How Media Misleads

Even public media like NPR misleads the consumer of its "news". Here is an excellent example by Dean Baker in his Beat the Press blog:

NPR Editorializes Against Growth In Europe

A Morning Edition segment on the recent European Union summit was headlined, "Most EU Nations to Sign Pact to Stop Overspending." This is both flat-out wrong and misleading.

It is flat-out wrong because the pact restricts deficits, not spending. It is misleading because it implies that the current crisis was caused by overspending. It wasn't. Most of the crisis countries had declining debt to GDP ratios before the downturn and two, Spain and Ireland, were actually running budget surpluses. The problem was caused by housing bubbles and the inept management of the economy by the European Central Bank.

If the media lies, then a representative government is impossible. And that makes the constitutional requirement for a free press a waste of effort. At least a significant majority of the press must be honest enough to tell the truth. A free press can be honest or sold out. The hope of the writers of the US Constitution was that the media was so fragmented and numerous that it would be impossible to manipulate the press as a whole. But the writers of the US Constitution lived in a simpler time when the US press was more like the bloggers of today: numerous and cheap to set up. They didn't envision "big media" with wall-to-wall coverage and a practical monopoly on the public's attention.

The coming of radio made possible the horrible dictators of the 1930s. The monopolization of the media in the late 20th century made possible the overweening power of right wing politics today. It took WWII to break the power of the dictators and give back popular democracies. What will it take to break the present day monopoly of big media and the rampant right wing politics that have created?

Speaking the Truth

Here is a post by Dean Baker on his Beat The Press blog:

President Obama Wants Credit for Avoiding a Great Depression: Where Is the Ridicule?

In its top of the hour news segment NPR reported that President Obama hoped that voters would give him credit for avoiding a second Great Depression. If this is an accurate representation of what President Obama said then it should have devoted a segment to economists ridiculing the president for trying to set an unbelievably low bar for measuring the success of his economic policy.

The first Great Depression was the result of a decade of inadequate policy responses. The massive spending associated with World War II that eventually got us out of the Great Depression could have been undertaken a decade sooner, if there had been political will.

There was nothing about the financial crisis at the beginning of President Obama's term that could have condemned the country to decade of double-digit unemployment. This only could have happened if Congress failed to respond adequately to a financial collapse.

The above should be supplemented by reading Paul Krugman's comments on the fate of democracy given the current depression.

How Big Corporate Media Utterly Fails the Public

Newspapers originated as partisan broadsheets full of pointed political views. They advocated. But by the 20th century newspapers fell into the hands of big corporations that were selling fish wrap (i.e. the paper was the medium of advertisers and they didn't want to upset readers, so toned down vague-and-fuzzy reporting replaced any serious opinion and investigative journalism). Papers stopped being intellectually challenging and because useful onto fish vendors to wrap the fish they sold or for homeowners to line the bottom of their bird cages to catch bird droppings.

Here is a post by Dean Baker in his Beat the Press blog making this point for the umpteenth time:

Post Does the Old He Said/She Said on Perry Energy Plan

Texas Governor Rick Perry announced an energy program yesterday that involved drilling everywhere in sight. According to the Post article on the plan, Perry claimed that his plan would create 1 million jobs. In classic he said/she said style the Post told readers:

"Perry predicted his energy plan would create more than 1 million new jobs. Weiss [a researcher at the Center for American Progress] sharply disagrees."

This is utterly useless information for readers. A Washington Post reporter should have the time to talk to some experts on this issue and/or read some of the key articles. Post readers do not have the time. Simply reporting opposing claims that readers have no ability to access is a pointless exercise. Trees died for nothing.

(Perry's claim is nonsense -- it is unlikely that it would in the long-run lead to even 100,000 additional jobs [0.07 percent of total employment]. The short-run effect would be considerably less.)

Is there any surprise in the fact that newspaper readership is plummeting and newspapers will go extinct? Why pay for pablum like this?

And... is there any surprise that major political parties have quietly fallen into the hands of big corporate lobbyists? With no "press" to challenge the politicians, most Americans have no idea that their government has been stolen from them. They have no idea that the traditional electoral exercise is a farce. The decisions of what laws will be passed -- indeed, even the writing of the bills -- has passed into the hands of big corporations.

The whole world of "American politics" is a kabuki dance of smoke-and-mirrors with lots of pretended outrage and threats when in fact all the deals have been quietly done behind locked doors as money passes hands to fund politicians and their "campaigns" (think John Edwards with his million dollar slush fund to hide Rielle Hunter and his illegitimate "love child", this was a "campaign donation" from billionaire heiress "Bunny" Mellon).

More Proof that Education in America is Failing

From Dean Baker's Beat the Press blog:

Speaker Boehner Commits Huge Gaffe, Can't Do Simple Arithmetic

Republican House Speaker John Boehner committed an enormous gaffe yesterday according to a Washington Post article. Mr. Boehner claimed that:

"Our unemployment rate has been higher than 8 percent for more than 21 / 2 years, far above what the Obama administration promised with the ‘stimulus.'”

Actually, the stimulus did not promise to keep the unemployment rate below 8 percent as Mr. Boehner would know if he ever looked at the administration's discussion of its stimulus proposal at the time. The report claimed that the stimulus as proposed would create between 3-4 million jobs by the end of 2010. However, the bill passed by Congress was substantially smaller than the stimulus requested by the president. The expected effect would therefore be in the range of 2-3 million jobs.

However, the economy was in much worse shape than the administration recognized at the time. It expected the unemployment rate to peak at 9.0 percent even without any stimulus. At the time, the economy was losing close to 700,000 jobs a month. The unemployment rate had already risen to 9.4 percent by May when the first stimulus related checks were just going out the door.

The best evidence available shows that the stimulus worked almost exactly as planned, creating 2-3 million jobs. However, the economy needed 10-12 million. The Obama administration's error was in underestimating the severity of the downturn, not overpromising for the benefits of the stimulus.

This is apparent to people who can read and know arithmetic. The Washington Post should have highlighted the fact that Mr. Boehner apparently either has difficulty with arithmetic or was deliberately trying to mislead the public.

Call me cynical, but I believe that somebody who gets a B.A. degree in Business Administration from the private Xavier University probably has math skills greater than a 5th grader. So my best guess is that Boehner is lying through his teeth for partisan advantage. He is part of the problem and not the solution. It is liars and cheats like Boehner who are destroying America.

I don't think education in America is failing. I think politics and politicians in America are failing. They are sold out to Wall Street and the ultra-rich. They politicians are bought and sold among the elite to do the bidding of the elite but hide behind stories that twist the truth and confuse the electorate.

The Voice Not Being Heard

There are all kinds of articles and interview, videos and radio reports about the economy and how Obama is a socialist Kenyan Marxist determined to destroy America in one last mau-mau jihad.

There are precious few items in the media that honestly assess what is going on. I enjoy reading Dean Baker's articles on his blog Beat the Press over at the CEPR (Center for Economic and Policy Research, a progressive economic policy think-tank based in Washington, DC, founded in 1999):

Robert Samuelson's Con Job

Robert Samuelson devoted his column today to decrying the lack of confidence in the U.S. economy. While confidence is indeed low, this largely reflects the prolonged downturn. Contrary to what Samuelson suggests, there is nothing surprising about the lack of confidence given the most prolonged period of high unemployment since the Great Depression.

In fact, given the weakness of demand, consumption and investment are both surprisingly high. The saving rate is hovering near 5.0 percent, well below the pre-bubble average of more than 8.0 percent, suggesting that consumers are more willing to spend relative to their income than was the case in the 50s, 60s, 70s, and 80s. The share of GDP devoted to investment in equipment and software is almost back to its pre-recession level.

The obvious problem in the economy, including the low rate of start-ups that is troubling Samuelson, is a lack of demand. This is best met by government stimulus, since government spending puts money in people's pockets and, contrary to what many politicians assert, people do work for the government, which means that the government can create jobs. If the government created enough demand in the economy, as it did during World War II, there is no reason to believe that firms would not invest more and that more start-ups would come into existence.

Measuring public "confidence" is a backward looking indicator. When times are good, confidence is high. When times are bad it is low. A low confidence isn't telling you something about the future. It is telling you about the past. And the wonderful thing about the American media is that the 2001-2008 Republican government under Bush has magically disappeared. He crashed the economy but you would never guess it. Instead, the media is busy selling the idea that the alien imposter with horns growing out of his head, the Kenyan, crashed the economy as part of his socialist jihad against red-blooded Americans.

By the way... have you noticed that Obama has been killing leaders of al Qaeda right, left and centre and getting precious little positive press for it. But when the blowheart Bush did his gunslinger routine of "get him dead or alive" the press fell over itself telling Americans what a swell leader they had. Nuts! Bush wasn't a "leader". He was a fool who created some of the biggest foreign policy mistakes in America's history and topped that off with business and regulatory decisions that destroyed $11 trillion worth of wealth.

I personally think Obama falls short as a leader, but he is head and shoulders above Bush. I can disagree with Obama but at least feel he is trying to do the right thing. Bush was a phony. He lied. He destroyed. He ran the military into the ground. He wrecked the economy. But Bush gets a pass from the media while they gang up on Obama.

Were is the voice of reason, or policy debate, in the American media? It has been quashed by right wing fanatics who spew propaganda and lies. Even the "mainstream" media is so far right that if it were taken back fifty years people would find it outrageously partisan.

Morality Trumps Economics

Here is an excellent post by Dean Baker in his Beat the Press blog:

Robert Samuelson has a piece today arguing that China's intervention is necessary to save the world economy. He of course is right in arguing that China has enough economic strength to save the euro and prevent a downward spiral that would throw the world economy back into recession, as some of us have argued.

However, the fact that China may have to play this role is due to the failings of the political leadership in both Europe and the United States. It is essential to remember that this is a crisis of a lack of demand, not supply. For this reason, it is ungodly stupid that so many people are being made to suffer from unemployment and declining living standards.

We know how to get out of this mess, we have known how for 70 years. We just need the government to generate demand. That means spending money. Ideally it would spend money on useful things like education, health care, and infrastructure, but even if it spent money in wasteful ways it would still create jobs and put people to work.

In the 30s we got much of the way back to full employment with the Works Progress Administration and other programs. Much of what was done was useful -- look around, you won't have to go far to find infrastructure built by depression-era programs. However, it took the massive spending associated with World War II to get the economy back to full employment. There is no magic associated with war that makes military spending more effective in creating jobs. The only difference was that the threat to the nation from the Axis powers removed the political obstacles to the necessary spending.

The same situation applies today. We just need to spend money. That applies to both the United States and the euro zone countries. The problem is that we have more people in political leadership positions who want to be morality cops and lecture about balancing budgets rather than focus on policies that will restore economic growth. This includes the top officials at the European Central Bank, many of the voting members of the Federal Reserve Board's Open Market Committee and much of the political leadership in the euro zone countries, the United Kingdom and of course here.

The reason why the world might need China to come to the rescue is that our economic policy is being designed by people who prefer to impose their warped sense of morality rather than pursue serious economic policy. The real humiliation of turning to China is not that we actually need China, it's that our political leaders are prevented us from saving ourselves.

The level of economic ignorance and the sheer audacity of pushing austerity in the face of large scale suffering is astounding and demoralizing. When I was a kid in the 1950s and 60s, all things seemed possible. Today the world is many times more productive and technologically advanced, but the it is infested with politicians who want to preach "limits" and "restraint" and the need to stand by while innocents are being mugged by an economy that was created by the very moralizers who say that their "hands are tied". Nuts!

Violence at Wall Street Demonstrations

Here is the title from an ABC News report: "‘Occupy Wall Street’ Protests Turn Violent; Video Shows Police Macing Women".

The obvious conclusion is that demonstratorss went berserk and the police had to resort to violence to contain the violence. Well... look for yourself:



These women are peacefully demonstrating, the police surround them with orange netting, then mace them. The only "violence" is the police.

ABC News has a title that misleads, then it starts its story with:

Video posted by the group Occupy Wall St from the eighth day of protests against corporations show police using Tasers and mace to control the crowd, which the group says has only made it more committed to keep up the demonstrations in lower Manhattan for the long haul.

A New York Police Department spokeswoman today confirmed the group’s claim that approximately 80 people were arrested Saturday, mainly for disorderly conduct and obstructing vehicular and pedestrian traffic.

The reader is left convinced the demonstrators "had it coming" because they were disorderly and confronting the police.

But if you watch the videos and read a little further into the article you find:

Among the video clips on the Occupy Wall Street website is one that shows a police officer macing a group of young women penned in by orange netting.

That is the full explanation for why the women were netted and maced. No violence. Nothing other than police arbitrarily imprisoning and then brutalizing them. But this is reported as "police restoring order". What?

ABC News goes on:

Another video has circulated of a police officer throwing a protester to the ground, though it is not clear why. The video shows the man standing in what seems to be a non-threatening manner before the incident.

Again, ABC News is presenting this as the police "restoring order" even as its very words show that the reporter sees no disorderly conduct other than police brutality. But ABC News maintains its sales job trying to present this as the poor overwhelmed police doing their best to deal with crazy mob violence.

You have to admire ABC News to sticking to its viewpoint even as it reports the opposite:

The website reported at least one protestor was arrested for taking photographs. An NYPD spokesman told ABC News Saturday that police were not targeting those with cameras.

Why are people demonstrating? It is for Occupy Wall Street

Meanwhile, in his Beat the Press blog, Dean Baker chastises the NY Times for its reporting about this event. The newspaper is cherry-picking what it reports to make the protests look ludicrous:

The NYT used its news section to mock critics of Wall Street. It presented the comments of some of the people protesting Wall Street. While the people quoted in this article do appear to be confused about the role of the financial industry in the economy, the paper would have no difficulty finding articulate critics of the financial industry.

For example, it could present the views of Nobel prize winning economist Joe Stiglitz. Or, it could present the views of Nobel prize winning economist, and NYT columnist, Paul Krugman. Or could interview Simon Johnson, a former chief economist at the International Monetary Fund.

It is not clear what news the NYT conveyed to its readers by by presenting the views of people who do not appear to be knowledgeable about the economy. This would be comparable to presenting the opinions of some of the more extreme people at a Tea Party rally as representative of the business community's arguments for lower taxes. This has not been done in the NYT or elsewhere.

Calling on Americans to Sacrifice for their Country

Here is a post by Dean Baker in his Beat the Press blog which points up the hypocrisy of a writer like Thomas Friedman writing for the NY Times. He wants "the little people" to sacrifice but can't think of a thing which the ultra-rich need to do. This is what Friedman called "shared" sacrifice:

That's right, he said it in his column today. He approvingly quoted Kishore Mahbubani, a retired diplomat who is now the dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore:

“No U.S. leaders dare to tell the truth to the people. All their pronouncements rest on a mythical assumption that ‘recovery’ is around the corner. Implicitly, they say this is a normal recession. But this is no normal recession. There will be no painless solution. ‘Sacrifice’ will be needed, and the American people know this. But no American politician dares utter the word ‘sacrifice.’ Painful truths cannot be told.”

Sacrifice is wonderful if it serves a purpose, but there are two big unanswered questions. First how would sacrifice help the recovery right now and second, exactly who do Mr. Friedman and Mahbubani think should be doing the sacrificing?

On the first question, I suppose that Friedman and Mahbubani want to see taxes increased or benefits like Social Security and Medicare cut. Both of these steps would mean real sacrifices for low and middle class people, but how exactly do they help the recovery?

Remember our problem is too little demand. So we make people sacrifice by paying higher taxes. How does this increase demand? Or we cut their Social Security benefits or make them pay more for their Medicare. Again, this would imply real sacrifice, but how does this spur the economy?

Are there businesses out there who are saying that they will not hire or invest today because Social Security and Medicare are too generous? Will these businesses decide to hire more workers and expand their business if the government cut these benefits?

In more normal times, there was at least a plausible argument that this could be the case. The story would go that reducing the deficit would lower interest rates, thereby encouraging businesses to invest. (Actually most research shows that investment is not very responsive to interest rates.) However, with interest rates already at post-Depression lows, it is difficult to envision them going much lower, nor that there would be much additional investment even if they did. In other words, Friedman and Mahbubani seem to be calling for pointless sacrifice.

The second part of the story is who they want to sacrifice. The top 10 percent of income distribution received the vast majority of the gains from economic growth over the last three decades. A grossly disproportionate share went to the top 1.0 pecent and the top 0.1 percent. It might be reasonable to expect that the big gainers over this period would be the ones who should be doing the sacrificing.

But not in Thomas Friedman's world. In his world, sacrifice must be shared equally. Those who are incredibly rich and those who are barely getting are both called upon to make sacrifices for the greater good. That's Thomas Friedman justice.

Friedman reminds me of the old men who exhort the young to "do their duty" and go to war. The old are safe in knowing they won't be called up. So it is awfully easy for them to rant about the need to "go to war" with this or that.

How the Political Right Attacks Workers

Here is another post by Dean Baker in his Beat the Press blog that demonstrates how the political right uses "facts" to attack workers by giving the false impression that their pensions are an immense burden:

The Washington Post used a front page story to scare readers about public sector pensions, implying that they faced an enormous unfunded liability. It refers to "states facing, by one estimate, a combined $3 trillion in unfunded pension liabilities."

It is unlikely that readers are able to assess the meaning of this $3 trillion figure in any meaningful way. It is worth noting first that it assumes that the stock market will provide a return that is approximately half of its historic average over the next three decades. If the economy and profits grow as projected, it would be necessary for stock prices to fall so much that they would have to be negative before the end of the 30-year period over which pensions are typically evaluated.

If we take the more typical figure of $1 trillion and compare it to future GDP, it is equal to approximately 0.2 percent of projected GDP over the 30 year planning period. By comparison, the wars in Iraq and Afghanistan have added approximately 1.6 percentage points of GDP to the military budget. This means that the unfunded liability of state and local pensions is approximately one eighth as large as the costs of these wars. This sort of context might have been helpful to readers.

In reporting the size of Rhode Island's pensions it would have been helpful to remind readers that many of these workers do not collect Social Security. That means their pensions are often their entire retirement income.

The top 1% owns the media, so they can get their propaganda out and repeat it and repeat it using the "big lie" technique that works very effectively to convince people of a falsehood. Meanwhile, the bottom 90% has no mechanism to get out a message to defend their interests.

Money Fall Upwards

Dean Baker has a new book The End of Loser Liberalism: Making Markets Progressive. It is available from his web site at the Center for Economic and Policy Research:

Money does not fall up. Yet the United States has experienced a massive upward redistribution of income over the last three decades, leaving the bulk of the workforce with little to show from the economic growth since 1980. This upward redistribution was not the result of the natural workings of the market. Rather, it was the result of deliberate policy, most of which had the support of the leadership of both the Republican and Democratic parties.

Unfortunately, the public and even experienced progressive political figures are not well informed about the key policies responsible for this upward redistribution, even though they are not exactly secrets.

The book will give you insights, it will make you more intelligent, it will make your teeth shine bright white, it will make you more handsome/pretty, it will add 4 inches to your height. You really should read this book.

Here is his indictment of the current political "debate" about the economy:

For the most part, progressives accept the right‟s framing of economic debates. They accept the notions that the right is devoted to the unfettered workings of the market and, by contrast, that liberals and progressives are the ones who want the government to intervene to protect the interests of the poor and disadvantaged.

But this view is utterly wrong as a description of the economy and competing policy approaches. And it makes for horrible politics. It creates a scenario in which progressives are portrayed as wanting to tax the winners in society in order to reward the losers. The right gets to be portrayed as the champions of hard work and innovation, while progressives are seen as the champions of the slothful and incompetent. It should not be surprising who has been winning this game.
In reality, the vast majority of the right does not give a damn about free markets; it just wants to redistribute income upward. Progressives have been useful to the right in helping it to conceal this agenda. Progressives help to ratify the actions of conservatives by accusing them of allegiance to a free-market ideology instead of attacking them for pushing the agenda of the rich.

For the last three decades the right has been busily restructuring the economy in ways that ensure that income flows upward. The rules governing markets, written by the rich and powerful, ensure that this gravity-defying outcome prevails. The right then presents the imposition of rules that it likes as the natural result of unfettered market forces.

Dean Baker is calling for the gloves to come off and for progressives to bring the debate down to the real issue: class warfare. Enough "trickle down" economics. There needs to be an economy where those who do the real work get paid real wages and get to share properly in the fruits of production and especially in increases in productivity.

Rather than speculate or philosophize about economics, Dean Baker quickly gets down to specific examples:

While the bank bailouts were big news, there is no shortage of less-visible instances in which conservatives have long been eager for the government step in to support the interests of the wealthy. We'll quickly discuss seven examples here: continued support for too-big-to-fail banks, patent and copyright protection, restrictions on organized labor, corporate liability limitations, Federal Reserve monetary controls, trade and dollar policy, and housing policy.

Let me repeat:

You really should read this book.

Grousing about the Elites

Here is Dean Baker on his Beat the Press blog feeling down in the dumps and a bit angry at how the same nitwits who set us up for the calamity of worldwide depression are now acting as cheerleaders for a double-dip recession:

Have the Double-Dippers Been Dipping Too Much?

The Commerce Department just released data showing that real consumption spending rose by 0.5 percent in July. This makes it highly unlikely that growth will turn negative in the current quarter. Consumption is 70 percent of GDP and this figure implies a 6.0 percent annual growth rate.

Of course consumption is not really growing that fast, more likely it is increasing at near a 2.0 percent annual rate, but maybe this number will shut up the arithmetic challenged economists who keep talking about a double-dip recession.

The economy's problem is pathetically slow growth. We should be seeing growth of 5-7 percent as the economy rebounds from the worst downturn of the post-war period. Instead, we will be lucky if growth just keep pace with the growth of the labor force, preventing unemployment rate from rising further.

The implication is that tens of millions of people will remain unemployed or underemployed because of the Wall Street sleazes and the incompetent economists who could not see an $8 trillion housing bubble and still don't know a damn thing about the economy. It's a crime that they still have their jobs.

I like Dean Baker. He is clever and really quite good at seeing the internal contradictions of those big shots who get all the limelight and hold the seat at the high table which divvies up the world and allots us the crumbs.

The above reminds me of my school days. The same "golden people" ruled the roost and took all the glory. They weren't particularly smart. They weren't always the most beautiful. But they were definitely the ones born with a silver spoon in their mouth. They were born to rule and rule they did. I found it funny how many people paid such close attention to these "trend setters". Lemmings over the cliff.

The nice thing about Dean Baker is that he does his own thinking. He even does the basic calculations and uses the tools of economics to evaluate the claims of the talking heads, the media, and the pundits of power.

Dean Baker is Puzzled by the Resounding Silence

The press normally loves to pick over flaws and faults and gaffs and errors of politicians, but as Dean Baker points out in his Beat the Press blog, there is an odd silence about Obama's abysmal ignorance of the depth of misery and suffering in the current depression:

Obama Says He Just Found Out How Bad the Economy Was in 2008, Where Is the Ridicule?

The media love to jump on politicians when they say something stupid or inaccurate about their personal lives.They will fill pages and pages of print, and take up hours on radio and TV, talking about the comment. They will bring on experts (i.e. political reporters and gossip columnists) to tell the public what the gaffe means and why it makes that person inappropriate for elected office.

However they somehow don't get the same urge when a political figure makes an incredibly foolish remark about a policy matter. This is striking because most people are perfectly competent to assess the appropriateness of a statement about a personal matter based on their own lives' experience. In other words, they really don't need the "experts" to tell them how important or unimportant a particular remark is. On the other hand, most people do not have expertise in the various areas of public policy, so they could benefit from having an expert tell them when a political figure makes an especially off the wall comment.

In that spirit, the Washington Post absolutely should have included a heavy dose of expert ridicule when it reported that President Obama said:

“I have to admit, I didn’t know how steep the climb was going to be. Because we didn’t realize — we just found out a week ago that the economy that last few months in 2008 was even worse than we had realized.”

It is true that the Commerce Department just revised down the GDP data to show that the decline at the start of the recession was even steeper than had previously been reported. However, by far the most meaningful measure of the steepness of the climb needed for recovery is the employment to population ratio (EPOP):the percentage of the working age population with jobs. This is reported monthly and is not subject to substantial revision.

President Obama's team always knew exactly how far the EPOP had fallen since the start of the downturn and therefore knows how many people must be put to work to get the economy back to full employment. The lower than previously reported GDP is an interesting piece of information, but tells us almost nothing new about how much ground must be made up.

The Post should have included the comments of economists ridiculing the idea that President Obama has just now discovered how bad the downturn was. It might even be worth a separate article or two. If the statement is actually true (i.e. President Obama just realized how bad the downturn was) then it is deserving of far more attention than his comment about working class whites being bitter and clinging to gun and religion before the Pennsylvania primary.

Obama can't be ignorant of the facts. He has met with Paul Krugman and Krugman has been repeating since 2008 that the downturn was worse than was being reported, that Obama's response was pitifully small compared to the need, that the government needed additional programs, and that Obama was playing political games by insisting that his stimulus in March 2009 was "just right" and that it was "working just fine" and that the US economy was "recovering" from the downturn. Instead, Krugman has been insistent that the US is stuck in the decades long "liquidity trap" like Japan suffered. In fact, Wikipedia notes:

On February 9, 2009, in warning of the dire consequences facing the United States economy after its housing bubble, U.S. President Barack Obama cited the "lost decade" as a prospect the American economy faced.

But Obama's policies have not responded to this reality.

Dean Baker Lambasts Eric Cantor

From a post on Dean Baker's Break the Press blog:

Fun With Eric Cantor

The Post gave Eric Cantor the opportunity to lay out his economic vision today. Let's have a little fun seeing how many things he got wrong.

Cantor begins by telling us:

"Our country is facing two related but separate crises. The first is the federal government’s debt crisis, the result of decades of fiscal mismanagement by both political parties as well as unsustainable entitlement commitments."

Debt crisis? Does Cantor mean the fact that we have to pay just over 2.0 percent interest on 10-year Treasury bonds, a post-depression low? Of course, there was a near debt crisis when the Republicans refused to raise the debt ceiling. If they had held to this position, then legally prohibiting payment of the debt can be viewed as a debt crisis, but this has nothing to do with the level of the debt or its sustainability.

As a practical matter, the debt-to-GDP ratio was actually relatively low prior to the downturn. It had been falling in the Clinton years, so the 90s should not be included in his list of "decades of fiscal mismanagement." Even with the Bush tax cuts, the cost of the wars, and the Medicare drug benefit, the deficit was projected to be just 1.4 percent of GDP in 2009, until the collapse of the housing bubble brought down the economy.

Cantor then tells us:

"the Obama administration’s anti-business, hyper-regulatory, pro-tax agenda has fueled economic uncertainty and sent the message from the administration that 'we want to make it harder to create jobs.'"

He then tells us about, "...the “Transport Rule,” which could eliminate thousands of jobs." Hmmm, thousands of jobs. That's not millions, hundreds of thousands or even tens of thousands. Back in the late 90s the economy was generating 3 million jobs a year or 250,000 a month. Cantor's "thousands of jobs," if accurate, would translate into one day's job growth back then.

But Cantor then comes back with the "ozone regulation" which he tells us "would cost upward of $1 trillion and millions of jobs in the construction industry over the next decade." It would be interesting to know where these numbers came from, perhaps they are somewhere near the story of creation in the bible.

Then we get:

"There is the president’s silence as the National Labor Relations Board seeks to prevent Boeing from opening a plant in South Carolina that would create thousands of jobs."

No, this was about shifting jobs from plants that are unionized to plants that are not unionized. There was not an issue of net job creation, unless Cantor thinks that non-union workers are less efficient so that it takes more of them to build a plane.

Cantor next jumps back to taxes, complaining that these regulations:

"coupled with the president’s insistence on raising the top tax rate paid by individuals and small businesses, has resulted in a lag in growth that has added to the debt crisis, contributing to our nation’s credit downgrade."

Yep, President Obama wants to raise the tax rate paid by the wealthy, a group which excludes the vast majority of small business owners, back to the level it was at when we were creating 3 million jobs a year. Clearly this is a job killer.

Oh yes, and the debt crisis has reappeared. It is featured again in the next paragraph:

"The debt crisis threatens our long-term future: the ability of our children and their children to have the same opportunities to succeed that this and previous generations have enjoyed. Republicans passed a budget this spring, written by Rep. Paul Ryan, that would address our challenges head-on by putting in place common-sense reforms to manage our debt over the short and long term."

According to the Congressional Budget Office, the Ryan plan would increase the cost of buying Medicare equivalent insurance policies by $34 trillion over the program's 75-year planning horizon. Note that this $34 trillion figure is the higher cost to the country. The total cost shift to future seniors (our children and their children) is $38 trillion.

Then we get another shot at Social Security, Medicare, and Medicaid:

"The president has acknowledged that without reform, spending on entitlement programs is unsustainable. But he has also made clear that he would never support the type of structural changes to Medicaid, Medicare and Social Security needed to make these programs solvent as envisioned in our budget."

Mr. Cantor probably missed it, but Congress passed health care reform last year. According to the Medicare trustees, the bill eliminated more than 75 percent of Medicare's long-term shortfall. That's not 100 percent, but Cantor seems more than a bit off the mark when he complains that Obama "would never support the structural changes ... needed to make these programs solvent," at least in reference to Medicare.

Cantor probably also failed to notice that the Republican budget did not include any thing to improve Social Security's long-term budget situation. This was no doubt an oversight.

For those keeping score, a tax increase that is equal to 5 percent of the wage growth projected over the next thirty years would be sufficient to keep the program fully solvent over its 75-year planning horizon. That doesn't sound like an insoluble problem.

Cantor then concludes with a paean to growth. Yes, more growth would be better, but it's not clear why anyone would think that Cantor's path of tax cuts and lax regulation, which we just tried (remember George W. Bush?) would be the route to fast growth.

Okay, enough fun for now, I have work to do.

Go read the original post to get the embedded links.

I is simply amazing that a still sizeable number of American actually believe this pig swill that the Republicans put out. If there were any justice, the Republicans would have disbanded as a political party after their 140 year record of corruption and pandering to the ultra-rich.

Reporting Facts and Not Opinions

Here is yet another post by Dean Baker in his Beat the Press blog where he takes the Washington Post to task for mis-reporting:

WAPO Should Make Clear, Constraints on Monetary and Fiscal Policy Are Political

A front page Washington Post piece was headlined, "Geithner, Bernanke Have Little in Arsenal to Fight New Crisis." This piece should have made it clear to readers that the obstacles to additional action are political not economic. All the obstacles noted in the piece are political in nature. The one possible exception is the S&P downgrade of U.S. government debt, which does not appear to be an obstacle at all. The markets laughed off this downgrade, sending U.S. bond prices soaring on the first trading day after the announcement.

A better headline for this piece would have been, "Political Obstacles Obstruct Response to Economic Crisis."

It feels like the US has a "Ministry of the Truth" sponsored by a Orwellian 1984 plot to confuse and misdirect the American people. Year after year Baker points out these "mistakes" by organizations like the Washington Post, but nothing changes. The people in charge of big media empires are not stupid. So they must be willingly spreading these lies and deceits. But for whose benefit?

Economic Ignorance

The tragedy is that people ignorant of economics hold the reins of power and drive the big political decisions. Heaven help us...

Here is a bit from a post by Dean Baker in his Beat the Press blog pointing out basic ignorance in the media:

The folks at Morning Edition may not know that this is what they said, but in fact, this is exactly what a Planet Money segment on the dollar's status as a reserve currency implied. The segment told listeners that it was a good thing that foreigners demanded large amounts of dollars to use and hold as a reserve currency.

If foreigners increase their holdings of dollars then this means that the United States has a trade deficit. This is a logical implication of foreigners efforts to acquire more dollars. In order to get more dollars, they have to sell more to the United States than they buy from the United States.There is no way around this.

If the United States has a trade deficit then it means that the country as a whole is a net borrower. That means that the combination of private and public savings must be negative. Again, this is an accounting identity, it must be true, just like 2+2 will always be equal to 4.

Generally private savings are roughly equal to private investment. The main exception is when asset bubbles like the stock market bubble or the housing bubble lead to a consumption boom and thereby depress private saving. (The housing bubble did also lead to a boom in construction, which as a component of investment allowed private investment to exceed savings, until the bubble burst.)

If the country has a trade deficit and private saving is equal to private investment, then the country must have a budget deficit. This means that in general circumstances, Morning Edition was telling us that budget deficits are good, since it told us that we should be happy that the dollar is the world's reserve currency.

There was another important aspect to this issue that the piece failed to mention. Even if the dollar is used as a reserve currency the amount that a country needs to support a given level of trade can vary enormously. The amount of reserves that developing countries hold soared in the wake of the East Asian financial crisis. This is usually attributed to the fact that the terms of the bailout imposed by the IMF on the countries of the region were viewed as being so harsh that developing countries wanted to make sure that they would never be put in the same situation. This meant accumulating massive amounts of reserves (i.e. U.S. dollars) as an insurance policy.

This was the origin of the massive trade deficits that the United States has been running in recent years. It would have been useful to make this point in this segment.

I find it funny. There are those who are pushy and self confident and those who are reserved and shy. There are those who are knowledgeable and those who are poorly informed. The ideal is to match up pushy/self confident/knowledgeable. But in reality, most leaders are pushy/self confident/poorly informed. The smart leaders are those who know how to surround themselves by the reserved/shy/knowledgeable and use them to secretly plan and guide their actions while getting up on the political stage and taking all the glory for "leading" the people. This happens from time to time, and these are the "golden age" eras of a civilization. Sadly, the US hasn't had a golden age in a long, long time.

Good News (Relatively Speaking) from Dean Baker

I like Dean Baker. He keeps a skeptical eye on the media and does yeoman duty spotting misleading and mendacious "reporting".

Here's his take on all the gloom and doom about the latest financial blow to the US economy. From his latest post on his Beat the Press blog:

The NYT told readers that a second recession could be even worse than the first. The reason is that people will have less of a cushion going in and that we are supposedly out of policy tools to get us out. There is some serious confusion here that is worth addressing.

First, it is true that most families have little left in reserve to deal with another layoff, so the NYT is absolutely right that a second downturn would really whack people that are already hurting. But there are two important points to make on this.

First, precisely because the economy is still badly depressed in many ways it is much less likely that we will see a recession. Remember a recession means two quarters of negative growth. To have negative growth there have to be sectors of the economy that are shrinking. Typically this would be construction and car purchases.

As it stands, construction (both residential and non-residential) are seriously depressed. It is difficult to imagine that either sector could fall much more than it already has. This means any negative impact that they have on the economy will be very limited. The auto sector is also still well-below pre-recession levels of sales. If it were to dip by another 10-15 percent (a very large dip), it would not have that much impact on the economy.

Consumption more generally is growing, albeit slowly. This is 70 percent of output, and even modest growth in consumption is likely to keep the economy growing. The government sector is shrinking, but only at around a 2 percent annual rate. So, we have to offset a sector that is about 20 percent of GDP shrinking at a 2 percent rate to stay in positive territory.

That is a pretty low bar. I think the double-dip crowd has not done their homework.

...

Finally, it is 100 percent nonsense to say that the government is out of policy options. We can do more stimulus. The financial markets are yelling at the government at the top of their lungs saying "borrow more money." That's what 2.6 percent interest rate on 10-year Treasury bonds means. There are balanced-budget worshipping politicians who say that the government can't do anything, but this is not true and the NYT has no business repeating it.

The Fed could also do more. For some reason the article does not mention policies that Ben Bernanke has himself suggested: targeting a long-term interest rate (e.g. a 1.0 percent 5-year Treasury rate) or a higher rate of inflation (e.g. 3-4 percent). The former was mentioned by Bernanke at his Jackson Hole speech last summer; the latter in a paper that he wrote while still a professor at Princeton. Both could help to boost demand and create jobs.

The government could also try to create jobs by taking steps to lower the value of the dollar.

...

In short, there is much that the government can do to create jobs. It is understandable that incumbent politicians would want to push the "nothing we can do line" to justify their own failings, however news outlets have no business passing along these excuses which are not true.

There's more. Go read the whole post.

So the news is less bad than the prophets of "doom-and-gloom" are touting. It is not good, but it isn't the end of the world. The US will recover from this. The best way out of the mess is for the US electorate to come out in force in 2012 and throw the Republican fanatics out of office!

Naming the Villains

This bit from a post by Dean Baker in his Beat the Press blog caught my eye:

At its peak, the housing bubble created more than $8 trillion in housing equity compared to a situation where house prices had just followed their long-term trend. People consumed based on this wealth, exactly as economic theory predicted.

This would have been an entirely rational decision if they were able to keep their bubble equity, but of course they were not. The problem was not that people were being spendthrifts, the problem was that the people in charge of running the economy allowed an $8 trillion bubble to grow that had predictably disastrous consequences.

The blame here lies not with the average homeowner, who acted rationally with the information available. The blame lies with the people who managed the economy, like Alan Greenspan, Ben Bernanke, and Hank Paulson, and the people who opine on economic issues in major news outlets. If these people were competent, they would have been shooting at the bubble with everything they had before it reached such dangerous levels.

Sadly, nobody in power in Washington has yet named the above as villains responsible for the Little Depression of 2008-??. Instead, these people still have sway along with other miscreants like Tim Geithner (promoted to Secretary of the Treasury for his "services" in creating the current mess) and Larry Summers (who was promoted to head of the US National Economic Council). Meanwhile, those who fought valiantly to stop the insanity, like Brooksley Born who was trashed and dumped in ignominy still remains shunned and despised.

How long with the forces of Darkness hold the high ground in Washington? How long will the stench of death and decay lay across America? Well, at least until the Republicans are humbled in the polls and until Obama is told to pack up and go back to Chicago.

Adam Smith's Invisible Hand

Dean Baker has found yet another invisible hand in the market of ideas with this post on his Beat the Press blog:

Erskine Bowles Gets $350,000 a Year from Morgan Stanley

For some reason the media never find room to mention the fact that Erskine Bowles is a director of Wall Street investment bank Morgan Stanley (an otherwise bankrupt beneficiary of the bailout). Bowles was a co-chair of President Obama's deficit commission and is now apparently one of the people whose name is being mentioned as a possible successor to Timothy Geithner if he were to resign as Treasury Secretary.

If Bowles was getting $350,000 a year from the United Auto Workers it seems likely that it would be mentioned in news reports. It's not clear why the media do not think his ties to a major Wall Street bank are relevant.

Call me a cynic, but I think people sing for their supper, I suspect Bowles' "advice" on the Debt Commission and as an advisor to Obama probably went like this: "Sir, do this-and-this-and-not-that to help our friends [the ultra-rich]". This was a wonderfully "invisible hand" that helps the rich in magical ways inside Washington and is amazingly effective at ensuring that government actions surprisingly favour the ultra-rich.

I find it funny that Dean Baker can spot the obvious while the rest of the "journalists" covering Washington don't see this kind of stuff.

Here's another example from another post by Baker:

This one is almost too painful to write about. The Post tells us that:

"Even some of the recent bright spots in the global economy are starting to dull. German economic growth, for example, appears to be slowing. Germany exports heavily to the European nations that are experiencing a debt crisis."

Is there anything in the world that was more predictable? Why on earth didn't the people making policy at the ECB see this?

Isn't that surprising! When you choke people to death, they don't hop up and ask you what they can do for you next.

Germany has been "reluctant" to help cover the bonds that are running up in price because of the threat of default by Greece and the other PIIGS. So these economies are being forced (choked) by Germany into austerity which cuts their GDP. Now, isn't it surprising that as they are gasping for air (austerity), they don't jump up and ask what more they can do (suddenly show a GDP growth spurt that demands more of your exports)? The world is a complex and nuanced place where only the subtlest minds -- Dean Baker -- can gaze through the murk and see these obscured truths.

I'm thinking the world wouldn't be so mysterious, dark, and unintelligible if the media presented real facts rather than their usual song and dance show, their magician moves, their propaganda for the rich.

Everybody should read the Beat the Press blog to discover just how beaten up they are by a press that only half covers "the story".

Painting Political Pictures with Words

Here is Dean Baker with his Beat the Press blog catching the Washington Post, yet again, slipping politically charged, emotional words into a supposedly "objective" news story:

How Does the Post Know That the Debt Is Becoming "Crushing?"

Yes, it was just a throw away line. But serious newspapers do not say in front page story that:

"Over the long term, the deal could help free the nation from what is fast becoming a crushing debt."

Lines about a "crushing debt" should appear in quotations or left to the opinion pages. They should not be assertions of fact to readers.

Manipulating people by painting emotionally charged pictures is just plain propaganda. This is why Dean Baker likes to refer to the Washington Post as "Fox on 15th Street".

Understanding the US Deficit Debate

It helps to put numbers with ratios to help understand what all the fury is in Washington with the refusal to pass a new deficit ceiling without some "deficit reduction".

Here is a post by Dean Baker at his Beat the Press blog that provides the explanatory numbers:

Does Everyone Know How Much $2.2 Trillion Is Over the Next Decade?

It seems unlikely that many people, even among the relatively well-educated readers of the New York Times and Washington Post, have much clue as to how much money is at stake in the battle over the debt ceiling. As some points of reference, the government is projected to spend roughly $46 trillion over the next decade. This means that $2.2 trillion in cuts would be around 4.8 percent of projected spending.

However, the impact is likely to be much larger on specific portions of the budget. If Social Security, Medicare, and Medicaid are left off the table, and most of the cuts come from the discretionary portion of the budget (which includes most government investment in infrastructure, education and research), then $2.2 trillion in cuts would come to 15.2 percent of projected spending. There is also the question of the division of the cuts between domestic discretionary spending and military spending. In the extreme case where all the cuts came from the domestic side of the budget, the cuts would be 32.8 percent of projected spending.

Finally, it is worth asking how large these proposed cuts are relative to the size of the economy. GDP is projected to be almost $200 trillion over the next decade. This means that if the government could raise taxes by an amount equal to 1.1 percent of projected income it would raise enough money to [cover] the spending cuts being debated by Congress.

So the horror of cutting government services could be avoided by a modest tax increase of 1.1% and given a progressive tax system, that means that the bottom 90% could expect an increase of much less that 1% while the top 1% of income earners could expect an increase of roughly 3-5%. If you are making $100 million a year, having to fork over another $5 million may be "painful" but how does that "pain" compare to a retiree not having enough for food, shelter, and drugs? In a fair world, the millionaire would do his duty and fork over the added contribution. But in the "new reality" of Republican-controlled US, it probably means more tax cuts for the rich -- sorry, the "job creators" -- and even bigger hardships for the poor.

If you want to understand the vicious double-speak of the right wing fanatics in the late 1930s and early 1940s when the world fell apart, you only have to look at the crazies who are "in charge" in Washington today, the Republicans.

Here is an insight into the "brave new world" that the Republicans love and want to spread and to make happen again and again and again...



This is the wonderful world where the lions inherit the world from the lambs.

This is the world where the "smart money" bets against the people and bring down a country.

This is the world where criminals and fraudsters get to perpetrate their crimes with no inhibition.

This is the world where Wall Street psychopaths get the "little people" to bail them out and help them collect record-setting "bonuses" for their sterling "performance" in crashing the world's economy.

This is the world brought to you by the Republican party.