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.

Please also consider supporting the blog on Patreon.

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

And they said it was impossible. The Post followed the NYT in calling for an independent agent to pick which credit rating agency will rate a company's issues. This is the obvious and simple way to fix the basic conflict of interest involved when the company pays the rater. If the company has no control over who gets hired, then the rating agency has no incentive to lie in its assessment.

Congress was running around in circles genuflecting over various non-solutions to this problem. However, in the last couple of weeks there seems to have been an outbreak of commonsense, no doubt fueled by a Krugman column pushing the idea. I also have been pushing this one for a while, although my megaphone is not as big.

Add a comment

That is a question that the Post should have asked in an article that reported on the Obama administration's plan to set aside $5 billion to help cover the cost of employer provided health care benefits for retirees who are not yet 65 and eligible for Medicare. The article tells readers that there are 2 million retirees under age 65 who are currently receiving benefits from their employer.

Since this $5 billion is the total amount available for the three years from 2011 until 2014, it means that there will be just under $1.7 billion available per year, or less than $900 per retiree per year. Health care costs for people in this age group average well over $10,000 a year, which means that this money will cover on average less than 9 percent of costs.

Add a comment

The NYT somehow thinks that when President Obama insists that he is going to “keep our boot on the throat of BP” that he is going against free market principles. This is 180 degrees at odds with reality. BP caused damage to hundreds of thousands of people, possibly millions, living in the gulf states. Under free market principles, they are supposed to compensate people for the damage that they have caused by their irresponsible conduct.

However, the "socialists" in Congress passed legislation that limited BP's damages to $75 million. This means that they ignored market principles and had the government step in and seize property from individuals and hand it to BP.

It would be good if the NYT and the rest of the media got the issues straight here. No one is arguing about a free market. We are arguing about whether a huge oil company can wreck people's lives with impunity. Conservatives are claiming that they can, but this reflects their belief that the government exists to redistribute wealth income upward, not out of any commitment to the free market.

Add a comment

It is painful to see the ongoing coverage of the bank bailouts and the extent to which the government is being reimbursed. It is true that the banks have repaid the vast majority of the money that was lent. However, this is almost irrelevant to anything.

At the time the government made money available to the banks through TARP and even more so through the Fed, liquidity carried an enormous premium. The major banks charged each other 5 percent interest on 90 day loans because they did not have confidence in their ability to survive.

In this environment, the government stepped in and providing banks with huge amounts of money (we don't know exactly who got how much because the Fed refuses to tell us what it did with our money), at a cost far below what they would have been forced to pay in private markets. The banks could lend this money at enormous premiums or use it to just buy government bonds and pocket the difference in interest rates. As a result, most banks have been able to get back on their feet.

As a bookkeeping matter we can say that the government "profited" from these deals in the sense that it got interest on its loans. (It also received warrants from banks that it sold at a profit.) However, as a practical matter, these profits no more benefit the government's accounts than if the Federal Reserve Board just printed the same amount of money and handed it to the Treasury by purchasing government bonds. Unfortunately, few reporters covering the economy and the bailout understand this point, so they end up writing pieces that imply the country was somehow benefited by the fact that the banks repaid their loans with interest.

Add a comment

The Washington Post devoted a major article to telling readers that banking industry lobbyists, most of whom are unnamed, are not happy with the financial reform bills being debated in Congress. At one point it tells readers they describe aspects of the legislation as "Draconian," "Crazy," and "Insanely unproductive," although it provides no information as to which lobbyists describe which components with these terms.

One unnamed lobbyist told readers that: "I think the worry is the stuff coming out of left field, the whack-job amendments,... It's limited only to the imagination of the senators." Again, it would have been helpful to have examples of what is considered a whack job amendment and by whom. It's good to know that at least some industry lobbyists are at unhappy with at least some parts of these bills, but without some specific content, this article really is not giving readers much information.

 

Add a comment

The NYT reports on the difficulties that Spain is facing in the wake of the collapse of its housing bubble. Its unemployment rate has crossed 20 percent and is likely to head higher. Its budget deficit exceeds 8 percent of GDP and its credit rating has recently been downgraded by Standard & Poor's.

It would have been worth noting that the credit rating agencies and the speculators who now believe that Spain is facing severe financial stress thought that Spain's economy was in solid shape as its housing bubble was growing ever more out of line with fundamentals. It is also would have been worth mentioning that Spain was running budget surpluses prior to the collapse of its housing bubble. At the time, it was often held up as a success story by the people now criticizing its institutional structure.

Add a comment
This piece of information should have been included in a Washington Post article on the European-IMF bailout plan for Greece. At one point the article quotes from a German newspaper editorial: "most Germans struggle to understand why they should be paying for the Greeks, who are broke because they squandered their money." It would have been helpful to point out to readers that this money is allowing Greece to continue to make payments to foreign creditors, a list which includes German banks. In other words, the money going from Germany to Greece is in part money going from German taxpayers to German banks. This fact should have been noted in the article.
Add a comment
Time Magazine's Adam Sorenson tells readers that: "Medicare, Medicaid and Social Security costs will catch up to the entirety of federal revenue as a percentage of GDP in coming decades if things don't change." However the graph included in the piece shows Medicare and Medicaid costs growing rapidly, while Social Security costs just edge upward slightly. The chart even carries the headline: "Medicare and Medicaid Expected to Grow Rapidly as a Share of the Economy." But, hey, when you're on a crusade to cut Social Security, why worry that the facts don't support your case.
Add a comment

The Post corrected "5 myths about immigration" in the Outlook section today. The first of the myths is that "immigrants take jobs from American workers." It dismissed this concern by telling us that: "economists also estimate that for each job an immigrant fills, an additional job is created." It might have been helpful it had included some names here of economists who hold this view. There are certainly some economists, such as Harvard Professor George Borjas, who see immigrant workers as having a substantial downward impact on the wages of less educated workers.

There also is an important question about who gets counted as an "American worker" in this story. Some analyses have concluded that immigrant workers have little impact on the wages of native born workers, however they do have a substantial negative impact on the wages of other immigrants. Of course many immigrants will become American citizens after being in the country for 10-15 years. So, if we count naturalized citizens as "American workers" then the Post's assertion is completely untrue.

It is worth noting that recent immigrants have had a much more difficult time in catching up with the wages of their native born counterparts than was true in 60s and 70s. This can be partially explained by the larger flow of immigrants in the last two decades.

It is also worth noting that there may be a difference between the marginal impact of more immigrants and the impact of a larger flow over time. In industries like residential construction and meatpacking, native workers have been largely displaced by immigrants over the last three decades. These industries had provided relatively well-paying jobs to workers with little education. They also had a substantial union presence.

This is less true today as wages and conditions in these industries have worsened considerably, as they became almost entirely non-union. At this point, more immigrants are likely to primarily depress the wages of other immigrants working in these sectors, although if there had not been a sharp uptick in immigration over the last three decades it is reasonable to assume that these industries would still employ native born workers at a better wage than they would have been able to receive in other industries.

Add a comment

In discussing the oil spill off the coast of Loiusiana the NYT told readers: "the country needs the oil — and the jobs." The basis for this assertion is not clear.

What is presumably at issue is the prospect of further drilling in currently protected areas. According to the Energy Information Agency, the potential yield from these areas is in the range of 200,000 barrels a day. This is equal to about 1 percent of U.S. oil consumption and around 0.2 percent of world oil consumption.

This amount of oil would have no notable impact on U.S. energy independence. (Actually, in a world where we can freely buy oil on world markets, from the standpoint of concerns about energy indepedence, it would make more sense to leave the oil in the ground so that it can be used if we actually are cut off from world markets.)

This amount of oil would have a trivial impact on oil prices, meaning that no one will notice a lower price at the pump because we open these areas to oil drilling. The jobs created directly by the drilling would also be trivial and would be dwarfed by a few days' job growth in a healthy economy. (The jobs would only come years down the road, since much exploration would have to precede major drilling.)

So, there is no apparent basis for the NYT's assertion about the need for drilling.

Add a comment