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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It is far too common for progressives to accept the right’s framing of economic issues. In the standard story, the right portrays itself as the champion of free markets. The image is of the rugged individualist who struggles against the current to come out ahead. They want to be able to make their way in business without the help or hindrance of the government.

In this story, liberals mess everything up by bringing in the government. They are so concerned that some people could get hurt that they bury businesses in bureaucracy and red tape, not only hurting profits but slowing growth and job creation, thereby hurting even the people they were trying to help. That is a worldview that is favorable to the right’s story – after all, who wants to stifle the economy?

I have written much to attack this worldview. My main point is that conservatives like the government just as much as liberals and progressives. The difference is that they want the government to act to redistribute income upward – and that they are smart enough to try to hide the role of government. That way they can say that their riches were just the result of talent and hard work. (This is the point of my book Rigged [it’s free].)

We got a great example of this turning of reality on its head in an otherwise excellent New York Times article on how it appears that Education Secretary Betsy DeVos intervened to ensure that a for profit college run by a political ally (Dream Center) could stay in business even after it was clear that it was about to go bankrupt. According to the piece, the Education Department’s actions allowed students enrolled in the school to continue to get government loans, even though there was little likelihood the school would survive long enough for them to graduate.

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I'm asking because in an otherwise very reasonable column on doctors' pay, Washington Post columnist Catherine Rampell suggests that if Medicare for All cut doctors pay, that they might "otherwise go into even higher-paying careers, like finance." In fact, almost all doctors are in the top two percent of the pay ladder for U.S. workers and many are in the top one percent. It is not plausible that the vast majority have higher-paying alternatives that they could otherwise pursue.

Doctors do go through years of training, and many work long hours. (They also have large debts from medical school, which is an issue, but grossly exaggerated.) Many other workers also have years of training and work long hours and get much lower pay.

In addition, there are hundreds of thousands of very smart and ambitious people elsewhere in the world who would be happy to study to U.S. standards and work for much lower pay than our doctors receive. They are prevented from coming here by protectionist measures.

For some reason "free traders" rarely seem bothered by protectionist barriers that inflate the pay of high end workers. In this case, these barriers cost us close to $100 billion annually, compared to a scenario in which doctors in the U.S. received pay that was comparable to pay in other wealthy countries. This is far more than the cost of Trump's tariffs, which have gotten economists quite excited.

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Readers must be wondering because it happens so frequently in contexts where it is clearly inappropriate. The latest example is in an article about the state of the race for the Democratic presidential nomination following the second round of debates.

The piece told readers:

"After a few candidates used the Detroit debate to demand that Mr. Biden account for Mr. Obama’s record on issues such as deportations and free trade, Mr. Biden was joined by some of the former president’s advisers, who chastised the critics for committing political malpractice."

The word "free" in this context adds nothing and is in fact wrong. The Obama administration did virtually nothing to promote free trade in highly paid professional services, like physicians' services, which would have reduced inequality. It only wanted to reduce barriers that protected less-educated workers, like barriers to trade in manufactured goods.

And, it actively worked to increase patent and copyright protections, which are the complete opposite of free trade. These protections also have the effect of increasing inequality.

Given the reality of trade policy under President Obama, it is difficult to understand why the New York Times felt the need to modify "trade" with the adjective "free." Maybe it needs to get this editing program fixed.

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No one expects serious budget reporting from the Washington Post, so we might as well have some fun with the ridiculous items it gives us under this pretext. It had a major article about the Senate approval of a bipartisan plan which it tells readers, "increases military and domestic spending by $320 billion over two years compared to existing law. It increases overall discretionary spending from $1.32 trillion in fiscal 2019 to $1.37 trillion in 2020 and $1.375 trillion in 2021."

So the gist of the story, as told in the first sentence, was that the deal "boosts spending," this is really only true relative to a baseline under which spending would be cut. The increases in law are actually slightly less than projected inflation over this period and considerably less than GDP growth, meaning that spending will decline as a share of GDP.

It would have been helpful to point this fact out to readers. The piece instead implies that this is an example of profligate spending.

To support this view, we get the quote from Florida Senator Rick Scott:

"I’m worried about the staggering debt we’re leaving for our children and grandchildren. ... Too often in Washington, compromise means both sides get everything they want so that no one has to make a tough choice. I can’t support that."

If Rick Scott were actually concerned about the burdens that the government is imposing on our children and grandchildren he should be looking at the costs of patent and copyright rents that result from these government-granted monopolies. These rents are running close to $400 billion a year in the case of prescription drugs alone. If we sum all the patent and copyright rents in the economy, it could exceed $1 trillion a year.

Granting patent and copyright monopolies is an alternative way for the government to pay for services as opposed to direct spending. Anyone who is seriously concerned about burdens created for our children would have to consider the cost of these monopolies. Otherwise, they are just looking to score cheap political points and richly deserve public ridicule.

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A Washington Post piece on the issues surrounding a rate cut this week by the Federal Reserve Board missed many important points. First, and most importantly, it never once mentioned that inflation has been persistently below the Fed's 2.0 percent target. This matters both for the Fed's credibility and more importantly as a protection policy in the next downturn.

On the first point, the Fed has repeatedly stated that its 2.0 percent inflation target is an average, not a ceiling. That means that the inflation rate must occasionally rise above 2.0 percent in order for the average to be 2.0 percent. Inflation in the core personal consumption deflator, the rate targeted by the Fed, has not exceeded 2.0 percent since the Fed Chair Ben Bernanke adopted it as an official target in 2012. If Fed policy is not consistent with achieving the 2.0 percent inflation target, then markets will not believe the Fed is committed to this target.

The other side of this is that we know that there will be another recession at some point. Inflation almost always falls in a recession. If we go into a recession with a 1.5 percent inflation rate (the figure for the last twelve months) then we are likely to see inflation fall very close to zero in a downturn. This matters because the Fed would like to have a large negative real interest rate (the nominal rate minus the inflation rate) in a recession. If inflation is near zero, then even with a zero federal funds rate, the real interest rate is only slightly negative.

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I was eagerly (okay, maybe not the right word) awaiting the data revisions that accompanied the 2nd quarter GDP report that came out yesterday. One of the items that often gets substantially revised is profits. I was surprised that initial reports showed the profit share increasing slightly in 2018 from 2017. That surprised me both because I had expected a tight labor market to allow workers to reclaim some of the share they lost to capital in the weak labor market following the Great Recession and because wage growth appeared to be somewhat outpacing productivity growth.

The revised data show a different picture. They show that the profit share fell by 0.4 percentage points in 2018, which means a total drop of 3.2 percentage points from their 2014 peak. If this pace of decline continues, then by 2022 the profit share will be pretty much back to its normal level.

This is good news for workers and also matters hugely for how we think about the economy. There have been many who argue that the shift from wages to profits, which began early in the last decade (I would argue the total is distorted by phony profits earned by the financial industry in the bubble years), is due to increasing monopoly power. This is the story of huge firms like Google, Apple, and Facebook dominating markets. On the other side, many of us think that the bigger story is weaker worker bargaining power due to declining unionization, weaker labor protections, and high unemployment.

If the first group is right, the key to restoring the labor share is breaking up the monopolies. If the second group is right, then the key is to restore workers' bargaining power, most immediately by maintaining a tight labor market. (Higher unionization rates would be great, as are increasing employment protections, but these are a bigger lift than keeping the Fed from raising interest rates excessively.)

The latest data make it look like the weak labor market gang is correct. Of course, there are still good reasons for breaking up monopolies. Also, data will be revised again next year, so the picture may look different in July of 2020.

Btw, as best I can tell, the revised profit data got zero attention in reporting on the GDP release.

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Last week the Washington Post ran a column by Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, one of the many pro-austerity organizations that received generous funding from the late Peter Peterson. The immediate target of the column was the standoff over the debt ceiling, but the usual complaints about debt and deficits were right up front in the first two paragraphs.

“At the same time, the federal debt as a share of the economy is the highest it has ever been other than just after World War II. ….”

“So our plan is to borrow a jaw-dropping roughly $900 billion in each of those years — much of it from foreign countries — without a strategy or even an acknowledgment of the choices being made because no one wants to be held accountable.”

This passes for wisdom at the Washington Post, but it is actually dangerously wrong-headed thinking that rich people (like the owner of the Washington Post) use their power to endlessly barrage the public with.

The basic story of the twelve years since the collapse of the housing bubble is that the U.S. economy has suffered from a lack of demand. We need actors in the economy to spend more money. The lack of spending over this period has cost us trillions of dollars in lost output.

This should not just be an abstraction. Millions of people who wanted jobs in the decade from 2008 to 2018 did not have them because the Washington Post and its clique of “responsible” budget types joined in calls for austerity. This meant millions of families took a whack to their income, throwing some into poverty, leading many to lose houses, and some to become homeless.

At this point, the evidence from the harm from austerity in the United States (it’s worse in Europe) is overwhelming, but just like the Pravda in the days of the Soviet Union, we never see the Washington Post, or most other major news outlets, acknowledge the horrible cost of unnecessary austerity. We just get more of the same, as though the paper is hoping its readers will simply ignore the damage done by austerity.

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I can't say I know anyone who reads Thomas Friedman, but I suppose such people must exist since the NYT keeps running his column. Anyhow, while the guy probably hasn't had a real insight for at least two decades, his column this week really paves new ground in absurdity.

The piece boldly tells readers in the headline, "the answers to our problems aren't as simple as left or right," this followed with the subhead, "the old binary choices no longer work." 

The piece is then filled with small-bore ideas that completely ignore the debates that actually are taking place on the issues he is addressing. More importantly, he completely ignores the fact that the right has soared into unreality land and shows no interest in returning.

To be specific, the right insists that climate change is not happening because, because, well, just because they don't feel like doing anything about it. Is there someone who could tell Friedman this fact?

The right also has no interest in economic policy other than giving more money to rich people. So great ideas for improving the plight of poor children or the position of women in the workforce or anything else that the rest of us might think of as positive are simply off the agenda.

The fact that the right is quite explicitly uninterested in any positive policy changes is obvious to anyone who reads papers like the New York Times. Fortunately for Thomas Friedman, you don't have to read the New York Times to have a column in it. You can just spew nonsense that is totally divorced from reality and collect your paycheck.

Good work, if you can get it.

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Hey, but why would anyone expect otherwise from the Washington Post. The piece gave the outlines of a budget deal between House Speaker Nancy Pelosi and the White House, which is intended to avoid hitting the debt ceiling.

According to the article:

"Agreeing on new spending levels also avoids onerous budget caps that would otherwise snap into place automatically under an Obama-era deal, and indiscriminately slash $126 billion from domestic and Pentagon budgets."

Is this $126 billion over one year or two years? That is not entirely clear from the piece, but it looks like a two-year figure. So how big a deal would this be? My guess is almost none of the Post's readers has any idea how much money the government is projected to spend in the effect categories (discretionary domestic and defense spending) over the next two fiscal years.

According to the Congressional Budget Office, if spending in these categories increased with inflation, it would come to a bit more than $2.7 trillion over the next two years. This means the cuts would have been a bit more than 4.5 percent of spending.

It would be helpful if the Post's budget articles put numbers in a context that is meaningful to their readers.

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(This post was originally published on my Patreon page.)

One of the central themes in Donald Trump’s presidential campaign was that U.S. workers were being badly hurt by trade. His story was that the country had signed bad trade deals that were put together by “stupid” trade negotiators.

Trump’s story was half right. Workers in the United States were badly hurt by trade, a fact that many in the mainstream are still reluctant to acknowledge in spite of overwhelming evidence.

The basic point is a simple one that has a long pedigree in economics dating back to the famous Stolper-Samuelson trade theorem. The United States has relatively more highly-educated workers (college degree or more) than developing countries and relatively fewer less-educated workers (less than a college degree). This means that when we open trade to China and other developing countries, we would expect to see more highly educated workers benefit and less highly educated workers lose.

We saw this story in action in the last decade in a really big way. From 2000 to 2007 we lost 20 percent of all manufacturing jobs in the United States. (This is before the Great Recession; the job loss was due to the explosion of the trade deficit in these years, not the collapse of the housing bubble.) We lost 40 percent of the jobs held by union members in manufacturing in these years.

It is important to remember that the Stolper-Samuelson prediction on non-college educated workers being losers (roughly two-thirds of the labor force) is a balanced trade story. The picture is of course worse when the U.S. runs a large trade deficit, since most of what we import is manufactured goods, a sector which employs a disproportionate number of non-college educated workers.

The Stolper-Samuelson effect is also amplified by the fact that we don’t have free trade in the items produced by the most highly educated workers. Doctors and other highly paid professionals from foreign countries cannot freely compete with our professionals. We have maintained and even strengthened professional barriers that keep pay for our doctors far above levels in other wealthy countries and even further above their pay in the developing world.

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