Beat the Press

Jobs From the Jobs Bill: NYT Gives the Full He Said She Said

The House just approved a $15 billion jobs bill that was already passed by the Senate. Will it help the economy? The NYT told readers that Representative Bob Etheridge, "estimated that the measure could create one million jobs." It then quoted Republican Representative Steven LaTourette saying that: "This is a no-jobs bill, this is a faux-jobs bill, this is a snow-jobs bill." Later we are told that: "But lawmakers said that given the dismal unemployment picture, they were willing to give it a try, and estimated the tax breaks would put 300,000 people to work." It's not clear where this 300,000 jobs number came from or which lawmakers it is associated with. As a practical matter, the incentive in the bill, which is primarily the 6.2 percent employer side of the Social Security tax, is unlikely to be large enough to have much effect on hiring. Even in the current weak economy, employers hire close to 4 million workers a month offsetting the departure of roughly the same number of...

Defense Spending: 4.7 Percent Is Closer to 5 Percent Than 4 Percent

The NYT told readers the defense spending in the United States is equal to 4.0 percent of GDP. The Congressional Budget Office reports that it was 4.6 percent of GDP in fiscal 2009 and will be 4.7 percent of GDP in fiscal years 2010 and 2011. --Dean Baker

The Fed Can Control Long-Term Interest Rates

The Washington Post had another piece pushing deficit scare stories. This time it tells readers that Greece's problems could spillover to the U.S. According to the piece, fears of a Greek default could lead investors to become more worried about a U.S. default, pushing up interest rates on U.S. government bonds. There are two logical problems with the assertions in the piece. If investors flee U.S. bonds because they fear default, where are they going to put their money? If the U.S. actually did default, then almost any other asset will also take a huge hit. For example, holding U.S. stock or bonds would be really really stupid if you thought that the U.S. government was going to default on its debt. This would in turn imply a general flight from dollar denominated assets, which in turn would lead to a plunge in the value of the dollar. A plunging dollar would in turn lead to soaring exports and a would cause the economy to boom rather than crash, as the article claims. The other...

David Brooks Is Worried About the Invasion of Martians

Okay, he said "runaway federal spending," but as long as you're making stuff up, you might as well make it invading Martians. It's no less true and a hell of a lot more exciting. As those of us here on planet earth know, there is no credible story of runaway federal spending. The budget deficit exploded because of the recession, which in turn was caused by the collapse of an $8 trillion housing bubble. But, Brooks needed copy for his NYT column, so runaway federal spending it is. I still think he should have talked about invading Martians. --Dean Baker

Good News From Ireland?

The NYT contrasts the resistance to austerity measures in Greece with the enthusiastic embrace of budget cutbacks by the Irish government. It is worth noting that Ireland's unemployment rate has increased from 4.6 percent before the crisis to 13.0 percent in the most recent data. It is unlikely that many of the economists and policymakers who promoted policies that lead to the crisis, or the bankers who profited from these policies, are among the 13.0 percent of the labor force who are unemployed. --Dean Baker

Secret Data Source Overlooked by the Media

On Wednesday of every week the Mortgage Bankers Association releases its index of mortgage applications which provides data on applications for mortgages for both purchase mortgages and refinancing. For some reason this index is almost completely ignored by economic reporters . This is difficult to understand. While a single week's data is of limited value, because it is so erratic, a four week average can provide important up-to-date information on the state of the housing market. While speculators have played some role in buying up blocks of homes, especially after foreclosure, the vast majority of homes are purchased with mortgages. This means that the applications index is giving analysts an early glance on the state of the housing market. (Applications typically precede sales by 4-6 weeks.) The news last week is pretty bad in this respect. While applications are up some from prior weeks, applications over the last month have been running close to 10 percent below the badly...

What Percent of Stimulus Financed Wind Turbines Come From Overseas?

That is undoubtedly the question that many would have after reading a Post article on an effort to stop stimulus spending on wind energy because some of the turbines are built in China. The point of stimulus was of course to create jobs in the United States. If it turned out that spending in a particular area was not creating jobs in the United States, then it doesn't fit very well in a stimulus package (although it may still be useful spending). The Post article repeated a few assertions, but it did not provide readers any basis to assess the key questions: how many jobs are being created here? what share of the wind turbines are constructed in the U.S? how large are the savings from buying them from abroad? Since these questions were not addressed, readers of the article would have little basis for assessing the debate over energy spending in the stimulus package. --Dean Baker

The Bush Tax Cuts Did Not Lower the Budget Deficits

The Post tells us that reconciliation: "is a procedure created in 1974 to help lawmakers advance politically difficult budget legislation, particularly measures that reduce the deficit." It then tells us that it has been used 22 times. Two of these 22 uses were to pass President Bush's major tax cuts. --Dean Baker

The NYT Mind Reading: Tells Readers That Financial Markets Don't Like the UK's Budget Deficit

The NYT told readers that: "The pound fell to $1.4954 on Tuesday, its lowest level against the dollar in nearly 10 months. The yield on 10-year government bonds, known as gilts, slid as investors fretted that Parliament would be too fragmented after a crucial election in May to whip Britain’s messy finances back into shape." That's pretty good that the NYT can read concern about this complex scenario into the market's 1-day movement. It is especially impressive since the yield on the 10-year bonds seemed to go the wrong way for this story. A lower bond yield usually means that investors are less concerned about the country's prospects and therefore require a lower risk premium. The biggest threat to the UK's economy is that it appears to have re-inflated its housing bubble. This is setting up the country for a further economic collapse at some point in the future when interest rates return to more normal levels. The NYT's market insiders were unable to see to the problems developing...

Post Gets the Whitewash Out for Bernanke

After Alan Greenspan, Ben Bernanke is more responsible for the economic downturn than any other person in the country. He was a Fed governor from 2002 to 2005 and then chairman of President Bush's Council of Economic Advisors from the summer of 2005 until he took over as Federal Reserve Board chairman in January of 2006. During this whole time he insisted that there was no housing bubble and that everything in the housing market was just fine. He fully supported Alan Greenspan in allowing the bubble to grow to ever more dangerous levels. Therefore it is striking to see a front page Washington Post article tell readers that Bernanke has: "led efforts to make the Fed's bank oversight more effective and focused on broad risks to the economy that arise out of banks' decisions." This would like saying Bernie Madoff was working to ensure integrity in finance, without mentioning that he had pulled off the biggest financial scam in history. That is not exactly a complete picture. The article...

More Repression Over Copyrights: When "Creative" People Lack Creativity

The NYT reviewed a new book by Jaron Lanier, who we are assured is a very creative person and one of the early pioneers of the web. According to the review, Mr. Lanier is very upset about people getting material at no cost over the web. His preferred solution is harsher punishments for copyright violation. Of course, another possible direction would be to devise alternative mechanisms for financing creative work. But that would require creativity. --Dean Baker

E.J. Dionne Spins Fairy Tales About Political Parties

He told readers that: "Democrats on the whole believe in using government to correct the inequities and inefficiencies the market creates, while Republicans on the whole think market outcomes are almost always better than anything government can produce." No, it just ain't so. Republicans (and many Democrats) want the government to structure markets to redistribute income upward. This is why they support government granted patent monopolies that allow drug companies to tax consumers close to $250 billion a year (almost 2 percent of GDP) by charging prices far above the competitive market level. The same applies to government granted copyright monopolies which transfer hundreds of billions of dollars from ordinary workers to people like Bill Gates. The Republicans (and many Democrats) also favor protectionist measures that prevent doctors, lawyers, and other highly educated professionals from being subjected to competition with low-paid workers in the developing world as are...

Robert Samuelson's Cheap Budget Tricks

Robert Samuelson apparently doesn't believe that he has much of a case for his budget deficit scare stories. How else can we explain the fact that he expresses budget deficits in dollar terms rather than as share of GDP. Yes, the budget deficit is a REALLY BIG NUMBER. That would be true even if it were a tiny number relative to the size of the economy. Suppose the deficit was $1,687,435. That is a really big number since almost none of us will ever see anywhere near this much money. However, for the U.S. economy, a deficit of this size is trivial. It is equal to 0.011 percent of GDP. The government could run deficits of this size forever and its ratio of debt to GDP would be continually shrinking as its GDP growth vastly exceeds the rate of growth of the debt. In this vein, Samuelson notes that the baseline budget is projected to be $752 billion in 2015 and that even if President Obama's deficit commission reaches its target, the deficit will still be $571 billion. Measured as a share...

More Demographic Crises at the Washington Post

The Post told readers that South Korea and other East Asians governments are worried that their countries will become less polluted and that wages will rise in coming years. Of course that is not exactly how the Post described the situation. The Post said that "collapsing birthrates are alarming East Asian governments, which in coming years will face a demographic crunch as the proportion of pensioners rises and the number of working-age adults declines." In standard economic theory, a smaller labor force will lead to a higher capital to labor ratio, which will increase productivity. If productivity is higher, workers can both enjoy higher living standards and be able to support a larger population of retirees. A smaller population will also make over-crowded countries more affluent by reducing the stress on space. In addition, it will make it easier to meet goals for reducing greenhouse gas emissions. For example, a 10 percent reduction in population has the same effect on greenhouse...

Fighting Foreclosures Without Talking About the Bubble Is a Waste of Time

Because Alan Greenspan and Ben Bernanke would not talk about the $8 trillion housing bubble, close to 30 million people are now either unemployed or underemployed. For some bizarre reason, policy people still have trouble talking about the bubble. For example, the NYT has an editorial discussing remedies for foreclosure which never mentions the housing bubble. The bubble should be central in such discussions because it says a great deal about the future directions of prices. If the bubble has largely deflated, as it has in places like Phoenix and Las Vegas, then it makes sense to try to stabilize prices and make policy as though prices will follow normal patterns (rising at the rate of inflation) in coming years. On the other hand, prices in many East Coast cities are still bubble-inflated as are prices in places like Los Angeles and San Diego. In these areas, prices are likely to fall in coming years leaving today's underwater homeowners further underwater. Discussing foreclosure...