It is fashionable in many circles to warn of the impending bankruptcy of the federal government (see USAToday). Be warned � this is not a story about the evils of Bush�s tax cuts for the rich. These tax cuts are just a footnote. The real villain in the bankruptcy story is the projected explosion in the cost of Medicare and Medicaid. This cost explosion is not due to aging; Social Security costs inch up in these projections � just like they have been doing for the past seventy years. Medicare and Medicaid costs explode in this story because the U.S. health care system is broken and the projections assume that we never fix it.

This is the first posting as a TAP blog, so I thought I would mark the occasion with a comment on the housing bubble. We have enough data at this point (lower sales, rising inventories, falling median prices) that I feel confident in saying that the crash has begun. We don't yet know the speed of the decline or the full repercussions in terms of the financial havoc or the extent of the economic downturn.

Apparently the reporters at MarketWatch can't. An article noting the uptick in labor compensation reported in the second quarter Employment Cost Index reported that Fed Chairman Ben Bernanke said that higher labor costs need not lead to inflation, if they are offset by rising productivity. Well, in the very next sentence Mr. Bernanke also said that higher labor costs could be offset by lower profit margins:

The weak second quarter GDP numbers were driven in part by the housing sector as noted in the NYT. See also the separate piece on the housing market. In addition to the GDP data, the Commerce Department also released data on vacancy rates for the second quarter. The vacancy rate for ownership units hit a new record.

Reporters should always use inflation adjusted numbers when making comparisons of dollar values at substantially different points in time. A dollar is worth much less today than it was 20 or 30 years ago. While most readers may know this, they do not typically have ready access to the consumer price index tables, so they will not generally be able to adjust the numbers themselves.

Several comments and e-mails on my last post on trade expressed confusion about restrictions on highly educated foreign workers in the United States. (There was one complaint about repetition, as long as the press repeats the error, I will repeat the complaint.)

These restrictions take two forms. The first is formal licensing restrictions. The highest paid professionals, like medicine, law, dentistry, and accounting all have licensing requirements. These requirements present a confusing patchwork (in most areas, each state has its own requirements) that makes it extremely difficult for foreign professionals to get licensed to practice their profession in the United States.

It would be nice if reporters were forced to read what they write before it appears in the paper. What do they mean when they say "free trade?"

What makes increasing patent and copyright protection (an essential part of recent U.S. trade agreements) free trade? These are government granted monopolies. Isn't that obvious? Yes, they serve a purpose in providing incentives for innovation and creative work, but ALL forms of protection serve a purpose, that doesn't mean that they are not protectionism.