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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The Washington Post had a piece on newly released data on the federal budget deficit. The piece included the obligatory comments from the always wrong budget "experts" at the Committee for a Responsible Federal Budget. It also warned readers:

"U.S. debt is considered one of the safest investments in the world and interest rates remain low, which is why the government has been able to borrow money at cheap rates to finance the large annual deficits. But the costs are adding up. The government spent about $380 billion in interest payments on its debt last year, almost as much as the entire federal government contribution to Medicaid."

"Almost as much as the entire federal government contribution to Medicaid!" Think about that. Try also thinking about the fact that interest payments were around 1.7 percent of GDP last year (before deducting money refunded from the Fed). That compares to a peak of 3.2 percent of GDP in 1991. Are you scared yet?

It's also not quite right to claim that interest rates in the United States are especially low, at least not compared to other rich countries. The U.S. pays an interest rate on 10-year government bonds that is more than two full percentage points higher than the interest rate paid by Germany and the Netherlands. It's even higher than the interest rate paid by Greece.

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When I first saw Senator Warren refuse to acknowledge that Medicare for All will mean higher taxes, I admired her political skills, but as an economist, I was annoyed at her evasion of an obvious truth. However, on further thought, I realize that she is exactly right and is doing a public service with her simple insistence that costs for most people will go down.

It is true that many people hate taxes and find the idea that they would ever have to pay more for taxes for anything repugnant. But that group is far from a majority of the electorate. Most people approach their tax bill as any rational person would. They want to know what they are getting for their money.

This is why Warren is giving the right answer even though it is angering reporters and political pundits. She is talking about what actually matters to most voters; what will they get for their money?

The reporters are determined to make this a “she will raise your taxes story.” This is an absurd narrowing of the issue. There is no reason that Warren should cooperate with their silly game. She is determined to talk about the substance of the issue, whether or not the reporters want to hear it.

For a larger context, consider how the budget is reported. Reporters routinely highlight the budget deficit and the accumulated debt, as though this is the most important feature of the budget. It is at least implicit in nearly all reporting that the country would be better off with a lower budget deficit.

This is also indicated in their choice of sources. An incredibly high percentage of budget stories in leading news outlets (i.e. the New York Times, Washington Post, and National Public Radio) feature comments from Committee for a Responsible Federal Budget, an organization committed to lower deficits and debt.   

News stories on the budget almost never present the countervailing view, which is endorsed by a growing number of economists, that the budget deficit has generally been too small in the years following the Great Recession. The result has been that growth has been slower than it otherwise would have been, causing workers to be needlessly unemployed.

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The Commerce Department reported that orders for non-defense capital goods fell 2.8 percent in September after dropping 3.1 percent in August. The September figure is more than 10 percent below the September 2018 level. If we pull out aircrafts, which are highly volatile and being pushed down by Boeing's 737-Max problems, orders were still down by 0.5 percent. Orders for the month are up just 0.2 percent from the year-ago level.

This would have been worth some attention (both the NYT and WaPo ran wire service stories), since the rationale for the corporate tax cut pushed through by the Republicans in 2017 was supposed to be that it would lead to an investment boom. While there was a modest rise in investment in the first half of 2018 (but certainly not a boom), investment has been extraordinarily weak for the last year. Clearly, the tax cut has not produced the projected benefits.

 

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The Washington Post had an article reviewing Donald Trump's various efforts to secure trade and other agreements with foreign countries. It comments briefly on the trade pact Trump negotiated with South Korea.

While the piece noted that the deal made few major changes in U.S.-Korea trade relations, it would have been useful to report on the impact on the trade deficit with South Korea. In the first eight months of 2018, the U.S. trade deficit in goods with South Korea was $11.7 billion. In the same months of 2019 it has been $14.9 billion. The full impact of any trade deal will only be felt after many years and there are many factors that affect bilateral trade deficits, but for now, at least, there is little evidence that Trump's trade deal has reduced the country's trade deficit with South Korea.

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Next week we will be celebrating the 20th anniversary of the founding of the Center for Economic and Policy Research (October 29th to be precise). I’m going to take this opportunity to point out how much economic debate has shifted over the last two decades, and also do a bit of boasting.

When Mark Weisbrot and I started CEPR at the end of 1999, it was the heyday of neoliberalism. Bill Clinton had won reelection in 1996, assuring us that the era of big government was over. Two big agenda items from his first term were the passage of NAFTA and welfare reform, which, as he put it, “ended welfare as we know it.” In international economics, the Washington Consensus reigned supreme, with privatization and austerity being pushed pretty much everywhere in the developing world.

Mark and I felt that the debate on economic policies had become overly narrow, and we thought that a small dynamic think tank, without major institutional constraints, could make a difference.

One of the first issues that we weighed in on was Social Security. At the time, the conventional wisdom, even among Democrats, was that Social Security was in crisis and that benefits had to be cut. Our book, Social Security: The Phony Crisis, came out just as CEPR was launching. Two decades later, not only have benefits not been cut, but the centrist position in the Democratic Party has shifted to benefits should be raised.

We also had pushed for full employment policies. In two books, Jared Bernstein and I argued that the benefits from low levels of unemployment to workers at the middle and bottom of the pay ladder were enormous. We also argued that economists had underestimated the economy’s ability to maintain low levels of unemployment without spiraling inflation. Today, as the unemployment rate sits at 3.5 percent, Jerome Powell, the chair of the Federal Reserve Board, has largely adopted our position.

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It made this assertion in two different articles last week, without attributing it to a source. The budget data from the I.M.F. do not seem to support this claim. (The numbers are all percent of GDP.)

While the deficits run in 2015 and 2016 were unsustainable, the deficit came down sharply in the next two years. The deficit run in 2018 and projected for 2019 could be sustained indefinitely. (Ecuador uses the dollar as its currency, so it must be able to borrow the money needed to finance its deficit in financial markets.)

Subject Descriptor

2015

2016

2017

2018

2019

General government net lending/borrowing

-6.119

-8.232

-4.533

-0.949

0.022

General government structural balance

-6.714

-6.783

-4.020

-1.676

-0.012

General government primary net lending/borrowing

-4.688

-6.670

-2.415

1.541

2.659

General government gross debt

    33.798

    43.166

    44.617

    46.132

    49.199

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(This post originally appeared on my Patreon page.)

Back in the late 1960s, when it was clear that the United States was losing in Vietnam, Vermont Senator George Aiken came up with the plan to declare victory and leave. It seems that Donald Trump has stolen the senator’s playbook. 

While we don’t know much of the details of Trump’s partial deal with China, it seems almost certain that he has not won most of his demands. According to press accounts, China will commit to buy a large amount of U.S. agricultural products. This is a highly visible, but largely pointless victory for Trump.

All the major agricultural commodities, such as wheat, corn, soybeans, and beef, sell on massive world markets. If China commits to buying some amount from U.S. producers, for the most part, it will come at the expense of producers from other countries. It will not be an increase in world demand. This means that the displaced producers will be dumping their now surplus commodities on world markets, leaving the market price received by U.S. farmers little changed. 

Anyhow, it was hardly a surprise to some of us that Trump would go the declare victory and leave route. My colleague at the Center for Economic and Policy Research, Mark Weisbrot, made exactly this prediction a couple of weeks ago, as did I, a few days earlier

This outcome was easy to see. Trump could not care less about U.S.-China trade policy. He does care about not looking weak and he very much wants to be re-elected. The obvious answer is to say that he won. It doesn’t matter that he may have gotten almost nothing of what he demanded. His followers will believe him and when the media raise questions after seeing the deal, we all know the Trump response: FAKE NEWS.

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That is undoubtedly what readers are asking after seeing the headline, "Facebook’s Mark Zuckerberg struggles to balance truth and free speech." The headline is for the recording of a remarkably uncritical interview of Zuckerberg.

In the interview, Zuckerberg presents himself as struggling to deal with the trade-off between banning ads that are untrue and allowing free speech. If a reporter had been conducting the interview, they would have pointed out that every newspaper in the country faces the same problem and, unlike Zuckerberg, seem capable of dealing with it.

They will not print ads that they know to be untrue and, if they are shown evidence that an ad is untruthful after it runs, they typically will run a correction. It would have been useful to point this out to readers.

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That seemed to be what Zuckerberg was saying in an interview with the Washington Post. Zuckerberg responding to complaints that Facebook was allowing people to lie in political ads:

"'People worry, and I worry deeply, too, about an erosion of truth,' Zuckerberg told The Washington Post ahead of a speech Thursday at Georgetown University. 'At the same time, I don’t think people want to live in a world where you can only say things that tech companies decide are 100 percent true. And I think that those tensions are something we have to live with.'"

Zuckerberg apparently feels tech companies lack the competence to determine the truth of claims that people make in ads and elsewhere. Traditional publishers make this determination all the time. They refuse ads that they believe to be false and issue corrections for ads that they run and then later are presented with proof that the ads are false.

It may well be the case that Facebook is run by incompetents, but that is an argument for improving the quality of its staffing, not allowing it to be a medium for spreading lies.

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It is amazing how reporters and many economists feel the need to deceive the public about the reason for the loss of manufacturing jobs in the last decade. The number of manufacturing jobs was little changed from 1970 to 2000. From 2000 to the end of 2007 (before the Great Recession) we lost 3.4 million manufacturing jobs as the trade deficit exploded.

Fans of logic and arithmetic might think there is a connection there, the AP's Fact Checker apparently does not. It tells readers:

"On trade

ELIZABETH WARREN: “The data show that we’ve had a lot of problems with losing jobs, but the principal reason has been bad trade policy. The principal reason has been a bunch of corporations, giant multinational corporations who’ve been calling the shots on trade.”

THE FACTS: Economists mostly blame those job losses on automation and robots, not trade deals.

So the Massachusetts senator is off."

Here's the picture as of a few years ago (sorry, I'm too lazy to update it).

baker buffie blue collar 2016 02 21 1

Apart from the huge falloff in the years from 2000 to 2007, which continued with the Great Recession, it is also interesting to note that manufacturing employment stabilized, and has risen modestly in the years since the Great Recession. So the economists AP relies on as sources much believe that robots and automation stopped displacing workers in manufacturing some time in 2010. Alternatively, we might note that the trade deficit has stabilized in the last nine years.

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