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

Politicians like to take credit for things they have little to do with it. Serious newspapers point this fact out when it happens.

The Washington Post fell down on the job in a piece that quoted Wisconsin governor Scott Walker saying, "There are more people in the workforce in Wisconsin than ever before in the history of the state."

This is a pretty empty claim since it will be true most of the time (except recessions) for most states. Since populations generally grow, unless there is a downturn, in most months the state will have more people in the workforce than ever before.

A more serious analysis would look at the percentage of the population in the workforce. This is not at an all-time high. In June, 54.6 percent of Wisconsin's population was in the workforce. This compared to more than 55.0 percent in 2000.

It is possible that this drop is explained by demographic changes (more older people and children today), but the percentage of people in the workforce would be the real question, not the number. The Post should have pointed this out to its readers so they would not be deceived by Walker's nonsense boast.

Add a comment

That might have been worth mentioning in this NYT piece on Wisconsin's political situation. The piece notes the conservative policies put in place by the state's Republican governor, Scott Walker. It then notes that the unemployment rate has fallen below 3.0 percent.

In this context, it might have been worth mentioning that Minnesota, Wisconsin's neighboring state, has an unemployment rate of 3.1 percent. Minnesota has been led by a liberal Democrat. This suggests that Wisconsin's relatively strong labor market might be more the result of regional factors than Mr. Walker's policies.

Add a comment

I am not in the habit of defending Democrats (it's not part of my job description), but come on folks. The central graph in this piece shows little change in the views of Democrats on the economy pre- and post-2016. It shows the percentage of Republicans who rate the economy good or excellent jumping from around 20 percent to 77 percent in the most recent reading.

This is a story of Republican attitudes reflecting who is in the White House. It shows the exact opposite for Democrats. We know this is the era of Trump, but please let's have reporting reflect the facts that are in front of our faces.

Add a comment

I see that Glenn Kessler, the Washington Post fact checker, is being pretty liberal in dishing out the Pinocchios over Democrats' claim that a study from a right-wing think tank found that a Medicare-for-all system would save $2 trillion over the course of the decade. Kessler's main complaints are that these savings assume that providers accept a 40 percent reduction in payments and that Democrats' have ignored the study's projection that Medicare-for-all would add $32.6 trillion to the federal budget over the decade. For these omissions, Kessler awarded three Pinocchios. This seems excessive to me.

First, Kessler argues that a 40 percent reduction in payments to providers is unrealistic. This is true, based on the historic balance of power in these debates where doctors hospitals, drug companies, and medical equipment suppliers all have very powerful lobbies. But if there was a committed majority in Congress for providing universal Medicare, it is possible that these lobbies could be defeated.

In this context, it would be helpful to point out that providers in other wealthy countries do get 40 percent, and sometimes even 50 percent or 60 percent less than providers in the United States. There is little doubt that providers would scream bloody murder over the prospects of large pay cuts, but what would be their option if there was the political will? Would doctors change careers and become shoe salespeople?

Kessler is, of course, right that the study projected a large increase in government spending under Medicare-for-all, and that was its main point. This does raise important political problems, but the biggest chunk of this increase comes from replacing employer payments for insurance with government payments. Would people really be that upset if the money that their employer sent to an insurance company was instead sent to the government to pay for health care?

It seems to me that the prospect of saving $2 trillion over a decade (roughly $15,000 per household) might be worth having more money go through the government. That is, of course, unless one has an ideological distaste for the government or wants to see insurers, drug companies, doctors, and equipment suppliers have more money.

As an economist and certified numbers geek, I can sympathize with Kessler's complaint that the Democrats aren't giving the full story. But is this really a three Pinocchio offense when we have many leading politicians, like the president, who literally just make things up and just deny well-established facts?

Add a comment

Prior to the collapse of the housing bubble and the resulting financial crisis there was little interest in major news outlets in pieces warning about the bubble and the risks it posed to the economy. These days there seems to be a large demand for such pieces. Unfortunately, in choosing these pieces, news outlets seem little better informed today than they were in the housing bubble years.

Today’s contribution comes from William D. Cohan and appears in the New York Times. The center of his story is corporate debt. The argument is that we have a large amount of debt that has been taken on at very low interest rates. If interest rates go up, then many debtors will be unable to pay their debts and we will be back in the 2008 financial crisis.

To get the ball rolling, Cohan pulls off one of the best bait and switches I have seen for a long time. He tells readers:

“The $30 trillion domestic stock market seems to get all the attention. When the stock market sets new highs, we instinctively feel things are good and getting better. When it tanks, as happened in the initial months of the 2008 financial crisis, we think things are going to hell.

“But the larger domestic debt market — at around $41 trillion for the bond market alone — reveals more about our nation’s financial health.”

This is a great bait and switch because he uses the $41 trillion figure for the bond market, but the rest of the piece is essentially devoted to corporate debt. Most of the $41 trillion in bonds either comes from the federal government ($17 trillion), Fannie and Freddie ($6.7 trillion), and state and local governments ($3.1 trillion). The portion that is attributable to non-financial corporations, which is the focus of the piece, comes to $6.2 trillion.

Add a comment

We all know how hard it is to get help these days. Companies are shelling out $15 or $20 million a year for CEOs who can't seem to figure out how to tie their own shoes. Marketplace radio ran a piece on how companies are turning to older workers, people with prison records, and people who failed drug tests to find workers. While this is great news, since these people are now getting opportunities as a result of the low unemployment rate, companies seem to be ignoring the most obvious place to find workers: their competitors.

For some reason, the possibility of pulling workers away from competitors never seems to occur to employers. We have been treated to endless pieces about how trucking companies can't find workers, or how manufacturing workers can't get people with the right skills.

These people are out there in large numbers, they just happen to be working elsewhere. But there is a way to get workers to change employers: offer them higher pay. We do see this process in action sometimes. When a baseball team wants to get a great pitcher, they offer them really high pay. Universities will do this to attract star academics. And, this is ostensibly how CEO pay got pushed up into the eight-figure range.

For some reason, these same CEOs just can't figure out how to raise wages when it comes to attracting ordinary workers. According to data from the Bureau of Labor Statistics, the average hourly wage for production and non-supervisory workers in both trucking and manufacturing have risen 2.7 percent over the last year, just even with the rate of inflation. This means that real wages are not rising at all in these sectors, in spite of employers alleged difficulty in finding workers.

Add a comment

Donald Trump provides no shortage of grounds for criticism, but the NYT is really grasping at straws in it editorial headlined, "clouds darken Trump's sunny economic view." The confusion that characterizes the piece starts in the first paragraph when it tells us "the stock market seemed unimpressed" by the 157,000 jobs reported for July.

This is bizarre for two reasons. First, a major complaint of the piece is that workers are not getting their share of productivity gains, instead, it is going to profits. While this is true (although the revised data do show a substantial shift from profits to wages in the last three years), the story of stagnant wages and rising profits should lead to a higher stock market, other things equal.

If shareholders believe that Trump policies will shift income from wages to profits, this would be a reason for the market to rise. If we are supposed to be impressed by the market's decline then this could mean shareholders are worried about future profits. This is again a case where it is worth pointing out that the stock market is not the economy.

The other point is that monthly jobs data are erratic. It is common for bad months to be followed by good months and vice versa. This is why economists typically focus on job growth over several months, as opposed to a single month.

We created 268,000 jobs in May and 248,000 jobs in June. Both numbers were revised upward with the July data. This gives us an average of 224,000 new jobs over the last three months. That is a pretty damn good story by any measure.

Add a comment

Last week I noted the Trump administration's professed concern that higher mileage standards would lead to more traffic deaths because fuel efficient cars make it cheaper to drive, therefore people will drive more. As I pointed out at the time, if Trump wants to discourage people from driving then shifting to pay by the mile insurance policies would have create much more disincentive than having them drive fuel inefficient cars.

I gave some links to the relevent literature in that blog post, but here are some newer ones.

 

I'm sure the Trump administration will soon be leading the charge on this issue.

Thanks to Mark Brucker for the references.

Add a comment

The NYT had a front page piece on how two major steel companies with close ties to the Trump administration are having enormous say on which companies are granted exemptions to his steel tariffs. While there is nothing in principle wrong with the affected companies giving their input on whether exemptions should be granted, given the lack of transparency and financial disclosure by top officials in the Trump administration, it is difficult to have confidence that these decisions are being made on the merits alone.

This issue has been noted earlier by the NYT. Tariffs and exemptions to them provide enormous opportunities for the Trump administration to practice crony capitalism. That is not necessarily an argument against all tariffs, but such favoritism is an inevitable problem associated with tariffs or other forms of protectionism (like patents and copyrights). This does show the need for having a transparent process in which the individuals making decisions do not have a financial interest in the outcome.

Add a comment

This recovery has not been great for workers. They have seen modest real wage gains over the last five years, but these gains have not come close to making up the ground lost in the recession and the first years of the recovery.

Nonetheless, real wages have been growing for most of the last five years. The last month has been an exception to this pattern, not because nominal wages have grown less, but because we had a large jump in energy prices, which has depressed real wage growth. Here's picture for the last five years.

fredgraph1

As can be seen, there is a very modest acceleration in the rate of average hourly wage growth over this period from just over 2.0 percent in the middle of 2013 to 2.7 percent in the most recent data. Real wage growth, which is the difference between the rate of wage growth and the rate of inflation, as measured by the Consumer Price Index, has mostly been positive, with the exception of a few months at the end of 2016 and beginning of 2017 and last month.

Add a comment