Beat the Press

If a Financial Transactions Tax Causes Trading to Fall, Then There are Few Costs to Pass On

The Washington Post discussed President Obama's suggestion to impose a tax on banks and including a brief mention of financial transactions taxes. Proposals for such a tax have been introduced in the House by Representative Peter Defazio and in the Senate by Tom Harkin.

After noting these proposals, the article then comments:

"Treasury officials oppose the idea. They warn that banks would try to impose the fee on their customers, shifting the cost partly to the broader economy. A range of legislators and economists share this view, arguing that such a tax would punish small investors and increase the cost of financial services. "

Bad Appraisals Would Not be Low Appraisals

USA Today reports that the National Association of Realtors (NAR) is unhappy about new regulations that require that appraisals be picked independently of the realtor or the bank issuing the loan. According to the article, the NAR complains that the appraisals are being down by inexperienced appraisers who don't understand the local market in which they are evaluating prices.

If this is true then it would be expected that there would be more variance in appraisals, but there is no reason that appraisals should come in consistently low. There is no reason to believe that these appraisers would have a bias towards issuing low appraisals.

--Dean Baker

AP Tries to Find that the Stimulus Does Not Work

Associated Press ran a "stimulus watch" piece in which it discusses a test that seemed designed to show that the stimulus failed. According to the article, the test involved comparing the changes in unemployment rates in counties that received the most amount of stimulus spending for road construction with those that received the least. The study found no differences in the movements in unemployment in these counties.

How Do You Talk About the Deficits Without Mentioning the Wars and The Housing Crash?

In the real world this would be difficult, but not on NPR. Morning Edition had a lengthy segment on the deficit with David Walker, the president of the Peter G. Peterson Foundation, an organization founded by Peter G. Peterson, the billionaire Wall Street investment banker and Commerce Department secretary in the Nixon Administration. Walker was allowed to give his account without any alternative perspectives.

Look for News Articles from the NRA's "Firearms Gazette" at the Washington Post

Andrew Alexander, the Washington Post's ombudsman, gave an argument about the Post's use of copy produced by the Peter Peterson funded "Fiscal Times." This argument can also be used to justify the use of "news" stories generated by any "news" service created by an advocacy group.

Silliness on Productivity

In discussing the December jobs report the Post repeated some of the silliness about productivity that is currently circulating among people who imagine themselves to be knowledgeable about the economy. It told readers that:

"Employers slashed positions more dramatically in the past two years, squeezing more productivity out of remaining workers. That has led many analysts to expect a substantial increase in the number of jobs in the early months of 2010, as companies must hire again just to keep up with demand for their products."

GDP Growth Should Be Measured in Annual Rates

The NYT discussed the release of new data showing the unemployment rate hitting 10.0 percent in the euro zone countries. At one point it notes that the euro zone economies had grown by 0.4 percent in the third quarter.

A Weak October: The Secret of the November Job Gain

Several news stories noted the revisions to prior months' data now show a 4,000 job gain for November. It is important to note that this is not especially positive news. The job gain no reported for November is entirely attributable to the fact that the job loss for October was revised upward by 16,000. The net effect of the revisions to the data for the two months was to show 1,000 more lost jobs than indicated in the prior release. It is difficult to see how this can be viewed as positive.

--Dean Baker

HIndsight Is Not 20-20: The NYT Has the Proof

NYT columnist William Cohan traces the current downturn to the decision to rescue Bear Stearns. In Mr. Cohan's view, if the government did not rescue Bears Stearns, then there would not have been a panic when Lehman collapsed and therefore we would not have double-digit unemployment today.

Someone apparently forgot to tell Mr. Cohan about the housing bubble. They must have also forgot to tell him that the recession began 8 months before the collapse of Lehman Brothers.

Job Growth and Unemployment Claims

A Washington Post article discussed predictions around the December employment report that will be released on Friday. It noted predictions that employment will actually be shown as increasing in this report, noting several pieces of relatively good news, including the fact that the number of weekly unemployment claims had fallen to their lowest level since August of 2008.

The Cadillac Health Care Plan is a Marginal Tax

That point seemed to be missing from an otherwise worthwhile discussion of the issue in the Post. This point is important to understanding its potential consequences.

Falling Home Sales Should Not Have Been a Surprise

The plunge in the Pending Home Sales index in November should not have been a surprise to analysts. The Mortgage Bankers Association applications index for purchase mortgages went into a tailspin in late October, as people could no longer be assured of closing by November 30th, the expiration date for the original first-time buyers tax credit.

Construction Spending Fell in November, Did Anyone Notice?

It seems that the line is that everything is good in the economy these days and we won't take about the things that are not. The Commerce Department reported that nominal construction spending fell by 0.6 percent in November. It also revised down the October data to show a decrease of 0.5 percent after previously reporting no change.

The main culprit is non-residential construction, where a bubble driven boom is rapidly reversing itself, however residential and public construction also fell in the month. Barring an extraordinary turnaround in December, construction spending will knock at least half a percentage point off the growth rate for the fourth quarter. This is newsworthy.

--Dean Baker

A Misadvertised Decline in the Growth Rate of Health Care Spending

The NYT highlighted the slowdown in the growth rate of national health care spending in 2008 to 4.4 percent, compared with 6.0 percent in 2007 and an average of 7.0 percent in the decade from 1998 to 2008. There really is not very much to tout in this story. The slowdown was roughly proportional to the decline in GDP growth. As a result, health care spending measured as a share of GDP rose by 0.3 percentage points, roughly the same rate of growth that it had averaged over the prior decade.

The affordability of health care will depend on its growth as a share of GDP and a growth rate of 0.3 percentage points annually cannot be sustained indefinitely.

--Dean Baker

Samuelson Wrong on Scarcity

The most painful aspect of the economic crisis is that the pain is unnecessary. Ordinarily we think of the economy being limited by the supply of available resources, land, labor, and capital. We can't all have huge houses with servants. In a world where the economy is limited by supply, pain is understandable, even if not acceptable. To give one person more means taking something away from someone else.