Every time his column appears, David Brooks demonstrates that the U.S. economy still offers good-paying jobs for unskilled workers. His Sunday column (sorry, Times Select and therefore non-linkable) is yet another diatribe against Democratic politicians (e.g. Sherrod Brown and Bob Casey) who are opposed to trade and immigration policies that are designed to redistribute income from less-skilled workers to college educated workers and capital. Brooks does the usual routine of contrasting these backward looking nationalists with forward looking internationalists like Hillary Clinton.

Of course, if Times columnists were required to know what they were talking about, Mr. Brooks would know that the Hillary Clinton "internationalists" are actually strong proponents of protectionism, but only for the professionals who make up their base. Their trade agreements do little or nothing to subject doctors, lawyers, and other highly paid professionals to international competition. Rather, they think that only autoworkers, textile workers, and custodians should have to compete with low wage workers from the developing world. This protectionism costs the country hundreds of billions of dollars a year in higher prices for health care, legal fees, accounting fees, and all the other goods and services that require this professional labor as an input.

The nationalist/internationist dichotomy is useful rhetoric for promoting the "internationalist" position, but it has nothing to do with the reality. And someone with Mr. Brook's job really should know this.

--Dean Baker

The NYT reported today that the German pharmaceutical company Bayer A.G. concealed a study from the F.D.A. that showed a drug used in heart surgery might increase the risks of strokes and death. Of course, economic theory predicts that government granted patent monopolies will create incentives for exactly this sort of behavior.

Economists should be focusing a large portion of their research to developing more efficient alternatives for financing pharmaceutical research. Unfortunately, they spend much more of their time calculating the gains from eliminating 5 percent tariffs on pants. As a result, tens of millions of people cannot afford drugs that would be sold at very low prices in a competitive (i.e. patent free) market, and drug regulators get lies about the safety of the drugs they evaluate.

--Dean Baker

The Wall Street Journal reports that a batch of good economic news might give Republican candidates a boost in this fall's elections. Well, good economic news is generally good news for the party in power, but the reports we have been seeing lately don't look very good.

At the top of the list we have falling home sales and prices, and record high ratios of mortgage debt to home values. Yesterday, the Commerce Department reported that new orders for durable goods are also headed down. Employment growth has been weak for 5 straight months, while wages have been struggling to keep even with inflation. None of this adds up to a disaster (at least not yet), but I'm not sure that anyone would boast about it either.

Gas prices have tumbled in the last few weeks, and this is clearly good news for people's pocketbooks, but I'm not sure that many people will vote Republican because of $2.30 a gallon gas. I guess my question is, if there is in fact so much good economic news, why hasn't the Wall Street Journal been reporting it?

--Dean Baker

The news reports on the release of revised data for 2nd quarter GDP missed the fact that output in the nonfarm business sector was revised down by 0.4 percentage points. This means that (ignoring rounding) productivity growth for the quarter should also be lowered by 0.4 pp to a 1.2 percent annual rate. At this point, the consensus estimate for 3rd quarter GDP growth is about 2.5 percent, which translates into a 1.5 percent rate of productivity growth, assuming hours grow at a modest 1 percent annual rate.

Productivity growth has clearly slowed from its extraordinary 3.6 percent annual rate over the years 2002-04. If the third quarter growth comes in at close to 1.5 percent, then the year over year rate (3rd quarter 2005 to 3rd quarter 2006) would be under 2.0 percent. That would be news.

-- Dean Baker

Reports on August new home sales initially touted the unexpected uptick from a 1,009,000 annual rate in July to a 1,050,000 annual rate. Fortunately, some folks noticed that the July numbers had been revised down from a previously reported 1,070,000 annual rate. Still, some reports noted the goods news that inventories of unsold homes had declined modestly from a record 570,000 in July to 568,000 in August. Well, that one isn't exactly right either. The July inventory numbers had previously been reported at 568,000.

The August report also showed a modest 1.3 percent (nominal) decline in median prices. This nominal price drop, which is approximately a 5 percent real price decline, in fact hugely understates the true fall. Builders in many of the formerly hot markets are giving large concessions in the form of free add-ons, below market mortgages, subsidized closing costs, and buyer side realtor bonuses. An accurate accounting of these concessions would certainly push the true price down further.

The sales figures are also somewhat exaggerated, since there are many more cancellations now than in the past. (Cancellations are never subtracted from sales.)

This downtick is just the beginning. Houses are still being built much more rapidly than end users want to buy them. Building will not fall to a sustainable level until prices drop more. The trend level for house prices is about 30 percent lower than current levels. This is going to get really ugly.

-- Dean Baker

The Washington Post reports this morning that the I.M.F. is telling Argentina’s president, Nestor Kirchner, that he must change his ways, if Argentina is to maintain its 9 percent GDP growth. Regardless of the specifics, the idea of the IMF giving advice to Argentina at this point is almost the dictionary definition of Chutzpah.

Let’s take a quick trip down memory lane.

Back in the nineties, Argentina was an IMF poster child. It privatized everything in sight (offering hefty gains to the buyers), tied its currency to the dollar, and got its inflation rate down to near zero. It also had some years of pretty good growth. However, by the late nineties, its luck had turned. The wave of financial crises in developing countries led to a big jump in interest rates, which was compounded by the fact that the currency had become hugely over-valued, causing the country to run a large current account deficit. Investors were demanding 20 percent interest rates in a country with near zero inflation. (As a sidebar, Argentina would have had a balanced budget in 2001 had it not followed the IMF-World Bank advice to privatize Social Security in 1994.)

While it should have been apparent that this situation was unsustainable, the word from the I.M.F. was to keep the currency peg and just run larger budget surpluses. Argentina’s government followed this advice from 1998 until the end of 2001, pushing the country into a severe recession.

By the end of 2001, it was no longer possible to stay on the I.M.F. regimen. The government missed some debt payments and finally removed the peg of its currency to the dollar. The I.M.F. boys refused further loans and gave stern lectures about impending doom. In April of 2002, they projected that Argentina’s economy would shrink by 12.5 percent for the year and grow just 1.5 percent the following year, based on its current course. Over the next two years, the I.M.F. did everything it could to squeeze money out of Argentina on behalf of its creditors, repeatedly warning of dire consequences if it did not comply. Argentina did not comply and forced its creditors to accept about 30 cents on the dollar.

As it turned out, Argentina’s economy did shrink in 2002, falling by 10.9 percent. But it bounced back quickly, growing 8.8 percent in 2003, 9.0 percent in 2004, and 9.2 percent in 2005. Now the I.M.F. has more advice for Argentina? Are they promising Mr. Kirchner, that if he would just listen to them, Argentina will be able to match Mexico’s post-NAFTA per capita GDP growth rate of 1 percent a year? I hope that Mr. Kirchner sends a good intern to the meetings with the I.M.F.’s representatives.

-- Dean Baker

In his weekly column, David Leonhardt tells readers that the problem with the U.S. health care system is not waste, rather we are getting what we pay for. I'll leave it to others to assess the value of good health and longer life expectancies, I'll simply point out that everyone else seems to get much more for what they pay. As I've noted before, every other wealthy country enjoys longer life expectancies than the United States and they pay on average less than half as much per person.

We can also say the same thing about the change in spending over the last 35 years, with the increase in spending in the United States vastly exceeding the increase in spending in other countries, with no corresponding gains in outcomes. For example, while life expectancy incrased by 5.9 years between 1970 and 2000 in the United States, it increased by 6.4 years in Canada. Over roughly the same period, Canada's per person health care spending went from 85 percent of the U.S. level in 1970 to 52 percent in 2003. Life expectancy in Germany increased by 8.0 years, while its per capita health spending went from 76 percent of U.S. levels in 1970 to 53 percent in 2003. France had a gain of 6.8 years, although its spending levels only dropped from 58 percent in 1970 to 53 percent in 2004. Norway and Sweden did have smaller gains than the U.S., but their life expectancies are still 1.9 years and 2.9 years longer than ours, respectively. (They pay 65 percent and 48 percent as much per capita as the United States, respectively.)

Maybe the benefits from our health care spending are worth the cost, but then everyone else in the world seems to be getting a really good deal. Where oh where are the proponents of free trade?

--Dean Baker

Now that the data are showing that home prices are falling, news reports are again citing statements from the experts who told us that home prices would never fall. According to these experts, house prices declines are no big deal after the extraordinary appreciation of the last decade. The data indicate otherwise.

People have been borrowing against their homes at a rate of more than $700 billion a year. This borrowing has helped to sustain consumption in the wake of slow job growth and declining real wages. This borrowing explains the negative savings rate, a first since the beginning of the Great Depression.

The problem with declining house prices is that it could quickly put an end to borrowing against home equity. The Fed reported that the ratio of equity to value was at a record low 54.1 percent last quarter. From the fifties through the eighties, this ratio was consistently in the high sixties. Coming after a decade of unprecedented price appreciation, this record low ratio is shocking. It is even more disturbing given that the country's demographics, with the huge baby boom cohort entering retirement, points to a higher than normal equity to value ratio.

If house prices drop further, this ratio of equity to value will fall further. More homeowners will hit their borrowing limits. This will both curtail consumption and likely cause many people to lose homes.

It would be good if the media talked to experts who were not in the "who could have known" school of economics.

-- Dean Baker

Since many folks seem confused on the idea of free trade in doctors, let me make a few points that may help clarify the issue. First, we should think about trade in doctors like we think about trade in manufactured goods. When the Bush 1-Clinton administration wanted to increase trade in manufactured goods with Mexico, tariffs were not the issue. U.S. tariffs on Mexican manufactured goods were already very low (@2 percent, on average). The issue was setting up an institutional structure that guaranteed U.S. corporations security so that they could set up factories in Mexico without having to worry about expropriation, restrictions on repatriating profits, or other such concerns. The treaty also gave assurances that exports to the United States would not be blocked by future tariff or non-tariff barriers.

With this in mind, free trade in physicians’ services would mean setting up a set of transparent education and licensing standards (which would also have to be standardized across the 50 states, just like with safety standards for manufactured goods). Every student in Mexico, India, or China, would then know that if they took the right courses and passed the right exams (administered in their home countries by U.S. licensed testers) then they would be able to practice medicine wherever they wanted in the United States, with the same opportunities as doctors trained in New York or Los Angeles. With such a structure in place, foreign students would train to practice medicine in the U.S., and foreign medical schools would teach to these standards.

We are very far from this “free trade” situation today. First, the rules were quite deliberately designed to restrict the number of foreign doctors (the NYT and Post both had several articles on this point in the mid-nineties, cited in The Conservative Nanny State). Second, the federal government, and many state and local governments have restrictions and even outright bans on employing foreign doctors. Governments are large employers of doctors.

Finally, it is illegal to hire a foreign doctor because they are willing to work for a lower wage than a native born doctor. While Wal-Mart is free to buy its toys and clothes from whoever sells them at the lowest price, an employer is supposed to certify that they were unable to find a U.S. citizen or green cardholder for a position before they are allowed to hire a foreigner. While this rule is not tightly enforced, it certainly precludes the possibility of a Wal-Mart Hospital that quite explicitly seeks out the lowest cost doctors from anywhere in the world. The government would throw the operators of Wal-Mart Hospital in jail. That’s because doctors have more political power than the workers who make toys or clothes.

-- Dean Baker

NPR had a piece this morning on the possibiity that Medicare reimbursements for doctors will be cut. It told listeners that if this cut went into effect, then there may be a shortage of doctors who are willing to serve Medicare beneficiaries.

In other contexts, such as supplies of farm workers, custodians, and restaurant workers, NPR has told listeners that shortages meant that the country needed immigrant workers. No one interviewed for this segment mentioned the possibility of more immigrant doctors, even though doctors receive much higher pay in the United States than they do in the developing world, or even Europe. Surely, if the United States worked to eliminate the barriers that make it difficult for foreigners to train to U.S. standards and practice in the United States, there would be large numbers of foreign physicians who would be willing to do the work that NPR tells us American workers do not want to do.

The great thing about economic models is that you can use the same models for almost anything, you just have to change the words that appear on the axis. If getting immigrants, who will accept low pay, to work in our farms and factories makes economic sense, then getting foreign doctors, who are willing to accept low pay, also makes sense. Maybe NPR will one day get reporters who know economics, if we elimiante barriers to trade among journalists.

-- Dean Baker

The NYT has a column today reporting that people's assessment of the economy is heavily influenced by their view of the situtaion in Iraq. While I am open to this view, the chart (sorry not linkable) accompanying the column left me unconvinced.

Eyeballing the numbers, we start in May '03 with more than 70 percent of the public thinking that the situation in Iraq is going well. At that time, just over 20 percent report believing that the economy is getting better. Over the next year, the share of the public who think that things in Iraq are going well falls below 40 percent, while the share who think the economy is getting better rises to 30 percent. In the subsequent two years the share of the public who think that things are going well in Iraq hovers near 40 percent, while the sahre who think that the economy is getting better falls below 20 percent. Maybe there's a problem with my eyesight, but I'm afraid that I don't see the correlation.

--Dean Baker

The NYT had an article today on Berlin’s mayor. At one point the article discusses Berlin’s economy, telling readers that it has a 17 percent unemployment rate.

It would have been helpful to point out Berlin’s unemployment rate is 17 percent using the official German measure of unemployment. This measure counts anyone who is working less than 15 hours a week, who would like to be working full-time, as being unemployed. In the United States these people are counted as being employed. This difference adds approximately 2 percentage points to Germany’s unemployment.

The Times reporters and editors are well aware of this difference in measurement. (I have repeatedly harassed them about it.) It is difficult for me to see why they would report the official German measure instead of attempting to convert it to the U.S. measure, or at least informing readers of the difference. This would be like telling readers that the temperature in Berlin in September averages 20 degrees, without noting that this was using the Centigrade system. Would the NYT consider that good reporting?

--Dean Baker

The NYT gives us yet another crisis story about declining congestion and pollution in Italy. You guessed it -- fewer children and falling population. According to the article, economists say that communities will struggle to find people for certain jobs like ambulance drivers or police officers.

It sounds more like Italy has a shortage of well-trained economists. If they raise the pay for these occupations, I am sure that they will be able to find the necessary workers. There is no reason that a society and economy should not be able to thrive in a period of declining population. I look forward to my beachfront property in Italy, which will no doubt be very cheap because there will be no one in Italy who wants it.

--Dean Baker

While I am reluctant to perpetuate the debate on living standards and the accuracy of the consumer price index (CPI), I just can’t resist holding economists and pundits to the things they claim to believe.

My last post featured the claim that living standards had improved substantially despite the stubborn refusal of the CPI to support this claim. When median family income is deflated by the CPI, then real family income was just 14.4 percent higher in 2004 than it was in 1979. This increase is explained largely by an increase in working hours per family, as the median hourly wage rose by even less over this period.

The stagnation deniers (SD) argue that the CPI has missed the benefits of all the new goods that have appeared on the market in the last quarter century – cell phones, the Internet, and the great gains in health care over this period. Life expectancy in the United States increased by 3.5 years over this period, from 73.7 years in 1980 to 77.2 years in 2003.

As I said in my last post, I preferred to accept the judgment of the ump (the Bureau of Labor Statistics) to the anecdotes of the stagnation deniers, but let’s have some fun and assume the stagnation deniers are right. Well, if the SD want to be consistent, then they would have to apply the same criticisms to price indices everywhere, including places like Old Europe. After all, Old Europe has pretty much all the same goodies we have here, and for the most part the new items have comparable levels of diffusion.

Of course, with healthcare, Old Europe scores much better than the U.S. over this period. According to the OECD, life expectancies in EU-15 increased by an average (unweighted) of 5.2 years to 79 years in 2004. Since SD believe that the CPI badly understated gains in living standards in the United States by failing to pick up the improvements in health care that allowed for this increase in life expectancy, they must believe that there is an even larger gap in Europe between the rates of increase in living standards implied by Europe’s price indices and the true rate of increase in the European standard of living.

Old Europe looks even better when we remember that it has managed to have these large gains in life expectancies even while they substantially reduced the average number of hours worked per worker per year (Europeans chose to take much of the gains from higher productivity in the form of more vacations and shorter workweeks.) If the SD crew wants to be consistent in its claims about the CPI and living standards, then they must believe that Europe has done quite well relative to the United States over the last quarter century – certainly better than the official data indicate.

I’ll conclude with a quick point of clarification. I had earlier noted that if the CPI overstatement claim is true, then many of us middle-age middle class types grew up in poverty. The point here is simple: there is no evidence any overstatement of inflation in the CPI has increased through time. The methodology has certainly improved substantially through time, which should have made it more accurate in the last quarter century than in the years from 1945-80. In fact, much of the evidence of a CPI overstatement of inflation is based on research into price data for the fifties and sixties. So, if there has been a substantial overstatement of inflation between 1980 and 2005, then there was almost certainly an overstatement at least as large in prior decades.

If we assume an overstatement of 0.8 percentage points annually, then median family income in 1947 would have been about $14,300 (in 2005 dollars) about 15 percent below the current poverty line for a family of three and more than 25 percent below the poverty line for a family of four. So, the SD must believe that most of us were quite poor in the relatively recent past.

--Dean Baker

The story on middle class living standards over the last quarter century is pretty bleak. There are some gains, but most of this is attributable to an increase in the number of workers per family – women have been entering the labor market. While this is the story from the official data, many of those arguing that living standards actually have been increasing rapidly go behind the data and argue that the consumer price index (CPI) overstates the true rate of inflation, and therefore understates the improvement in living standards.

David Leonhardt presents this case today based on the anecdotes of Robert Gordon, a member of the notorious Boskin Comission, and one of the leading proponents of this view. As the Boskin Comission's primary opponent, I can't let this one slide.

This issue raised in the column is the question of “new goods bias,” the idea is that some goods enter the market initially at very high prices, but then the price drops rapidly in their first years on the market. The bias results from the fact that the consumer price index (CPI) does not include the new product until after its period of rapid price decline, therefore missing large prices declines that would lower the average rate of inflation. This would have been more of a problem in prior decades when some new goods might not enter the index for decades, but even today it can still be somewhat of a problem.

I always thought that the claims about the size of new goods bias were probably overstated, but insofar as it exists, it is primarily something that leads to an overstatement of the CPI for rich people. The example of the snow blower that Leonhardt highlights in his column is probably a good one to illustrate the basic issue. According to the column, the snow blower was introduced in the mid-fifties. It initially cost $150 and was very clumsy. It didn’t enter the CPI until 1978 when it cost just $100 and was quite light. Therefore the CPI missed this large price decline and quality improvement.

The key question is how many people bought snow blowers in the fifties when they were clumsy and expensive? Probably not many, and those who did were mostly rich people who could afford expensive toys. Most of the drop in snow blowers' prices took place before the middle class began to buy them. This drop provided a gain to those who already were buying snow blowers, but it provided zero gain to those who found them too expensive to be worth their money.

The same logic applies to any new good. During the Boskin controversy people often cited the example of the cell phone, which managed to slip through the cracks until the mid-nineties (97, if I remember right), a point at which more than half of the population still did not owne a cell phone. I remember an estimate (I think from M.I.T. professor Jerry Hausman) that excluding cell phones alone led to an overstatement in the CPI of something like 0.2 percentage points annually. I once debated an economist who cited this estimate. I asked him how much this oversight led to an overstatement in the cost of living for the half of the population that still didn't own a cell phone. He originally started to say, “not very much” – then remembering economic theory, he gave the correct answer “zero.”

Of course, the cell phone was an extreme case -- most goods always entered the index long before half of the population purchased them -- but in general the story of new goods with big price declines not being picked up in the CPI was a story that affects the cost of living of the rich people who could afford to buy them when they were expensive. It is not an issue that affects middle class living standards.

--Dean Baker

National Public Radio (NPR) did a piece today on a series of ballot initiatives in western states that would prohibit regulatory “taking.” “Takings” in this context are defined as government regulations that reduce the value of property. This could happen, for example, if the government limited development on a plot of land in order to prevent congestion.

NPR bought the right-wing story on this one hook, line and sinker. The piece portrayed the issue as a tough moral call between the rights of the individual and the interests of the larger community. I hope they got a big contribution from the takings crew.

Let’s get back to reality. The government takes actions all the time that both decrease and increase the value of property. It builds airports and roads that make the property accessible. It constructs schools, parks, and streetlights that have the effect of making property desirable and safe. The rugged individualists in the takings story are not sending checks to the government every time it does something that increases the value of their property.

Nope, the rugged individualists in the takings stories are not libertarians who want the government out of their life, they are crybabies who want all the benefits that they can get from the government, but never want to pay any of the costs. In fact, the poster child in this story wanted compensation for being denied the opportunity to develop a parcel of land that he owned for more than twenty years. Apparently, he was just getting around to developing the land when the government decided to prohibit the development. Right – this guy wants to get compensated for his dreams.

Well, we all want a free lunch, but that is not a serious political philosophy. NPR deserves a lot of grief for presenting it as one.

-- Dean Baker

Remember the days when the European welfare state led to economic stagnation and high unemployment? Well, like hula hoops and bobby socks, this story may be a relic of the past. The latest data from the OECD show that employment to population (EPOP) ratios for prime age workers (ages 25-54) are almost identical in the EU-15 countries and the United States.

The EPOPs for young workers and older workers are still substantially lower in the EU than in the United States, but this is largely the deliberate outcome of policy decisions. In the case of young people, European countries have very low college tuition and often give students stipends. As a result, most European college students do not work. In the case of older workers, European countries generally have lower retirement ages, so that workers can often begin to receive benefits in their mid or late fifties. Whether or not these are good policies, Europeans recognize that student stipends and early retirement benefits are lowering employment rates, so the low EPOPs among the young and old can not be seen as failings of their labor markets.

--Dean Baker

The Times reported today that the National Retail Federation (NRF) predicts a 5 percent increase in holiday sales for 2006. It notes that this is a lower pace than the 6 percent increases seen the prior two years. It would have been helpful to adjust this prediction for inflation.

The CPI for commodities, excluding food, energy, and new and used trucks, which most closely corresponds to the items sold in retail stores, is running about 0.7 percent above its year ago level. It was essentially flat on a year over year basis the prior two years. This means that the NRF federation prediction implies a drop of about 1.7 percentage points in real terms from year over year growth in the prior two years.

--Dean Baker

With the annual meetings of the IMF-World Bank in Singapore, there has been another round of stories about how certain fast growing countries are getting an increased voice at the IMF to correspond with their growing importance in the world economy. As I noted in prior posts, Mexico is one of the four rabbits on the list (along with China, Turkey, and South Korea.)

As I pointed out in my prior post, Mexico has no business being on this list because it is not a fast growing economy. Starting from before the NAFTA slump, it's per capita GDP has risen by just over 1.0 percent annually. It's growth rate has actually lagged the world average.

I am revisiting this issue because I just got my copy of the March OECD Observer in the mail. The "Databank" section on the last page has a nice little chart showing per capita GDP growth since 1980 for several of the poorer OECD countries, along with the OECD average. And, what do you know, "fast growing" Mexico is at the bottom of the list.

It would have been nice if just one of the reporters covering the topic had pointed out that Mexico is not a fast growing economy, and therefore this cannot be the reason that it is a getting an increased voice at the IMF. Clearly, there is some other reason. My guess is that Bush is using the U.S. dominance of the I.M.F. to give a small reward to a loyal ally, but that is just a guess.

--Dean Baker

Allan Sloan, a columnist at Newsweek and the Washington Post and a commentator on MarketPlace reversed his previous position on the Social Security trust fund. I had previously taken Mr. Sloan to task for advocating default on the government bonds held by the Social Security trust fund. This morning on MarketPlace, he unambiguously stated that he expects that these bonds will be paid off, and therefore they should be included in measures of the government's deficit. See, even prominent columnists are capable of learning.

--Dean Baker

In an article on the victory of the conservatives in Sweden's election, the NYT repeated their assertion that Sweden's official 5.7 percent unemployment rate would jump to 21 percent if "early retirees, people in job-training and those on long-term disability" were included. The same charge appeared the previous day.

It is not clear what this 21 percent measure means. In the United States, the vast majority of people stop working before age 65. Would the conservative's measure include all these people, including Bill Gates, who is about to step down from his position at Microsoft, as being unemployed?

As I noted yesterday, there are internationally comparable measures of employment and unemployment available from the OECD. These data show that Sweden has higher employment rates than the United States by almost any measure. It would be helpful if the Times would try to use data that readers could interpret in a meaningful way.

-- Dean Baker

Sweden is holding an election on Sunday, which earned it a bit of ink in the Times. The article notes that Sweden’s official unemployment rate of 5.7 percent is one of the lowest ones in Europe. It then reports the assertion of the conservative opposition candidate that its unemployment rate would be 21 percent if you add in people on disability, early retirement and in government training programs.

It would be helpful if the article provided some evidence to readers to better allow them to assess the truth of this claim. Politicians are known to say things that are not true. Serious reporters do not just report one claim and then a denial. (e.g. Democrats oppose President Bush they claim he is mass murderer. The president denies the allegation.)

It is not even clear what the 21 percent figure is intended to refer to. (Does it count every retiree in Sweden as being unemployed?) The OECD does make an effort to standardize measures of employment and unemployment. It reports that the employment rate in Sweden for people between the ages 15 and 64 is 73.5 percent. This compares to 71.5 percent in the United States. This would have been useful information for readers trying to assess competing claims about Sweden’s unemployment problem.

-- Dean Baker

The Fed released data for industrial production for August yesterday. The story in the media was that production had fallen by 0.1 percent in August, suggesting that the economy was slowing.

Well, this is a case where more caution would be helpful. First, it is best to focus on the data for manufacturing. The other two components, mining and utlities, are very erratic. (Utility output tells you primarily about last month's weather.) Manufacturing output was unchanged in August.

While this may not give a very different picture, it is worth noting that the Fed revised July's growth figure up from 0.1 percent to 0.4 percent. This means that the new report showed August output as being 0.3 percent above where we had previously believed July's output to be. I'm not saying that there has not been a slowdown in manufacturing (my guess is that there has been), but the latest data are far more ambigious than the headline number implies.

--Dean Baker

Actually, California's economy has done pretty well over the last 30 years, yet its per capita use of electricity has barely budged. It also ranks near the bottom of the 50 states in per capita gasoline consumption. This is a striking story, given how much some politicians and economists have led us to fear regulations aimed at reducing greenhouse gas emissions. Anyone who takes global warming seriously should look at this article.

--Dean Baker

One of the themes that has arisen in the recent Paul Krugman inspired debate on middle class living standards is the possibility that the consumer price index (CPI) misses improvements in the quality of various goods and services, and therefore overstates the true rate of inflation. This would then mean that "real" wages and income have risen more than official data show.

I have spent far more time on this issue than I would have liked. In the mid-nineties there was an effort inspired by Alan Greenspan and spearheaded by the late Senator Daniel Patrick Moynihan to cut Social Security benefits based on this claim.

The link is that SS benefits for retirees are tied to the CPI. If the CPI overstates inflation by 1.1 percentage point (their "best guess"), then they should index benefit increases to the rate of inflation shown by the CPI minus 1.1 percentage point.

I am proud to say that I played a role in derailing this effort. (1.1 percent adds up to real money after 10-20 years). I won't recount all the gory details, but I will make two points. First, this issue cannot be reduced to a few anecdotes. Yes, there are cases where the changes of the last quarter century have improved life in ways that do not seem to be picked up by quality adjustments in the CPI. But there are also ways in which there have been deteriorations that are not picked up. Increased congestion and commuting time, greater separation of families (both physically and in work-times), and the rise of new diseases (i.e. AIDS) top my list.

On this story, I argue that we should leave the call to the umpire – in this case the Bureau of Labor Statistics (BLS), the agency that constructs the CPI. Of course BLS can and does make mistakes, but they have generally been an honest broker on this issue. When economists have presented solid research showing understatements or overstatements in the CPI, BLS has examined the issue and sought to make the appropriate adjustments (We were very fortunate that the Katherine Abraham, the commissioner in the 90s, resisted the political pressure to implement a politically convenient "fix" of the CPI.) I have my own criticisms of the ump, but at this point, I'm going to defer to the ump's call over the anecdotes of the CPI critics.

The other point is that you do not just get to change the CPI and leave the rest of the world in place. If the CPI substantially overstates inflation, then everything we think about the world is very different. For example, a 1.0 percentage point overstatement means that real wages and incomes have been rising by 1.0 percentage points more rapidly than our data show. This enormously changes our assessment of the future and the past. It would imply that us middle income types grew up at a standard of living that is lower than the current poverty level.

It also changes our assessment of the future. If wages and living standards have been rising by 1.0 pp more rapidly than we thought, then presumably they will continue to rise by 1.0 pp more rapidly than currently projected. This means that our children and grandchildren will be far richer than we imagined possible with current projections.
Such future prosperity may make current concerns about the deficit seem rather silly. Why should be care if our grandchildren will have to pay another 10 percent of their income in taxes, if their standard of living will be 4 times as high current standards of living? (I once completely stumped in a debate, when my opponent said that "Dean thinks it's okay to tax our children because they will be rich.")

There are many other stories about the world that would have to be adjusted if we think that the CPI substantially overstates inflation (see my book Getting Prices Right: The Debate Over the Accuracy of the Consumer Price Index), but the basic point is simple. You can't just change the CPI and imagine everything else is the same. This measure has very serious implications and the people who want to argue that the CPI is seriously overstated better think through the implications of what they are claiming.

--Dean Baker

The deficit hit another record in July. It's now running at an $820 billion annual rate, more than 6 percent of GDP. Of course, I'm talking about the trade deficit, not the budget deficit. All the bad outcomes of large budget deficits are also true of large trade deficits, yet the media barely notice a trade deficit that is now more than 3 times as large as the budget deficit. (Even if we add in the money borrowed from Social Security the trade deficit would still be almost twice as large as the budget deficit.)

Like the budget deficit, in the short-run the trade deficit allows higher living standards. We can consume imported goods that we are not paying for, just as the government can spend money that is not paid for with tax revenue. In the long-run we cannot do this, we accumulate foreign debt on which we will have to pay interest. While the media never tires about talking about long-run problems from the budget deficit, they manage to largely to ignore the much larger trade deficit. They also never talk about its cause, an over-valued dollar.

--Dean Baker

The NYT reported on Chicago Mayor Richard Daley's decision to veto an ordinance setting a higher minimum wage for large stores (e.g. Wal-Mart). After 2010, the law would have required large stores to pay workers at least $10 an hour, plus $3 an hour for benefits.

The article concludes by presenting the assertion of a Wal-Mart spokesperson that the average wage for "full-time hourly associates" in Illinois is $10.41 an hour. Before anyone assumes that this means that Wal-Mart already pays more than the 2010 minimum imposed by the vetoed ordinance, it is important to remember that the spokesperson only referred to "full-time" employees. What percent of Wal-Mart's workforce is counted as full-time? I don't know this one offhand, and the article provides no guidance on this issue. Maybe they could have gotten this information if they had spoken to someone from an organization that is critical of Wal-Mart.

--Dean Baker

This is what reporters are supposed to do.

--Dean Baker

We are still at the early stages of the collapse of the housing bubble, but it’s not too early to start pointing fingers. This isn’t a question of vengeance, the issue is accountability. If the dishwasher breaks the dishes, she gets fired. If the custodian doesn’t clean the toilet, he gets fired.

Economists think it’s very important that people who don’t do their job adequately face serious sanctions, including job loss. This provides the necessary incentive for people to do their job effectively, and sustains the economy’s productivity. This is why it is important to identify the people who did not do their job, and therefore contributed to the growth of a dangerous housing bubble.

A very big finger has to be pointed at all the reporters who cover the housing market. In news stories on the housing market, how many times did they present the views of the economists from Fannie Mae, Freddie Mac, the National Association of Realtors, the Mortgage Bankers Association, and the Homebuilders Association? The answer is far too many.

Of course, these are all people with a very clear stake in promoting the housing market. It is fine to present their views, but these views should be presented to readers/listeners in a way that makes it clear that they have a material interest in this issue. (Imagine that the only people commenting on the problem facing GM and Ford worked for the United Auto Workers.) Reporters should also be certain to present the views of independent experts – views that were seriously lacking in much of the coverage of the housing market as the bubble grew to unprecedented heights.

Business reporters are fortunate that they are not held to the same standards of accountability as dishwashers and custodians.

--Dean Baker

After getting a few things wrong in his last column, David Brooks is back to tell us his remedy for the problem of inequality: education (sorry, it’s Times Select and therefore not linkable). He proposes an agenda that would promote educational opportunity for middle class and poor kids. I question whether his route is the best one for this task (universal child care and health care would rank higher on my list), but promoting educational opportunities for the less advantaged is certainly a good thing.

But, I want to avoid straying too far into the policy prescriptions of the punditocracy and stick more to the facts and here Mr. Brooks once again provides some rich material for BTP. He tells readers that:

“When you ask orthodox liberals about wage stagnation, they never tell you exactly what they would do to counteract the epic forces of globalization and technological change, but they seem to imply they can restructure the economy with the right trade, minimum-wage and union rules to create middle-class wealth.”

I might be missing something here, but a higher minimum wage, respect for the right of workers to organize unions, and a restructured trade policy (described below) seem like fairly specific policies. Brooks may not like these policies, or not think that they would be as effective as do the orthodox liberals he criticizes, but they are specific policies. Like most progressives, my list is longer. For example, it includes full employment monetary policy, reformed rules on corporate governance, and reformed rules on intellectual property, but Brooks’ list is a good start. (see The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer for my full list.)

I want to focus on the trade story. At the risk of boring BTP regulars, I am going to write this so that even David Brooks can understand it.

The fact that some types of labor (e.g. factory workers and custodians) have been subjected to international competition through globalization, while other types of labor have remain largely protected from competition (e.g. doctors, lawyers, economists, and newspaper columnists) was not an accident. It was a deliberate decision by U.S. trade negotiators from both political parties. Trade deals like NAFTA were designed to place U.S. manufacturing workers in direct competition with manufacturing workers in Mexico. To do this, the treaty includes extensive rules on investment, providing the insurance that U.S. corporations needed to set up factories in Mexico. They also got assurances that the output from these factories could not be blocked from the United States by future tariffs or safety and environmental regulations imposed at various levels of government.

Instead of focusing on removing barriers to trade in manufactured goods, our negotiators could have structured NAFTA to remove the barriers that prevent smart kids in Mexico from studying to become doctors, lawyers, economists, and columnists in the United States. Just as manufacturing workers in Mexico are willing to work for much lower wages than their counterparts in the United States, so are professionals in Mexico.

If our negotiators sought to remove the barriers that prevented competition from professionals in Mexico and other developing countries, the U.S. economy would benefit from an enormous influx of talented professionals (educated to U.S. standards). This would lead to much lower prices for health care, education, and all the products in which the cost of these professional services are a major factor. (Don’t worry about brain drain – in ten seconds any competent economist can give you an easy solution that ensures developing countries gain as well in this story.) This trade policy would have led to enormous economic gains to the United States, and it would have promoted equality rather than inequality.

My guess is that David Brooks, like most other beneficiaries of U.S. trade policy, thinks that he is already competing with people from the developing world. He would point to his Indian doctor or a Chinese born economist he knows. This is known as the “Mexican avocado” theory of trade. The story goes like this: because I can get a Mexican avocado at the grocery store, we have free trade in agriculture. Of course this is absurd; we have all sorts of protection in agriculture.

In the same vein, the fact that some very talented and ambitious professionals from the developing world are able to circumvent our trade barriers doesn’t mean that barriers don’t exist. Real free trade in professional services means providing the same sort of guarantees as were put in place for manufacturing. A 12-year old living India will not prepare herself to work as a professional in the United States unless she knows that she will have the opportunity to compete on an equal footing with her counterparts growing up in Chicago. Similarly, the schools in India will not train students to meet U.S. professional standards unless they know that their students will actually have the opportunity to work as professionals in the United States. And competition won’t really be free until hospitals, law firms, universities and newspapers can hire foreign professionals with as much ease as Wal-Mart buys toys from China. That would be free trade in professional services, and we don’t have anything like it now.

Unfortunately, David Brooks will never hear this argument on the Lehrer New Hour, so we can probably expect many more ill-informed columns on this topic in the future.

--Dean Baker

The Fed released data for consumer debt for July on Friday. The release got little attention, and the short pieces that did cover it mostly focused on the slower rate of growth. The growth in consumer credit overall slowed from a 7.3 percent annual rate in June to a 2.8 percent rate in July. For the revolving debt component (primarily credit card debt), the slowdown was much sharper, from 13.2 percent in June to a 3.4 percent rate in July.

I had previously noted the sharp uptick in credit card debt as evidence of the bursting of the housing bubble. When houses stop appreciating, people are forced to borrow against their credit cards instead of their homes. This new report doesn't change my mind. The reason is that the growth rate for credit card debt was revised sharply upward for the prior two months. The growth rates previously reported for May and June were 11.0 percent and 9.8 percent, respectively. These numbers were revised upward in yesterday's report to 13.0 and 13.2 percent. This brings the annual rate of growth in credit card debt over the last three months to 10.3 percent. By comparison, credit card debt grew at an average annual rate of 3.2 percent from 2002-2005.

The moral of the story is that it still looks like there is a big shift towards credit card debt, a predictable outcome of weakening housing prices.

--Dean Baker

According to the New York Times reporting on wages at Delphi, the autoworkers seem to be gaining rapidly. Earlier the NYT had reported that compensation for autoworkers at Delphi averaged $65 an hour. They never gave a detailed breakdown of this figure, but they did report that wages were $28 an hour. If the wage number is right, then the Times $65 an hour figure implies that Delphi workers average $37 an hour, or $74,000 a year, in health insurance, pension and other benefits.

While I had noted that this seemed implausible to me, the Times has raised the bar in their latest reporting. It now tells us that workers at Delphi get more than $80 an hour in compensation. If the hourly wage rate is unchanged, then the Times is telling us that Delphi workers are getting health insurance, pensions, and other benefits that are worth $104,000 a year. I don’t think so.

--Dean Baker

NYT columnist David Brooks weighed in on the origins of inequality in his column (sorry—it’s NYT select and therefore not linkable). While he wants to assure readers that inequality is not a serious issue, and not caused by policy, he gets almost everything in his article wrong.

Briefly, here are the highlights:

1) He claims that the labor compensation share of GDP has not fallen due to rising profits. Actually, the labor compensation share of net income in the corporate sector (this is the place to look for redistribution – there are no profits in government or non-profits) fell by 1.7 percentage points from the profit peak of the 1970s cycle (1977) to last year. This redistribution is equal to 5.9 percent of the family income of the bottom 60 percent of the income distribution. (Think of this as a profit tax.)

2) He assures readers that globalization has not been a problem because outsourcing accounted for only 1.9 percent of layoffs. I’m not sure what this means. The biggest impact of outsourcing would be on jobs not created and also the threat effect (as in, “give us a pay cut of 20 percent or we move your jobs overseas”). So, I’m not really sure what we are supposed to make of the fact that only 1.9 percent of laid off workers are told that they lost their jobs due to outsourcing.

3) He tells us that job tenure hasn’t changed over the last 40 years. This is a bit tricky. Job tenure has gotten longer for women, because they are entering and staying in the labor force in higher numbers. But, if we look at the situation for men, there is very sharp fall in tenure since 1983, the period for which we have reliable data. In 1983, median job tenure for workers ages 35-44, 45-54, and 55-64 was 7.3 years, 12.8 years, and 15.3 years, respectively. By 2004 (the most recent survey), these numbers had fallen to 5.2 years, 9.6 years, and 9.8 years.

4) He assures readers that income mobility has not declined. His unsupported assertion contradicts a recent study by Mary Corcoran and Jordon Matsudaira (cited in The Sate of Working America) showing that whites born in the bottom quintile between 1962-1969 were 40 percent less likely to end up in the top quintile than their counterparts born a decade earlier. For blacks, the figure was 45 percent.

5) He assures us that the weakening of unions only accounts for 10-20 percent of the increase in inequality. We will call this 10-20 percent share on the increase in inequality a "de-unionization tax" for workers at the middle and bottom of the wage distribution. If we say that income has fallen by 20-30 percent for these workers due to rising inequality, this de-unionization tax amounts to between 2-6 percent of income. I suspect that Mr. Brooks would be concerned if we proposed to increase taxes on high income people by between 2-6 percentage points.

6) He assures us that for most workers wages still rise over their working lifetime. Well yes, wages for workers in their peak earning years (ages 45-54) are typically 50 to 80 percent higher than in their entry years (ages 18-24), with the rise depending on gender and education. Things have not gotten so bad as to reverse this pattern, but it’s not clear what this shows.

7) Brooks tells us that the wage for typical male worker with some college rose from $34,000 in 2000 to $40,000 today. This refers to nominal wages, serious people adjust wages for inflation. According to the State of Working America, the average hourly wage for men with some college fell from $17.95 in 2000 to $17.76 in 2005 (in 2005 dollars).

To sum up, David Brooks comes up with almost nothing in his column that would contradict the vast body of evidence showing that most workers have not been benefiting from the economy’s growth over the last quarter century – and that this is the result of deliberate policy decisions. You can get the real story in The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer, a free downloadable e-book.

--Dean Baker

Both the NYT and Post had articles this morning that warned about the 4.9 percent annual rate of growth in unit labor costs in the second quarter reported yesterday, and indicated that this could cause the Fed to raise interest rates further to combat inflation. Whatever the Fed does on interest rates, let’s hope that the quarterly data on unit labor costs is not the reason.

Unit labor cost data are highly erratic and are also subject to large revisions. This is due to the fact that both the numerator (compensation in the national income accounts) and the denominator (productivity) are highly erratic. Compensation can jump because of the timing of health care payments to insurers or the decision of workers to take stock options. (Compensation for the first quarter was revised up in yesterday’s release to show a 13.7 percent annual rate of growth, after originally showing a 6.9 percent rate of growth.)

Productivity for the second quarter was reported as growing at 1.6 percent annual rate after growing at a 4.3 percent rate in the first quarter. It’s far more plausible that the rate of productivity growth was overstated in the first quarter and is now understated for the second quarter, than the actual rate of growth in the economy just crashed.

The Fed would be right to pay attention to trends in hourly compensation, but they better be aware of the limitations in the data or we are going to be in serious trouble.

--Dean Baker

There should be a simple rule written in huge neon signs in every newsroom: “You don’t know what politicians ‘think.’”

The reason is simple. Politicians do not generally say what they think. They say what will advance their political careers. This is their job. (That is a bi-partisan comment.) If a reporter believes that she knows what a politician actually thinks then she is probably too close to this person to be able to cover them objectively. Reporters best serve the public by reporting what politicians say, and leave it to their readers to determine what the politicians might actually believe (if anything).

For this reason, it was very annoying to read a book review in the Washington Post that tells us that Bill Thomas, the chairman of the House Ways and Means Committee, prohibited Medicare from offering its own drug plan that would negotiate directly with the drug industry because he “thought pitting private insurance companies against one another would inject competition into the drug market for seniors and keep the price of drugs down, without the heavy hand of government.”

While Mr. Thomas said this, do we really know that this is what he thought, as opposed to the competing view that he thought the insurance and pharmaceutical industries are a great source of Republican campaign funds? Sorry, I am not prepared to accept the reporter’s personal assurance on Mr. Thomas’s thoughts, and the Washington Post would do best to keep them out of the paper, except on the editorial pages.

(One reason that I question the reporter’s assessment is that if Mr. Thomas really had such confidence in private insurers, he could have allowed Medicare to offer a plan competing with them. If the private insurers were actually more efficient, then the public would vote with their feet and sign up with the private plans. However, Mr. Thomas was unwilling to let the private sector demonstrate its superiority in the free market.)

--Dean Baker

The NYT had an interesting piece on counterfeit drugs in Russia. It reports that counterfeits may account for as much as 30 percent of total sales. This is what happens when the government creates an artificial monopoly with patent protection. Just as the Soviet Union couldn't prevent black market sales of blue jeans, Russia can't prevent sales of unauthorized versions of patented drugs. A little economic analysis would have been very useful in this article.

--Dean Baker

If Social Security was a private corporation, Tim Russert would be unemployed and NBC would be out of business. (When you misrepresent the financial state of a private business in the way that Russert misrepresents the financial state of Social Security, you get sued for libel.)

Note how the fact that Social Security, Medicare, and everything else that fits under “entitlements” becomes a Social Security problem, as Russert points out that entitlements account for 52 percent of the budget, approaching 70 percent. (I believe that these percentages exclude interest payments, but it's not clear where Russert is getting these numbers.) Note that Mr. Russert ignores the fact that Social Security is funded by a designated tax that will keep the program fully funded until 2046, according to the most recent projections of the Congressional Budget Office.

Many people, including me, have tried to call Russert’s attention to the actual numbers on Social Security – he obviously does not care. He wants to cut the program and he will not let the evidence stand in his way. And, he has absolutely no hesitation about deliberately misrepresenting the facts on national television to advance his agenda.

--Dean Baker

The NYT’s Europe-bashing desk pulled out the stops today in going after Germany. Readers would have learned about Germany’s “chronic double-digit inflation.” This surely would be news to most readers, since the OECD puts Germany’s inflation rate over the last year at just over 2.0 percent.

Perhaps the article meant to say “chronic double-digit unemployment.” Well that’s a bit closer, but still no cigar. The OECD puts Germany’s unemployment rate at 8.2 percent. [The web version has replaced "inflation" with "unemployment."] (Even this number should be qualified – former East Germany still has an unemployment rates in the high teens, which means that the unemployment rate in the areas that comprise former West Germany is around 6.5 percent.)

Then the article warns about “a health care system that is going bankrupt because of rising costs and an aging population.” Well, we all hate health care systems that are going bankrupt – but yes that’s right BTP fans, Germany’s costs are not growing anywhere near as rapidly as costs in the United States. We’re all waiting for the NYT article about the looming bankruptcy of the U.S. health care system.

--Dean Baker

No, that's not me rooting for a quick end to the housing bubble; those are the words of David Lereah, the chief economist of the National Association of Realtors, as quoted in the Wall Street Journal. Yes, this is the same economist who until recently was assuring buyers that house prices will never fall.

The new data on pending sales of existing homes show a year over year drop of 16 percent, yet more evidence that the bubble is bursting.

--Dean Baker

The standard story of financial bubbles has that financing gets progressively more tenuous as the bubble expands.
BusinessWeek has a nice piece about the latest and most pernicious financial innovation of the current bubble, the option ARM. It's too bad that no one in a position of authority was awake before the bubble grew to such proportions.

--Dean Baker

Regular users of government data (like reporters) should know its limitations. Many of the series are highly erratic, meaning that any individual number contains a considerable amount of error and a limited amount of information.

The hourly wage data very much fit this bill. In the real world, hourly wage growth doesn’t change very much from month to month. (How could it? – not that many people change jobs in a month; and wages don’t suddenly plunge or soar for workers keeping their jobs.)

However, the monthly wage series does show large fluctuations in the rate of hourly wage growth. For example, in April, the average hourly wage reportedly increased by 10 cents, a 0.6 percent increase. Similarly, it reportedly rose by 8 cents in July, a 0.5 percent increase. Before anyone gets too concerned that these wage increases will lead to inflation, let me point out that wages rose by just 1 cent in May and 2 cents in August.

The smart folks out there already guessed that the slow wage growth in May and August is directly related to the fast wage growth the prior months. If we imagine that there is some “true” rate of wage growth (e.g. 5 cents a month at the moment) then our monthly data will fluctuate around this true rate because the survey is imperfect. If it randomly shows too much wage growth in some months, as was likely the case in April and July, then it will likely show less than the true rate of wage growth in the following month (May and August).

What does this mean? Serious people largely ignore single month wage data. Take a 3-month average. Does it look like wage growth is accelerating or decelerating compared to earlier periods? That is what you can get out of the data. When reporters make a big deal out one month’s wage growth, they are wasting their readers’ time.

-- Dean Baker

The Post has an article headlined "Fast-Growing Countries to Gain More Clout at IMF." The list of countries is China, South Korea, Turkey, and Mexico. The first three countries can reasonably be described as "fast-growing," but not Mexico. Mexico's per capita GDP growth has averaged just 1 percent annually for the last decade, a slow rate for any country, but an especially pathetic pace for a developing country. Whatever the reason Mexico is getting increased clout at the IMF, it has nothing to do with fast growth.

--Dean Baker

The Times ran an article about India’s rise as a manufacturing force. Much of it is informative, but some of it is painful. In the painful category is the claim that global manufacturers are turning to India because of “a serious demographic squeeze facing China.” It then goes on to point out that although China has a larger population than India, because of China’s “one child policy” India will have more young workers in less than a decade.

Okay, let’s step back to reality. China’s supply of manufacturing workers will not be limited by its population anytime soon for the simple reason that close to half of its work force is still in agriculture. So, there is not any imminent shortage of manufacturing workers in China.

Now, there is a separate point. There is some evidence (noted in the article) that wages are rising in China. This is not a “demographic squeeze,” this is the desired result of economic growth. Chinese workers, like New York Times reporters, would like better living standards. The fact that workers might be experiencing rising living standards is good news for China – the opposite of a problem. If workers in India will be willing to work for lower wages in a decade than workers in China, that would be bad news for India, not China.

The other painful part of the article is that it implies that unions and higher wages necessarily mean higher costs. In fact, a unionized workforce could also be a more productive workforce, with more training and less turnover. Getting workers at the lowest possible wage is not always the most cost-effective approach. For example, I don’t think the NYT would be more profitable if its reporters were high school kids getting the minimum wage.

--Dean Baker