Beat the Press

What Would be Evidence of a Housing Bust?

One should never make too much of a single month's data, but yesterday's report of a sharp falloff in existing home sales, price declines throughout most of the country, and record inventories of unsold homes, might be seen as supporting the view that a bubble is bursting, but not in the NYT.

Really Bad Immigration Bill Numbers at the Washington Post (corrected version)

I wrote a short note a couple of days ago about an article in the Washington Post on the immigration bill passed by the Senate. I wrote that the article used an estimate from CBO that was based on an error in the bill's wording that would almost surely be corrected before the final passage.

After someone sent me a note, I reread the CBO report and I realized that the article had correctly reported the spending in the bill, as projected by CBO. However, it had neglected to mention the increase in tax revenue that CBO projected based on the corrected wording.

Bad Housing Market News: The Surprise that Surprises

House prices have stayed even with the overall inflation rate from 1950-1995. Since 1995 they have risen by more than 50 percent in real terms. There has been no remotely comparable increase in rents. As a result, home building has been hugely outpacing the rate of household formation and vacancy rates are at record levels. Given this information, economists should see a bubble in the housing market and expect prices to plummet. Instead, when they see bad news on sales, they are surprised.

The Wall Street Journal Discovers the Housing Bust

Good to see that reporters and my fellow economists are now discovering some of the downsides of the housing bubble. The WSJ now recognizes the problem in part, although we're still only talking about something "harder than a soft landing but softer than a hard landing." But, that's progress.

The article earns a BTP goat prize for failing to note that current house price indices are failing to pick up the full decline in prices because they miss the various concessions (seller paid closing costs, buyer-side realtor bonuses, and seller subsidized mortgages) that sellers often use to move their houses.

NPR�s Counterfeit Reporting on China

NPR ran a piece this morning on �counterfeiting� in China. (Anyone who heard the story knows that NPR disapproves of the practice being discussed, but the term that neutral reporters use is �unauthorized copying.�)

The segment included no economic analysis of the practice, which would point out many of the benefits of unauthorized copies. The segment included no discussion of the relative quality of the authorized copies. Nor did the segment even clarify the extent to which the unauthorized copies are genuinely counterfeit products. (The goods are only genuine counterfeits if the consumers believe that they are buying the brand whose products are being copies.)

From the New York Times Canadian Health Care Bashing Desk

As I have noted before (see �Missing Fact on British Health Care,� May 7, 2006), the New York Times feels the need to periodically run articles on the health care crises in countries with universal health care systems. These articles never make comparisons to the health care situation in the United States, which might help readers put the articles in some context.

Really Bad Immigration Bill Numbers at the Washington Post

The Post had an article on the Congressional Budget Office�s (CBO) estimate of the cost of the recently passed Senate immigration bill that was sure to mislead anyone who reads it. The article�s headline warns that CBO estimated the 10-year cost at $126 billion.

This headline not only commits the common sin of scaring readers with a big number outside of any context (the spending is less than 0.4 percent of projected federal spending), it also fundamentally misrepresents the CBO report. The report is very clear that there was a mistake in the wording of the bill. The $126 billion is an estimate based on the mistaken wording.

Black Market Guitar Picking

The absurdities associated with copyright enforcement in the 21st century seem to be endless. The NYT had an article on another one this morning. Apparently publishers of sheet music are up in arms over guitar tablature sites. These are sites where guitarists pass along tips to each other on how to play particular songs. (I know nothing about guitar playing, so I welcome clarification.) The sheet music publishers argue that these sites, which are accessible at no charge, are a violation of their copyright for the sheet music and should be shut down.

Jobs Without Money? Employment in the Mortgage Banking Industry

Mortgage applications in 2006 are running at a pace that is about one-third lower than the year-round average for 2003. One-third fewer mortgages should mean that revenue is roughly one-third lower. This would presumably translate into a substantial drop in employment in the industry, but not according to the Washington Post.

I.R.S. Cracks Down

The NYT had a good piece this morning about plans by the I.R.S. to turn over 12,500 tax deliquency cases to private collection agencies. There are two interesting features to this story. First, the I.R.S. believes that it will get less money by turning these cases over to private collection agencies than if it pursued the cases itself. (Well, someone has to help out the collection agencies -- life's tough out there.)

Bad Inflation Numbers From BLS

A couple of days ago I commented in passing about the Bureau of Labor Statistics plans to change the way it reports its inflation numbers. I realize that I did not fully understand the issue until a couple of posts clarified the problem.

Currently, BLS reports index numbers and changes only to the first decimal. Remarkably, it computes the monthly change based on index numbers rounded to the first decimal, even though it obviously has the data calculated to many decimals. This can lead to the monthly inflation figure being understated or overstated, depending on the rounding.

Media Use the Social Security Surplus to Hide the Budget Deficit

It is common for people to complain that politicians are using the Social Security surplus to hide the true size of the federal budget deficit. In fact, this is not possible. The media decide which budget numbers the public hears on the news and reads in the newspapers. If they believe that the appropriate deficit numbers include the money borrowed from Social Security, then it is a very simple matter to report this number, regardless of which deficit numbers politicians happen to use. Reporters don�t even have to do the simple arithmetic of adding two numbers together.

Perverse Incentives in the U.S. Health Care System

Economists believe that people respond to incentives. Unfortunately, they pay much too little thought to the incentives that the U.S. health care system gives to providers. The NYT has two very good pieces showing the practical effect of the current incentive structure in today's paper.

Free-Trade Ain�t What It Used to Be

USA Today had a great story about President Bush�s visit to a Harley-Davidson factor in York, Pennsylvania to tout the merits of �free-trade.� The reason why the story was so great is that the plant is in fact a testament to the effective use of protectionist policies to sustain a favored industry.

Don�t take my word for it, here�s the beginning of a 1983 article in the New York Times describing President Reagan�s decision to impose tariffs on imported motorcycles:

�In an unusually strong protectionist action, President Reagan today ordered a tenfold increase in tariffs for imported heavyweight motorcycles.

Premature Celebrations on Inflation

The press treated it as big news that inflation in the core CPI came in at 0.2 percent in July after being 0.3 percent in each of the prior 4 months. The celebration may be premature. While there is some evidence of easing price pressure in the data (lower medical care inflation stands out in this regard), most of the story in July's lower inflation was a 1.2 percent drop in apparel prices. Apparel prices are always erratic, and it is very unlikely that a drop of this size will be repeated. If we construct a non-apparel core CPI, here is what it would have shown since February:

Feb -- 0.209
Mar -- 0.310
April -- 0.278
May -- 0.279
June -- 0.307
July -- 0.268