That point would have been worth making in an article about new drugs approved by the Food and Drug Administration for treating prostrate cancer. According to the article, these drug costs can cost up to $8,000 a month. If the drugs were sold in a free market without patent protection, they would almost certainly sell for less than $100 a month. It would have been worth noting this cost of the patent system for financing prescription drug research.
That point would have been worth making in an article about new drugs approved by the Food and Drug Administration for treating prostrate cancer. According to the article, these drug costs can cost up to $8,000 a month. If the drugs were sold in a free market without patent protection, they would almost certainly sell for less than $100 a month. It would have been worth noting this cost of the patent system for financing prescription drug research.
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The NYT told its readers nothing when it said that California is using an optimistic revenue assumption of an additional $4 billion in revenue next year in order to balance its budget. It is unlikely that even 1 percent of NYT readers have any idea of how large California’s budget is. There is no way to assess the importance of the revenue assumptions or spending cuts discussed in this article without knowing how large the total budget is.
California spends roughly $130 billion a year, so assuming a $4 billion rise in revenue, this would be an increase approximately equal to 3 percent of the budget [corrected — thanks GP].
One of the major reasons that the public is so ill-informed about the budget (at all levels of government) is that reporters routinely report budget numbers without any context. Since almost no one knows how big the total budget is, they don’t realize that many of the items drawing attention from politicians or the media are irrelevant for all practical purposes.
For example, the $1 million Woodstock museum that Senator McCain made a major prop of his 2008 presidential campaign cost 0.00003 percent of the federal budget. If the media had made a point of putting this cost in the context of all federal spending, it is likely that Mr. McCain would have been forced to find a more substantial item in the budget to make an argument about government waste.
The NYT told its readers nothing when it said that California is using an optimistic revenue assumption of an additional $4 billion in revenue next year in order to balance its budget. It is unlikely that even 1 percent of NYT readers have any idea of how large California’s budget is. There is no way to assess the importance of the revenue assumptions or spending cuts discussed in this article without knowing how large the total budget is.
California spends roughly $130 billion a year, so assuming a $4 billion rise in revenue, this would be an increase approximately equal to 3 percent of the budget [corrected — thanks GP].
One of the major reasons that the public is so ill-informed about the budget (at all levels of government) is that reporters routinely report budget numbers without any context. Since almost no one knows how big the total budget is, they don’t realize that many of the items drawing attention from politicians or the media are irrelevant for all practical purposes.
For example, the $1 million Woodstock museum that Senator McCain made a major prop of his 2008 presidential campaign cost 0.00003 percent of the federal budget. If the media had made a point of putting this cost in the context of all federal spending, it is likely that Mr. McCain would have been forced to find a more substantial item in the budget to make an argument about government waste.
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A Washington Post article on the budget negotiations told readers that the battle over the budget:
“has set off an ideological battle across the Capitol.”
It is not clear why anyone would think that members of Congress care about ideology. These are politicians who hold their jobs based on their ability to appeal to powerful interest groups, not their ability to espouse political philosophy. It is reasonable to assume that their stances on the budget involve appeals to these interest groups, some of whom are anxious to avoid higher taxes and some of whom value the government programs that could be cut. There is no reason to assume that ideology has anything to do with this dispute.
A Washington Post article on the budget negotiations told readers that the battle over the budget:
“has set off an ideological battle across the Capitol.”
It is not clear why anyone would think that members of Congress care about ideology. These are politicians who hold their jobs based on their ability to appeal to powerful interest groups, not their ability to espouse political philosophy. It is reasonable to assume that their stances on the budget involve appeals to these interest groups, some of whom are anxious to avoid higher taxes and some of whom value the government programs that could be cut. There is no reason to assume that ideology has anything to do with this dispute.
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The NYT tells us that doctors are really upset that the government is trying to find out how easy it is for patients to get access to their services. The article interviews several doctors who expressed anger that the government plans to have testers call for appointments without identifying themselves as testers. The purpose is to determine how difficult it is for people with various types of insurance (e.g. Medicare and Medicaid) to get appointments.
This is a standard practice for researchers. In fact, it would be outrageous if the government were spending close to $1 trillion a year on various health insurance programs without knowing how effective they were in providing care.
While the NYT did interview some people connected with the government testing program, it should have interviewed some independent experts who could have reaped ridicule on the doctors. Of course no one forces the doctors to practice medicine in the United States. If they find the government too intrusive, as several complained, then they have the option to work in Canada, the United Kingdom or any other wealthy country and earn about half as much.
The NYT tells us that doctors are really upset that the government is trying to find out how easy it is for patients to get access to their services. The article interviews several doctors who expressed anger that the government plans to have testers call for appointments without identifying themselves as testers. The purpose is to determine how difficult it is for people with various types of insurance (e.g. Medicare and Medicaid) to get appointments.
This is a standard practice for researchers. In fact, it would be outrageous if the government were spending close to $1 trillion a year on various health insurance programs without knowing how effective they were in providing care.
While the NYT did interview some people connected with the government testing program, it should have interviewed some independent experts who could have reaped ridicule on the doctors. Of course no one forces the doctors to practice medicine in the United States. If they find the government too intrusive, as several complained, then they have the option to work in Canada, the United Kingdom or any other wealthy country and earn about half as much.
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The NYT has an excellent piece today presenting evidence that the Energy Information Agency has been presenting an overly optimistic picture of potential shale oil reserves as a result of relying on industry claims instead of independent analysis.
It also has a piece on an rule change by the Securities and Exchange Commission that allowed gas companies to claim much larger reserves. Yesterday it ran a piece suggesting (based on internal e-mails and discussions with company insiders) that these companies were inflating their reserves in press releases and other company documents.
This is what newspapers are supposed to do.
The NYT has an excellent piece today presenting evidence that the Energy Information Agency has been presenting an overly optimistic picture of potential shale oil reserves as a result of relying on industry claims instead of independent analysis.
It also has a piece on an rule change by the Securities and Exchange Commission that allowed gas companies to claim much larger reserves. Yesterday it ran a piece suggesting (based on internal e-mails and discussions with company insiders) that these companies were inflating their reserves in press releases and other company documents.
This is what newspapers are supposed to do.
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A Post article on the possible effects of lowering of the loan limit for Fannie and Freddie backed mortgages said this could hurt the “faltering” housing market, pushing prices down further. Of course the current price decline is simply the deflation of a bubble. Nationwide prices still have to fall by around 10 percent to return to their trend level.
The piece is also somewhat confused on the effect that lowering the limit would have. It tells readers that:
“The loan limit [the new limit of $625,500]— down from $729,750 — would have affected about 40 percent of mortgages made in Great Falls if it were in place last year and more than 20 percent of the loans made in expensive areas such as Bethesda, McLean, Chevy Chase, Dunn Loring, Potomac, Fairfax Station and Upper Northwest Washington, according to a Washington Post analysis of data from LPS Applied Analytics.”
Many homebuyers would take advantage of the opportunity to borrow up to the limit when buying a new house because they can get a low interest rate. If the limit were lowered, many of these upper income homebuyers would simply arrange to put up a larger downpayment. In other words, the limit is likely a major factor determining the size of the mortgage.
A Post article on the possible effects of lowering of the loan limit for Fannie and Freddie backed mortgages said this could hurt the “faltering” housing market, pushing prices down further. Of course the current price decline is simply the deflation of a bubble. Nationwide prices still have to fall by around 10 percent to return to their trend level.
The piece is also somewhat confused on the effect that lowering the limit would have. It tells readers that:
“The loan limit [the new limit of $625,500]— down from $729,750 — would have affected about 40 percent of mortgages made in Great Falls if it were in place last year and more than 20 percent of the loans made in expensive areas such as Bethesda, McLean, Chevy Chase, Dunn Loring, Potomac, Fairfax Station and Upper Northwest Washington, according to a Washington Post analysis of data from LPS Applied Analytics.”
Many homebuyers would take advantage of the opportunity to borrow up to the limit when buying a new house because they can get a low interest rate. If the limit were lowered, many of these upper income homebuyers would simply arrange to put up a larger downpayment. In other words, the limit is likely a major factor determining the size of the mortgage.
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In a segment of Morning Edition where Scott Horsley discussed the budget negotiations, he told listeners that we face a large debt because Congress likes to spend money. This is like saying that firefighters spray water on buildings because they like to spray water from hoses.
The proximate cause of the large budget deficit, as every budget analyst knows, is the economic downturn caused by the collapse of the housing bubble. If Congress opted not to spend money, then the economy would have sunk further and the unemployment rate would be considerably higher today.
There are many people who make up stories about out of control government spending. This is not true and NPR’s reporters should know this fact.
In a segment of Morning Edition where Scott Horsley discussed the budget negotiations, he told listeners that we face a large debt because Congress likes to spend money. This is like saying that firefighters spray water on buildings because they like to spray water from hoses.
The proximate cause of the large budget deficit, as every budget analyst knows, is the economic downturn caused by the collapse of the housing bubble. If Congress opted not to spend money, then the economy would have sunk further and the unemployment rate would be considerably higher today.
There are many people who make up stories about out of control government spending. This is not true and NPR’s reporters should know this fact.
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The Washington Post had a clean out the refrigerator front page piece taking pot shots at President Obama for favoring a certain number of politically connected firms in the clean energy business and also using his travel for political purposes.
There are two distinct issues here. Is the president using his travel for political purposes? Do fish swim in the ocean?
Come on folks, this is not serious. There is no front page story in presidents using their travel for political ends, there’s no story period. This is always done. In fact, if it turned out that President Obama’s travel did not seem to fit his political agenda, that would have been an appropriate front page story.
There is a separate issue as to whether the Obama administration has circumvented normal procedures to give government support to political allies. This is an issue and possibly even a front page story, however the piece is too scattered to give a clear sense of the evidence on this point.
The Post would be well-advised to leave the nonsense about political travel in the frig and focus on the allegations of corruption in the loan guarantee process. If there is a clear case here, then present it to your readers.
The Washington Post had a clean out the refrigerator front page piece taking pot shots at President Obama for favoring a certain number of politically connected firms in the clean energy business and also using his travel for political purposes.
There are two distinct issues here. Is the president using his travel for political purposes? Do fish swim in the ocean?
Come on folks, this is not serious. There is no front page story in presidents using their travel for political ends, there’s no story period. This is always done. In fact, if it turned out that President Obama’s travel did not seem to fit his political agenda, that would have been an appropriate front page story.
There is a separate issue as to whether the Obama administration has circumvented normal procedures to give government support to political allies. This is an issue and possibly even a front page story, however the piece is too scattered to give a clear sense of the evidence on this point.
The Post would be well-advised to leave the nonsense about political travel in the frig and focus on the allegations of corruption in the loan guarantee process. If there is a clear case here, then present it to your readers.
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That is what readers are asking after seeing an NYT article in which several economists expressed surprise over the continuing weakness of the economy. What is surprising in this picture? What sector did they expect to give a boost to the economy that fell short?
The special cues to the ignorance of the economists interviewed is the seeming surprise at the continuing drop in house prices. Do these economists still not know about the housing bubble? It almost crashed the financial system and is the cause of the current downturn. Can you actually get paid to be an economist and still not know about the bubble?
Of course if you knew about the bubble then you are not surprised that house prices are continuing to fall. Prices have to fall by about 10 percent in real terms to get back to their long-term trend. This means that the decline in house prices over the last half year should have been entirely predictable.
The economists cited in this article also seemed surprised that consumers aren’t spending more. Economists who know about the economy are the surprised that consumers are still spending as much as they are. The savings rate plummetted in the 90s and 00s as a result of the wealth created by the stock and housing bubbles. This is the result of the “wealth effect” whereby more wealth in assets leads to more consumption and less savings. This effect has been a central part of economics for more than 70 years.
With the housing bubble largely deflated, and the ephermal wealth that it created largely gone, savings rates are rising back to their historic level. If anything, the surprise is why consumption is so high, not why it is so low.
Source: Bureau of Economic Analysis. (Click here for a larger version.)
(Sorry about the mess of a graph — my Microsoft program was updated and in keeping with their proud tradition, the new version is much clumsier than then the old one.)
That is what readers are asking after seeing an NYT article in which several economists expressed surprise over the continuing weakness of the economy. What is surprising in this picture? What sector did they expect to give a boost to the economy that fell short?
The special cues to the ignorance of the economists interviewed is the seeming surprise at the continuing drop in house prices. Do these economists still not know about the housing bubble? It almost crashed the financial system and is the cause of the current downturn. Can you actually get paid to be an economist and still not know about the bubble?
Of course if you knew about the bubble then you are not surprised that house prices are continuing to fall. Prices have to fall by about 10 percent in real terms to get back to their long-term trend. This means that the decline in house prices over the last half year should have been entirely predictable.
The economists cited in this article also seemed surprised that consumers aren’t spending more. Economists who know about the economy are the surprised that consumers are still spending as much as they are. The savings rate plummetted in the 90s and 00s as a result of the wealth created by the stock and housing bubbles. This is the result of the “wealth effect” whereby more wealth in assets leads to more consumption and less savings. This effect has been a central part of economics for more than 70 years.
With the housing bubble largely deflated, and the ephermal wealth that it created largely gone, savings rates are rising back to their historic level. If anything, the surprise is why consumption is so high, not why it is so low.
Source: Bureau of Economic Analysis. (Click here for a larger version.)
(Sorry about the mess of a graph — my Microsoft program was updated and in keeping with their proud tradition, the new version is much clumsier than then the old one.)
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The NYT ran an article noting that homeownership rates in the UK are dropping which it attributed to the fact that, “disposable income has shrunk and loan requirements have toughened.”
However somewhat later in the article it notes that:
“One reason homeownership remains attractive in Britain is because property values dropped less drastically than in the United States, in part because of a shortage in housing. Prices in some large cities, including London, have even increased recently.”
If there really is a shortage of housing, then the tighter loan requirements, which are a main focus of the article, have nothing to do with the declining rates of homeownership. If loan requirements had remained lax, and nothing had changed to the supply of housing, then it would simply mean that prices would rise further and more people would be priced out of the market due to high house prices rather than tough loan conditions.
The ability of people in the UK to be homeowners is limited by the supply of housing. If there is really inadequate supply, as this article contends, then the terms of mortgage loans and even levels of disposable income will not affect homeownership rates.
The NYT ran an article noting that homeownership rates in the UK are dropping which it attributed to the fact that, “disposable income has shrunk and loan requirements have toughened.”
However somewhat later in the article it notes that:
“One reason homeownership remains attractive in Britain is because property values dropped less drastically than in the United States, in part because of a shortage in housing. Prices in some large cities, including London, have even increased recently.”
If there really is a shortage of housing, then the tighter loan requirements, which are a main focus of the article, have nothing to do with the declining rates of homeownership. If loan requirements had remained lax, and nothing had changed to the supply of housing, then it would simply mean that prices would rise further and more people would be priced out of the market due to high house prices rather than tough loan conditions.
The ability of people in the UK to be homeowners is limited by the supply of housing. If there is really inadequate supply, as this article contends, then the terms of mortgage loans and even levels of disposable income will not affect homeownership rates.
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