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 highlighting the latest Beat the Press posts.

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Austin Frakt had a peculiar piece in the NYT Upshot section, which told readers, "there is no single, best policy for drug prices." The piece is peculiar because for some reason Frakt opts not to even consider the policy of direct public funding for research, which would then allow all new drugs to be sold at generic prices.

While there are problems with any system, direct funding, which could be done through various mechanisms, would permanently end the problem of high-priced drugs. With the research costs paid upfront, the price of the drugs would simply cover the manufacturing cost with normal profits. In nearly all cases, this would mean prices would be low, generally less than 10 percent of current prices for patent-protected drugs and in some cases less than 1 percent.

This is also not a far-out idea. It has long been pushed by several prominent economists, most notably Joe Stiglitz. The idea of delinking drug prices from research costs has also been pushed in international forums by China, India, and many other developing countries. In fact, if Trump were pursuing his trade war with China in the interest of working people, instead of the rich, such a shift in funding for drug research could well be an outcome.

In any case, it is bizarre that a piece that purports to be an overview of ways to lower drug prices would not even mention this issue.

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The NYT had a column by Eliza Griswold talking about the prospect of job loss in coal mining areas due to efforts to restrict greenhouse gas emissions. While it is often traumatic for workers to lose jobs, especially long-held jobs, it is important to realize that relatively few jobs are at stake in the coal mining industry.

For example, in Pennsylvania, one of the states mentioned in the piece, the Bureau of Labor Statistics reports that there are now 5,000 coal mining jobs in the state. The state has over 6 million workers, which means that coal mining accounts for roughly 0.08 percent of employment in the state. Kentucky has 5,800 jobs in coal mining, with total employment of 1,950,000. That comes to a bit more than 0.3 percent of total employment. Even in West Virginia, the heart of coal country, there are only 23,000 jobs in coal mining out of a total of 740,000 jobs. This comes to a bit more than 3.0 percent of total employment.

In all three states, there were sharp drops in employment in the industry in the past, which drastically reduced the importance of coal mining employment. It is a bit peculiar that the earlier declines in coal mining employment, which were primarily due to productivity growth (specifically, replacing underground mining with strip mining -- a policy often opposed by environmentalists), received relatively little attention in the media or from politicians. By contrast, the prospect of considerably smaller future declines due to efforts to reduce greenhouse gas emissions is drawing extensive attention.

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(This post first appeared on my Patreon page.)

The June jobs report showed the economy created 224,000 jobs in the month, a sharp increase from the revised level of 72,000 reported for May. With considerable evidence that the economy is slowing, and the ADP report showing the economy created just 102,000 jobs in June, the jobs growth number from the Bureau of Labor Statistics was much higher than most analysts had expected.

It led the markets to reverse their expectations of a July cut in the federal funds rate. With average job growth of 171,000 over the last three months, the thinking was that the Fed did not need to provide any additional boost to growth. A bit deeper look suggests that additional stimulus may still be a good idea.

First, it is important to remember where the labor market is. The June unemployment rate of 3.7 percent certainly looks very good relative to almost any other point in the last fifty years.

However, if we look at employment rates (EPOP) for prime age workers (ages 25 to 54), the labor market does not look so great. The June EPOP was 79.7 percent. That is down from a pre-recession peak of 80.3 percent. It is far below the 2000 peak of 81.9 percent. It’s even down from the 79.9 percent peak for the recovery hit in January and February of this year.

The weak EPOP suggests that the economy has room to expand. There have been repeated efforts throughout this recovery to attribute low EPOPs to workers’ reduced interest in working, primarily among young men. This story does not work well for two reasons.

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I am not anxious to defend Donald Trump's economic performance, but a complaint by Steven Rattner in his New York Times column caught my attention. The column features a graph showing that the ratio of the median wage for blacks has fallen relative to the median wage for white workers since 2016.

This bothered me, because in general the situation for blacks, and other groups who face discrimination, improves in a tight labor market. While it is possible that the plight of blacks has deteriorated due to Trump's open racism, there is another plausible explanation.

The improvement in the labor market has had a considerably larger impact on employment rates for blacks than for whites. If we compare averages for the first six months of 2019 with the 2016 average, the employment to population ratio for blacks has risen from 56.4 percent to 58.3 percent, a rise of 3.3 percent. For whites, the increase has been from 60.2 percent to 60.8 percent, a rise of 1.0 percent.

The increase in black employment has been a very important gain for hundreds of thousands of black families, but it also means that the composition of black workers has changed somewhat. Let's assume that the new workers have less education and experience than most of the people working in 2016.

In the extreme case, that they all fell near the bottom of the wage ladder, the increase in employment by 3.3 percent will mean that the median black worker in 2016 is now the 53.3 percentile worker, whereas the 46.7 percentile worker in 2016 is now the median worker.

When we compare medians from 2019 with 2016, we are looking at workers that were considerably further down the income ladder in 2016. This effect would be much smaller with white workers since their employment rates changed by less. 

One piece of evidence supporting this story is that Rattner's graph shows that drop in the ratio of medians under Trump essentially continues a trend that had been in place since 2012 when the labor market began to tighten substantially. To get the fuller picture, we really need to control for factors like education and experience or use longitudinal data sets that track the pay of individual workers through time, but it's fair to say that Rattner's graph really is not telling us much.


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Greece's economy has recovered modestly from the depths it hit at the peak of its crisis in 2014 and 2015, but with an unemployment rate that is still close to 19 percent, there hardly seems like great cause for celebration. The overall economic picture in Greece still looks horrible even compared with disasters like the Great Depression in the United States.

Employment is still down by almost 20 percent from its pre-crisis peak in 2008, the equivalent of 30 million people losing work in the United States. (Part of the story here is large-scale emigration to other countries.) Per capita income is roughly the same as it was in 2001.

While that sounds pretty terrible, Roger Cohen tells us that Greece is the "good news" story in Europe. The punch line is near the end of the piece:

"The Obama administration won Tsipras over and so dragged him toward the center. Joe Biden, as vice president, told the then-prime minister not to take rash decisions — such as leaving the euro — that would be irreversible. A breakup of the eurozone, with other countries possibly following Greece, was avoided."

Right, so we are supposed to be happy because the euro, a system managed by a bunch of economic know-nothings in expensive suits and strong business ties, has managed to survive. While Greece is the biggest victim of euro-idiocy, the people of Italy, Spain, France, and other countries are also suffering due to needless austerity. 

But at least Roger Cohen is happy.


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Sorry to pick on a NYT editorial with which I mostly agree, but the assertion that plans by Democratic presidential candidates to increase homeownership, "if successful, could ease the demand for rental units," really needs to be called out.

Let's say these plans are successful. Where do the additional units come from that the new homeowners now occupy? Some may come from existing homeowners who decide to sell at the higher prices resulting from these plans and then become renters.

Some of the units may come from the stock of rental units. Contrary to what the piece implies, god did not designate housing units as either ownership or rental units. Apartment buildings frequently switch from being rental to condominiums, if the sale price justifies the expense of the conversion. Furthermore, roughly one-third of all rental units are single-family homes. These can be converted very easily to ownership units if the price justifies it.

Long and short, policies to increase homeownership should be evaluated based on their impact of the affected population. It is not always the path to secure wealth, as people alive during the housing bubble years know. But as a way to reduce the cost of rental housing, it is just foolish.


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(This post orginally appeared on my Patreon page.)

Many of the leading Democratic candidates, especially Sanders and Warren, have been putting forward bold progressive plans in a wide variety of areas. Sanders and Warren have both supported a quick transition to a universal Medicare program, with no premiums, co-pays, or deductibles. Several candidates have supported a Green New Deal, which in some versions would guarantee every worker in the country a decent paying job.

Such policies are really big deals. They would both have a huge impact on people’s lives and also pose serious problems of implementation. The willingness of Democrats to think big in other areas makes their determination to think small on prescription drugs surprising. Replacing government-granted patent monopoly financing of research is both a huge deal and one that can be implemented gradually without threatening massive disruptions in a transition process.

Free Market Drugs Are a Really Big Deal

First, it is necessary to realize that having drugs available at free market prices, without patent monopolies or other forms of exclusivity, would have an enormous impact on the economy and the health care system. On the first point, we will spend more than $460 billion on prescription drugs in 2019. Without patent protection, these drugs would almost certainly sell for less than $80 billion, implying a savings of more than $380 billion.[1] 

To put this $380 billion figure in context, it is more than five times the annual food stamp budget. It is more than twice the size of the Trump tax cut. If we project out the savings over the course of a decade, they would come to more than $5 trillion. That is more than three times the amount that is projected to be needed to cover the cost of full forgiveness for outstanding student loan debt. This is more than $30,000 per household. In short, there is huge money at stake by any measure.

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No folks, it's not a rerun of the Three Stooges, it is Washington Post columnists pretending to say wise things about economic policy. They apparently decided to work overtime to criticize the more progressive Democratic candidates, which is what Jeff Bezos pays them to do. (No, I have no idea if Bezos is especially pernicious among rich people, but if the Washington Post was owned by people who were not rich Steven Pearlstein, Charles Lane, and Fred Hiatt would not be getting paid to spout ignorance on its opinion pages.) I don't have time to deal with all the misinformation in these three columns, but let me just take some highlights from each.

Pearlstein is very unhappy about the Democrats' big plans. For example, he is upset that a Medicare for All program will lead to some inefficient hospitals closing and some people losing jobs. Of course, we will not be getting less health care, so this is just a story of people moving from one hospital to another facility.

That can be traumatic, I would never minimize the seriousness of job loss, but almost 1.8 million people lose their job every month, and this is in an economy with 3.6 percent unemployment. How much does Pearlstein think Medicare for All will add to this?

Similarly, he is angered about the job loss from a Green New Deal. He tells us that the new jobs won't replace the lost jobs in the coal mines. This is true, and we currently have just over 50,000 people working in coal mines. We lost 3.4 million manufacturing jobs due to the explosion of the trade deficit in the last decade, sparking very little concern on the Post's opinion pages, but the risk to 50,000 jobs in coal mining is worth berating the Democratic contenders over.

Of course, the loss of jobs attributable to the trade deficit was associated with an upward redistribution of income. A Green New Deal may lead to more equality.

Charles Lane is lecturing us again about the debt and deficits. Let's just deal with this one quickly. Lane says not a word about the trillions of dollars of patent/copyright rents (much of it for prescription drugs) that the government has committed the public to pay with its grant of monopolies. If Lane doesn't understand that these rents are equivalent to future taxes then he is far too ignorant to take seriously on the topic of debt. Alternatively, he is simply a dishonest propagandist.

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For many years we regularly saw news stories, like this Washington Post piece, telling us that the official data on the bilateral U.S. trade deficit was hugely exaggerated. The argument was that we count the full value of a final good imported from China in calculating our trade deficit, even though much of the value added came from other countries.

The classic case is an iPhone exported from China to the U.S. We would count the full value of the iPhone as an import from China even though the vast majority of the value added came from other countries. This Post piece cites a study showing that the trade deficit with China would be reduced by 40 percent if we subtracted the value of all intermediate goods produced in third countries. (An honest assessment would also add in the intermediate goods manufactured in China that come to the U.S. in imports from Japan, the European Union, and elsewhere.)

This argument about an overstatement of the China trade deficit was frequently used to argue that people were wrong to be concerned about the bilateral trade deficit. Remarkably, now that Trump has embarked on his trade war with China, the media are telling us that China's exports to the U.S. actually were a huge deal for its economy.

The NYT ran the strongest piece in this vein, telling readers that the trade war truce "could enshrine a global economic shift." The homepage lead said that it could "unseat China as the world's factory floor."

For fans of logic and arithmetic, we can't both have China's trade deficit with the U.S. being no big deal and also a scenario where reducing the deficit unseats China as the world's factory floor. To see what the actual story might be, a little data is helpful.

The U.S. trade deficit with China peaked at $420 billion in 2018. China's GDP measured in dollar terms is $14.2 trillion this year. (Measured at purchasing power parity it's $27.3 trillion. For this question, it is appropriate to use the exchange rate measure.)

If we use the great wisdom from the Washington Post piece and say that our trade deficit with China is just 60 percent of the official figure, then it came to $252 billion in 2018. If we assume an extreme effect of the trade war and the deficit falls by 50 percent (that's way more than the impact seen to date), China would see a reduction in its trade surplus with the U.S. of $126 billion. That's just under 0.9 percent of its GDP. It's a bit hard to believe a loss of net exports equal to 0.9 percent of China's GDP will fundamentally alter its position in the global economy.

Even if we use the official data the loss would be $210 billion or just under 1.5 percent of GDP. It's still hard to imagine that fundamentally changing China's economy, and this is assuming an impact of the trade war that is absurdly high.

Anyhow, the moral of this story is that our top media outlets are perfectly willing to play with the data to tell a story. They don't care if their story directly contradicts other stories they tell. They just assume that no one will notice.


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Seriously, that's what a piece on the state of China's economy told readers.

"Another headache is China’s demographic problem, namely that it is running out workers thanks to the failure of its now-abandoned one-child policy. With growth slowing, China faces a race to avoid the dreaded “middle-income trap” where the economy of developing countries stagnates once the low-hanging fruit of industrialisation has been picked but before income has been spread widely enough around the population. China is expanding its technology industry as fast as it can to build-up high-value manufacturing but, as the Huawei standoff shows, the policy is bringing conflict with the west."

Fans of logic and arithmetic know that countries don't "run out of workers." In a tight labor market, workers move from lower paying lower productivity jobs to higher paying higher productivity jobs. This means that we are likely to see fewer people working the late-night shift in convenience stores or as valets in restaurants. They will instead work at better-paying jobs. Of course, the people who depend on low-paid workers (the "hard to get good help" crowd) will suffer. (Also, don't forget that we are supposed to be worried about robots taking all the jobs.)

While there are serious human rights issues associated with China's one-child policy (these are hugely exaggerated, the killing of female infants happened throughout the region in countries that did not have a one-child policy), the slowing of China's population growth was a great thing for the environment. In 1975, China' population was roughly 50 percent larger than India's population. Currently, they are almost the same, with India projected to pass China in the next decade.

If China's population had grown at the same pace as India's since 1975 there would be another 650 million people on the planet. This would make the prospect of limiting the damage from greenhouse gas emissions hugely more difficult.


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