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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I was going to really tee off on this NYT article, calling Medicare for All an "ambitious and expensive left-wing" policy, but I think Paul Waldman did a nice job making the point in his Washington Post column.The basic point is that reporters should leave these sorts of adjectives out of their coverage of the debate over reforming the health care system.

Every other wealthy country has some sort of universal health care system, many with government-run insurance that look a lot like Medicare for All. This has not bankrupted any of them. So the idea that we should move to something like this sort of system in the United States should not be treated as an extreme left far out position.

On the other hand, there is an accurate adjective that could be applied to the assertion by billionaire Michael Bloomberg that a universal Medicare system "would bankrupt us for a very long time." That adjective is "wrong."

If the NYT is trying to better inform its readers about health care policy for the 2020 election, rather than telling them Medicare for All is an extreme position, it would point out when its critics make untrue assertions about the policy.

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The New York Times had an article on the status of Trump's trade war with China. While the piece pointed out Trump's claim that his trade war is responsible for China's economic problems, it didn't point out that this is almost certainly not true.

In spite of Trump's tariffs, China's exports to the United States were up by more than $30 billion in the first ten months of 2018 compared to 2017. While their exports may have grown even faster without the tariffs, it doesn't make sense that slower than expected growth in exports to the United States could be too big a hit to the Chinese economy.

It is also worth noting that China's exports to the United States are actually not that large a share of its economy. If we just take the reported value of China's exports to the United States, it comes to less than 3.9 percent of its GDP.

This overstates the actual share of Chinese value-added in these exports, since we record the full price of a product as an export, even though much of the value-added comes from other countries. For example, we would record the full value-added of an iPhone assembled in China as an export from China, even though the vast majority of the value added in the product comes from the United States and other countries.

This is offset in part by Chinese value-added in items from third countries. For example, cars we import from Germany and electronic items we buy from Japan or Korea are likely to include a substantial amount of parts produced in China. But these items will not be affected by Trump's tariffs on China.

If we conservatively reduce the value-added of the items we import from China by 25 percent to account for foreign inputs, this means the value-added in Chinese exports to the United States accounts for less than 3.0 percent of its GDP. This means that even if Trump's tariffs reduced its exports by one third (a huge reduction), it would only imply a loss of less than 1.0 percentage point of GDP. By contrast, following the collapse of the housing bubble, residential construction in the United States dropped by almost four percentage points of GDP.

In short, the idea that Trump's tariffs are a major factor in China's economic problems is absurd on its face, just like his claim that he had the largest inaugural crowd in history or that millions of illegal votes were cast in California. Just as the NYT would not report these claims without pointing out they are not true, it should not report Trump's claim that his tariffs are doing great harm to China's economy without noting that it is false.

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David Leonhardt used his column to give us a story about how the millennials are the big losers and the oldsters are the big winners in today's economy. The piece shows trends in the growth of income and wealth which show the over 65 group doing very well and everyone else not. This is not a quite a simple granny-basher column, Leonhardt does come around at the end and tells readers:

"But the country’s biggest economic problems aren’t about hordes of greedy old people profiting off the young. They’re about an economy that showers much of its bounty on the already affluent, at the expense of most Americans — and of our future. The young pay the biggest price for these inequities."

Nonetheless, there are a couple of points that are misleading and need some qualification.

First, when it comes to the median income of people over age 65, it is important to note that this is much more likely to reflect the income of a household with at least one worker than would have been the case a quarter century earlier. The percentage of people between the ages of 65 to 69 who are working rose from 21.0 percent in 1994 to 31.9 percent in 2018. For people between the ages of 70 to 74 it rose from 11.3 percent to 18.9 percent.

 Employment to Population Ratio 70–74 Years

LNU02324941 1209526 1548700252833

Source: Bureau of Labor Statistics.

This increase in employment among older workers is not all negative. In many cases, it is due to the fact that older people are more likely to be in good health and to be working at jobs they enjoy. But in many cases, these are people who are working because they have no other way to make ends meet. In these cases, it is not an apples-to-apples comparison to say that the income of an older worker in 2018 is higher than a non-working retiree 25 years earlier.

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Economists have been concerned about the sharp slowdown in productivity growth since 2005 and wondering whether it will persist indefinitely. Productivity (a.k.a. "automation") grew at an annual rate of almost 3.0 percent from 1995 to 2005, roughly the same pace as during the long Golden Age from 1947 to 1973. For reasons that are not clear, growth then slowed sharply to a 1.3 percent annual rate in the years since 2005.

 

Productivity: Non-farm Business Sector

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Source: Bureau of Labor Statistics.

Projections from the Congressional Budget Office, Social Security Administration, and elsewhere assume that the rate of productivity growth will remain slow for the indefinite future.

But there is good news. In a New York Times column, Kevin Roose tells us about the secret he learned from talking to rich people at Davos. They apparently all have great plans for increasing productivity at their businesses but are keeping them a secret.

If the word from Roose's rich friends turns out to be accurate, then we can expect to see more rapid wage growth. We also don't have to worry at all about budget deficits. The more rapid productivity growth will mean more rapid economic growth and higher tax revenues. Also, with more rapid productivity growth, there will be less reason to fear that large budget deficits will push the economy too far and lead to inflation.

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The NYT did a very simple step today and performed a great public service. In an article on allegations by Texas Secretary of State that 95,000 non-citizens in Texas might be registered, it put the numbers in the context of the total number of registered voters in Texas. 

The piece reported on the conclusions from an investigation which found that 58,000 of these people voted since 1996. The NYT article points out that even if all 58,000 of these votes were cast in 2018, it would amount to 0.69 percent of the votes in the state. It notes that no one claims that all 58,000 votes from these people were cast in 2018.

The article also points out that the secretary of state's office did not determine that the 95,000 registered voters it identified were in fact not US citizens. It just could not be certain that these people were US citizens. This could be due to name changes or simply inaccurate record keeping. The actual number of non-citizens in this group is certainly less than this figure and possibly much less.

 

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That is the gist of a piece telling us that automation (a.k.a. productivity growth) will surge in the next recession. Since the Congressional Budget Office (CBO) and most other forecasters project continued slow productivity growth, the prediction of an imminent surge in automation goes against standard views in the economics profession.

I have to say, the basic story here is hard to follow. Here are the first two paragraphs:

"Robots’ infiltration of the workforce doesn’t happen gradually, at the pace of technology. It happens in surges, when companies are given strong incentives to tackle the difficult task of automation.

"Typically, those incentives occur during recessions. Employers slash payrolls going into a downturn and, out of necessity, turn to software or machinery to take over the tasks once performed by their laid-off workers as business begins to recover."

This one has to draw a really big "huh?'

Employers need to turn to automation out of necessity because they are laying off workers? How about if they didn't lay off workers, then they wouldn't need to replace them with automation.

In the old days, we used to think that the incentive to automate was greatest in the upturn when labor is tight and wages are high. In the downturn, workers are willing to work for lower pay because they have few other options. Why would companies see this as the time to automate?

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(This post originally appeared on my Patreon page.)

Last week, Jack Bogle, who founded Vanguard Funds, died at the age of 89. Bogle was widely praised in his obituaries (including by me) for starting Vanguard, which now has over $5 trillion in assets.

Bogle’s innovation was the recognition that most people lose money by trading. This is regardless of whether it is their own trading or they have an actively managed mutual fund. The fact is that the vast majority of people do not beat the market. This means that the money people spend in trading is essentially money thrown in the garbage.

The main asset offered by Vanguard is low-cost index funds. The idea is that investors buy an index fund that will closely track major market indexes like the S&P 500. By minimizing trading and other administrative expenses, people investing in Vanguard funds will maximize the returns on their investment.

The annual fees on many of Vanguard’s fund are in the neighborhood of 0.1 percent. By contrast, people often pay 1–2 percentage points of their assets, each year, in trading costs and fees for ordinary mutual funds. Simple arithmetic shows the enormous amount that Vanguard investors save. If we assume that alternative funds would charge 1.0 percentage point more than Vanguard, then Vanguard’s investors are saving over $50 billion a year compared to alternative funds.

The total savings would be considerably higher when we include the fact that other companies now also offer low-cost index funds in order to compete with Vanguard. It’s fair to say that Bogle has had a big impact on the ability of middle class people to save for their retirement.

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Let's see, cattle ranchers are against vegetarianism, coal companies are against restricting CO2 emissions, and the Davos crew is trying to combat populism, according to The Washington Post. It is kind of amazing that the rich people at Davos would not understand how absurd this is.

Yeah, we get that rich people don't like the idea of movements that would leave them much less rich, but is it helpful to their cause to tell us that they are devoting their rich people's conference to combating them? The real incredible aspect of Davos is that so many political leaders and news organizations would go to a meeting that is quite explicitly about rich people trying to set an agenda for the world.

It is important to remember, the World Economic Forum is not some sort of international organization like the United Nations, the OECD, or even the International Monetary Fund. It is a for-profit organization that makes money by entertaining extremely rich people. The real outrage of the story is that top political leaders, academics, and new outlets feel obligated to entertain them.

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There have been numerous articles in the news recently telling us about China's slowing economy (e.g. here and here). From the accounts I've seen, it does sound like China has problems, although we have heard this story before. (There have been China experts predicting a financial collapse since the late 1990s.)

But the striking part is that a slowing economy is treated as something unexpected. China had been maintaining extraordinary double-digit growth through the 1980s, 1990s, and 2000s. The idea that China could continue to grow at this rate seemed pretty far-fetched. In fact, if we go back to 2016 and look at the IMF's forecast for growth in China in 2018 and 2019, it was 6.0 percent for both years. The IMF's forecasts are generally in the middle of professional forecasts. For this reason, it is a bit strange to read an article in the NYT telling us that China's slowdown to 6.4 percent growth last year is really bad news for the world economy.

It is also worth noting the ostensible problem here. The idea is that if China's economy were growing more rapidly, it would be creating more demand for goods and services produced by other countries. This is true, but there is another way that the countries facing insufficient demand can generate it if China's economy is not cooperating. Their governments could spend money.

The problem of insufficient demand is best countered by more demand. Insofar as the US faces this problem right now (it may not), it can be remedied by doing things like extending access to health care and child care or starting a Green New Deal. It really is not that hard to find ways to spend money.

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