant of the relative competitiveness of the United States. He has supported the tax plans being pushed by congressional Republicans, which will altogether exempt the foreign profits of U.S. corporations from being taxed by the United States.

He also has done nothing to increasingly expose more highly skilled workers, like doctors and dentists, to international competition, which would reduce the pressure on less-skilled workers. And, he has pushed measures to increase protectionism for patents and copyrights, as well as imposing rules on digital commerce on our trading partners. These would have the effect of increasing the income of US corporations from foreign countries which would, other things equal, mean increased deficits in the areas that employ and low- and middle-skilled workers.

It seems like the comment about Trump wanting to keep low- and middle-skilled jobs in the United States was largely a throwaway line. It would have been best just to throw it away rather than include it in an otherwise solid article.

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Fox News and Atlantic Magazine have zero shame. The latter has a major article telling readers that Social Security is "the grandparents stealing from the grandchildren."

The piece is a cornucopia of misstatements about Social Security and Medicare, most importantly implying that today seniors get some big windfall from the programs and that it somehow comes at the expense of our grandchildren. Both parts of this claim are seriously wrong.

In the case of Social Security, most people retiring in the near future will actually get back from the program roughly the same amount that they paid in, using standard interest rates. Low- and-moderate income people will get back somewhat more, whereas "high earners" (defined as people earning around $75,000 a year) will get back less.

The average value of Medicare benefits will exceed tax payments, but this is due to the high cost of medical care in the United States. While we don't have better health care outcomes in the United States than in Germany, Canada, or other wealthy countries, we do pay around twice as much per person as these other countries. The difference is the greater price of drugs and medical equipment, the cost of insurance, and the pay of doctors. A serious article would look at how these big actors in the health care industry are stealing from our grandchildren, but not the Atlantic.

The other part of the story is the implication that somehow the Social Security and Medicare received by seniors is limiting our ability to ensure a decent standard of living for our children and grandchildren. This is lunatic land. As the Republicans are showing right now, we are not near any limits in our ability to run larger deficits. We could always impose higher taxes on the rich who have been the big gainers from economic growth over the last four decades, due to their rigging of the economy.

We could also reverse some of the rigging. For example, ending patent monopolies on prescription drugs and allowing them to be bought at free market prices would save us close to $370 billion a year, roughly half of which would take the form of savings to the government. Expansionary fiscal and monetary policy that allows the unemployment rate to fall to lower levels also disproportionately benefits those at the bottom of the income ladder, benefiting our children and grandchildren by giving their parents jobs and the bargaining power to get pay increases at those jobs.

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Did you hear the one about...? Okay, it's not that funny, but the Washington Post tells us that the Republicans are now considering a 21 percent corporate tax rate instead of the 20 percent rate that was in the bill passed by both the House and Senate.

The reason this matters is that the Republicans are assuming their tax bill will lead to additional growth, which they claim means $1.5 trillion in new revenue over the next decade. While virtually no economists outside of the administration accept this claim (the Joint Tax Committee assumes one third of this growth effect), the ostensible basis for the claim is the incentive for new investment based on a 20 percent corporate tax rate.

The problem here is that a 21 percent corporate tax rate means less of a reduction in taxes than a 20 percent corporate tax rate. This means it should provide less incentive to invest and a smaller increment to growth and revenue. But apparently, the Republicans don't intend to change their $1.5 trillion target implicitly leaving their growth assumption unchanged even though they've changed the basis for the assumption.

Welcome to the modern Republican Party: Up is Down, Night Is Day, and American is Great Again.

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As the labor market has tightened, many of us have looked to trends in wage growth to see evidence that we could be hitting full employment. While the tighter labor market has led to gains for those at the middle and bottom of the wage distribution, it has not led to a general acceleration in wage growth. The year-over-year increase in the average hourly wage was just 2.5 percent for November, roughly the same as it has been for the last two years.

In spite of the weak wage growth, news outlets continually tell us that employers are unable to find workers with the necessary skills. The argument is that more people would be hired if only the unemployed workers had the skills required by employers.

This story doesn't fit with the weak wage growth story since there are always workers with the necessary skills — they just might work for competitors or in another city. The way employers attract these workers is by offering a higher wage. If we don't see wages rising, then this story doesn't really make sense. (Employers would always like to find workers who will accept below-market wages; so what?)

Nonetheless, we often see people citing the Bureau of Labor Statistics data on job openings and hires to argue the case that companies can't find workers with the needed skills. There has been a fall in the ratio of monthly hires to job openings over the last decade. This is taken as evidence that employers have positions that are going unfilled because they can't find skilled workers. A closer look at the data indicates otherwise.

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After all, being a columnist at the NYT is a pretty good gig. Yet he repeatedly shows he doesn't have a clue on the issues on which he pontificates.

In his latest effort he criticizes the people he dubs "radicals" and contrasts them with radicals of prior years. He tells readers:

"Today’s radicals do not want to upend the meritocracy, which is creating a caste system of inherited inequality. They don’t want to stop technical innovation, which is displacing millions of workers."

Really, it is meritocracy that gives us patent and copyright monopolies, that bails out Wall Street billionaires who put their banks into bankruptcy, that protects doctors and dentists from foreign competition? It is meritocracy that gives us a corrupt corporate governance structure that allows CEOs to largely set their own pay? It is meritocracy that gives us fiscal and monetary policies that denied jobs to millions following the collapse of the housing bubble?

That doesn't fit my definition of meritocracy. That sure looks like a rigged system designed to redistribute income upward. (Yeah, I'm plugging my free book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.)

But Brooks makes his case:

"Well, they are wrong that our institutions are fundamentally corrupt. Most of our actual social and economic problems are the bad byproducts of fundamentally good trends."

Okay, if he says so. I thought people were supposed to have to argue for their positions based on evidence, but in David Brooks' "meritocracy" you can make unsupported assertions and get published in the NYT twice a week.

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A Washington Post article on the Republican tax proposals being considered by Congress implies that they are sharp departure from the plans Donald Trump put forward in the campaign in the benefits it provides to the rich. The headline is "as tax plan gained steam GOP lost focus on the middle class."

This description is pretty much 180 degrees at odds with reality. While Donald Trump always promised to help the middle class, the proposals he put forward during his campaign were hugely tilted toward the rich. The Tax Policy Center's analysis of the last tax cut plan he proposed before the election showed 50 percent of the benefits going to the richest one percent of the population.

In fact, the Republicans are putting in place a tax plan similar to what they campaigned on. If the fact that it mostly helps the rich is a surprise to anyone it is due to the poor quality of reporting during the campaign.

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This would have been useful information to include in an article on various proposals to alter the program. While the article does helpfully point out the limited size of benefits to the typical recipient, it reports the total cost as $73 billion a year.

Since most people are not very familiar with the size of the federal budget, they may think the food stamp program accounts for a substantial share of their tax dollars. For this reason, it would have been helpful to express this figure as a share of the total budget.

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Of course, The Washington Post would never make such an assertion, even if there is good reason to think that it is true. Instead, an article on Friday's jobs report told readers:

"President Trump and Republicans on Capitol Hill have said they hope to pass sweeping changes to the tax code by the end of December, a move they believe will create more good-paying jobs and supercharge economic growth."

This is again an inexplicable excursion into mind reading. The Post really has no idea what Republican politicians believe. Why is it so hard to just report what they say and leave the speculation on their true beliefs to readers?

This piece also included an inaccurate statement from Jason Furman, who served as President Obama's chief economist. He quotes Furman as saying:

"'They’re [workers] more confidently quitting their jobs to find another. Everything with the way people are behaving is consistent with the strength in the labor market. But wages just aren’t picking up the way we thought they would.'"

In fact, the share of unemployment due to people voluntarily quitting their jobs is much lower than it has been in the past when the unemployment rate got this low. The most recent numbers put the share of unemployment due to voluntary quits at just over 11.0 percent. By contrast in 1999 and 2000, the share was over 13 percent and peaked at more than 15.0 percent. This suggests that workers are much less confident in their job prospects than they were the last time the unemployment rate was near 4.0 percent.

Percent of Unemployment Due to Job Leavers

job leavers

Source: Bureau of Labor Statistics.

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The NYT article on the November jobs report notes the fact that the rate of wage growth does not appear to be appear accelerating. To explain why it presents the views of Michael Big, a general contractor in the Chicago area.

The piece tells readers that Mr. Big has had to turn away jobs in recent months because he can't find the needed workers:

"'Unfortunately we don’t have the labor to take all the projects that are coming in,' Mr. Big said. His competitors are having the same problem, he added. 'We’re all grumbling and complaining about the same thing, when we’re not poaching guys from each other.'"

The piece continues:

"Mr. Big’s experience raises a question: If workers are so hard to find, why aren’t companies raising pay? In his case, Mr. Big says that in order to pay more, he would have to charge his customers more, and if he does that, he’ll be outbid by his competitors."

"'The labor is there, but they’re not skilled enough for the wages they’re asking,' Mr. Big said. He said construction workers without special skills were asking $15 an hour, well above the roughly $12 an hour he can afford."

This presentation of the problem indicates the jobs really are not there. If people like Mr. Big are not prepared to pay enough to attract workers, then they really don't have jobs to offer.

This is like if I want to see a doctor, but am only willing to pay $25 an hour. I probably would not find any doctors willing to work for that pay. In this case, I don't really have a job for a doctor, or at least not in an economically meaningful sense. It is no surprise that jobs that offer pay below the market rate are not driving up wages.

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A Morning Edition segment on the Republican tax cut plan made comparisons to the Reagan tax cuts and referred to the "boom" that occurred following the tax cuts. While the economy did grow rapidly in the years from 1983 to 1986, the main reason was the severity of the 1981–82 recession. Economies tend to bounce back quickly following a severe recession. 

We saw the same story in the 1970s. The economy grew at a 5.7 percent annual rate in the thirteen quarters from the fourth quarter of 1982 to first quarter of 1986. This is not hugely different than the 5.3 percent annual growth rate from the first quarter of 1975 to the third quarter of 1977. The key to the more rapid growth in the Reagan recovery was the somewhat greater severity of the 1981–82 recession, which pushed unemployment almost to 11.0 percent.

It is also worth mentioning the poor performance of investment following the reduction in the corporate income tax in 1986. The tax reform act passed in that year lowered the corporate rate from 46 percent to 35 percent, roughly the same size reduction as is included in the current bill. Rather than leading to a boom, investment actually fell as a share of GDP over the next three years.

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Making mistakes is part of life. Serious people own up to them and correct themselves. Unfortunately, when it comes to NAFTA, this is not the practice of the Washington Post.

Ten years ago today, December 7, 2007, a Washington Post editorial attacked the three leading contenders for the Democratic nomination over their pledge to renegotiate NAFTA. The Post had long been a strong supporter of NAFTA, biasing both its news coverage and opinion pages to push pro-NAFTA views. Its editorial page staff was obviously upset to see Senators Hillary Clinton, John Edwards, and Barack Obama attack their beloved trade agreement.

The editorial, ironically titled “Trade Distortions,” told readers how NAFTA had provided large benefits to the United States. Then it stated:

“Not that any of the Democratic candidates seem to care, but the impact of NAFTA seems to have been both larger and more positive in Mexico than in the United States. Mexico's gross domestic product, now more than $875 billion, has more than quadrupled since 1987.”

This one was a headscratcher for two reasons. First, NAFTA took effect in 1994 — why was the Post telling us about Mexico’s growth since 1987?

But this was the less important gaffe in this sentence. Mexico’s GDP “has more than quadrupled?” That is a pretty incredible claim on its face. If GDP quadruples in two decades, it implies an annual growth rate of 7.2 percent. While many developing countries have a brief spurt where they grow at this pace for two or three years, sustaining this sort of growth for two decades is truly extraordinary. China managed to do it, but not many other countries have. Was there another China growth miracle hiding south of the border that had somehow had gone unnoticed?

It turns out there wasn’t. According to the International Monetary Fund, adjusting for inflation, Mexico’s GDP went from 6,564 billion pesos in 1987 to 12,088 billion pesos in 2007.[1] That translates into cumulative growth of 84.2 percent, quite a bit different from the “more than quadrupled” claimed by the Washington Post. Rather than being a near-record-setting growth pace, this translates into a thoroughly mediocre 3.1 percent annual rate of growth.

On a per capita basis, Mexico’s growth trailed growth in the United States, averaging just 1.5 percent annually, compared to 1.9 percent in the United States. That’s not the expected story. Poor countries are supposed to be catching up to rich countries.

So how did the Post get this one so badly wrong? It’s possible that it looked at Mexico’s nominal GDP growth. This measure doesn’t adjust for the effects of inflation. Since Mexico had a very serious problem with inflation over most of this period, its nominal GDP did more than quadruple.

In fact, Mexico’s nominal GDP increased by more than a factor of 50, from 217.6 billion pesos in 1987 to 11,403.3 billion pesos in 2007. That certainly qualifies as “more than quadrupled.”

However, runaway inflation hardly makes a good case for NAFTA. While concerns over inflation have arguably been excessive in recent decades, inflation running well into the double digits is certainly a problem. In any case, higher inflation is hardly an outcome worth boasting about.

Anyhow, whatever the cause of the original error, the really disturbing part of the story is the Post’s refusal to correct it even after I called it to their attention. People view a newspaper like the Post as authoritative. As long as the mistaken numbers on Mexico’s growth appear on the paper’s website, it is possible that readers will find the piece and assume the numbers are correct. This is why serious newspapers append a correction to the bottom of an article or column that includes a major error.

For some reason, the Post has chosen not to acknowledge and correct its error over the last ten years. Let’s hope we don’t have to write a second edition of this piece in 2027.


[1] This uses 2008 constant pesos.

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Now that we seem on the edge of giving lots more tax dollars to Donald Trump and his rich friends, the deficit hawks feel newly empowered and have Social Security and Medicare clearly in their sights. Robert Samuelson is on the job, telling us that we haven't prepared for the aging of the population.

His primary weapon is a new report from the OECD on the aging problem. The report says that the ratio of the over 65 population to the 25 to 65 population is projected to rise from 0.124 in 2015 to 0.196 in 2050. Oh wait, I made a mistake, that was the increase in this ratio in the thirty five years from 1945 to 1980. The ratio is projected to rise from 0.246 in 2015 to 0.379 in 2050.

The ratio is projected to rise faster in the next 35 years than it did in the earlier period, but the rise in the ratio in the earlier period did not prevent the country from enjoying huge increases in living standards. The same should hold true over the next 35 years. Real compensation per hour is projected to rise by roughly 60 percent over the the 35 years from 2015 to 2050.

Suppose we had a huge 5.0 percentage point increase in the payroll tax to pay for Social Security and Medicare taxes over this period. This would still leave workers with 50 percent more compensation after-tax than what they have today. Are we scared yet?

Normal productivity growth swamps the impact of demographics, as fans of arithmetic everywhere know. I should also point out, if the robot and artificial intelligence enthusiasts are even half right, productivity will increase far more than the wage projections in the Social Security trustees report assumes.

At this point, all good Beat the Press readers are yelling that most workers have not seen their share of wage growth. The money has gone to CEOs, Wall Street types, doctors and other high end professionals. If that continues over the next 35 years most workers will have a very difficult time dealing with any increase in payroll taxes.

That point is exactly right, which is why the living standards of our children depend hugely on reversing the upward redistribution of the last four decades. That is the point of Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.

This is where the real money is. Folks like Robert Samuelson and the billionaire Peter Peterson are trying very hard to distract us from going after the rich, and instead go after our parents' Social Security and Medicare. It's a cheap trick, but they won't give up trying.

It is also worth mentioning in this respect that the GDP we've lost as a result of failing to rein in the growth of the housing bubble, and not having an adequate fiscal stimulus following its collapse, dwarfs any tax increases that may be needed to fund Social Security and Medicare in the years ahead. But Robert Samuelson and the Peterson gang would rather not have us talk about that fact either.

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Ross Douthat goes over what he sees as the good and the bad in the Republican tax plans in his column today. He notes the ending of the mandate that people buy health care insurance in the Senate version of the bill and then says:

"In the long run any universal health insurance system will be on a firmer political footing if it finds a way to work without requiring people to buy a product they don’t want."

A "universal" system does mean that everyone has to have health insurance even if they don't want it. It is possible to effectively make people "buy" insurance through the back door if it is paid for with tax revenue. In this case, people pay for their premiums through their taxes, but they don't directly "buy" insurance.

It's possible that Douthat is arguing for some Medicare for All type system, but it's also possible that he doesn't really want a universal health care system.

 

Thanks to Robert Salzberg for calling this to my attention.

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The NYT has an article discussing the ways in which Mick Mulvaney is changing the Consumer Financial Protection Bureau in his capacity as an acting director. There is one item on which it is somewhat misleading. The piece indicates that Mulvaney's status as an acting director is an accident, telling readers that Trump could appoint a new director, but the confirmation process could take months.

While confirmation can be lengthy, depending on the quality of the nominee (Republicans do control the process), Trump has obviously made a decision not to put up a nominee for the directorship. Cordray's decision to resign before his term ended was widely expected. Most administrations would already have a candidate in mind whose name could be submitted as soon as the resignation was announced. However, a nominee for director would be subject to various disclosure requirements and would also have to testify before the Senate. After being approved the director could only be removed for cause.

By contrast, an acting director is not required to make the same sorts of disclosures, nor do they have to demonstrate their competence to the Senate. Also, the acting director serves entirely at the will of the president. Trump can remove Mulvaney any time he chooses for any reason whatsoever.

Trump has followed a similar path with the position of the Comptroller of the Currency and the Commissioner of the Internal Revenue Service. In each case, he has an acting head of agencies that are supposed to operate in a non-political manner. As with Mulvaney, Trump has the ability to remove these heads any time he chooses.

This abuse of the appointment process has received little attention. It threatens the integrity of all three agencies.

 

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That could have been the headline, at least if the New York Times article reporting on the action is accurate. The NYT told readers that when Clinton first created the Grand Staircase National Monument in 1996:

"When Mr. Clinton formed Grand Staircase, the move halted plans for a coal mining project there that would have brought desperately needed jobs to a poor county."

Since the demand for coal is not hugely elastic, if coal was being mined from the area that became the monument, it would have largely displaced coal that was being mined elsewhere in the United States. As it was, employment in the coal industry fell from roughly 90,000 in 1996 (0.08 percent of total employment) to 52,000 in the most recent data (0.03 percent of total employment). The decline in employment in areas now producing coal would have been even sharper if the Grand Staircase had been open to mining, according to the NYT.

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Robert Samuelson used his column today to say he doesn't understand budget deficits. This is hardly a surprise to regular readers of his column. But, he bizarrely argues that because he is confused, everyone else is also.

Samuelson tells readers:

"The truth is that we don’t fully understand the effects of budget deficits on the business cycle."

No, "we" do understand the effects of budget deficits. It really is pretty simple, deficits increase demand compared to a balanced budget or surplus. Of course, not all spending or taxes are equal. Direct spending on goods and services has more impact than transfer payments, and transfer payments have more impact on demand if they go to lower income people who will spend them than higher income people who save much of their income. The same is true of taxes.

Also, it is important to note that the budget only captures a portion of the government's commitments of revenue. Government-granted patent and copyright monopolies can easily involve a commitment in excess of $1 trillion a year (4–6 percent of GDP) in payments for rents. These are effectively privately collected taxes. 

Anyhow, it's unfortunate that Samuelson is confused on this issue. It is even more unfortunate that the Post could not find an economic columnist who understands economics.

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Sure, Republicans say this, but did we think that they would say that they expect their tax plan to increase the debt by $1.5 trillion, but rich people need tax cuts? Given their endless tirades about deficits under President Obama, Republicans are pretty much required to say that their tax cuts will pay for themselves regardless of what they actually believe.

So why don't we recognize this very simple fact and stop telling people what Republicans believe, as this NYT article does?

"But the bill’s passage was made possible by a near-complete Republican embrace of the idea that about $1.5 trillion of tax cuts will pay for themselves, by producing enough economic growth and additional federal revenue to offset their costs to the Treasury.

"That belief was contradicted by several studies, including one from Congress’s official economic scorekeeper, which Republicans dismissed as overly pessimistic."

The NYT's reporters have no idea what Republican members of Congress believe about the fiscal impact of their tax cut, so they should not be implying that they do. As a practical matter, they may have no beliefs on the issue whatsoever. They get and keep their jobs by doing what their donors want them to do, not by thinking about the economic impact of the bills they pass.

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