Beat the Press

European Union Enlargement and Mexico

Both the Clinton and Bush administrations were eager proponents of European union expansion, calling on the EU to quickly admit the former Soviet bloc countries, as well as Turkey. The media have typically presented resistance to rapid expansion as reflecting perverse European fears of globalization. The Post had another piece in this vein this morning. In assessing this resistance to expansion, it would be helpful to point out that the EU is more than just a NAFTA type trading bloc. It is a quasi-state, that in principle allows free movement of people and workers across borders and provides for substantial subsidy flows from richer regions to poorer ones. In this context, the people who oppose rapid ascension of the considerably poorer countries of east Europe and Turkey are showing the same sort of perverse fears as those people who oppose free entry of Mexican workers into the United States and a committment to use federal tax revenue to quickly bring Mexico up to U.S. living...

Immigration ID Logic

Perhaps I'm missing something, but it seems that there is an obvious flaw with President Bush's proposal to have a tamper proof identification card for guest workers. As I understand it, under his program guest workers would be required to present this ID to employers when they get a job. The flaw in the logic is that all workers are already required to present ID to employers showing that they are either a U.S. citizen or have legal authorization to work in the United States. The problem is that the necessary documents can be readily forged, which is why so many workers are employed illegally. The question is, if the documents accepted for proof of U.S. citizenship can still be readily forged, what difference does it make that the ID for guest workers is relatively secure? If the flaw in the president's plan has been reported, I have not seen it. --Dean Baker

No Fun With Numbers: Another Cost of Intellectual Property

The Times had a piece this morning about how Major League Baseball is suing to prevent fantasy baseball games from using players' statistics without paying a licensing fee. The article tried to be fair in presenting the views of both parties as well as independent legal scholars. What is missing from the discussion is any independent economic analysis. The lack of economic analysis in articles on efforts to extend intellectual property has been an ongoing problem in the media (read the discussions of the legal battles over Napster and related services). This would be comparable to reporting on the debates over agricultural protections without ever referring to their economic costs. The economics profession has not been very good in its treatment of intellectual property (IP) issues, but that should not give the media an excuse to ignore the often sizable economic impact of IP controversies. --Dean Baker

Two Points on Health Care

Since questions continually arise on my health care postings, I will make a couple of points here that do not directly relate to the news coverage. First, health care costs have posed a problem everywhere, but nowhere do they pose as much of a problem as in the United States. If we look at the OECD data , in 2003 (the most recent year available) the United States spent 15.0 percent of its GDP on health care. The next three countries ranked by expenditure as a share of GDP are Switzerland, Germany, and Iceland at 11.5 percent, 11.1 percent and 10.5 percent, respectively. Canada clocks in at 9.9 percent of GDP, Sweden at 9.4 percent, and the United Kingdom at just 7.7 percent. The comparison of GDP shares actually understates the gap in expenditures. Per capita GDP is more than 20 percent higher in the United States than in Europe, primarily because we work more hours. The difference in current expenditure levels is attributable to much more rapidly growing costs in the U.S. than...

The Medicare and Social Security Hoax

Medicare and Social Security costs are projected to soar over the next decade as the baby boomers retire. Medicare and road maintenance costs are projected to soar over the next decade as the baby boomers retire. Health care costs in the United States are out of control, with per capita health care costs rising at rate that is more than 2 percentage points more rapid than the rate of growth of per capita income. If this pattern continues, health care costs will have a devastating effect on the private economy and also on the federal budget because of government health care programs like Medicare and Medicaid. The obvious policy response to the projections of exploding health care costs would be to find some way to fix the U.S. health care system (no other country has a problem of the same magnitude). It is dishonest to portray the issue as a problem of aging, we can afford the costs associated with aging, the problem is our health care system. When the media reports, as the Post did...

Copyrights and Consumers: Not at the Times

The New York Times had an article this morning about a new digital copyright law in France. The main features (according to the article) appear to be a requirement that music downloading services be usable on multiple devices (as opposed to Apple's Ipod monopoly) and a relatively small penalty for unauthorized downloading of copyrighted material. For comments on the law, the Times turned to a representative of Apple, a representative of the recorded music industry, a representative of the software industry, and a business consultant. This would be like writing an article on steel tariffs and only getting comments from the steel companies and their workers. Wouldn't it be appropriate to get some comments from consumer groups or at least economists who could discuss the potential benefits to consumers and the economy from lower prices? --Dean Baker

The Times Discovers Temps in Europe

The New York Times had an interesting article about the growth of part-time and temporary employment in Europe. It notes that in several European countries, 20-30 percent of the workforce is employed either part-time, or on temporary employment contracts, or both. It is good to see this piece, because part-time and temporary employment has been an important part of many European economies for close to two decades. As the article notes, these workers tend to enjoy far less employment protection than do full-time workers. Of course, the article is somewhat misleading in implying that these workers enjoy no protection. The extent to which employment protection extends to part-time and temporary workers varies substantially across countries, but in most countries, part-time and temporary workers enjoy more legal protection than do full-time workers in the United States, who generally can be fired without cause at any time. Part-timers and temps in Europe also generally have health care...

The Conservative Nanny State is Here!

The moment you have all been waiting for has finally arrived. You can download your copy of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer today. The book is available as a free e-book (read chapter 4 for the reasoning). You will soon be able to order paperback copies at Conservativenannystate.org . The book takes issue with the prevailing political metaphor in U.S. politics: that liberals want the government to intervene to promote fairness and equity, while conservatives want to leave outcomes to the market. The book argues that conservatives (or at least those in power) support a wide range of government interventions that have the effect of distributing income upward. This list includes a trade and immigration policy that places less-skilled workers in direct competition with workers in developing countries, while protecting highly paid professionals from the same sort of competition. Another item on the list is Federal Reserve Board...

The New York Times Discovers Sweden

The Times had an article this morning that reports on Sweden's success in sustaining healthy rates of economic growth, while also ensuring a high degree of economic security for its workforce. The article is mostly fair, but is misleading on a few points. For example, the article reports that Sweden overhauled its Social Security system in the mid-nineties and added private accounts. This is true, but it would have been helpful to add that the defined benefit portion of Sweden's system is still approximately one-third larger (relative to wages) than the current U.S. system. The article also reports a common complaint that the official unemployment rate of 4.8 percent substantially understates true unemployment because it excludes the people in government retraining programs. (The article reports that labor unions put the true rate at 8 percent. Labor unions rarely appear as a source for economic data in Times articles.) It is not clear why workers in government funded training...

Post Columnist Advocates Default on National Debt

Washington Post columnist Allan Sloan called for defaulting on the U.S. national debt, or at least a portion of it, in his weekly column today . Mr. Sloan pointed out that the Social Security trustees project that the program will begin drawing on the government bonds in its trust fund in just over a decade. He said that repaying the bonds in the trust fund will be a burden to the government, and that his children, as future taxpayers, shouldn't have to bear this burden. Mr. Sloan probably would object to describing his column as a call for default on the national debt, but this in fact exactly what it is. In the column, he implicitly derides the legitimacy of the bonds held by Social Security by calling them IOUs. Of course all bonds are IOUs, but they are never described this way in normal discussions. Under the law, the bonds held by the Social Security trust fund are legal obligations of the federal government. Social Security bought these bonds with the excess Social Security...

Dying Children and Numbers in Context

A New York Times article this morning, reporting that up to 4 million infants die every year for the lack of very simple medical care items, provides a classic example of reporting numbers out of context. The article informs readers that the Bush administration proposes to spend $323 million in 2007 on aid for maternal and child health care in developing countries, down from $356 million in 2006. Apart from the failure to adjust the spending figures for inflation, very few Times readers are probably aware of the fact that the 2007 appropriation comes to $1.08 per person in the United States, or 0.013 percent of federal spending. This program may or may not be a good use of public money, but it is a trivial item in the federal budget, and readers should be made aware of this fact. --Dean Baker

Missing Fact on British Health Care

The New York Times had an interesting piece on the poor state of the dental care provided by the British public health care system in its Sunday paper. The article reports that people face long waits for even emergency dental care, and that many now turn to private dentists or go to foreign countries for treatment. Readers naturally feel sorry for the plight of Britons with bad teeth and are thankful that here in the United States we have an efficient private health care system. The key fact missing in the story is that Britain spends less than 40 percent as much person for its health care as the United States. Whatever the relative merits of the British mechanism for providing health care and the U.S. system, it would be truly astonishing if the British system could best the U.S. in every category, spending just 40 cents to our dollar. (Britain does much better on life expectancy for its 40 cents.) This article is part of a long series of articles in the New York Times which could go...

Are Wages Rising?

Like everyone else, the media have been confused on this basic question, with the main data sources providing very different answers. Last Friday, the Bureau of Labor Statistics (BLS) released the employment cost index (ECI) which showed a sharp slowing in the rate of nominal hourly compensation growth in the first quarter to an annual rate of just 2.4 percent. This is well below the rate of inflation, which, depending on the course of gas prices, will be in the range of 3.0-4.0 percent for this year. On Thursday, BLS released productivity data, which showed that hourly compensation was rising at an annual rate of 5.7 percent for the same quarter. Further complicating the picture is the employment report that BLS released this morning showing wages rising at a 4.7 percent annual rate over the most recent three months (compared to the prior 3-month average). The picture is not quite as confusing as this may appear. First, the quarterly compensation data from the productivity report...

Correction: Productivity Growth Clocks in at 3.2 Percent

I plead guilty to the same sort of sloppiness I have noted elsewhere. Earlier this week I commented on the coverage of Commerce Department's release of data for March on consumer spending and prices. I then noted that the consensus forecasts for first quarter productivity growth appeared to be too high. I based this on the fact that the hours data reported in the monthly employment reports indicated that hours were growing at close to a 4.0 percent annual rate in the quarter. As it turned out, hours growth was reported as 2.5 percent. What went wrong? Well, the hours data that go into the published index in the employment reports are for production and non-supervisory workers in private non-farm employment. That means that the index excludes the impact of changes in employment and hours for production and supervisory workers. (There are also some private sector workers who are not in the business sector, for example workers in non-profit universities or hospitals.) Since the vast...

Corruption in the Pharmaceutical Industry: Why Is Anyone Surprised?

The New York Times has run many excellent articles over the years describing various forms of corruption in the pharmaceutical industry. (The latest describes the battle over monitoring the prescribing practices of individual physicians.) The one thing missing from these articles is any economic analysis. Every person who has suffered through an introductory economics class has heard the story about how government intervention in the market leads to corruption. Economists always rant above how trade protection or various forms of government regulation inevitably lead to gaming of the system and rent-seeking behavior. If we expect to see such corruption when a tariff or quota raises clothes prices by 15-20 percent, why wouldn't we expect to see such corruption when drug patents raise prices by 200 percent or more? Calling government protection a "patent" or defining it as an "intellectual property right" does not change the economic model one iota. The sort of incentive for corruption...

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