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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Carlos Lozada, the non-fiction book critic for the Washington Post, promised "an honest investigation" of whether truth can survive the Trump administration in the lead article in the paper's Sunday Outlook section. He delivers considerably less.

Most importantly and incredibly, Lozada never considers the possibility that respect for traditional purveyors of "truth" has been badly weakened by the fact that they have failed to do so in many important ways in recent years. Furthermore, they have used their elite status (prized university positions and access to major media outlets) to deride those who challenged them as being unthinking illiterates.

This dynamic is most clear in the trade policy pursued by the United States over the last four decades. This policy had the predicted and actual effect of eliminating the jobs of millions of manufacturing workers and reducing the pay of tens of millions of workers with less than a college education. The people who suffered the negative effects of these policies were treated as stupid no-nothings and wrongly told that their suffering was due to automation or was an inevitable product of globalization. 

These claims are what those of us still living in the world of truth know as "lies," but you will never see anyone allowed to make these points in the Washington Post. After all, its readers can't be allowed to see such thoughts. (Yes, I am once again plugging my [free] book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.)

This was far from the only major failure of the purveyors of truth. The economic crisis caused by the collapse of the housing bubble cost millions of workers their jobs and/or houses. While this collapse was 100 percent predictable for anyone with a basic knowledge of economics, with almost no exceptions, our elite economists failed to see it coming and ridiculed those who warned of the catastrophe.

Incredibly, there were no career consequences for this momentous failure. No one lost their job and few probably even missed a scheduled promotion. Everyone was given a collective "who could have known?" amnesty. This leaves us with the absurd situation where a dishwasher who breaks the dishes get fired, a custodian that doesn't clean the toilet gets fired, but an elite economist who completely misses the worst economic disaster in 70 years gets promoted to yet another six-figure salary position.

And, departing briefly from my area of expertise, none of the geniuses who thought invading Iraq was a good idea back in 2003 seems to be on the unemployment lines today. Again, there was another collective "who could have known?" amnesty, with those responsible for what was quite possibly the greatest foreign policy disaster in US history still considered experts in the area and drawing high salaries.

When we have a world in which the so-called experts are not held accountable for their failures, even when they are massive, and they consistently look down on the people who question their expertise, it undermines belief in truth. It would have been nice if Lozada had explored this aspect of the issue, but hey, it's the Washington Post.

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Apparently, the idea that China would ignore US intellectual property claims as a weapon in Trump's trade war is simply unimaginable to Rampell, the Post's lead economic columnist. It doesn't even merit a sentence in a column devoted to the alternatives China might pursue given the limited amount of US imports on which it can impose tariffs. Since Rampell can't imagine how this weapon can work, let me try.

Suppose that China's government announces that, in response to Trump's latest round of tariffs, it will not be enforcing any of Microsoft's copyrights, starting on September 1, 2018. This means not only that everyone in China would be able to buy computers with Windows operating system and Microsoft's Office Suite without sending Bill Gates a penny, but computers manufactured in China could be sent all over the world without Microsoft collecting anything. The same would be true for Apple's iPhones.

This would also apply to prescription drugs. China could start manufacturing generic versions of drugs like the Hepatitis C drugs Sovaldi and Harvoni, which have list prices of more than $80,000 for a course of treatment. China could make the generic versions available both to its own people and the rest of the world for a few hundred dollars, with the manufacturers still making a healthy profit.

And, that latest Hollywood hit movie? Imagine anyone, anywhere in the world could download it in seconds for free. Of course, the same would apply to new music as well as the older movies and music that still generate money for the entertainment industry.

Does anyone think these moves might get a little attention from US corporations? My guess is that they would probably take notice and probably be threatening Republican members of Congress in a really big way if they didn't act quickly to rein in their president.

But, that's just my speculation.

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The Washington Post had an interesting piece on how people with chronic conditions, such as high blood pressure, can now have key measures monitored remotely on an ongoing basis through a new program. This will allow for health care professionals to quickly detect problems and recommend steps to counteract them or to see a physician for care, if needed. As the piece points out, this is likely to lead to both better health outcomes and lower costs, as many patients may take steps to alleviate problems before they become life-threatening issues and need emergency care.

While this program as described in the piece sounds like a substantial improvement in health care, it is interesting how it would appear in our national income accounts and measures of health care inflation. If better monitoring of blood pressure and other risk factors leads to fewer strokes and heart attacks, and therefore fewer people coming in for treating emergencies, it will mean that less health care is being provided in our GDP accounts.

The savings also would not appear as a reduction in health care costs in measures like the Consumer Price Index (CPI). The CPI measures the increase in the price of specific goods and services. If we need fewer services because we have found ways, such as better monitoring, to improve people's health, it is not picked up in the index.

This method of accounting is why some of us have advocated pulling health care spending out of GDP measures instead looking at what we spend net of health expenditures and then using various measures of health status to determine the extent to which we are making progress. After all, we care about how long and how well people live, not how many bypass surgeries they receive.

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In case you were wondering how large that $33 billion increase in military spending that the other NATO countries agreed to was, it comes to roughly 0.16 percent of their collective GDP. Apparently Donald Trump was impressed with this commitment since he called it "really amazing."

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No one wants to pay higher taxes, but we all understand the need when there is a good cause. Therefore, consumers shouldn't have any issues paying an extra $20 billion a year ($200 billion over a 10-year budget horizon) to force China to pay Boeing, Pfizer, Microsoft and other major US corporations more money for their patent and copyright monopolies.

This is explicitly the story, as the Post reports:

"Administration officials said the tariff fight is aimed at forcing China to stop stealing American intellectual property and to abandon policies that effectively force U.S. companies to surrender their trade secrets in return for access to the Chinese market.

"'These practices are an existential threat to America’s most critical comparative advantage and the future of our economy,' said Robert E. Lighthizer, the president’s chief trade negotiator."

Of course, the cost to US consumers is likely to be far more than $20 billion a year if the Trump administration wins its trade war, since it will mean that the prices of goods and services we import from China will be higher because they have to pay more money to US corporations for these intellectual property claims.

However, this will create some good-paying jobs. There will be more demand for economists doing research on the causes of inequality.



In a rush, I followed standard media practice instead of good reporting. The proposed $20 billion in tariffs comes to roughly $150 per family per year.

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As we remain mired in the longest period of weak productivity growth in recorded US history, the NYT ran yet another piece on coping with the problem of automation creating mass job displacement. This one is focused on the developing world and asks how developing countries could cope with massive displacement of workers in agriculture and manufacturing.

Incredibly (perhaps not incredibly) the possibility of ignoring the patent and copyright monopolies that rich countries demand does not appear on the list of remedies. If new technologies were available in a free market without these government imposed monopolies, it would mean that developing countries could hugely increase their agricultural and manufacturing output at very low cost.

That should be a good story for them, not a crisis. But apparently, reporters are not allowed to raise questions about patent and copyright monopolies in The New York Times.

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That's the implication of this piece warning that a tight labor might force companies to raise wages and this could be hard on many companies' profits. We know that profit shares are near record highs, especially after the Trump tax cut substantially reduced companies' tax liabilities.

This means that the vast majority of companies should be able to easily absorb higher wages without passing the cost on in prices. Undoubtedly some companies are not well-situated because they are less efficient or face weak demand for their products. These companies may go out of business.

This is what happens in capitalism. It is how productivity increases and living standards improve through time. Inefficient companies shrink and go out of business, while more dynamic companies grow and prosper.

The piece also bizarrely highlights the 2.7 percent increase in workers' pay over the last year as though it is a big bonanza. This is just equal to the rate of inflation over this period, so in effect, the WSJ is upset that in an economy with 4.0 percent unemployment workers have enough bargaining power to keep even with inflation.

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Any newspaper can hire reporters, but The New York Times hires mind readers. Yes, they are at it again. In an article on Trump's demand that other NATO countries increase their military spending to 2.0 percent of GDP the NYT tells readers;

"Mr. Trump, who appears to have a special animus toward Germany, believes that Berlin has developed a vibrant social system and thriving export-driven economy unfairly and on the back of the United States, by not spending enough on defense."

It's so great that we have the NYT to tell us that Trump really has such incredibly absurd beliefs. The idea that Germany's economy would somehow have suffered horribly if it had spent an additional 1.0 percent of GDP on the military is pretty crazy, especially since it has suffered from a serious lack of demand for the last decade.

This doesn't mean that military spending would be the best use of Germany's resources. But it's very hard to make a case that additional spending, even if it were entirely wasteful from a social and economic standpoint, would have devastated Germany's economy. In fact, it probably would have led to somewhat stronger growth and surely would have benefitted the other EU countries that are Germany's largest trading partners.

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It's not clear how the paper made these determinations, but it does assert them to be true in the second paragraph of an article on the Trump administration's plans to reduce the rights of federal employees:

"The administration describes Trump’s new rules, issued in May, as an effort to streamline a bloated bureaucracy and improve accountability within the federal workforce of 2.1 million."

While it is certainly possible that the Trump administration is motivated by a desire to make government more efficient, given its willingness to grant no-bid contracts to politically connected companies, government efficiency does not seem to be a priority for the Trump administration. A plausible alternative that the Post seems to rule out with this assertion is that Trump is attacking a group of workers that he sees as political enemies.

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I sometimes go under the professional name of "No One" as in "no one saw the financial crisis coming." I apparently need to use this identification again when it comes to a trade war with China.

On Morning Edition today, Jeff Greene interviewed Jonah Goldberg, senior editor at National Review. Mr. Goldberg told Greene how conservatives are free traders so they generally are opposed to Trump's tariffs. He then suggested that a way out for Trump would be to focus on China's intellectual property "theft," since everybody agrees this is a problem.

This is where I come in. I don't particularly consider the fact that China doesn't pay Microsoft, Pfizer, and Boeing what they think they are owed to be a problem for people who are not major stockholders in these companies. As a basic proposition, the more money China sends to these companies, the larger its trade surplus in other areas.

More generally, as a basic proposition, it is more than a bit bizarre that so many economists can somehow believe both that without patent and copyright monopolies and related protections, there would be no incentive for innovation and that technology causes inequality. If we have a problem with inequality due to "technology,"  it is due to the way in which we assign property rights. Shorter and weaker patents and copyrights mean less money to the people on top and more money for everyone else.

That seems pretty simple, but recognizing an $8 trillion housing bubble ($12 trillion relative to today's economy) also seemed pretty simple. There is a reason people say that economists are not very good at economics.

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