Beat the Press

NYT Invents "Broad Agreement" About Budget Problem

The NYT ran a front page article today claiming a "broad agreement broad agreement among critics about Exhibit A: The unwillingness of the two parties to compromise to control a national debt that is rising to dangerous heights." The article presents no evidence to suggest a broad agreement of any sort among critics, nor does it point out that every one of the "experts" cited failed to warn of the housing bubble, the collapse of which is projected to add close to $4 trillion to the national debt.

Japan as #2: It Isn't

USA Today told readers that Japan is hanging on for now as the world's second largest economy, ahead of China. This is just silly. While Japan does still rank second when its GDP is measured using a currency conversion standard (converting its currency into dollars at the current exchange rate), its economy is only half the size of China's using a purchasing power parity standard. This measure applies the same set of prices to all goods and services.

David Brooks Goes for Nobel in Victim Blaming

We are looking at a prolonged period of high unemployment because economists with degrees from places like Harvard and M.I.T. could not see an $8 trillion housing bubble. The economics reporters who work for outlets like the New York Times, National Public Radio, and the Wall Street Journal all lacked the ability to think independently and largely accepted at face value the assertions from the well-respected economists that there was no problem in the housing market. And the politicians -- well that's not worth mentioning.

So, what does David Brooks tell us in his column?

More Social Security Scare Stories

The Chicago Tribune may have laid off many of their reporters but it still has a Social Security fearmonger position. Greg Burns told readers that: "As of this year, Social Security will be running in the red for the first time in a quarter-century."

AP Starts Running Editorials on the Deficit As News Stories

AP broke with standard news practices by circulating what can only be considered an opinion piece on the deficit as a news story. The article exclusively presents the views of deficit hawks and misrepresents many fundamental issues about the budget.

After noting the Greek budget crisis, the second sentence tells readers: "In the world's largest economic and military power, there's a far more serious debt dilemma."

The piece continues:

"For the U.S., the crushing weight of its debt threatens to overwhelm everything the federal government does, even in the short-term, best-case financial scenario — a full recovery and a return to prerecession employment levels.

Trade Deficit: Down for the Year, but Up for the Month

The NYT notes the sharp drop in the trade deficit for calendar year 2009 compared to 2008. The falloff in the trade deficit was a striking feature of the downturn. Imports fell by almost than 25 percent year over year. Exports fell nearly as much in percentage terms, but since U.S. exports were only two-thirds as much as imports, this translated into a large improvement in the trade deficit.

New Economics at the NYT

The NYT told readers that China's central bank is raising reserve requirements rather than the central bank lending rate because it is worried that if raised its lending rate, the higher interest rates would pull more foreign money into the economy. This explanation does not make sense because raising reserve requirements would also lead to higher interest rates.

The mechanism is very simple. Higher reserve requirements reduce the supply of money. A lower supply leads to higher interest rates.

Spain's Fundamentals Were Not Sound

Morning Edition reported on Spain's slump this morning. The slump has pushed the unemployment rate into the high teens.

At one point the piece presents the views of an economist who asserts that Spain's fundamentals were sound prior to the downturn. This is not true. Spain had a huge housing bubble that led to a current account deficit that peaked at 10.0 percent of GDP in 2007. It should have been very clear at the time that its fundamentals were enormously unsound, it is remarkable that NPR found an economist who even now does not recognize that Spain's fundamentals were not sound during its housing bubble.

--Dean Baker

Annualize GDP Growth Rates

In the U.S. economic growth measures are always presented at annual rates. There is no magic to using annual rates, but it is the convention. This is why it is infuriating to see the NYT use quarterly growth figures in an article reporting on Europe's growth rate for the fourth quarter of 2009.

David Ignatius: Mervyn King Is Not Only an Incompetent Central Banker, He Also is a Bad Teacher

Mervyn King, the head of the United Kingdom's central bank, is best known for allowing the UK's housing bubble to expand to a level that was even greater than the bubble in the U.S. At its peak in 2007, house prices in the UK were on average about 10 percent higher than the bubble-inflated prices in the U.S., even though the per capita GDP in the UK is about 10 percent lower. As a result of his failure to check the growth of the bubble, the UK has fallen into a severe downturn, with questionable prospects for a rebound any time soon.

Is President Obama Opposed to Workers Saving for Retirement?

That is what USA Today claims. It told readers that the Obama administration believes that current saving rates are impairing economic recovery:

"It [job growth] will be even tougher if Americans continue to save at high rates — somewhere in the 4% to 7% range — as the White House report predicts they will until the financial services sector eases lending."

Raising the Value of the Yuan Would Reduce Inflation in China

The NYT had an article about rising inflation in China. At one point it notes the government's determination to prevent inflation. It then tells readers that higher inflation may reduce pressure from the U.S. to raise the value of the yuan, since higher inflation in China will make Chinese goods relatively less competitive.

It would have been worth noting that a higher valued yuan would help to reduce inflation in China. It would reduce the price of imports thereby putting downward pressure on the price of domestically produced goods. Also, by reducing China's trade surplus, it would slow China's growth.

--Dean Baker

Misrepresenting the Economics of Books

The NYT had a piece on a deal that made with book publishers which could raise the price of some e-books by as much as 50 percent. At one point the article asserts that readers who might resist this increase don't understand the economics of publishing: "To consumers who do not pay much attention to the economics of publishing, though, such arguments are trumped by the fact that e-books have been available for $9.99 for more than a year."

Can We Cry for the Poor People Making Over $225,000 a Year?

People making over $225,000 must have it much tougher than the rest of us since the media highlight their problems so frequently. In discussing the housing market and the homebuyers' tax credit USA Today told readers: "Many potential buyers in higher-price markets such as New York, Boston, Hawaii and San Francisco won't qualify because their incomes are too high. Under the income limits, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit."

The Trucking Index of GDP

USA Today highlights a new measure of economic activity that is based on truckers' use of diesel fuel. This is an interesting way to try to get an up-to-date measure of the production and sale of goods in the economy. By contrast GDP numbers only come out quarterly and are not released until a month after the quarter is over. Similar information can be found by simply examining the index of hours worked in trucking in the monthly employment report. (Unfortunately, the Labor Department just stopped publishing this index for the trucking sector this month.)

--Dean Baker