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Inertia, Budget Reporting and Starving Children

Dean BakerApr 21, 2006

I had earlier promised to give my explanation for the fact that articles on the budget fail to put budget numbers in a context that would make the millions, billions and trillions meaningful to readers. While laziness is part of the story, the bigger factor is simply inertia, why change? Reporters may agree that it would be very simple and more informative to express budget numbers as percentages of total spending or dollars (or cents) per person, but this is not how their papers did it last year. Including this information is a change, and doing things differently can put you on the spot. In short, since no one put budget numbers in context last year, no one will do it this year.

How Big Is China?

Dean BakerApr 20, 2006

This is not a grand existential question; I am referring to the size of its economy. According to most news reports, China's GDP is approaching $2 trillion, rivaling Germany for the #3 ranking in the world, behind the United States and Japan. In fact, this figure grossly understates the size of China's economy. It is already far larger than Japan's economy and is likely to surpass the size of the U.S. economy in less than a decade.

Surprising News on Mexico at the Washington Post

Dean BakerApr 19, 2006

Readers of the Washington Post might have been surprised to read that since the passage of NAFTA, "Mexico's gross domestic product has ballooned, multiplying nearly seven-fold, from $108 billion in 1993 … to $748 billion in 2005" ("Mexican Deportee's U.S. Sojourn Illuminates Roots of Current Crisis," 4-17-06:A1). This amounts to a world record 17.5 percent average annual rate of growth in the 12 years since NAFTA was implemented.

Budget Deficits and Current Account Deficits

Dean BakerApr 18, 2006

A New York Times story on Iceland provides a good opportunity to discuss the asymmetry in reporting on government budget deficits and national current account deficits. While news of the budget deficit routinely appears prominently on the front pages (in addition to occupying considerable space on editorial and op-ed pages) discussion of the current account deficit is generally relegated to the inner pages of the business section. Since the long-term impact of the two on the economy is comparable, there is little justification for the difference in treatment.

The "Theft" of Health Care by Immigrants: Does It Matter?

Dean BakerApr 17, 2006

The New York Times ran a front page story on Sunday that could have been a case study of why it is essential to put budget numbers in context. The article, "Medicaid Rule For Immigrants May Bar Others," explains how new rules intended to prevent illegal immigrants from getting Medicaid may also prevent many eligible beneficiaries from getting assistance. The problem is that many low income people don't possess the necessary documentation (e.g. drivers licenses or birth certificates) needed to receive Medicaid under the new rules.

Immigration: Die at the Border and Open Borders

Dean BakerApr 16, 2006

I want to follow up quickly to a couple of notes on my posting where I referred to the "Die at the Border" policy. I was not arguing for open borders. I don't think that anyone who has given the issue serious thought advocates open borders, since a literal open border policy would almost certainly imply an inflow of hundreds of millions of people in the next couple of decades.

Sick Europe and the Italian Elections

Dean BakerApr 14, 2006

The elections in Italy prompted another round of knowing comments about how Europeans must get over their silly attachment to employment security (e.g. "Europe Stalls on Road to Economic Change"). None of the comments I saw even considered the possibility that the contractionary policies of the European Central Bank (ECB) play any role in Europe's economic weakness.

Immigrants and "Low Wage" Jobs

Dean BakerApr 13, 2006

One of the great absurdities in the debate over immigration policy is the frequently repeated claim that the U.S. economy is generating more "low wage" jobs than can be filled by the domestic workforce. This line has been endlessly repeated in news stories on the issue.

Quick trip back to econ 101: recall the concepts "supply" and "demand." What makes a job a "low wage" job? In econ 101 world, a job will be a "low wage" job if the supply is high relative to the demand. When there is insufficient supply, then the wage rises. My students didn't pass the course if they couldn't get this one right. Econ 101 tells us that there is not a shortage of workers for low wage jobs; it tells us that there are employers who want to keep the wages for these jobs from rising.

When Out of Context Is Untrue

Dean BakerApr 12, 2006

A couple of days ago, I gave my standard diatribe about the importance of putting numbers in context, especially budget numbers, which as isolated billions or trillions are virtually meaningless to the typical reader. In some cases, the issue is not just one of being uninformative, it's also a question of actually being wrong.

In budget reporting, the most obvious case in which out of context is wrong, is when comparisons of the deficit are made through time. There have been many news reports pronouncing the Bush deficits the largest in history based on the fact that nominal deficits (which peaked at $413 billion in 2004) were larger than the size of the deficits in any prior year.

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