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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There were down slightly last week, but the 4-week moving average is still 462,000. Usually claims have to be under 400,000 to be consistent with steady job growth.

This release got no mention in the Post even though it provides far more information about the state of the economy than other data releases that are routinely covered, such as the consumer confidence indexes. Perhaps the Post will give the data more attention when it starts showing fewer claims.

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New York Times columnist Floyd Norris told readers that: "China ties its currency to the dollar, and despite American jawboning, there is little that the United States can do about that." Actually, the U.S. government is free to set its own higher exchange rate of the yuan against the dollar.

The Chinese government sets an exchange rate puts the value of the yuan at approximately 14 cents. There is nothing that prevents the Treasury of offerring to buy yuan at a higher price, for example 20 cents. If the Treasury made this commitment and was prepared to stand behind it, it would like raise the value of the yuan to 20 cents. This competing exchange rate would be highly unusual, but there is nothing that literally prevents the U.S. government from doing it.

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University of Chicago economist Casey Mulligan makes the case that housing is now on the upswing. The part of the story that he seems to have missed is that after house prices rose last fall as a result of low mortgage interest rates, a hyperactive HUD, and the first time homebuyers tax credit, they have recently reversed course and are heading downward by most measures. We'll look for Professor Mulligan's account of the second housing slump in 6 months or so. Add a comment

That should not be a surprise given the paper's hostility to Social Security and its outrage over the fact that unionized auto workers can earn $56,000 a year, but the Post's editorial calling for reform does miss an important part of Greece's story. While aspects of Greece's welfare state almost certainly do need to be changed (a retirement age of 60 is hard to support in a modern economy), it is also important to note that there is massive tax evasion in Greece, especially by the wealthy.

The OECD estimated the size of Greece's underground economy at more than 30 percent of its official economy. Even if this is an overstatement, the existance of a large uncounted sector inidcates that Greece's debt burden is considerably smaller relative to the size of its economy than the official data imply. It also points to the fact that many wealthy people are likely paying the taxes that they legally owe. Greece's citizens are likely to be less amenable to giving up benefits like a relatively generous Social Security system in a context where the wealthy are avoiding their tax obligations. This is an important part of the story that needs to be mentioned in  any discussion of Greece's fiscal problems.

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Just about the whole economics profession missed the housing bubble that sank the U.S. economy. Fortunately for them, economics is not a profession where performance matters. The "experts" who completely missed the largest economic disaster in 70 years are still the sole source for the overwhelming majority of news stories on the crisis.

This is especially painful in coverage of the Greek and now larger euro crisis. Those of us who read Keynes (a group which should include all economists, but apparently excludes nearly all media "experts") know that the problem is that the European Central Bank has to make more money available to its members to get through this crisis. While many governments hold superstitions about the benefits of rain dances and the causes of inflation, there is no basis for concern that printing money will cause inflation in the current economic situation.

The story that reporters should be writing that is that the superstitions of many European governments (with Germany topping the list) are needlessly inflicting pain on tens of millions of people across Europe. Ironically, these superstitions may ultimately have a severely negative effect on Germany's economy as well.

Economists who are not clueless about this crisis could explain this situation to readers. It is unfortunate that most major media outlets have chosen to rely exlcusively on economists who are.

 

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It's possible that he doesn't know this, but it is what he said. According to the NYT, Volcker said that: "He [Volcker] and other speakers expressed fear that without some action in the next year or two that reduces deficits for decades to come, interest rates could spike, the dollar could lose value or some other financial crisis would occur."

A drop in the dollar is the only plausible way to get our trade deficit closer to balance. A large trade deficit, by definition, means that the United States must have low national savings (barring an extraordinary and unprecedented uptick in investment). Low national saving means that we must either have large budget deficits or very low private savings, or some combination. So proponents of a high dollar (like Mr. Volcker) want a large budget deficit and/or very low private savings. It would have been helpful to point this fact out to readers.

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NPR presented a segment on the impact of the new health care bill on farmer this morning. It told listeners that employers of more than 50 workers who do not provide insurance will be required to pay a "hefty" fee. It is not clear how NPR determined that the fee was "hefty."

 

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It would have been helpful to point this fact out in an article reporting on the Greek and eurozone financial crisis. While Greece did have serious fiscal problems prior to the economic crisis, the other countries now facing difficulties were not similarly troubled. Spain, the most important of the troubled countries, actually was running surpluses prior to the crisis. The difficulties now facing these countries is largely the result of the economic downturn, which has seriously worsened their fiscal situation.

The European Central Bank (ECB) could make the money available to these countries to sustain their economies through this downturn. (They would print it.) The ECB has opted not to go this route because of peculiar superstititions about inflation. It would be worth pointing out to readers that this crisis is largely the result of superstitions by Europe's central bankers, not fundamental economic problems.

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The Washington Post (a.k.a. Fox on 15th Street) told readers that: "Official forecasts suggest that without sharp changes in federal spending or tax collections, the United States could enter into a downward spiral of indebtedness that by the end of this decade would erode the country's ability to educate its children, care for the elderly or mount a robust national defense."

Wow, that sounds really dire. It would have been great if they gave a source for this one because that is not what the standard sources say. For example, if we go to our most recent Budget and Economic Outlook from the Congressional Budget Office (CBO), we find the economy growing at an average annual rate of 2.4 percent over the years 2015-2020. CBO also projects average productivity growth for this period at 1.8 percent a year, meaning in principle that living standards can rise at roughly that rate. It also projects an average interest rate on 10-year Treasury bonds of 5.5 percent, this is only slightly higher than the low-point of the budget surplus years at the end of the Clinton administration.

In short, there is no evidence in these projections of the sort of crisis described in the Post article. It would be interesting to see the document(s) that provide the basis for the Post's assertion.

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Federal Reserve Board Chairman Ben Bernanke, who famously missed the housing bubble and then insisted the problems in the housing market would be contained in the subprime sector, warned the country about the need to contain deficits in testimony before President Obama's deficit commission today.  It would have been helpful to readers if reporters had noted Mr. Bernanke's track record so that they would be better able to assess the importance of his remarks.

Of course, his main statement: "History makes clear that failure to achieve fiscal sustainability will, over time, sap the nation's economic vitality, reduce our living standards, and greatly increase the risk of economic and financial instability," is trivially true. Obviously something that is not sustainable cannot, by definition, persist indefinitely.

However, Bernnake's statement provides no basis for determining whether this is a need to act now, in 5 years, or in 20 years. It effectively says nothing. Reporters could have pointed this fact out to readers.

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