Beat the Press

Big News: Arithmetic Problems at the Council of Economic Advisors

Economists are supposed to be good at math. It is a great honor for an economist to be appointed as head of the President's Council of Economic Advisors. For these reasons, it should be big news that the person currently holding this position apparently has problems with simple arithmetic.

According to an article carried by Dow Jones Newswire, Ed Lazear, the current chief of the Council of Economic Advisors, claimed that wage growth "seems to be taking off right now." The article reports Mr. Lazear's view that workers now seem poised to get substantial real wage gains.

Silliness on the Budget Deficit

The coverage of the debate over the recent budget numbers has been painful. The arguments on both sides have been far removed from reality. The media should have put in the effort to bring the issue back to earth.

Noble Lies to Promote Korean Trade Agreement?

The prospect of a new trade agreement with the United States has prompted mass opposition within South Korea, as demonstrated by large and angry protests. The International Herald Tribune (IHT) appears to be rising to the occasion, going all out to push the new pact.

The "Social Security and Medicare" Syndrome

Many of the stories on the reduction in the 2006 budget deficit have correctly focused on the fact that the long-term deficit picture still looks pretty awful. However, they have badly misled readers about the reason for the deficit problem. The standard line is that "Social Security and Medicare" costs will explode as the baby boomers retire (e.g. this NYT piece).

Credit Card Debt Soars in May

The initial reports on the Fed's release of consumer credit data for May focused on the slow 2.4 percent annual rate of growth reported for the month. This reporting misses the boat.

There are two major components to consumer credit. The non-revolving component is primarily car loans. This component fell at a 2.0 percent annual rate, reflecting weak car sales.

The other component is revolving credit. This is primarily credit card debt. This component rose at 9.9 percent annual rate in May. This is a sharp acceleration from earlier this year, when revolving debt was actually declining.

And, You Can Read More ......

For those who want to read more of my ramblings, I am guest blogging at the Drum Major Institute this week.

--Dean Baker

The Washington Post Argues for More High-Skilled Immigrants

Okay, I tricked you. The Washington Post ran an article reporting that the wages of high-skilled workers in the Washington area are rising far more rapidly than the wages of less-skilled workers. It attributes this fact primarily to technology that has reduced the demand for less-skilled workers.

Those who believe in market forces would see rising wages as evidence of a labor shortage. In other contexts (e.g. nurses, construction workers, custodians etc.) the Post has reported that the country needs immigrants to deal with such labor shortages. Surprisingly, this article did not include any discussion of the need for more high skilled immigrants.

The NYT Magazine on Immigration

The NYT magazine had a pretty good piece summing up the state of the academic debate on the impact of immigration on the labor market. I have two quick observations.

The piece, like the literature, largely ignores the impact of immigration on housing costs. This is important, because housing is a large chunk of people's expenditures, especially those of low wage workers, who are the focus of the discussion. Examining wages across cities and regions provides little insight if we don't adjust for differences in housing costs, since housing accounts for close to 40 percent of the consumption of low income families.

Creative Stories on Wage Growth in the Washington Post

There was a larger than expected jump of 8 cents in the average hourly wage reported for June. This left some folks scrambling for an explanation. The Washington Post found a creative one, courtesy of "some analysts."

According to these analysts, the more rapid wage growth in June is partly explained by a change in the mix of jobs, with the economy losing low wage jobs in the retail sector and adding jobs in the relatively high-paying manufacturing sector.

The Coin of the Realm

The Washington Post had an interesting piece about whether it still makes sense for the government to mint pennies, given how much they cost to make relative to their value. The article might have asked the same question about the dollar bill. Coins are in general much cheaper to keep in circulation than bills, and given that a dollar today is worth about as much as a quarter was 35 years ago, it might be time for the switch.

The Washington Post's Front Page Editorial on Mexican Elections

The lead headline of the Washington Post this morning was "Mexico Vote Tally Gives Free-Trader a Narrow Victory." Wrong! Felipe Calderon, the candidate who is now ahead in the vote tally to be Mexico's next president is not a free-trader. He has supported increasing copyright and patent protection and shown no special interest in removing protectionist barriers that obstruct free trade in the services of highly paid professionals (e.g. doctors, lawyers, accountants).

The Washington Post does not own the term "free-trade." If they want to identify Calderon by his trade position, they can call him pro-NAFTA. It is more accurate and saves 2 letters.

New York Times Does PR Work for Brazilian Energy Company

Remember the good old days when newspapers didn't just unquestioning print what the powerful tell them? (Okay, maybe they never existed.) Anyhow, a Times article this morning reports that Petrobras, the Brazilian energy company, has invested $50 billion in Bolivia.

W.T.O. Mysteries in the Washington Post

Economists always like to talk about the ideal situation of perfectly competitive markets. This is the world in which there are vast numbers of buyers and sellers so that no individual buyer or seller can affect the price. In this world, every producer is a price taker. This means that the price is set by the market, and they can sell as much as they want to produce at the prevailing market price.

In the real world, this is not an accurate description of most markets, which have a relatively limited number of sellers. The one market that does seem to fit the competitive story reasonably well is agriculture. Farmers see a price in the market for corn, wheat, soybeans, etc. and they can sell as much as they choose at this price.

Xenophobia at the New York Times

The New York Times editorial page went a bit overboard in its anti-Bush tirade on the budget deficit. The basic point, that the Bush administration deficits are too large, is on the mark. (By the way, they could better make this point using the gross deficit [4.0 percent of GDP], which includes the money borrowed from Social Security, or better yet, just report the change in the ratio of gross debt to GDP.)

Getting Tough on Immigrants Seeking Health Care

To paraphrase my friend Brad DeLong, "why oh why do newspapers have to use meaningless numbers when it is so easy to provide information." Today's example is a Washington Post article about a new rule that requires people to show proof of citizenship before they can be covered by Medicaid.

The article includes much useful information and comments from both proponents and opponents of the rule. Then it tells us that the Congressional Budget Office estimates that this rule will save Medicaid $735 million over the next decade.