Beat the Press

Sorkin is Wrong: There Is No Tradeoff Between Growth and Bank Capital Requirements

NYT columnist Andrew Ross Sorkin warned readers that higher bank capital requirements, intended to ensure safety: "would come at the expense of economic growth as banks would make fewer loans.This is not true.

The Federal Reserve Board decides on the level of reserves that it wants to pump into the financial system based on the level of economic activity. If economic activity is too slow, it can increase the volume of loans available to banks by putting more reserves into the system. Contrary to what Sorkin asserts, it is not necessary for the banks to raise their leverage of the same amount of reserves in order to generate more loans for businesses.

--Dean Baker

Surging Homes Sales? Seasonal Adjustments, Please

The NYT told readers that home sales are surging in advance of the April 30th expiration of the extended first-time homebuyers tax credit. While it is reasonable to expect somewhat of a surge, there is actually very little evidence of one this far.

Exploding Health Care Costs: Can Someone Tell the NYT About Something Called "Patents"?

The NYT discussed concerns that the new health care bill will do little to address the problem of overuse of certain medical procedures that drive up costs. Remarkably, the article never discusses patent monopolies, which are a major factor driving up costs and excess use.

Patents lead to excess costs for two reasons. First, by granting monopolies, patents push up the price of many drugs and medical equipment by several thousand percent above their marginal cost. This is especially true of drugs, almost all of could be profitably sold for just a few dollars a prescription in a free market.

Beat the Press Coming Home to CEPR's Website

On April 1, 1996, way before anyone heard of a blog, Beat the Press
began as a weekly commentary called "Reading Between the Lines" on the
Economic Policy Institute's website. I started writing it because I felt
that major media outlets were often obscuring rather than explaining
major economic issues.

Post Uses Xenophobia to Advance Its Budget Agenda

The Post once again used xenophobia to push its budget agenda as editorial page editor Fred Hiatt darkly warned readers that as a result of projected future budget deficits: "the United States would be increasingly at the mercy of China, Saudi Arabia and other lenders."

Did the Federal Government Make Money Bailing Out Citigroup?

The Washington Post is anxious to tell its readers that the government made a profit on its bailout of Citigroup. This claim gives a whole new meaning to the notion of "profit." The government gave enormous amounts of money to Citigroup through various direct and indirect channels. It is only getting a portion of this money back in its "profits," the rest is going to Citigroup's shareholders (e.g. Robert Rubin) and its millionaire executives who are highly skilled at getting the government to hand them money.

The New York Times Could Not Find Any Economists Who Saw the Housing Bubble to Talk About Financial Regulation

The NYT magazine featured a lengthy piece on financial regulation. Remarkably, it did not quote or cite a single person who saw the housing bubble and recognized its danger.

The failure to include the views of someone who actually understood the economy makes the issues surrounding regulation appear far more complex than they are. There was very little problem in recognizing the housing bubble for any competent economist. There was an enormous divergence in house prices from their long-term trend with no remotely plausible explanation. The sort of reckless loans and over-leveraging that one expects in a bubble were also easy to see.

Meaningless Budget Numbers on Health Care

How many NYT readers know how large $500 million is as a share of California's budget? How about $370 million a share of Texas' budget.

My guess is that almost no one outside of the people who live in these states (and probably not even many of them) has any clue as to how large these sums are to the state governments. This means that when the NYT tells readers that the health care reform bill will cost the state of California $500 million a year in higher Medicaid costs and Texas $370 million a year, it is giving readers no information whatsoever.

NPR Discusses Housing Market Without Talking to Anyone Who Recognized the Bubble

It seems that a condition of being a source on the housing market for NPR is having missed the housing bubble. Morning Edition ran a piece on President Obama's new housing plan in which Mark Zandi claimed that a main benefit was that it could stop the decline in house prices. Since there continues to be enormous oversupply in the housing market, as shown by a record vacancy rate and falling rents, it is extremely unlikely that house prices will stabilize until they return to at least their pre-bubble levels. It is also not clear why anyone would want to make homes more expensive for future buyers as a matter of policy.

--Dean Baker

Has The Post Heard About the Housing Bubble?

It seems that they haven't. When discussing the cause of foreclosures the Post told readers that the Obama administration's new housing plan takes aim at: "the major cause of the current wave of foreclosures:

"the spike in unemployment. While the initial mortgage crisis that erupted three years ago resulted from millions of risky home loans that went bad, more-recent defaults reflect the country's economic downturn and the inability of jobless borrowers to keep paying."

Helping Banks by "Helping" Homeowners?

The NYT reports on a new plan from the Obama administration to help homeowners. According to the article, under the plan the Federal Housing Authority (FHA) will guarantee new loans in exchange for banks writing down some of the principle on underwater mortgages.

NYT Invents "Important Threshold" To Scare Readers About Social Security

A front page NYT story noted that Social Security benefit payments this year exceed its tax collections. As both the experts cited in the article pointed out, this fact makes absolutely no difference for the program since it holds more than $2.5 trillion in government bonds.

In spite of the statements by the experts cited in the article, the second paragraph told readers that this event marked: "an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office." Nothing in the article or in the structure of the program suggests that there is any importance whatsoever to this threshold.

--Dean Baker

addendum:

Exports Do Not Magically Increase Productivity

That seems to be the argument of a Washington Post article that reports that firms are finding ways to increase output without hiring more workers. Of course firms are always finding ways to increase output without hiring more workers, this is called "productivity growth."

Sallie Mae Complains That Direct Government Loans Will Increase Efficiency

That is the implication of its complaint that getting private financial companies out of the government insured student loan business will cause it to shed 2,500 jobs. Since the government is not hiring new employees to deal with the extra business, the implication is that these people were unnecessary paper pushers. This move by the government is freeing up resources to be used more efficiently elsewhere.

--Dean Baker

NPR: "Republican Leader Senator Judd Gregg Has No Understanding of Health Care Bill"

That should have been the lead to an NPR piece following up a Morning Edition interview with New Hampshire Senator Judd Gregg. Senator Gregg, who is often held up as a thoughtful fiscal conservative, concluded his interview by asserting that the health care bill approved by Congress would increase the size of government from 20 percent to 25 percent of GDP.

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