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.

Please also consider supporting the blog on Patreon.

Follow on Twitter Like on Facebook Subscribe by E-mail RSS Feed

That is the logic of a major article on the idea of a Green New Deal which equates measures to stem global warming with big government and socialism. If we recognize the emission of greenhouse gases as an externality that is doing serious harm to others, then it is equivalent to massive dumping of sewage on other people's lawns.

Most of us would not think that government action to prevent this sort of massive sewage dump was "big government" or socialism. It is government that is taking the action necessary to protect people's rights.

This is effectively the story that we are looking at with a Green New Deal. It is understandable that opponents of actions to stop global warming would describe a Green New Deal as big government, but it is not clear why the Post would choose to do so.

Add a comment

That apparently is the assumption of the paper's editors. An article that discussed the impact of the debate on global warming on this weekend's election told readers of a study pushed by proponents of inaction which:

"estimated that the 45 percent reduction in carbon emissions proposed by the opposition Labor Party would cost the economy 167,000 jobs and 264 billion Australian dollars, or $181 million."

In case readers did not know how important 167,000 jobs are to Australia, it is equal to a bit less than 1.3 percent of its current workforce. (The calculation of job loss in these models is typically associated with a reduction in pay due to carbon taxes, which means fewer people will decide to work.) The loss of GDP is equal to 0.8 percent of projected GDP, according to the model.

Since it is likely that most NYT readers have no idea how large Australia's workforce is, or the size of its economy, it might have been useful to include context that would make these numbers meaningful.

Add a comment

(This post first appeared on my Patreon page.) Earlier this month, New York Times reporter Binyamin Appelbaum wrote a moving piece on Ady Barkan. Ady is a lifelong activist who is now dying from A.L.S., often known as Lou Gehrig’s disease.

It is an incredibly sad story, Ady is just 35 years old. He is married with a young son. While I’m sure he would like to spend the time he has left with his loved ones, he is determined to use whatever energy he can to push for universal Medicare.

I was sitting next to him last month when we were both testifying on universal Medicare. Ady was in a wheel chair, having lost control over most of his muscles. He could not speak and instead had a mechanical voice speak out the words he typed.

It was clear that it was not easy for him to be there. He was sweating profusely in a room that was not particularly warm. It was a very impressive show of determination for a cause to which he is very committed.

I actually first met Ady through his work on a different topic, the Fed Up campaign, which was designed to push the Federal Reserve Board to prioritize full employment and higher wages. Fed Up was about bringing the voices of ordinary workers and community activists into the debate on monetary policy. Ady was one of the lead organizers with the Center for Popular Democracy, the group that spearheaded the Fed Up campaign.

As Appelbaum points out in this piece, the Fed Up campaign was remarkably successful in getting the Fed to take the concerns of working people more seriously. In general, the Fed is far more responsive to the concerns of the financial industry.

Add a comment

The Wall Street Journal's opinion page has never been a place where reality is a binding constraint. Andy Kessler demonstrates this fact in a column that tells us that the Consumer Price Index (CPI) overstates the true rate of inflation by at least 2.0 percentage points annually and possibly as much as 5.0 percentage points.

The immediate basis for this observation is an interview Alan Greenspan gave in which he said:

"Because products are continuously changing, ..... when new products go on the market, they come in at relatively high prices. Henry Ford’s Model T came in at a very high price, and the price went down as technology improved. You didn’t start to pick up the price level until well into that declining phase.”

“So there is a bias in the statistic. You’re getting statistics which are not correct. ... If you had a 2% inflation rate as currently measured, it’s the equivalent of zero for actually what consumers are buying.”

As Kessler describes it, "pretty heady stuff from the former Fed head."

Perhaps, but it's hardly new. Greenspan made the same observation more than a quarter-century ago. He told Congress back then that the CPI overstates inflation by at least 1.0 percentage point, and possibly as much as 2.0 percentage points. He suggested that Congress could use this alleged fact as a way to reduce the budget deficit, since Social Security payments (post-retirement) were linked to the CPI, as were income tax brackets. If the annual inflation adjustment in these measures was 1.0-2.0 percentage points lower, it would drastically reduce Social Security benefits over time and raise a great deal of tax revenue.

Add a comment

That's what Sarah Jeong says in a New York Times column. The piece argues that if Uber drivers got a living wage then Uber would just turn to using driverless cars.

It is an interesting possibility. The argument is that higher pay is a major driver of productivity growth, as it forces companies to use workers more efficiently and to invest in labor saving equipment. Many progressive economists have long made this argument, although it is rejected within the mainstream of the economics profession.

It is possible that we are seeing some evidence of this story in recent productivity data, which show productivity had risen 2.4 percent over the last year. While this is still far below the 3.0 percent growth rate of the long Golden Age from 1947 to 1973 (and again from 1995 to 2005), it is a big improvement over the 1.3 percent rate from 2005 to 2017.

If this increase proves to be real (productivity data are highly erratic) it will primarily be a story of employers being forced to use workers more efficiently in a tight labor market with 3.6 percent unemployment. Investment was not especially strong in 2018, so there was no mass displacement of workers by capital. Anyhow, if we can continue to pursue high employment policies and use higher minimum wages and other measures to sustain wage growth, we may see a more rapid pace of productivity growth going forward, with workers reaping benefits in the form of more rapidly rising wages.

Add a comment

I'm not kidding. The first sentence of an article on the Trump administration's plans to impose a 17.5 percent tariff on Mexican tomatoes told readers:

"The United States will impose a 17.5 percent tariff on Mexican tomato imports starting Tuesday, and economists say that could lead to shortages and price increases of up to 85 percent as soon as this winter."

The idea that more than 400 percent of a tariff could be passed on to U.S. consumers should strike readers as a bit bizarre. After all, if the full 17.5 percent tariff was passed on to U.S. consumers in higher prices, then Mexican producers are getting just as much money on each pound of tomatoes they sell as before the tariff was in place. This means that they have as much incentive to grow and sell tomatoes in the U.S. market as they did previously.

It is undoubtedly possible to construct a model with unusual supply assumptions that could lead to the sort of soaring prices described in the first sentence of the piece, but these would almost certainly be implausible. The Post piece tells us that the 85 percent price rise came from "analysis by economists at Arizona State University conducted in April."

The Post article neglected to tell readers that the study, which does not appear to be available on the web, was commissioned by the Fresh Produce Association of the Americas.

While it is likely that this tariff will lead to a substantial increase in the price of tomatoes in the United States, and is probably a bad idea for many reasons, the Post should not be in the business in disguising industry propaganda and passing it along uncritically to readers. It seems this is acceptable in discussions of trade policy (unless the issue is protecting items like prescription drugs or doctors), but it is not good journalism.

Add a comment

The NYT had a piece today on the Initial Public Offering (IPO) of Uber and other recent start-ups. It notes that this generation of tech start-ups has waited much longer than the start-ups of the dot-com era to go public. The piece tells readers that this longer period gives:

"start-ups have had more runway to figure out sustainable business models while avoiding the public eye."

The problem with this assertion is that start-ups like Uber and Lyft don't seem to have developed a sustainable business model. In Uber's case it is losing billions of dollars a year, even as it is likely to face higher costs going forward due to efforts at various governmental levels requiring it to obey labor laws. It seems investors are still prepared to pay billions for these companies, but that seems to have little connection to whether they have a sustainable business model.

Add a comment
(This post first appeared on my Patreon page.)

I had the opportunity to testify last week before the House Rules committee on Medicare for All. Incredibly, this was apparently the first time the topic had been explicitly addressed in a congressional hearing. In my testimony, I argued that a Medicare for All program would be affordable, but the key factor was reducing the cost of input prices, like prescription drugs, medical equipment, and doctors’ pay. I also briefly laid out what I considered the key features of a transition from the current system. I want to go into this issue in a bit more detail here.

I listed four main steps as being key in the transition:

  1. Fix the current Medicare system;

  2. Allow a Medicare buy-in;

  3. Take measures to reduce input prices;

  4. Lower age of Medicare eligibility to 64.

These four steps should allow for an orderly phase in of a universal Medicare system. They also should quickly provide substantial benefits to most of the population in the form of better quality/lower cost health care.

Add a comment

A Washington Post article on Uber's IPO told readers that Uber drivers earned $21 an hour and linked to a study that came out of Stanford as the source. The study actually reports that $21 is the gross pay before deducting driving expenses such as gas and depreciation. This is very clear in the study.

It notes (page 42) the difference where it suggests a net measure might be more appropriate for the issue it is assessing (gender differences in earnings):

"Suppose drivers average 25 cents per mile in costs other than insurance – Uber covers drivers’ insurance costs while driving. A typical Uber driver covers about 20 miles in one hour. The driver earns approximately $15.80 net of Uber’s current 25% average share of driver gross earnings."

Arguably 25 cents is too low a figure. The federal government uses 58 cents as it per mileage compensation charge. Since Uber covers insurance for the driver, let's say 40 cents per mile is closer to the mark. That would translate into expenses of $8 an hour, lowering the pay net of expense to $12.80 an hour, almost 40 percent less than the figure in the Post article.

Add a comment

The United States International Trade Commission's (USITC) analysis of Trump's new NAFTA projected modest gains, entirely due to a reduction of uncertainty associated with its rules on digital commerce. (It makes it harder to regulate Facebook and Google.) The gains the USITC attributed to reduced uncertainty from this fairly limited segment of the economy were extraordinary, but they raise the obvious question about the cost of uncertainty in other areas.

For example, Donald Trump is now tweeting threats to substantially expand his trade war with China, raising a wide range of tariffs from 10 percent to 25 percent. If tariffs against any country can be raised or lowered by presidential whim, then it has to create a substantial amount of economic uncertainty. It would be interesting to see how the USITC would assess the impact of this uncertainty on the economy. It would almost certainly have to be an order magnitude larger than any reductions in uncertainty in the digital economy associated with the new NAFTA.

Add a comment