In the interest of providing the public with better reporting on economic issues the association of economic reporters approved the following list of resolutions for 2007: (Okay, no such association exists and this list is completely invented, but I can dream.) 1) Put Numbers in Context Virtually no one can attach any meaning to the $40 million appropriation for a particular earmark, the $196 billion transportation budget for the next six years, or the projected $70 trillion budget shortfall over the infinite future. These numbers can be made meaningful by putting them in some context. In the case of budget items, this is probably best done as shares of total spending and/or as per person expenses. In the case of deficits, the appropriate denominator is GDP over the relevant time frame (annual GDP for a current year deficit, all future GDP for an infinite horizon calculation). These calculations require almost no extra time from reporters and zero extra space (substitute a percentage or per person number for a meaningless million, billion, or trillion dollar figure). 2) Separate Health Care Cost Projections from Other Projections The projections of massive future deficits and tax burdens are all driven by projections that health care costs will continue to explode. If these projections prove true, then the economy will be wrecked regardless of what we do with the public sector health care programs. It is misleading to imply that these huge deficit projections indicate fundamental budgetary imbalances, as opposed to the fact that we have a serious problem with our health care system. In particular, combining Medicare and Social Security to imply that the projected budgetary problems are primarily demographic in origin is basically lying. 3) Stagnant or Declining Populations Are Not a Crisis There is no fundamental problem with a country experiencing zero or negative population growth, as is the case for many rich countries. This scenario implies a rising ratio of retirees to workers, but we have always had a rising ratio of retirees to workers, and we have generally enjoyed rising living standards (on average). Productivity growth generally swamps the impact of demographics (it takes fewer people to make a car, handle bank transactions, or staff a retail store) so there is no problem associated with the fact that a smaller share of our population may be working in the future. Also, many jobs don�t need to be done � convenience stores don�t need to be open 24 hours, lawns don�t have to be mowed as frequently, restaurants can be cafeterias. In addition, in a world where scientists recognize global warming as a serious problem, a smaller number of people in the high per capita polluters is a good thing. 4) Social Security Does Not Face a Crisis, So Stop Asserting That It Does The latest projections from the Congressional Budget Office show that the program can pay all scheduled benefits until 2046 with no changes whatsoever. This would not fit most people�s definition of a crisis. This means that if you want to use �financially distressed� �fiscally threatened� or some equivalent adjectival phrase to refer to Social Security, talk to your editor about getting an opinion piece. Such phrases do not belong in a news story. 5) Use Purchasing Power Parity When Discussing the Size of China�s Economy Much of the country has little idea of how large China�s economy is relative to the U.S. economy because reporters routinely use exchange rate conversion measures of China�s GDP. By this measure, China�s economy is hovering near $2.5 trillion, less than one-fifth the size of the U.S. economy, behind Japan and Germany. However, by the purchasing power parity (PPP) measure, China�s GDP is now close to $10 trillion, approximately 75 percent of the size of the U.S. economy. For most purposes economists would use the PPP measure. To make one simple point on its merits, if you use the exchange rate measure, then you think that China is exporting one-tenth of its annual output to the United States. 6) Trade Deals Do Not Mean �Free Trade,� so Don�t Call Them �Free Trade Agreements� Everyone likes freedom. That is why politicians who put forward trade agreements call them �free trade� agreements. But, these deals are not free trade agreements. They don�t free all types of trade (they do little or nothing to remove the barriers that protect doctors, lawyers, and other highly paid professionals) and they actually increase some types of barriers to trade, most notably by increasing the strength of patent and copyright protection. Back in the 80s, President Reagan dubbed the controversial MX missile, the �Peacekeeper.� To their credit, reporters continued to use the neutral �MX� term to refer to the missile. In discussing the current round of trade agreements, it would be more accurate (and save space) to simply refer to them as �trade� agreements, rather than free trade agreements. 7) The Stock Market is Not the Home Team: A Rising Stock Market Is Not Good News A run-up in stock prices means that people who own stock are richer. Stock prices can go up because the future of the economy looks brighter and therefore the future prospect for corporate profits also looks brighter. In this context, where everyone stands to gain from more economic growth, a rising stock market can be seen as a good thing. However, the stock market may also rise because investors anticipate redistributions from wages or government to profits. In this case, the rise in stock prices is purely redistributive. Alternatively, the rise in stock prices may be just an irrational bubble, like in the late 90s. This is also not good news. Unless a reporter can identify the cause of a run-up in stock prices, he/she cannot say whether it indicates good news for the economy as a whole. Therefore, it should not be reported as good news. 8) The Fed Makes Policy Choices The Federal Reserve Board must decide how much it should it focus its policy on limiting inflationary risks as opposed to sustaining economic growth and high levels of employment. This is a policy choice involving both its assessment of the relative risks and the relative costs of higher inflation verse higher unemployment. The public should be aware of the choices that are being made on its behalf. It is important to realize that, contrary to frequent assertions, there is no consensus among economists on Fed policy. There was a consensus in the mid-90s. The vast majority of economists believed that if the unemployment rate fell below 6.0 percent, the inflation rate would increase and soon reach dangerous levels. The prolonged period of low unemployment in the late 90s, and in the current decade, have proven that this view was wrong. At this point, there is no widely accepted view on the relationship between inflation and unemployment. 9) People Who Work for Trade Associations Are Not Neutral Commentators and Should not be Treated as Such Okay, this one seems really dumb, but how often do you see a news report in which the views of the spokesperson for the National Association for XXX or the American XXX Association are presented as objective analysis on an issue? This really should be a no-brainer. These people have an agenda. They are paid to get their industry�s perspective into the media. They may be knowledgeable commentators on a topic and it is certainly appropriate to share their views with the public, but it is absurd to imply that they are disinterested observers. They don�t get paid their salaries to be disinterested observers. Okay, lacking any great inspiration at the moment, I�m stopping at 9. Perhaps a creative commentator will give me a 10th item to round out the list. Here's # 10 (inspired by Beowolf's comment): 10) You Don�t Know What Politicians Think or Believe, so Don�t Tell Readers Saying things that you don�t believe is a job requirement for being a politician (left or right). Politicians say what they think will advance their career and get them re-elected, which is not necessarily what they think about the world. This means that when a politician says that he/she is supporting a particular policy because they believe in �the market� or �small government� or the �need to protect the weak,� the statement should never be presented as being what they actually think. In other words, give the comment to the readers in quotes, don�t tell readers that Senator X believes in the market or Representative Y believes in helping the poor. The basic line for reporters is that you are not close enough to a politician to know their inner most thoughts. If you are close enough, then your relationship is too personal and you cannot report on this politician objectively.
-- Dean Baker
