That probably would be have been helpful information to readers of a Washington Post article that told readers:
“Up to $2 billion in U.S. aid could be affected by President Donald Trump’s suspension of security assistance to Pakistan, which is accused of failing to crack down on Taliban militants targeting U.S. personnel in neighboring Afghanistan, a senior U.S. administration official said Friday.”
Almost none of the Post’s readers would have any idea of how much $2 billion means to the United States (or to Pakistan, it’s about 0.7 percent of its GDP). The paper could have saved space by just leaving the numbers out of the article since it wasn’t providing information by including them. Unfortunately, there is a reporter fraternity ritual that requires they use numbers that everyone, including them, know to be meaningless to their audience.
While we’re on the topic, the $2.4 billion in food aid the United States provides to the UN to combat famine in Africa comes to a bit less than 0.06 percent of the federal budget. Many people mistakenly believe that such aid is a major component of the U.S. budget. If newspapers focused on informing their readers, instead of fraternity rituals, perhaps the public would be better informed.
That probably would be have been helpful information to readers of a Washington Post article that told readers:
“Up to $2 billion in U.S. aid could be affected by President Donald Trump’s suspension of security assistance to Pakistan, which is accused of failing to crack down on Taliban militants targeting U.S. personnel in neighboring Afghanistan, a senior U.S. administration official said Friday.”
Almost none of the Post’s readers would have any idea of how much $2 billion means to the United States (or to Pakistan, it’s about 0.7 percent of its GDP). The paper could have saved space by just leaving the numbers out of the article since it wasn’t providing information by including them. Unfortunately, there is a reporter fraternity ritual that requires they use numbers that everyone, including them, know to be meaningless to their audience.
While we’re on the topic, the $2.4 billion in food aid the United States provides to the UN to combat famine in Africa comes to a bit less than 0.06 percent of the federal budget. Many people mistakenly believe that such aid is a major component of the U.S. budget. If newspapers focused on informing their readers, instead of fraternity rituals, perhaps the public would be better informed.
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The NYT had a piece discussing the views of members of the Federal Reserve Board’s Open Market Committee (FOMC), which sets monetary policy, on the course of interest rates over the next year. The piece notes that inflation has consistently been below both the Fed’s 2.0 percent target and the FOMC members projections, as they have consistently over-predicted the impact of tighter labor markets on the inflation rate.
It is worth noting that even the modest inflation we are seeing is largely due to rising rents. A measure of core inflation that excludes rent has risen just 0.6 percent over the last year.
Consumer Price Index, Excluding Food, Energy, and Shelter
Source: Bureau of Labor Statistics.
This matters because rents are driven by a qualitatively different dynamic than most other prices. They depend largely on the ease of building and shortages of land, rather than rising wages. By slowing new construction, higher interest rates are more likely to increase rather than decrease rents, unless the rise goes far enough to lead to a recession and thereby substantially reduce demand.
The NYT had a piece discussing the views of members of the Federal Reserve Board’s Open Market Committee (FOMC), which sets monetary policy, on the course of interest rates over the next year. The piece notes that inflation has consistently been below both the Fed’s 2.0 percent target and the FOMC members projections, as they have consistently over-predicted the impact of tighter labor markets on the inflation rate.
It is worth noting that even the modest inflation we are seeing is largely due to rising rents. A measure of core inflation that excludes rent has risen just 0.6 percent over the last year.
Consumer Price Index, Excluding Food, Energy, and Shelter
Source: Bureau of Labor Statistics.
This matters because rents are driven by a qualitatively different dynamic than most other prices. They depend largely on the ease of building and shortages of land, rather than rising wages. By slowing new construction, higher interest rates are more likely to increase rather than decrease rents, unless the rise goes far enough to lead to a recession and thereby substantially reduce demand.
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Austin Frakt and Aaron Carroll had an interesting Upshot piece in the NYT on why the U.S. spends twice as much per person as other wealthy countries for its health care. The piece cites research pointing out that people in the United States do not use more health care services than people in other countries. The reason that we pay more for health care is that actors in the industry, such as doctors, drug companies, insurers, and medical equipment manufacturers, get more money than their counterparts elsewhere.
The piece concludes by noting a couple of mechanisms for containing costs, but then argues:
“If attempted nationally, or even in a state, either of these would be met with resistance from all those who directly benefit from high prices, including physicians, hospitals, pharmaceutical companies — and pretty much every other provider of health care in the United States.
“Higher prices aren’t all bad for consumers. They probably lead to some increased innovation, which confers benefits to patients globally. Though it’s reasonable to push back on high health care prices, there may be a limit to how far we should.”
It’s striking to see economists reluctant to use mechanisms that would bring payments in the health care in line with payments in the rest of the world because they “would be met with resistance from all those who directly benefit from high prices.”
Efforts to reduce trade barriers that had the effect of destroying jobs and cutting pay for autoworkers, textile workers, and other manufacturing workers were also met with resistance. Economists not only supported these efforts, they treated them as an almost holy cause. They insisted on “free trade,” as the ultimate good.
For some reason, Frakt and Carroll believe that comparable efforts (we can also use trade in the health care sector to reduce costs) to reduce excess payments in the health care sector are a bad idea because the people who would see their pay and income reduced will be unhappy. In this context, it is probably worth mentioning that there is hugely more money at stake in bringing our health care costs in line with the rest of the world than with reducing trade barriers with items like steel and cars. The latter can save us at most a few tens of billions a year. If we paid the same amount per person for health care as people in Canada or Germany, the savings would be more than $1.5 trillion annually, more than $4,000 per person per year.
Austin Frakt and Aaron Carroll had an interesting Upshot piece in the NYT on why the U.S. spends twice as much per person as other wealthy countries for its health care. The piece cites research pointing out that people in the United States do not use more health care services than people in other countries. The reason that we pay more for health care is that actors in the industry, such as doctors, drug companies, insurers, and medical equipment manufacturers, get more money than their counterparts elsewhere.
The piece concludes by noting a couple of mechanisms for containing costs, but then argues:
“If attempted nationally, or even in a state, either of these would be met with resistance from all those who directly benefit from high prices, including physicians, hospitals, pharmaceutical companies — and pretty much every other provider of health care in the United States.
“Higher prices aren’t all bad for consumers. They probably lead to some increased innovation, which confers benefits to patients globally. Though it’s reasonable to push back on high health care prices, there may be a limit to how far we should.”
It’s striking to see economists reluctant to use mechanisms that would bring payments in the health care in line with payments in the rest of the world because they “would be met with resistance from all those who directly benefit from high prices.”
Efforts to reduce trade barriers that had the effect of destroying jobs and cutting pay for autoworkers, textile workers, and other manufacturing workers were also met with resistance. Economists not only supported these efforts, they treated them as an almost holy cause. They insisted on “free trade,” as the ultimate good.
For some reason, Frakt and Carroll believe that comparable efforts (we can also use trade in the health care sector to reduce costs) to reduce excess payments in the health care sector are a bad idea because the people who would see their pay and income reduced will be unhappy. In this context, it is probably worth mentioning that there is hugely more money at stake in bringing our health care costs in line with the rest of the world than with reducing trade barriers with items like steel and cars. The latter can save us at most a few tens of billions a year. If we paid the same amount per person for health care as people in Canada or Germany, the savings would be more than $1.5 trillion annually, more than $4,000 per person per year.
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As of today, I am no longer co-director at CEPR. Eileen Appelbaum, who has been a Senior Economist at CEPR for the last decade, will be replacing me as co-director. Prior to that, she was Distinguished Professor and the director of the Center for Women and Work at Rutgers University in New Jersey, the research director at the Economic Policy Institute, and a Professor of Economics at Temple University in Pennsylvania. CEPR will be in good hands.
I am stepping down after 18 years largely because I want more time for doing the work I enjoy and for pursuing personal interests. When Mark Weisbrot and I started CEPR at the end of 1999 we had no idea what to expect. We were one of the last of the dot.com startups, and unlike many others, we have managed to survive for almost two decades now.
I will keep doing work; there is still plenty of room for critical voices in economic policy debates. But I will no longer have administrative responsibilities at CEPR. Hopefully, this will let me be more productive. I expect to continue Beat the Press in its current form long into the future.
As of today, I am no longer co-director at CEPR. Eileen Appelbaum, who has been a Senior Economist at CEPR for the last decade, will be replacing me as co-director. Prior to that, she was Distinguished Professor and the director of the Center for Women and Work at Rutgers University in New Jersey, the research director at the Economic Policy Institute, and a Professor of Economics at Temple University in Pennsylvania. CEPR will be in good hands.
I am stepping down after 18 years largely because I want more time for doing the work I enjoy and for pursuing personal interests. When Mark Weisbrot and I started CEPR at the end of 1999 we had no idea what to expect. We were one of the last of the dot.com startups, and unlike many others, we have managed to survive for almost two decades now.
I will keep doing work; there is still plenty of room for critical voices in economic policy debates. But I will no longer have administrative responsibilities at CEPR. Hopefully, this will let me be more productive. I expect to continue Beat the Press in its current form long into the future.
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I have not generally been in the business of defending Amazon, but I thought I would throw in a word or two of clarification around Donald Trump’s claim that the U.S. Postal Service is “dumber and poorer” because of its deal with Amazon. Trump’s claim is based on a Citigroup study that found that Postal Service loses an average of $1.46 on each package it ships for Amazon. The Postal Service claims that it profits from its arrangement with Amazon and that it would lose business if it raises its rates.
There actually is a very simple explanation for the differing assessments. The Postal Service has a huge amount of fixed costs in the form of retiree benefits and especially retiree health benefits. Congress has required that the Postal Service pre-fund 75 years of retiree health benefits. This requirement sets the Postal Service apart from private businesses, who do little or no pre-funding of retiree health benefits. It also accounts for almost all of the Postal Service’s losses over the last decade.
But the accounting issue is independent of this requirement imposed by Congress. Essentially what the Citigroup study did was impute the largely fixed cost of retiree health benefits to the various sections of the Postal Service’s business. If these costs are imputed to its delivery of packages for Amazon, the Citigroup study finds they are coming up short by $1.46 a package.
But this is just bad economics. The question for the Postal Service is whether it is recovering its marginal costs — the additional amount spent on labor, gas, wear and tear on vehicles, etc. — with the prices it is charging Amazon. The Postal Service claims it does (I have not tried to check their calculations), and if that is true, the Postal Service is coming out ahead from its deal with Amazon.
So the loss claimed by the Citigroup study is clearly wrong and Donald Trump is wrong to be using it to attack the Postal Service, Amazon, and Jeff Bezos. On the other hand, Amazon has gotten a subsidy worth tens of billions of dollars since its creation as a result of not being required to collect sales taxes in most states for most of its existence. This subsidy almost certainly exceeds its cumulative profits since it was created, so people do have serious cause to complain about Amazon.
I have not generally been in the business of defending Amazon, but I thought I would throw in a word or two of clarification around Donald Trump’s claim that the U.S. Postal Service is “dumber and poorer” because of its deal with Amazon. Trump’s claim is based on a Citigroup study that found that Postal Service loses an average of $1.46 on each package it ships for Amazon. The Postal Service claims that it profits from its arrangement with Amazon and that it would lose business if it raises its rates.
There actually is a very simple explanation for the differing assessments. The Postal Service has a huge amount of fixed costs in the form of retiree benefits and especially retiree health benefits. Congress has required that the Postal Service pre-fund 75 years of retiree health benefits. This requirement sets the Postal Service apart from private businesses, who do little or no pre-funding of retiree health benefits. It also accounts for almost all of the Postal Service’s losses over the last decade.
But the accounting issue is independent of this requirement imposed by Congress. Essentially what the Citigroup study did was impute the largely fixed cost of retiree health benefits to the various sections of the Postal Service’s business. If these costs are imputed to its delivery of packages for Amazon, the Citigroup study finds they are coming up short by $1.46 a package.
But this is just bad economics. The question for the Postal Service is whether it is recovering its marginal costs — the additional amount spent on labor, gas, wear and tear on vehicles, etc. — with the prices it is charging Amazon. The Postal Service claims it does (I have not tried to check their calculations), and if that is true, the Postal Service is coming out ahead from its deal with Amazon.
So the loss claimed by the Citigroup study is clearly wrong and Donald Trump is wrong to be using it to attack the Postal Service, Amazon, and Jeff Bezos. On the other hand, Amazon has gotten a subsidy worth tens of billions of dollars since its creation as a result of not being required to collect sales taxes in most states for most of its existence. This subsidy almost certainly exceeds its cumulative profits since it was created, so people do have serious cause to complain about Amazon.
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The Washington Post ran an article telling readers that employers are finding it difficult to attract qualified workers. As the piece says:
“Firms that save money from the tax cuts may simply be unable to find more workers to hire at the price they are willing to pay.”
This is really the core of the problem. There is apparently a huge skills gap among employers at firms across the country. They don’t seem to understand basic market principles. If they want to hire more workers, then they have to offer higher wages.
There are always workers out there. They may work for a competitor or live in another city, but for a high enough wage they will change jobs or move. According to the Post piece, many employers don’t seem to understand this basic fact, leaving them unable to get the workers they say they need.
The Post piece suggests this problem is widespread. It notes manufacturing and trucking as areas facing serious labor shortages. According to the Bureau of Labor Statistics, the average hourly wage in manufacturing has risen by just 1.6 percent over the last year. That is slightly less than inflation over this period. The average hourly wage has risen by 4.4 percent in trucking over the last year, but this increase comes after a rise of just 1.0 percent in 2016 and a modest decline in 2015. If competent employers were facing a labor shortage, wages would be rising far more rapidly.
It is also worth noting that these labor shortage pieces are 180 degrees at odds with the “robots taking our jobs” story. That is a story of a labor glut. It is incredible that we often see these stories of labor shortages and labor glut running side by side. It would be like having an article warning of bone-chilling cold right next to an article talking about a record heat wave. In principle, one or the other can be the case, but both cannot be true at the same time.
The Washington Post ran an article telling readers that employers are finding it difficult to attract qualified workers. As the piece says:
“Firms that save money from the tax cuts may simply be unable to find more workers to hire at the price they are willing to pay.”
This is really the core of the problem. There is apparently a huge skills gap among employers at firms across the country. They don’t seem to understand basic market principles. If they want to hire more workers, then they have to offer higher wages.
There are always workers out there. They may work for a competitor or live in another city, but for a high enough wage they will change jobs or move. According to the Post piece, many employers don’t seem to understand this basic fact, leaving them unable to get the workers they say they need.
The Post piece suggests this problem is widespread. It notes manufacturing and trucking as areas facing serious labor shortages. According to the Bureau of Labor Statistics, the average hourly wage in manufacturing has risen by just 1.6 percent over the last year. That is slightly less than inflation over this period. The average hourly wage has risen by 4.4 percent in trucking over the last year, but this increase comes after a rise of just 1.0 percent in 2016 and a modest decline in 2015. If competent employers were facing a labor shortage, wages would be rising far more rapidly.
It is also worth noting that these labor shortage pieces are 180 degrees at odds with the “robots taking our jobs” story. That is a story of a labor glut. It is incredible that we often see these stories of labor shortages and labor glut running side by side. It would be like having an article warning of bone-chilling cold right next to an article talking about a record heat wave. In principle, one or the other can be the case, but both cannot be true at the same time.
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The New York Times had an article on President Trump’s plans to cut the US contribution to the United Nations. The article told readers:
“Under a formula tied to economic size and other measurements established under an article of the United Nations Charter, the United States is responsible for 22 percent of the United Nations operating budget, the largest contribution. It paid about $1.2 billion of the 2016-2017 budget of $5.4 billion.
“The United States also is the largest single financial contributor, at 28.5 percent, to a separate budget for United Nations peacekeeping operations, which totals $6.8 billion in the 2017-2018 budget finalized in June.”
This might have led readers to believe that the combined total of slightly less than $3.1 billion is a substantial cost to US taxpayers. In fact, it is slightly less than 0.08 percent of projected federal spending in 2018. While the value of this spending can be debated, it will not lead to major savings to the government if it is cut back or even eliminated altogether.
It would have been helpful if the NYT had made some effort to put this number in context since virtually none of its readers has any idea of the importance of this level of spending as it is written in the piece.
The New York Times had an article on President Trump’s plans to cut the US contribution to the United Nations. The article told readers:
“Under a formula tied to economic size and other measurements established under an article of the United Nations Charter, the United States is responsible for 22 percent of the United Nations operating budget, the largest contribution. It paid about $1.2 billion of the 2016-2017 budget of $5.4 billion.
“The United States also is the largest single financial contributor, at 28.5 percent, to a separate budget for United Nations peacekeeping operations, which totals $6.8 billion in the 2017-2018 budget finalized in June.”
This might have led readers to believe that the combined total of slightly less than $3.1 billion is a substantial cost to US taxpayers. In fact, it is slightly less than 0.08 percent of projected federal spending in 2018. While the value of this spending can be debated, it will not lead to major savings to the government if it is cut back or even eliminated altogether.
It would have been helpful if the NYT had made some effort to put this number in context since virtually none of its readers has any idea of the importance of this level of spending as it is written in the piece.
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