That wouldn’t be such a big problem if he didn’t write on economic issues. This time the problem affects his discussion of past and future efforts at boosting the economy.
Samuelson seems to think that investment and consumption are depressed because of businesses and consumers fears about the economy. If he had access to the economic data, he would know that non-residential investment is almost back to its pre-recession share of GDP (12.3 percent in the most recent quarter compared to an average of 12.8 percent in the years 2005-2007). Given the large amount of excess capacity in most manufacturing sectors, this doesn’t suggest much business pessimism. The consumption share of GDP is at near record highs, exceeded only by the 2011 and 2012 shares, which were boosted by the payroll tax cut.
So neither business investment nor consumption show any evidence of weakness due to pessimism. The obvious basis for continuing weakness is that housing construction is still depressed due to the overbuilding of the bubble years and continued high vacancy rates. Also consumption is lower relative to disposable income than it was during the bubble years because households have lost close to $8 trillion in bubble generated housing equity. Ultimately the problem is that the economy needs some extraordinary source of demand (e.g. large budget deficits or asset bubbles) to replace the $500 billion in annual demand lost to the trade deficit.
The piece also cites John Taylor’s work to claim that the tax cuts that were part of the stimulus had no effect on consumption. Research by David Rosnick and me shows that Taylor’s results on this issue are not robust. Minor changes in specification lead to the conclusion that the tax cuts had a substantial impact on consumption and growth.
That wouldn’t be such a big problem if he didn’t write on economic issues. This time the problem affects his discussion of past and future efforts at boosting the economy.
Samuelson seems to think that investment and consumption are depressed because of businesses and consumers fears about the economy. If he had access to the economic data, he would know that non-residential investment is almost back to its pre-recession share of GDP (12.3 percent in the most recent quarter compared to an average of 12.8 percent in the years 2005-2007). Given the large amount of excess capacity in most manufacturing sectors, this doesn’t suggest much business pessimism. The consumption share of GDP is at near record highs, exceeded only by the 2011 and 2012 shares, which were boosted by the payroll tax cut.
So neither business investment nor consumption show any evidence of weakness due to pessimism. The obvious basis for continuing weakness is that housing construction is still depressed due to the overbuilding of the bubble years and continued high vacancy rates. Also consumption is lower relative to disposable income than it was during the bubble years because households have lost close to $8 trillion in bubble generated housing equity. Ultimately the problem is that the economy needs some extraordinary source of demand (e.g. large budget deficits or asset bubbles) to replace the $500 billion in annual demand lost to the trade deficit.
The piece also cites John Taylor’s work to claim that the tax cuts that were part of the stimulus had no effect on consumption. Research by David Rosnick and me shows that Taylor’s results on this issue are not robust. Minor changes in specification lead to the conclusion that the tax cuts had a substantial impact on consumption and growth.
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The Washington Post told readers that the Republicans are putting together an alternative to the Affordable Care Act (ACA). Unfortunately it substituted Republican talking points for an actual description of the plan.
At one point the article told readers:
“They would prefer to see a shift away from the federal government and to the states, with an emphasis on getting more consumers on private plans.”
In fact the Republican plan explicitly takes away authority from the states. It would have the federal government require states to accept insurance plans offered by other states. This is 180 degrees at odds with what the Post told readers.
This would be comparable to requiring the United States to allow insurance plans from insurers regulated in the Cayman Islands, Panama, or some other tax/regulatory havens. That would take away control from the United States government. This should have been pretty obvious to the Post reporters.
The other part of this claim is also bizarre. The ACA requires that people buy health care insurance from private insurers. What could it possibly mean to say that the Republicans have:
“an emphasis on getting more consumers on private plans.”
This is presumably a line that was focus group tested for appeal, since the Republicans have routinely referred to the ACA as a government takeover of the health care system. However it has no basis in reality and no place in a news article, except as a quote. Even in that case a responsible newspaper would point out to readers that the assertion is not true.
The Washington Post told readers that the Republicans are putting together an alternative to the Affordable Care Act (ACA). Unfortunately it substituted Republican talking points for an actual description of the plan.
At one point the article told readers:
“They would prefer to see a shift away from the federal government and to the states, with an emphasis on getting more consumers on private plans.”
In fact the Republican plan explicitly takes away authority from the states. It would have the federal government require states to accept insurance plans offered by other states. This is 180 degrees at odds with what the Post told readers.
This would be comparable to requiring the United States to allow insurance plans from insurers regulated in the Cayman Islands, Panama, or some other tax/regulatory havens. That would take away control from the United States government. This should have been pretty obvious to the Post reporters.
The other part of this claim is also bizarre. The ACA requires that people buy health care insurance from private insurers. What could it possibly mean to say that the Republicans have:
“an emphasis on getting more consumers on private plans.”
This is presumably a line that was focus group tested for appeal, since the Republicans have routinely referred to the ACA as a government takeover of the health care system. However it has no basis in reality and no place in a news article, except as a quote. Even in that case a responsible newspaper would point out to readers that the assertion is not true.
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The headline of the piece was “manufacturing gains likely to spur Fed’s stimulus cuts.” The actual news was that manufacturing output was reported as rising 0.8 percent in February, reversing most of a 0.9 percent decline in January. It’s a bit hard to see this as solid growth. If we add in December, manufacturing has grown at a 0.4 percent annual rate over the last three months.
Manufacturing output is just 1.5 percent above its year ago level. This has led to a drop in the capacity utilization rate of 0.1 percentage point to 76.4 percent. It is pretty hard to see this as an argument for cutting back stimulus.
The headline of the piece was “manufacturing gains likely to spur Fed’s stimulus cuts.” The actual news was that manufacturing output was reported as rising 0.8 percent in February, reversing most of a 0.9 percent decline in January. It’s a bit hard to see this as solid growth. If we add in December, manufacturing has grown at a 0.4 percent annual rate over the last three months.
Manufacturing output is just 1.5 percent above its year ago level. This has led to a drop in the capacity utilization rate of 0.1 percentage point to 76.4 percent. It is pretty hard to see this as an argument for cutting back stimulus.
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This NYT piece compares life expectancy and health outcomes in Fairfax, Virginia, a wealthy county of Washington suburbs, with McDowell County, West Virginia, a poor coal-mining county in Appalachia. It describes some of the differences in living conditions that have led to a 15-year gap in life expectancies between the two counties. The differences in health outcomes in these counties are attributable to factors that have led to sharp increase in gaps in life expectancy by income across the country.
This NYT piece compares life expectancy and health outcomes in Fairfax, Virginia, a wealthy county of Washington suburbs, with McDowell County, West Virginia, a poor coal-mining county in Appalachia. It describes some of the differences in living conditions that have led to a 15-year gap in life expectancies between the two counties. The differences in health outcomes in these counties are attributable to factors that have led to sharp increase in gaps in life expectancy by income across the country.
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Joe Stiglitz had a nice piece on globalization pointing out that recent “trade” agreements have been largely about shaping rules and regulations to benefit the one percent rather than reducing trade barriers. The strategy of the Obama administration and other proponents of deals like the Trans-Pacific Partnership is to make nonsense claims about the economic benefits of these deals and use ad hominem arguments against the opponents (i.e. call them Neanderthal “protectionists”).
In reality, it is the proponents of these deals who are the protectionists, supporting the barriers that limit competition from foreign doctors and others in highly paid professions. And, one of the main goals of these deals is to increase the strength of patent and copyright protection, often raising the price of the affected items by several thousand percent about the free market price.
Joe Stiglitz had a nice piece on globalization pointing out that recent “trade” agreements have been largely about shaping rules and regulations to benefit the one percent rather than reducing trade barriers. The strategy of the Obama administration and other proponents of deals like the Trans-Pacific Partnership is to make nonsense claims about the economic benefits of these deals and use ad hominem arguments against the opponents (i.e. call them Neanderthal “protectionists”).
In reality, it is the proponents of these deals who are the protectionists, supporting the barriers that limit competition from foreign doctors and others in highly paid professions. And, one of the main goals of these deals is to increase the strength of patent and copyright protection, often raising the price of the affected items by several thousand percent about the free market price.
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Some folks might think that the point of a newspaper is to provide information to readers. Those people have nothing to do with reporting at the Washington Post. That is why, in an article on unexpected state budget surpluses, the paper told readers that capital gains taxes from the initial public offerings of Facebook and Twitter generated $3 billion in unexpected revenue for California, that Florida’s legislature is voting on a $400 million tax cut, and Idaho is projecting an $80 million surplus.
These are all very cute numbers which probably mean almost nothing to 99 percent of Washington Post readers. If the paper was actually trying to inform readers it might have told them that the money from Facebook and Twitter amounts to approximately 3 percent of the state’s revenue for a year. It could have told readers that Florida’s proposed tax cut comes to a bit more than $20 per person and that Idaho’s projected surplus is equal to just under 3.0 percent of its budget.
While most Post readers understand percentages and can relate to to a per person dollar amount, it is unlikely that many are familiar with the size of these states budgets or economies offhand. They could take two minutes to look this information up on the web, but most readers will have less time for this task than the Washington Post’s reporter. In fairness, the piece did point out that a proposal to use $4.6 billion to fund pre-kindergarten programs would take up about 3 percent of the state’s overall budget. (The higher level of implied spending presumably includes money other than what appears in the general budget.)
Some folks might think that the point of a newspaper is to provide information to readers. Those people have nothing to do with reporting at the Washington Post. That is why, in an article on unexpected state budget surpluses, the paper told readers that capital gains taxes from the initial public offerings of Facebook and Twitter generated $3 billion in unexpected revenue for California, that Florida’s legislature is voting on a $400 million tax cut, and Idaho is projecting an $80 million surplus.
These are all very cute numbers which probably mean almost nothing to 99 percent of Washington Post readers. If the paper was actually trying to inform readers it might have told them that the money from Facebook and Twitter amounts to approximately 3 percent of the state’s revenue for a year. It could have told readers that Florida’s proposed tax cut comes to a bit more than $20 per person and that Idaho’s projected surplus is equal to just under 3.0 percent of its budget.
While most Post readers understand percentages and can relate to to a per person dollar amount, it is unlikely that many are familiar with the size of these states budgets or economies offhand. They could take two minutes to look this information up on the web, but most readers will have less time for this task than the Washington Post’s reporter. In fairness, the piece did point out that a proposal to use $4.6 billion to fund pre-kindergarten programs would take up about 3 percent of the state’s overall budget. (The higher level of implied spending presumably includes money other than what appears in the general budget.)
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A NYT commentary by Jeff Sommer told readers that the Fed is not likely to focus much on recent trends in stock and housing prices at its next meeting because asset prices are not part of its mandate. The piece commented:
“Even if such issues [recent trends in stock and house prices] provide a subtext for Fed discussions, the direct effects of Fed policy on the stock and housing markets may not be an explicit part of the Fed’s agenda this week.
“That’s partly because Congress didn’t include financial asset prices in the Fed’s mandate, which is ‘to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.’ Those stable prices referred to items like cars, food and shoes, not to financial assets like stocks and bonds, whose price levels fall outside the Fed’s traditional purview.”
The last two recessions were caused by collapses in asset bubbles. These collapses had enormous impact on employment, as well as inflation and interest rates. It would be absurd for Fed officials to say they will not focus on asset prices because they are not directly part of their mandate.
A NYT commentary by Jeff Sommer told readers that the Fed is not likely to focus much on recent trends in stock and housing prices at its next meeting because asset prices are not part of its mandate. The piece commented:
“Even if such issues [recent trends in stock and house prices] provide a subtext for Fed discussions, the direct effects of Fed policy on the stock and housing markets may not be an explicit part of the Fed’s agenda this week.
“That’s partly because Congress didn’t include financial asset prices in the Fed’s mandate, which is ‘to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.’ Those stable prices referred to items like cars, food and shoes, not to financial assets like stocks and bonds, whose price levels fall outside the Fed’s traditional purview.”
The last two recessions were caused by collapses in asset bubbles. These collapses had enormous impact on employment, as well as inflation and interest rates. It would be absurd for Fed officials to say they will not focus on asset prices because they are not directly part of their mandate.
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Gretchen Morgenson had a column on a new report from the Inspector General of the Justice Department which found that prosecuting mortgage fraud was a low priority, contrary to claims by the Obama administration. Since there is so much confusion on the topic it is worth repeating again what the Justice Department would have done if law enforcement had been its concern.
It’s not a question of simply locking up Jamie Dimon and Lloyd Blankfein and other top bankers, the point would be to build a case from the bottom up. This means going to mortgage agents at Countrywide, Ameriquest, and other major subprime issuers. Investigators would confront them with stacks of improperly documented mortgages and ask them why they put through mortgages with improper or even obviously false documentation.
Folks who took out a mortgage in years prior to bubble know the ordeal involved. You had to bring in your first grade teacher to vouch for your character. Everything had to be properly documented and was closely scrutinized. This was not the procedure that was followed in the bubble years. Justice Department investigators would ask the mortgage agents why they passed through mortgages without proper documentation.
Since this was a widespread practice and not the work of a few rogue agents, presumably office managers told these agents to get mortgages and that proper documentation did not matter. Faced with the risk of jail for committing fraud, it is likely that many agents would be prepared to testify that they were acting on instructions from their branch manager. The investigators would then confront their branch managers with the testimony from their employers and ask them what prompted them to tell employers to ignore standard procedures and pass through improperly documented mortgages. Again, faced the prospect of several years in jail, it is likely that many branch managers would be prepared to testify against their bosses at the corporate headquarters. (The Justice Department has pursued this sort of investigation in going after illegal campaign contributions to Washington Mayor Vincent Gray.)
The same practice would be followed at Goldman Sachs, Morgan Stanley, and the other investment banks that securitized the loans. The folks who were constructing the securities are all smart people who know what a good mortgage looks like. They surely knew that many of the mortgages they were throwing into the pools were not properly documented and almost certainly fraudulent. In these cases the Justice Department investigators would ask the Harvard MBAs whether they are really stupider than rocks.
At least some would admit to not being morons and acknowledge that they knowingly packaged fraudulent mortgages into securities. These bright young ambitious MBAs would then be offered the opportunity to stay out of jail if they told investigators why they thought it was a good idea to package fraudulent mortgages into mortgage backed securities.
Would this process have put Jamie Dimon, Lloyd Blankfein, Robert Rubin and the rest behind bars? Who knows, but we know with certainty that the Justice Department never started on this path so there was no way that the honchos could ever be held accountable for any crimes they did commit. This speaks volumes about the nature of justice in the United States today.
There is one other issue that is worth addressing here. Many commentators have argued that the honchos were foolish, not crooked. They really did believe that the house prices would just keep rising. In this case all the mortgages would end up being good mortgages. (If a bank forecloses on a fraudulent loan where the house has appreciated 20-30 percent, it is not likely to suffer a loss.)
It is entirely possible that the top people at the banks really did believe that the bubble would keep inflating indefinitely, but it is also irrelevant. (The Enron boys may have believed they really had a good business model. That doesn’t change the fact that they broke the law.) The issue at hand is whether they knowingly issued and passed along mortgages that were not documented properly. That is fraud and a criminal act. It doesn’t change anything if they were also stupid.
Gretchen Morgenson had a column on a new report from the Inspector General of the Justice Department which found that prosecuting mortgage fraud was a low priority, contrary to claims by the Obama administration. Since there is so much confusion on the topic it is worth repeating again what the Justice Department would have done if law enforcement had been its concern.
It’s not a question of simply locking up Jamie Dimon and Lloyd Blankfein and other top bankers, the point would be to build a case from the bottom up. This means going to mortgage agents at Countrywide, Ameriquest, and other major subprime issuers. Investigators would confront them with stacks of improperly documented mortgages and ask them why they put through mortgages with improper or even obviously false documentation.
Folks who took out a mortgage in years prior to bubble know the ordeal involved. You had to bring in your first grade teacher to vouch for your character. Everything had to be properly documented and was closely scrutinized. This was not the procedure that was followed in the bubble years. Justice Department investigators would ask the mortgage agents why they passed through mortgages without proper documentation.
Since this was a widespread practice and not the work of a few rogue agents, presumably office managers told these agents to get mortgages and that proper documentation did not matter. Faced with the risk of jail for committing fraud, it is likely that many agents would be prepared to testify that they were acting on instructions from their branch manager. The investigators would then confront their branch managers with the testimony from their employers and ask them what prompted them to tell employers to ignore standard procedures and pass through improperly documented mortgages. Again, faced the prospect of several years in jail, it is likely that many branch managers would be prepared to testify against their bosses at the corporate headquarters. (The Justice Department has pursued this sort of investigation in going after illegal campaign contributions to Washington Mayor Vincent Gray.)
The same practice would be followed at Goldman Sachs, Morgan Stanley, and the other investment banks that securitized the loans. The folks who were constructing the securities are all smart people who know what a good mortgage looks like. They surely knew that many of the mortgages they were throwing into the pools were not properly documented and almost certainly fraudulent. In these cases the Justice Department investigators would ask the Harvard MBAs whether they are really stupider than rocks.
At least some would admit to not being morons and acknowledge that they knowingly packaged fraudulent mortgages into securities. These bright young ambitious MBAs would then be offered the opportunity to stay out of jail if they told investigators why they thought it was a good idea to package fraudulent mortgages into mortgage backed securities.
Would this process have put Jamie Dimon, Lloyd Blankfein, Robert Rubin and the rest behind bars? Who knows, but we know with certainty that the Justice Department never started on this path so there was no way that the honchos could ever be held accountable for any crimes they did commit. This speaks volumes about the nature of justice in the United States today.
There is one other issue that is worth addressing here. Many commentators have argued that the honchos were foolish, not crooked. They really did believe that the house prices would just keep rising. In this case all the mortgages would end up being good mortgages. (If a bank forecloses on a fraudulent loan where the house has appreciated 20-30 percent, it is not likely to suffer a loss.)
It is entirely possible that the top people at the banks really did believe that the bubble would keep inflating indefinitely, but it is also irrelevant. (The Enron boys may have believed they really had a good business model. That doesn’t change the fact that they broke the law.) The issue at hand is whether they knowingly issued and passed along mortgages that were not documented properly. That is fraud and a criminal act. It doesn’t change anything if they were also stupid.
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The Washington Post finds politics to be very confusing. It apparently thinks that the people paid high six or even seven figure salaries to lobby for the pharmaceutical industry are humanitarians trying to advance global health.
Toward the end of an article on efforts by drug companies to get stronger patent-type protections in the Trans-Pacific Partnership (TPP) the Post told readers:
“But pharmaceutical industry advocates worry that without strong global rules, the drug development process will suffer.”
Of course the industry advocates say they “worry” that drug development will suffer, just as the defense lawyer always says her client is innocent. Just as lawyers are paid to defend their clients, lobbyists are paid to promote the case for their client. Newspaper reporters and editors should understand this fact.
It would also be worth mentioning that the protections being pushed by the pharmaceutical industry in this deal will likely worsen inequality and lead to fewer jobs for workers in the United States. They will transfer more money to the shareholders and top executives of the drug companies. They will also leave consumers in the countries who are parties to the TPP with less money to buy U.S. made products.
The Washington Post finds politics to be very confusing. It apparently thinks that the people paid high six or even seven figure salaries to lobby for the pharmaceutical industry are humanitarians trying to advance global health.
Toward the end of an article on efforts by drug companies to get stronger patent-type protections in the Trans-Pacific Partnership (TPP) the Post told readers:
“But pharmaceutical industry advocates worry that without strong global rules, the drug development process will suffer.”
Of course the industry advocates say they “worry” that drug development will suffer, just as the defense lawyer always says her client is innocent. Just as lawyers are paid to defend their clients, lobbyists are paid to promote the case for their client. Newspaper reporters and editors should understand this fact.
It would also be worth mentioning that the protections being pushed by the pharmaceutical industry in this deal will likely worsen inequality and lead to fewer jobs for workers in the United States. They will transfer more money to the shareholders and top executives of the drug companies. They will also leave consumers in the countries who are parties to the TPP with less money to buy U.S. made products.
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