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 front page article on how delay has raised the cost of the Greek bailout effort. The article told readers:

"the cost of helping Greece avoid default increased about fourfold, to $140 billion from roughly $35 billion at the start of the year. Confidence in the European economy was so badly battered that European leaders together with the IMF had to pledge another nearly $1 trillion to reassure investors."

While the point about the cost of delay is well-taken (it would have been easier to reassure markets with a strong commitment early by the European Central Bank and the IMF), the measure of costs is very misleading. The $1 trillion figure is a measure of loans and guarantees, not actual outlays. During the U.S. financial crisis, the Fed and Treasury extended more than $10 trillion worth of loans and guarantees by some measures. The overwhelming majority of this money involved guarantees that were never actually needed or loans that were repaid in full. This is likely to be the case with the European commitments as well.

It is important to make the distinction between this sort of confidence building effort and actual money out the door. The Washington Post and other news outlets were able to make this distiniction quite effectively with the U.S. bailout (in fact, they have misleading reported that the government has made money on these bailouts). Presumably they can apply the same analytic skills to their discussion of Europe's bailout.

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In his speech on the BP oil spill President Obama discussed his clean energy agenda. At one point he said: "There are costs associated with this transition, and some believe we can't afford those costs right now."

It would have been worth pointing out that the opposite is true. Measures to shift to alternative forms of energy require increased resources. At present, with the economy operating well below full employment it has a vast amount of unemployed labor and idle capacity. In principle, some of these idle resources can be used to promote the switch to alternative energy or for measures that promote conservation.

We would have less money for this transition if the economy were near full employment and there was little idle capacity. In that situation, the only way to get resources for the transition would be by pulling them away from their current uses. This would mean effectively some types of tax on current consumption patterns. At the moment, any taxes on can be fully rebated to consumers with little cost to the economy.

Reporters who cover this issue should be aware of these facts. It would have been appropriate to correct President Obama on this statement.

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It's no secret that New York Senator Charles Schumer is very close to Wall Street. As a senator from New York he directly represents Wall Street firms and their employees. He also gets huge amounts of campaign contributions from Wall Street. For this reason it would not be surprising that he would oppose any measure that changes the way business is conducted on Wall Street.

This is why it is surprising that the NYT told readers that: "Even Senator Charles E. Schumer (emphasis added)" raised questions about an amendment put forward by Senator Al Franken that would require that credit rating agencies be selected by the SEC rather than the issuer seeking the rating. The current situation creates an obvious conflict of interest since the credit rating agency has an incentive to issue positive ratings to ensure more business. Senator Franken's amendment eliminated this conflict by taking away the power for the issuer to pick the agency.

Given his close ties to Wall Street, it would be surprising if Senator Schumer would support any measures that interfer with a pattern of business that is very profitable for both issuers and credit rating agencies. The article notes that Schumer originally voted for the Franken amendment. It is of course common for members of Congress to vote for popular measures when they know that their vote will not make a difference. Since the Franken amendment passed with strong bi-partisan support, Senator Schumer's vote would not have made a difference in its passage. It does however give him more standing now with naive observers as he works to kill it.

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The media have been highlighting projections produced by the military that show that Afghanistan may have $1 trillion of mineral wealth. It would be helpful to put this figure in some context. The NYT helpfully described this sum as being equal to $38,482.76 for every person in Afghanistan.

It would be useful to note that this is a gross number, it does not subtract the cost of extracting the minerals nor does it consider that these resources would likely be extracted over many decades. If we assume that the cost of extracting the minerals (e.g. foreign produced equipment, foreign trained technicians, profits of foreignh companies and environmental damage  -- not counting domestic Afghan labor) is between 25 and 50 percent of the value of the minerals, then the money going to Afghanis would be between $500 billion and $750 billion.

If this money is earned over a 40-year period (Saudi Arabia has been producing oil for 80 years), then it comes to between $12.5 billion and $18.8 billion a year. Afghanistan's population is currently 29.1 million, but it is growing at the rate of 2.5 percent annually. Assuming the growth rate slows, Afghanistan's population will average about 40 million over this period. This means that the revenue from the minerals will average between $312.50 and $470 per person per year. This is still likely to have a substantial impact on Afghanistan's economy, since its current GDP per capita is just $800 on a purchasing power parity basis.

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The Washington Post reported on the opposition in Congress to spending more money to aid financially strapped state and local governments or unemployed workers. It highlighted the complaint of Nebraska Senator Ben Nelson that President Obama's request for $80 billion was in appropropriate in a situation where the government has a $12 trillion debt.

It would have been helpful to include some discussion of the economic implications of the opposition to this bill. The economy will be weaker if Congress refuses to appropriate the funds requested by the Obama administration. Assuming a multiplier of 1.5 (most of the proposed spending is generally estimated to have a relatively high mutliplier), not spending this money will reduce GDP by $120 billion.

When it outlined its stimulus plan, the Obama administration assumed that a 1 percentage point increase in GDP creates 1 million jobs. This implies that a loss of $120 billion in output would lead to a loss of 800,000 jobs. It would help readers assess the proposed spending if they understood its likely economic impact.

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There is something incredibly otherworldly about current economic policy debates. We are sitting here with almost 10 percent of our workforce unemployed. Let's repeat that so even a policy wonk can understand it: almost 10 percent of the workforce is unemployed. That means people with the skills and desire to work cannot find jobs. The problem is too few jobs, too much supply  of labor, got it?

Nonetheless, there is now a national fixation on the problems of an aging population. The story is that we will have too few workers to support too many retirees. That's a problem of too little labor.

At a time when we have the greatest oversupply of labor since the Great Depression, we are now supposed to be terrified that in a few very short years we will not have enough labor. Is that possible?

Not if we know arithmetic. The NYT gave us a little glimpse of this horror story in its Economix blog today. It showed that the ratio of dependents (defined as people over 64 or under 20) to working age people (those between the ages of 20 and 64) is supposed to rise from 0.67 today to 0.74 in 2020, and 0.83 in 2030; pretty scary, right?

Well suppose we defined a slightly different dependency ratio. This will be the ratio of people who are not working to the people who are. The idea being that people who are working must support the people who are not, regardless of their age.

In 2010, this ratio stands at 1.22. We have 139.4 million people working and 170.1 million not working. However, if we assume that we get back to near full employment and the labor force grows as the Congressional Budget Office projects and population grows as the Census Department projects, this dependency ratio will have fallen to 1.05 in 2020 and then rise to 1.07 by 2030. So, are we scared yet?

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There is a well-known stock wealth effect. Economists usually estimate that annual consumption increases by 3-4 cents for each additional dollar of stock wealth. This was the basis for the strong growth of the late 90s. The stock bubble created $10 trillion of wealth causing consumption to soar and savings to plummet.

Robert Samuelson notes this stock wealth effect in his column today and tells us that we have keep the stock market happy in order to have a recovery. Actually, he's missed most of the story. Consumption in the last decade was driven by the housing bubble, not the stock market. At its peak in 2007, the stock market had just reached the same nominal level that it had been at 7 years earlier at the peak of the bubble. Since the economy was more than 40 percent larger in 2007 (in nominal dollars) than it had been in 2000, the stock market was not a big factor in driving the extraordinary consumption boom that was in turn driving the economy.

This instead was explained by the housing bubble, that gets only passing mention in Samuelson't piece. The housing wealth effect is usually estimated at 5-7 cents on the dollar. At its peak in 2006, the bubble had created $8 trillion in housing wealth. This translates into $400 to $560 billion in additional consumption each year. If the bubble does not reinflate, this consumption is not coming back. (It's not clear that it would be desirable in any case, baby boomers need to save for retirement.)

By comparison, the wealth that will be generated by modest increases in stock prices will have relatively limited effect on consumption. The market was valued at close to $20 trillion at its peak in 2007. Its current valuation is around $14 trillion. If it were to rise by 10 percent, this would generate another $1.4 trillion in stock wealth, which would translate into $42 billion to $56 billion in annual demand, after a lag of 1-2 years. This will have a very limited impact on the economy, so the idea that we have to keep the stock market happy to sustain the economy has no basis in reality.

Samuelson also somehow has the saving rate having increased to 16 percent following the stock market's crash in 2008-2009. This is his invention, it does not show up in the data. The saving rate peaked at 5.4 percent in the second quarter of 2009. The main reason for the uptick that quarter was the distribution of tax rebates from the stimulus, much of which was not spent right away.

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Apparently not at the Washington Post. It ran an article projecting a severe shortage of doctors due to the retirement of large numbers of baby boomers. The article never discussed the possibility of allowing more foreign doctors into the country.

The current rules on foreign doctors are highly protectionist to ensure that doctors can command high salaries. However, if shortages become too severe, the country could easily opt to relax these rules. There is no shortage of smart and ambitious kids in the developing world who would eagerly seize the opportunity to train to U.S. standards and work as doctors in the United States. This flow could easily meet any future demand for doctors in the United States.

It would also be a simple matter to attach a tax to the earnings of these doctors that would be paid to the home country. This tax could be used to train 2-3 doctors for every doctor that practices in the United States, thereby ensuring that the health care in developing countries improves by this arrangement as well.

Remarkably the Post does not discuss the possibility of increased use of foreign physicians even though it is almost fanatical in its support of free trade in other circumstances.

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I often think it's too bad that Social Security isn't a private company. If it were, it could sue Marketplace Radio for libel for this sort of reporting. Does Marketplace's host have any idea what she is talking about when she says: "Social Security is in such a sorry state"? According to the Congressional Budget Office the program can pay all benefits for the next 34 years with no changes whatsoever and even after that can pay more than 75 percent of benefits indefinitely. The program is in much better shape in this respect that it was in the 40s, 50s, 60s, or 70s. So what on earth is this person talking about? Can Marketplace Radio pay all its expenses for the next 34 years?

Marketplace's expert then tells us that Social Security will probably be means-tested. This idea is extremely unpopular among both the public and policy experts, so it would be interesting to know the basis for this assessment. She also recommends raising the retirement age, apparently unaware of the fact that the retirement age has already been raised to 67. She also is apparently unaware of the fact that the vast majority of the huge baby boom cohort has almost nothing saved for retirement and therefore will be almost entirely dependent on Social Security.

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It would be nice if the media didn't feel the need to rely almost exclusively on economists who are continually surprised by the economy. The Commerce Department's release of May data on retail spending surprised many economists by its weakness as noted by both the Post and the Times.

Economists who know economics were not surprised. Prior to the recession consumer spending was propelled by the $8 trillion in housing wealth created the bubble. This is the well-known housing wealth effect that economists were supposed to learn in their under-graduate training: annual consumption increases by 5-7 cents for every dollar of housing wealth. The bubble sent consumption soaring and pushed saving rates to record lows.

Now that most of the bubble wealth has disappeared, consumption is returning to more normal levels. Even now the savings rate , at around 4.0 percent, is well below its levels before the stock and housing bubbles, which averaged more than 8.0 percent. In fact, with most of the huge baby boom cohort in its 50s, with very little wealth accumulated for retirement, the demographics should be heavily tilted towards saving. This is why the small subgroup of economists who know economics are asking why consumption is so high, rather than so low.

Reporters should recognize that the economics profession doesn't have the same sort of internal controls as other occupations, like custodians or retail clerks, Therefore many economists are not good sources for information about the economy.

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