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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The Wall Street Journal told readers that the country will face a serious shortage of doctors in the next decade. It notes that in principle the country could bring in more foreign doctors, however, U.S. rules require foreign doctors to do a residency in the United States. Since U.S. residency slots are limited, the availability of foriegn-trained physicians will not help.

This article is remarkable because it does not include any quotes from economists about the enormous cost that the economy is being forced to bear as a result of the extreme protectionism used to maintain doctors' salaries. It would not be difficult to design residency programs in other countries that met U.S. standards. (Even a doctor should be smart enough to do that.) We can also include a subsidy to the countries of origin of foreign-trained physicians to ensure that they can train more than enough doctors to make up for those that come to practice in the United States.

This could hugely increase the supply of doctors in the United States. This would lower the wages of physicans and reduce the cost of health care. This article should have been reported as an example of protectionism by a powerful special interest group being carried to absurd levels (e.g. Buy American policies times 1000), but instead the issue was never even raised.

 

--Dean Baker

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It seems that the media are not interested in letting bad economic data get in the way of the economic recovery stories. The Labor Department reported that new unemployment claims rose to 484,000 last week, an increase of 24,000 from the previous week. This report got very little attention and seems to have gone unmentioned in both the NYT and WAPO.

While the weekly figure was undoubtedly inflated by people who put off filing the week before Easter, the prior week was exceptionally high given its timing. The 4-week moving average was 457,750, a number that is far above levels consistent with job growth. For 90 percent of the country, the labor market is the economy. This number deserved some serious attention.

 

--Dean Baker

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The NYT reported on the release of new data from the Treasury Department showing a doubling in the number of redefaults on loans that had been permanently modified through the administration's HAMP program. The new data show that more than 1 percent of permanent modifications have already redefaulted. Since most of the modifications have only been completed in the last few months, this indicates that a very percentage of the permanent modifications are likely to end in default. Since the vast majority of homeowners facing foreclosure will not receive a permanent modification, these means that the program is likely to help only a small minority of homeonwers keep their home.

It would have been useful to point out that the money that the government spends on a failed modification goes to banks, not homeowners. Typically, the government will have subsitituted an FHA insured mortgage for the original mortgage issued by a bank. This means that when a redefault takes place, the bank will have received most of the principle back on the loan, with the government incurring the loss on the redefault. The net result of this policy is that far more money is likely to be given to banks through the HAMP than to homeowners. This should have been pointed out in this article.

 

--Dean Baker

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That might have been a good question for reporters to address when they reported on the February trade data released yesterday. The data showed that royalties and licensing fees had increased by $883 million from January, a rise of more than 40 percent.

This has occasionally happened in prior months and presumably reflects one-time payments to a producer or set of producers. However, this was a big part of the $2.8 billion rise in the overall trade deficit from January and it deserved some mention in the coverage of the February data.

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That's effectively what the Washington Post told readers in another front page editorial highlighting the need for deficit reduction. The article said:

"But by suggesting the deficit may have peaked, administration officials are taking a political gamble. If the favorable number does not hold up in coming months and the budget shortfall surpasses the $1.4 trillion recorded last year, voters in the November midterm elections could punish the Democrats for offering false hope."

That's a great story. Is it plausible that even 1 percent of voters are going to have any clue as to whether this year's deficit is marginally higher or marginally lower than last year's deficit? Is there any reason that anyone should care? Is there any evidence that this will influence their vote in an environment where they are concerned about their jobs and their homes?

In the Post's dreams maybe, but not on this planet.

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A new Pew poll of reporters and editors found a great deal of pessimism about the prospects for the newspaper industry. At one point, the article reports the poll's finding that: "about three-quarters of the editors who took part said they would have serious objections to accepting direct support from either the government or interest groups, and a similar number said their organizations had not seriously thought about taking donations from nonprofit groups."

Of course there are other ways in which new media can be supported. Currently the government supports newspapers by granting them copyright monopolies. Without this special protection anyone would be able to use content without paying for it, including for commercial purposes. So these editors are already taking government support, even if they don't realize it.

In the Internet era this mechanism of financing newspapers is obviously no longer adequate. It is striking that Pew failed to consider any of the obvious alternative mechanisms in its poll. The article could have also discussed such alternatives.

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In an article reporting on the debate over extending unemployment insurance benefits the Washington Post told readers: "on Wednesday, Federal Reserve Chairman Ben S. Bernanke warned that growing budget deficits imperiled the economy's long-term stability."

It is worth noting that in his capacity as a Federal Reserve Board governor from 2002 to 2005, chief economic adviser President Bush, and then Fed Chair since January of 2006, Bernanke never raised any concerns about the housing bubble and the threat it posed to the economy. Based on this history, readers may question Mr. Bernanke's ability to assess threats to economic stability. The Post should have informed readers of Bernanke's record on this issue.

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Paul Krugman asks in his column this morning why Texas managed to largely escape the worst of the housing bubble while Georgia leads the country in the number of failed banks. Both are states in which the major cities have relatively few zoning restrictions or natural barriers, which allows for easy sprawl to meet new housing demand. Krugman explains the difference by the better consumer protection legislation in Texas.

While this may have played a role, it is important to note that Texas had just been through a boom/bust cycle in the 80s. The state was at the epicenter of the S&L crisis. Land prices had soared with the oil boom at the start of the decade, but then collapsed along with the price of oil in the middle of the decade. Texas bankers who had lived through this experience might have had more realization that house prices could fall than bankers in other parts of the country. Of course, the experience of a recent boom and bust cycle did not affect in slowing the bubbles in either southern California or Colorado.

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Those are the questions that readers of the WAPO's Sunday Outlook section must be asking. The Post told readers that: "this year, China's economy is expected to produce about $5 trillion in goods and services. That would put it ahead of Japan as the world's second-biggest national economy, but it would still be barely one-third the size of the $14 trillion U.S. economy."

This reflects China's GDP measured on an exchange rate basis. However, economists typically use purchasing power parity measures of GDP for international comparisons. By this measure, China's economy is expected to be about $9.5 trillion this year. At its current growth rate, it will pass the size of the U.S. economy in about five years.

By many measures it is already larger than the U.S.. For example, it has more Internet users, college graduates in science and engineering, a larger car market, and about twice as many cell phone users.

The article also tells readers that the exchange rate will not have much impact on the trade deficit with China. Virtually all economists believe that an increase in the price of imports from China by 20-30 percent would substantially reduce imports. it is not clear why the author of this article believes otherwise.

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The NYT notes that interest rates have recently risen and are generally predicted to continue to rise. It then told readers: "That, economists say, is the inevitable outcome of the nation’s ballooning debt and the renewed prospect of inflation as the economy recovers from the depths of the recent recession."

Okay, what are they smoking there? We have just been through a period of extraordinarily low interest rates. Interest rates fell to their lowest levels in more than 50 years. This was a deliberate policy response to the worst downturn since the Great Depression. Once we are out of the worst of this downturn, everyone expected that interest rates would rise even if we had a balanced budget and moderate inflation, the latter of which is predicted by almost all economists.

In other words, the standard projections from the Fed, the Congressional Budget Office and most private economists is that interest rates will be rising to normal levels from very low levels. Almost no one is projecting soaring interest rates in response to "the nation’s ballooning debt and the renewed prospect of inflation." This is the invention of the NYT.

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