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.

Please also consider supporting the blog on Patreon.

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

You have to love Robert Samuelson. He writes a column noting that baby boomers are leaving the workforce, and some are dying off, leaving the country to our children and grandchildren. He concludes the piece with a comment on the national debt.

"To boot, there’s also a massive federal debt. Good luck."

Given the enormous damage that we have done to the environment, our children and grandchildren would be enormously forgiving if all they blamed us for is the national debt. Of course, since we (baby boomers) will all be dead at some point, we will also be passing on the bonds that constitute the national debt to our children and grandchildren.

Most kids will not be inheriting bonds, due to the inequality of wealth, but at some future point, the debt will be held by the children and grandchildren of Bill Gates and his ilk, making the debt an issue of intra-generational inequality, not inter-generational inequality. But even beyond this logical point, the burden of the debt is also relatively low these days, around 1.0 percent of GDP, as opposed to 3.0 percent of GDP in the early 1990s. So it's hard to see what the big deal is.

Also, Samuelson consistently ignores (like all deficit hawks) the implicit debt that the government creates by granting patent and copyright monopolies. These government-granted monopolies raise the price of items like prescription drugs, medical equipment, software, and other products by many hundred billion dollars annually above the free market price. Yet, the deficit hawks want us to pay no attention to this burden. If I were more cynical I would think they were getting money from the interest groups that benefit from these monopolies.

Anyhow, if the only thing our kids think we did was wrong was run up large government debt, then we failed big-time in giving them a decent education. 

Add a comment

The New York Times had an article on the Middle East peace plan being developed by Donald Trump and his son-in-law Jared Kushner. The piece tells readers:

"The idea is to secure financial commitments from wealthy Persian Gulf states as well as donors in Europe and Asia to induce the Palestinians and their allies to make political concessions to resolve the decades-old conflict with Israel. The White House has indicated that it is seeking tens of billions of dollars but would not identify a precise figure; diplomats and lawmakers have been told the goal is about $68 billion for the Palestinians, Egypt, Jordan, and Lebanon."

This is obviously quite vague, but it might be helpful to readers to put this $68 billion figure in context. First, it is a bit more than half of the estimated fortune of Jeff Bezos.

More importantly, if we take the total population of the four groups listed, it comes to roughly 120 million. This means that the sum that Trump and Kushner hope to raise to induce a commitment to their peace plan comes to $560 per person. This seems to be a one-time figure rather than any ongoing commitment of aid.

Add a comment

That is the logic of a major article on the idea of a Green New Deal which equates measures to stem global warming with big government and socialism. If we recognize the emission of greenhouse gases as an externality that is doing serious harm to others, then it is equivalent to massive dumping of sewage on other people's lawns.

Most of us would not think that government action to prevent this sort of massive sewage dump was "big government" or socialism. It is government that is taking the action necessary to protect people's rights.

This is effectively the story that we are looking at with a Green New Deal. It is understandable that opponents of actions to stop global warming would describe a Green New Deal as big government, but it is not clear why the Post would choose to do so.

Add a comment

That apparently is the assumption of the paper's editors. An article that discussed the impact of the debate on global warming on this weekend's election told readers of a study pushed by proponents of inaction which:

"estimated that the 45 percent reduction in carbon emissions proposed by the opposition Labor Party would cost the economy 167,000 jobs and 264 billion Australian dollars, or $181 million."

In case readers did not know how important 167,000 jobs are to Australia, it is equal to a bit less than 1.3 percent of its current workforce. (The calculation of job loss in these models is typically associated with a reduction in pay due to carbon taxes, which means fewer people will decide to work.) The loss of GDP is equal to 0.8 percent of projected GDP, according to the model.

Since it is likely that most NYT readers have no idea how large Australia's workforce is, or the size of its economy, it might have been useful to include context that would make these numbers meaningful.

Add a comment

(This post first appeared on my Patreon page.) Earlier this month, New York Times reporter Binyamin Appelbaum wrote a moving piece on Ady Barkan. Ady is a lifelong activist who is now dying from A.L.S., often known as Lou Gehrig’s disease.

It is an incredibly sad story, Ady is just 35 years old. He is married with a young son. While I’m sure he would like to spend the time he has left with his loved ones, he is determined to use whatever energy he can to push for universal Medicare.

I was sitting next to him last month when we were both testifying on universal Medicare. Ady was in a wheel chair, having lost control over most of his muscles. He could not speak and instead had a mechanical voice speak out the words he typed.

It was clear that it was not easy for him to be there. He was sweating profusely in a room that was not particularly warm. It was a very impressive show of determination for a cause to which he is very committed.

I actually first met Ady through his work on a different topic, the Fed Up campaign, which was designed to push the Federal Reserve Board to prioritize full employment and higher wages. Fed Up was about bringing the voices of ordinary workers and community activists into the debate on monetary policy. Ady was one of the lead organizers with the Center for Popular Democracy, the group that spearheaded the Fed Up campaign.

As Appelbaum points out in this piece, the Fed Up campaign was remarkably successful in getting the Fed to take the concerns of working people more seriously. In general, the Fed is far more responsive to the concerns of the financial industry.

Add a comment

The Wall Street Journal's opinion page has never been a place where reality is a binding constraint. Andy Kessler demonstrates this fact in a column that tells us that the Consumer Price Index (CPI) overstates the true rate of inflation by at least 2.0 percentage points annually and possibly as much as 5.0 percentage points.

The immediate basis for this observation is an interview Alan Greenspan gave in which he said:

"Because products are continuously changing, ..... when new products go on the market, they come in at relatively high prices. Henry Ford’s Model T came in at a very high price, and the price went down as technology improved. You didn’t start to pick up the price level until well into that declining phase.”

“So there is a bias in the statistic. You’re getting statistics which are not correct. ... If you had a 2% inflation rate as currently measured, it’s the equivalent of zero for actually what consumers are buying.”

As Kessler describes it, "pretty heady stuff from the former Fed head."

Perhaps, but it's hardly new. Greenspan made the same observation more than a quarter-century ago. He told Congress back then that the CPI overstates inflation by at least 1.0 percentage point, and possibly as much as 2.0 percentage points. He suggested that Congress could use this alleged fact as a way to reduce the budget deficit, since Social Security payments (post-retirement) were linked to the CPI, as were income tax brackets. If the annual inflation adjustment in these measures was 1.0-2.0 percentage points lower, it would drastically reduce Social Security benefits over time and raise a great deal of tax revenue.

Add a comment

That's what Sarah Jeong says in a New York Times column. The piece argues that if Uber drivers got a living wage then Uber would just turn to using driverless cars.

It is an interesting possibility. The argument is that higher pay is a major driver of productivity growth, as it forces companies to use workers more efficiently and to invest in labor saving equipment. Many progressive economists have long made this argument, although it is rejected within the mainstream of the economics profession.

It is possible that we are seeing some evidence of this story in recent productivity data, which show productivity had risen 2.4 percent over the last year. While this is still far below the 3.0 percent growth rate of the long Golden Age from 1947 to 1973 (and again from 1995 to 2005), it is a big improvement over the 1.3 percent rate from 2005 to 2017.

If this increase proves to be real (productivity data are highly erratic) it will primarily be a story of employers being forced to use workers more efficiently in a tight labor market with 3.6 percent unemployment. Investment was not especially strong in 2018, so there was no mass displacement of workers by capital. Anyhow, if we can continue to pursue high employment policies and use higher minimum wages and other measures to sustain wage growth, we may see a more rapid pace of productivity growth going forward, with workers reaping benefits in the form of more rapidly rising wages.

Add a comment

I'm not kidding. The first sentence of an article on the Trump administration's plans to impose a 17.5 percent tariff on Mexican tomatoes told readers:

"The United States will impose a 17.5 percent tariff on Mexican tomato imports starting Tuesday, and economists say that could lead to shortages and price increases of up to 85 percent as soon as this winter."

The idea that more than 400 percent of a tariff could be passed on to U.S. consumers should strike readers as a bit bizarre. After all, if the full 17.5 percent tariff was passed on to U.S. consumers in higher prices, then Mexican producers are getting just as much money on each pound of tomatoes they sell as before the tariff was in place. This means that they have as much incentive to grow and sell tomatoes in the U.S. market as they did previously.

It is undoubtedly possible to construct a model with unusual supply assumptions that could lead to the sort of soaring prices described in the first sentence of the piece, but these would almost certainly be implausible. The Post piece tells us that the 85 percent price rise came from "analysis by economists at Arizona State University conducted in April."

The Post article neglected to tell readers that the study, which does not appear to be available on the web, was commissioned by the Fresh Produce Association of the Americas.

While it is likely that this tariff will lead to a substantial increase in the price of tomatoes in the United States, and is probably a bad idea for many reasons, the Post should not be in the business in disguising industry propaganda and passing it along uncritically to readers. It seems this is acceptable in discussions of trade policy (unless the issue is protecting items like prescription drugs or doctors), but it is not good journalism.

Add a comment

The NYT had a piece today on the Initial Public Offering (IPO) of Uber and other recent start-ups. It notes that this generation of tech start-ups has waited much longer than the start-ups of the dot-com era to go public. The piece tells readers that this longer period gives:

"start-ups have had more runway to figure out sustainable business models while avoiding the public eye."

The problem with this assertion is that start-ups like Uber and Lyft don't seem to have developed a sustainable business model. In Uber's case it is losing billions of dollars a year, even as it is likely to face higher costs going forward due to efforts at various governmental levels requiring it to obey labor laws. It seems investors are still prepared to pay billions for these companies, but that seems to have little connection to whether they have a sustainable business model.

Add a comment
(This post first appeared on my Patreon page.)

I had the opportunity to testify last week before the House Rules committee on Medicare for All. Incredibly, this was apparently the first time the topic had been explicitly addressed in a congressional hearing. In my testimony, I argued that a Medicare for All program would be affordable, but the key factor was reducing the cost of input prices, like prescription drugs, medical equipment, and doctors’ pay. I also briefly laid out what I considered the key features of a transition from the current system. I want to go into this issue in a bit more detail here.

I listed four main steps as being key in the transition:

  1. Fix the current Medicare system;

  2. Allow a Medicare buy-in;

  3. Take measures to reduce input prices;

  4. Lower age of Medicare eligibility to 64.

These four steps should allow for an orderly phase in of a universal Medicare system. They also should quickly provide substantial benefits to most of the population in the form of better quality/lower cost health care.

Add a comment