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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- Written by Dean Baker
Folks who have followed economic policy debates for the last few decades can never be surprised by the poor quality of reporting, but it still can get annoying. In a world where we are already doing irreparable damage to the environment through global warming, the idea that we will have fewer people in the future should be seen as a good thing.
Nonetheless, our leading news outlets are warning us that China, the world's most heavily populated country may be seeing its population decline in the decades ahead. The story is that fewer babies will mean fewer workers twenty years out. We are warned that this would lead to a labor shortage and make it more difficult to support retirement pensions. The Post article warns that in Japan (it also talks about countries other than China), it could make it difficult to sustain economic growth.
Let's deal with these one by one. What does a labor shortage mean? Presumably it will be hard to get people to do the least productive, lowest paying jobs. The obvious response is, so what? This is called "capitalism." If a particular job holds little value then it won't get done. This is the reason half of our workforce is not still in agriculture. They are doing more productive tasks elsewhere.
Going forward, if we do see serious labor shortages we will probably see fewer people serving tables in restaurants, working as housekeepers in hotels or providing valet parking. And, the people who still work at these jobs will get much higher pay. Sounds like a terrible crisis!
The second point is that with fewer workers per retiree, it will be harder to support retirement programs. The problem with the story is that the benefits from higher productivity growth swamp any possible increase in costs associated with changes in demographics. Here is what I wrote a few years back in reference to China.Add a comment
- Written by Dean Baker
(This is a guest post by Shawn Fremstad.)
In his column today, Paul Krugman rightly calls for more attention in the presidential campaign on family benefits and child poverty. As he points out, in Europe public social expenditures on family benefits (including benefits like child allowances, paid family leave, and child care) “average between 2 and 3 percent of G.D.P. The corresponding number for the United States is 0.6 percent of G.D.P.”
I’d add there are at least three notable non-European examples of countries that substantially boosted their expenditures on family benefits over the last decades. In Canada, family benefits have increased from .9 percent of GDP in 2000 to 1.6 percent in 2015 (this is the latest year for Canada in the OECD’s comparative database, but their spending is likely even higher today for reasons noted below). In Japan, family benefits have increased from .6 percent of GDP in 2000 to 1.3 percent in 2015. In Korea, family benefits have increased from .1 percent of GDP in 2000 to 1.2 percent 2017.
While Krugman highlights child care and mentions paid family leave, he doesn’t mention a third important family-benefit reform that we need to make: turning the Child Tax Credit into an inclusive child allowance. In 2015, Justin Trudeau ran on reforming Canada’s then-byzantine set of tax credits for families with children into a single, simple, and progressive benefit. I was in Quebec during the run up to that election and remember seeing regular campaign ads touting his Child Benefit proposal. Notably, Trudeau pitched his plan in a way that was designed to appeal to both low- and middle-income families:
“… with [conservative Prime Minister] Harper you need to be a certain family to get his $2 billion tax break. For our plan, all you need is to be middle class, or hoping to join it. You can be a single mom, a stay-at-home dad, a family where both parents work or are divorced. It doesn’t matter. Our plan helps you.”
Trudeau won, and today the maximum credit is $6,639 (CA$) per child under age 6 and $5,602 per child age 6 through 17. Unlike in the United States, all very low-income families get the maximum credit, and child poverty has declined substantially in Canada as a result.
Finally, I have to say that Krugman gets offtrack at the end when he argues that the Sanders campaign is to blame for the lack of attention to children because he made Medicare for All “a bright shiny object chased by the news media at the expense of other policies that could greatly improve American lives….” (My colleague Dean Baker has written about past Krugman critiques of Sanders on Medicare for All). While the media certainly needs to expand its focus to include family policy issues beyond health care, it is unfair to blame Sanders for their failings.Add a comment
- Written by Dean Baker
(This post first appeared on my Patreon page.)
This is not an abstract philosophical question. Boeing forced out its CEO, Dennis Muilenburg last week. Muilenberg had played a major role in overseeing the development and production of the Boeing 737 Max, a plane which was recently involved in two major crashes, resulting in hundreds of deaths. Following these crashes, and the grounding of the plane in March, evidence has come out that Boeing did not take seriously many safety issues that were raised by people working on the plane.
Since Muilenberg was the person in charge for the last four and a half years, it is certainly understandable that the company would want to send the guy packing. Boeing had long been a company with a solid record of putting safety as a top priority. It no longer has that reputation, which is hugely important for a maker of civilian airplanes. While this was clearly not all Muilenberg’s fault, as CEO he has considerable responsibility.
All of this is pretty straightforward. The part of the story that many people may find jarring is that Muilenberg walked away with $62 million in pay and benefits when he left the company.
This is jarring because it would be pretty hard to argue that Muilenberg had done a good job running the company. He leaves it with a horrible reputation problem, for which it may take many years to recover.
But we know shareholders don’t care about reputation, they care about money in their pockets. They might be okay with handing Muilenberg $62 million if he made them a lot of money.
However, that doesn’t seem to be the case. Boeings stock did do quite well under Muilenberg, rising by just under 130 percent over the four and half years that he was at the helm. But the stock of Airbus, Boeing’s main global competitor, almost matched this performance, and that was without the assistance of the big cut in corporate taxes that Trump gave to U.S. corporations in 2017. In other words, there is little reason to think that Muilenberg did anything for shareholders that any other Boeing CEO would not have done.Add a comment
- Written by Dean Baker
I am speaking here in my capacity as "no one," as in "no one saw the housing bubble and the risks it posed to the economy." The reason for my comeback is the new consensus that we have to do something about China's "bad practices," which generally mean its lack of respect for the intellectual property claims of U.S. corporations.
This Washington Post piece gives us a good example, telling us:
"There is now a wide consensus in the United States to challenge China on its worst actions. After this agreement, U.S. firms in China are no longer supposed to be forced to hand their technology over to Chinese companies, a long-standing problem."
Okay, at the risk of not getting included in the happy consensus, I will make a few points here.
The first should be the obvious one, if U.S. corporations don't have to worry about being forced to transfer technology when they set up operations in China, then they will be more likely to set up operations in China. That's pretty much Econ 101. Boeing obviously is happier when it is not forced to transfer technology to a future competitor, Boeings' workers have no reason to be happy about more of their jobs going to China.
The second point is that China's economy is already 30 percent larger than the U.S. economy. By the end of the decade it will almost certainly be more than twice as large as the U.S. economy. It spends roughly the same share of its GDP on research and development as the United States.
I know that the media are dominated by America First Trumper types, but if a country is spending twice as much on R&D as the U.S. it is likely to have more technology that we will want from them, then we will have technology that they will want from us. A trade policy that actually looked to benefit the United States and the world would be looking to share innovation as quickly as possible rather than lock down the patent and copyright monopolies of U.S. corporations.
Think of how much we could gain if clean technologies developed in both countries were immediately available for the whole world to use. The same applies to breakthroughs in health care and other areas. Yeah patents might have been a great system in the 16th century, but it might be worth a bit of rethinking on whether they are the best way to promote innovation in the 21st century. (This is the topic of chapter 5 in Rigged [it's free].)
Finally, stronger and longer patent and copyright monopolies give more money to the people in a position to benefit from the rents from patent and copyrights (think Bill Gates). One of the great pieces of idiocy in economics (there are many) is the idea that technology is responsible for the upward redistribution of the last four decades. Sorry folks, it was not technology, it was our policy on technology. In a world without patents and copyrights, Bill Gates would probably still be working for a living. (Actually he is old enough to be getting Social Security.)
It was our policies on technology which allowed some people to get hugely rich while devaluing the skills of tens of millions of others. It is possible to argue that these policies were still best for the country as a whole in that they provided incentives to develop new technologies (that seems a hard argument, given the pathetic productivity growth of the last fifteen years), but the point is that it was a policy choice that redistributed income upward, not the technology itself.
The China case is just a classic example of this story. We are being told about the wide consensus by our media, without any indication that there is actually a policy choice here. That is the simple and obvious point that no one is saying.Add a comment
- Written by Dean Baker
Tim Geithner might have left his job as Treasury Secretary seven years ago, but his legacy lives on. The Wall Street Journal reported that the financial firm Morningstar had reached a settlement with the SEC over marketing it had done for firms whose bonds it had rated.
SEC rules prohibit rating agencies from doing promotional work for firms whose bonds it rates. This is done to prevent the obvious conflict of interest, that it may give better ratings as part of a promotional effort.
This conflict of interest is inherent in the rating process as it is now designed. Rating agencies have an incentive to give high ratings as a way to attract business.
This was one of the problems that led to the run-up in the housing bubble, the collapse of which caused the Great Recession. Rating agencies gave investment grade ratings to mortgage backed securities that they knew were filled with bad mortgages because they did not want to lose the business.
There is a very simple solution to this problem which was addressed in an amendment to the Dodd-Frank financial reform bill inserted by Senator Al Franken. (I worked with Senator Franken's staff on this amendment.) The amendment would require issuers to contact the SEC, who would then select the rating agency. This would eliminate the incentive to give good ratings to attract more business. The Franken amendment passed with bipartisan support, getting 65 votes in the Senate.
Unfortunately, as he discusses in his autobiography, Tim Geithner arranged to have the amendment killed in the conference committee. Ensuring that the corrupt system we had in the housing bubble years was left in place.Add a comment
- Written by Dean Baker
David Leonhardt argues in his column that Democrats have to make the benefits of government more visible to people and criticizes them for failing to do so. While he does have a very good point, he ignores all the ways that conservatives (defined as people who want to redistribute money upward) use the government to structure the market to give more money to those on top.
This includes items like longer and stronger patent and copyright protection and trade deals which are designed to subject manufacturing workers to competition with low-paid workers in the developing world, while protecting the most highly paid professionals, like doctors and lawyers. This stealth effort has led to enormous upward redistribution over the last four decades, which economists and reporters at elite news outlets like the New York Times then attribute to the blind forces of technology and globalization.
But apart from this more general point, Leonhardt seriously misrepresents one of the major policy decisions he criticizes. Leonhardt tells readers;
"Out of a well-intended desire to get Americans to spend more of their stimulus tax cut, the administration snuck the money into people’s paychecks, rather than sending one-time checks (as George W. Bush had done in 2001) that families might have saved.
"Economically, it worked. Spending rose, helping to end the financial crisis. Politically, it was a dud. Many Americans gave Obama little credit and voted for Republicans in the 2010 midterms, virtually killing his larger legislative agenda."
The issue was not a zero/one question of spending versus no spending. The issue was the percentage of the tax cut which would be spent. At most, the decision to have the tax cut slipped into people's paychecks, rather than a one-time check from the government, increased the share that would be spent by 10 percentage points.
The tax cut was roughly $60 billion a year in both 2009 and 2010. This means that a high-end estimate of the addition to spending would be $6 billion a year. If we add in a multiplier of 50 percent, this would imply an increase in GDP of $9 billion a year as a result of this method paying out the tax cut. In a $15 trillion economy, this implies a boost to growth equal to 0.06 percent of GDP, an increment that is far too small to be noticed by the public.
This point is important, because the plausible impact on growth from hiding the tax cut in people's paychecks was trivial. On the other hand, the lost in political goodwill from not sending out a check, as George W. Bush had done, was substantial.
The Obama people did not sacrifice politics for the good of the economy, they sacrificed politics to be able to conduct an experiment in economic policy. It proved to be a very costly experiment.Add a comment
- Written by Dean Baker
This assertion appeared in the middle of an article about how the Trump administration plans to reduce the number of days that federal employees can telework rather than show up in their office. Of course seeking more accountability is a legitimate reason to change a policy, however there is absolutely zero evidence presented in the piece that reducing telework will actually increase accountability.
In fact, the very end of the piece reports on the impact of a decision to sharply reduce telework in the Education Department:
The piece concluded with a statement from the Education Department, that it will:
"continue the agency’s 'efforts to achieve the intended outcomes of improved collaboration and productivity' and limit working from home."
This strongly implies that efforts to limit telework have little to do with increasing accountability as earlier asserted. An alternative is that they are about harassing federal employees, who have been a frequent target of the Trump administration.The open hostility of the Trump adminsitration to federal employees should have been a reason for questioning any reasons given for making their jobs less pleasant, instead of passing them on to readers as though they are true.
- Written by Dean Baker
Just wondering, since they do it so often in contexts where it is inappropriate, like this Washington Post piece on Bernie Sanders foreign policy. After noting how Trump has upended U.S. foreign policy in many areas, it adds:
"Sanders would deliver another jolt — echoing some of Trump’s criticisms of military actions and free trade but realigning the country’s priorities even more thoroughly."
The piece could have far more accurately said "U.S. trade policy." Of course patent and copyright proteections, which have been at the center of this policy, are 180 degrees at odds with free trade -- even if people might like tthem.
Add a comment
- Written by Dean Baker
Jim Tankersley and Jeanna Smialek had a column in the NYT talking about how economists seem to be worried about the economy, in spite of low unemployment and continued growth. The economists cited had a variety of concerns, but most seemed to center on the possibility that the government will lack the tools to respond to the next recession.
The basis of the concern is that the federal funds rate, at 1.5 percent, is already very low, leaving little room to fall further. In terms of fiscal policy, we already have deficits of more than $1 trillion (4.6 percent of GDP), which are high by historical standards. The argument is that both monetary and fiscal policy seem to be near limits, so that there is not much else the government can do.
The prospect of ending up like Japan, which now has a debt to GDP ratio of more than 250 percent, was raised as one possible bad outcome. It is not clear why this would be an especially bad outcome to fear. On a per capita basis, Japan's economy has grown at an average annual rate of 1.4 percent since 1990. That is less than the 2.3 percent rate in the U.S., but hardly seems like a disaster.
Furthermore, the length of the average work year has been reduced by 16 percent over this period, which means that workers in Japan are enjoying far more leisure time than they did before the collapse of the country's stock and housing bubble. The work year has only declined by 3.0 percent over this period in the United States.
As far as the burden of Japan's debt, interest payments on Japan's debt will amount to 0.005 percent of GDP this year, according to the I.M.F. That would be equivalent to interest payments of roughly $1.2 billion in the U.S. economy. (Our interest payments will be a bit over $200 billion this year, after netting out money rebated by the Federal Reserve Board.) The I.M.F. projects that Japan's interest burden will turn negative next year, as investors are paying the country money to hold its debt.
In short, there doesn't seem to be much of a horror story here. If the U.S. economy does fall into recession it seems the only obstacle to a large fiscal stimulus will be political, not any actual economic constraint.Add a comment
- Written by Dean Baker
(This post originally appeared on my Patreon page.)
Last month, in an interview with Rolling Stone, Chuck Todd responded to a question about whether he was surprised that the Trump administration would deliberately spread misinformation (i.e. lie):
“I fully admit, listening to you ask that question now, and me giving you the honest answer of, yeah, I guess I really believed they wouldn’t do this. Just so absurdly naive in hindsight.”
This answer had to have people all over the country banging their heads against the wall. Chuck Todd is the host of Meet the Press, the country’s most widely watched news interview show. He also regularly appears as a commentator on MSNBC.
After the Trump administration has engaged in a systematic pattern of lying on a wide range of issues, it is truly incredible that Chuck Todd would be telling us that he just came to realize this fact now. (Many of the lies, including Kellyanne Conway’s famous “alternative facts” were told right to Todd’s face on Meet the Press.)
This is a bit like the lead announcer at Super Bowl games over the last decade saying that he just discovered that the teams were trying to get the ball into the opposing team’s end zone. The big question in that case, as it is with Todd, is whether it is worse that they could be so astonishing ignorant over a prolonged period of time or that they apparently see nothing wrong with admitting it now.
While honesty should be applauded, Todd effectively said in this interview that he has totally failed in his job. If he didn’t recognize that Trump and his supporters were making up nonsense to advance their agenda, he was not acting as a serious reporter.
When most workers completely mess up on their job (e.g. the custodian who doesn’t clean the toilets or the dishwasher who breaks all the dishes) they face serious consequences, like getting fired. That does not appear to be the case with Chuck Todd. In all probability he will continue in his role with Meet the Press as though nothing had happened.Add a comment