Beat the Press

Washington Post Corrects Mexico's Post-NAFTA Growth Rate

It took 43 days, but the Washington Post did finally correct an April 17th news story that had Mexico's economy growing at a 17.5 percent annual rate in the period since the passage of NAFTA. This is longer than one would hope, and it required much more prodding from my colleagues at CEPR than should have been necessary, but it is still good to see that the paper felt a responsibility to correct such a blatant mistake. --Dean Baker

Immigrant Labor and Supply and Demand

The Times had an article this morning that explained the immigration problem in very simple terms, "this many jobs; only this many visas." As the article reports, there are a huge number of less-skilled jobs waiting to be filled by immigrants, but almost no visas are available for immigrants to come across the border and work at these jobs legally. To prove this case, the article quotes Stephen P. Gennett, president of the Carolinas chapter of the Associated General Contractors of America (a builders' trade group), "we have a problem here, a people shortage." While Mr. Gennett is undoubtedly knowledgeable about the state of the labor market for construction workers, he also represents an organization that has a clear interest in this issue, they want cheap labor. Ordinarily, the claim that there is a people shortage would imply that wages are rising at an extraordinary rate. (This is the way economists ordinarily think about markets, shortages mean higher prices.) This means that...

Do Trade Agreements Have to Be "Free"

I am continually amazed by the apparent need that reporters feel to describe the trade agreements negotiated by the U.S. government as "free trade" agreements. (See the Times article on the Colombian elections for the current target of my wrath.) What possible additional information do reporters and editors believe that they are conveying by including the word "free?" As I have written elsewhere, these agreements do not free all trade -- there are still substantial obstacles facing Colombian doctors, lawyers, and other professionals who would like to sell their services in the United States. This agreement also increases protectionist barriers by stengthening patent and copyright protection. (Even if you think these protections are good, they are still forms of protection.) So, why don't these reporters just save themselves a word and more accurately describe these pacts as simply "trade agreements." --Dean Baker

Right Wing Law and Economics: Free Market Economics at NPR

National Public Radio had a piece this morning about how some think tanks committed to "law and economics" (applying economic principles to the law) were hosting seminars for judges. The segment asserted that these think tanks, which purportedly receive large contributions from the tobacco industry, the oil industry, and other industry lobbies, are committed to free market economics. This should have been one of those paid public relations spots that helps NPR pay the bills. The tobacco industry does not want to be held responsible for things like marketing to children or concealing evidence of the danger of cigarettes. The oil industry doesn't want to be held accountable for the damage that oil does to the environment. Since when is the effort to avoid being accountable for the damages you cause free market economics? If I burn down by neighbor's house (accidentally), and then argue in court that I shouldn't have to pay for rebuilding, is that free market economics? According to NPR...

American Idol Special: Was the Vote Kosher?

First, Beat the Press extends its congratulations to Taylor Hicks, the new American Idol. Now, for the serious question, was the vote fair? The issue here has to do with the voting mechanism. As we know the vote took place through phone-in voting. (People could also text message in their favorites). The problem is that the enthusiastic response by Idol fans often left the phone lines busy. For example, the Washington Post Idol wrap-up reported that a special on-line speed dialing service was able to get through with less than one-quarter of its calls. If most calls don't get through, then the votes recorded for each contestant will end up being roughly the same, regardless of how many people intended to vote for them. This can be seen with a simple example. Suppose the system accepts 10 calls a minute for each contestant (they had separate phone numbers). Now suppose that Katharine McPhee had 1000 calls and Taylor Hicks had 2000 calls. Since the system will only accept 10 calls a...

Can We Buy New Home Sales Data?

The Commerce Department's data for new home sales in April showed a 4.9 percent increase from March. Many news reports took this as evidence of the continued strength of the housing market. A bit of caution is appropriate here. First, monthly data are always erratic. This should be a mantra for anyone trying to track the economy. If a particular data source shows data that are out of line with other data we have on the economy, then it was probably driven by some quirk in the data. Second, the new home sales data show contracts signed, not actual sales. The difference is the number of contracts that are cancelled. A year ago, when buyers thought that prices were going through the roof, cancellations were relatively rare. Now there are reports of cancellation rates in the neighborhood of 20-30% in some markets. This means that completed sales may actually be dropping, even if contracts are rising. There is evidence for this proposition in the April report. The inventory of unsold homes...

Problems With Venezuelan Numbers

It appears that Mexico is not the only Latin American country for which the media have difficulty with official statistics. Apparently, the media have been anxious to tout high poverty numbers for Venezuela. The problem appears to be that they want to cite poverty data for 2004, which showed a large upturn in the poverty rate in the immediate wake of a strike in the oil sector. The Venezuelan economy rebounded sharply, beginning in 2004, and the poverty rate predictably fell back below its previous levels. However, even though the 2005 data is now available, the media continues to use the much higher numbers from 2004. My colleagues at CEPR posted a short piece on Venezuelan poverty today. --Dean Baker

Rising Wages for Nurses? Nanny State to the Rescue

The New York Times had an article today that could have badly used a bit of economic analysis. The article reports on a provision in the Senate immigration bill that removes the cap on the number of nurses who can enter the country each year. The problem, as described in the article, is that the country faces a large and growing shortage of nurses. The decision to turn to immigrants is striking, since this is not what Congress did to meet the large shortages of doctors, lawyers, accountants, economists, CEOs and other occupations that draw very high wages. In other words, the Senate is making a decision to consciously try to depress the wages of nurses, in a way that it has not done for other professions that command high wages. It would have been reasonable to ask why nurses are being singled out in this way. There certainly is no economic argument for holding down the wages of nurses but not the wages of workers in more highly paid occupations. --Dean Baker

Washington Post Still Believes in Mexico's Post-NAFTA Growth Miracle

It is now 36 days since the Washington Po st published an article that reported that Mexico's economy has grown at a world record 17.5 percent annual rate since NAFTA was implemented in 1994. (According to IMF data, annual growth averaged 2.9 percent.) They have refused to print a correction despite repeated calls and e-mails from my colleagues at CEPR. The Post has a very strong policy on correcting errors, which was printed in a recent column by the ombudsman ("Policy vs. Reality in Correcting Errors" 5-7-06; B 6): "The Washington Post is committed to correcting all errors that appear in the newspaper, just as we are committed to the kind of careful journalism that will minimize the number of errors we print. Preventing and correcting mistakes are two sides of the coin of our realm: accuracy. Accuracy is our goal, and candor is our defense." -- The Post Stylebook As I noted before, the Post had taken a strong editorial stand in support on NAFTA. I will allow them to explain this...

What if Money Managers Had to Work for a Living?

The Times had an article this morning about the effort by stock exchanges to merge across international borders. At one point, it comments about fears that this trend could make it easier for companies to shop among stock markets in order to list their shares in the country with the least restrictive accounting and reporting rules. This is a reasonable concern. It is a safe bet that if companies can evade regulations that cost them money, they will. But, there is a very important implicit assumption in this story which is worth noting, that investors don't value the regulations that impose high standards for corporate accounting. This is probably an accurate assumption, but one that deserves to be examined more closely. The Sarbanes-Oxley Act, and other examples of regulatory tightening, was prompted by massive fraud at companies like Enron, WorldCom, and Global Crossing. These companies were able to get away with their fraud because money managers that control billions of dollars of...

The Times Versus Bush on the Deficit and the Dollar

The lead editorial in Saturday's New York Tim es noted the recent drop in the dollar. It then blamed President Bush's deficits and warned of an impending recession unless the budget deficit is reduced. As best I can tell, the editorial was incoherent, like much of the discussion on the trade deficit and the budget deficit. In the last quarter century, the conventional wisdom on the relationship between the dollar and the budget deficit has changed almost as frequently as the seasons. It may not be surprising that politicians would change their views on how the economy works whenever it is convenient. It is a bit more disappointing that the media would show similar flexibility. In the old days, economists used to say that large budget deficits lead to higher interest rates in the United States. When interest rates in the United States rise, more people want to hold dollar denominated assets (e.g. government bonds or money market accounts in U.S. banks). This increases the demand for...

The Fed and the Housing Bubble: Fool Me Once, …..

The financial press eagerly reported Federal Reserve Board Chairman Benjamin Bernanke's comments this week saying that he expected a gradual softening of the housing market, not a serious collapse. Mr. Bernanke's comments may reflect his true view of the housing market. However, it is also possible that these statements were made simply to soothe the financial markets. One of the most fascinating stories in the stock bubble was Alan Greenspan's view of the Fed's proper role in dealing with the bubble. Following the bubble's collapse, Greenspan has publicly stated that he recognized the stock bubble, but thought it was inappropriate for the Fed to take any steps to reign in the bubble. This included saying anything publicly about the bubble. Greenspan's comments about the stock market as it was soaring to unprecedented price to earnings ratios were carefully crafted comments of noncommittal nonsense. He never said that a 5000 NASDAQ could be justified by fundamentals, but he was also...

The Power of the Press: Congress Takes Back Tax Breaks for Big Oil

The New York Times had an article this morning about efforts in Congress to renegotiate federal oil and gas leases that gave the industry a windfall projected to be $20 billion over the next 25 years. The sums at stake are not huge for the country or the industry (the $800 million annual windfall is less than 1 percent of the industry's current profits), but the story does show the impact that the media can have when they do their job. The windfall was part of the energy bill approved by Congress last year. It included a provision that gave an incentive for the industry to drill in deep water off the U.S. coast, by not requiring royalty payments. The prior energy bill also included this incentive, except royalties would be required if the price of oil crossed $34 a barrel. The new energy bill dropped the $34 threshold provision, making all oil and gas from these wells royalty free. Times reporter Ed Andrews wrote a series of pieces earlier this year exposing this little-known clause...

Budget Reporting Without Context

The Times ran a piece this morning on a budget resolution passed by the House last night. According to the article, the resolution provides for a substantial increase in defense spending (not counting war expenditures) and some degree of cuts for everything else. However, it is not clear where (if anywhere) adjustments have been made for inflation (now between 3.0-4.0 percent) so I doubt that many readers have any clear sense of what spending changes would be implied by this resolution for a $2.7 trillion budget ($2.8 trillion on NPR). In fairness, this bill was passed at 1:00 A.M. and the Senate will almost certainly not approve it, but if it was worth writing about, it was worth writing about in a way that provided information to readers. --Dean Baker

The Conservative Nanny State in html

To increase sales, we now have my new book, The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer , available for free download in html format . It is still possible to get a free PDF download, or you can also order a paperback copy. Also, for those interested in asking questions on the book, or just questioning my competence and integrity, I will be guest blogging at Maxspeak on Wednesday, May 24, from 1:00-2:30 (EDT). --Dean Baker