Relevant and even prescient commentary on news, politics and the economy.

Felix Salmon comments on media bias

Felix Salmon comments on media bias at Seeking Alpha:

But let’s not kid ourselves that there’s any particular reason why global stocks are falling. And especially, let’s not try to invent some spurious reason for the fall, be it broad and inchoate (“global economy fears”) or weirdly specific (“Federal Reserve pessimism”).

As a general rule, if you see “fears” or “pessimism” in a market-report headline, that’s code for “the market fell and we don’t know why”, or alternatively “the market is volatile and yet we feel the need to impose some spurious causality onto it”.

This kind of thing matters — because when news organizations run enormous headlines about intraday movements in the stock market, that’s likely to panic the population as a whole. They think that they should care about such things because if it wasn’t important, the media wouldn’t be shouting about it so loudly. And they internalize other fallacious bits of journalistic laziness as well: like the idea that the direction of the stock market is a good proxy for the future health of the economy, or the idea that rising stocks are always a good thing and falling stocks are always a bad thing.

Or, most invidiously, the idea that the most interesting and important time period when looking at the stock market is one day…

I’m not going to try to read any great narrative into this chart. But if you want to explain stocks to the broad population, this is the sort of thing you should be showing them. Rather than useless and irrelevant news about what happened to stock prices this morning.

Guest Post: Latest from Cato…

Guest post by Michael Halasy

Latest from Cato…

Kaiser Health News carries an article from Michael Cannon from Cato Institute on the benefits of Ryan’s proposal on Medicare.

Cannon is wrong.

First, he begins by advocating for repeal by comparing the roughly 500 billion in cost of the program to the overall debt and deficit, never mentioning that the 500 billion is actually over 10 years. Next he proceeds to Medicare savings, and concludes that there were no mechanisms to constrain Medicare savings…and he’s right here.

However, then he states: “Even if they were, ObamaCare just spends the presumed savings elsewhere”. Which comes across snippy, and a little arrogant. Then he talks about vouchers, and the proposal by Congressman Paul Ryan.

Here’s what he says:

Second, the budget should restrain Medicare spending by giving enrollees fixed vouchers they can use to purchase any private health plan of their choice. Poor and sick enrollees should get larger vouchers, but the average voucher amount should grow only at the overall rate of inflation. Because vouchers enable seniors to keep the savings, they will do what ObamaCare won’t: reduce the wasteful spending that permeates Medicare. Seniors will choose more economical health plans and put downward pressure on prices across the board. Indeed, vouchers are the only way to contain Medicare spending while protecting seniors from government rationing. Skeptics worry that seniors will make bad decisions with their vouchers. They should keep in mind that, according to Obama’s Council of Economic Advisers, “nearly 30 percent of Medicare’s costs could be saved without adverse health consequences.” In other words, vouchers come with a huge built-in margin of safety: seniors could consume one-third less care without harming their health.

There are some big problems with this, which Mr. Cannon never addresses, or even acknowledges.

To start with, many seniors are living on constricted, fixed incomes. Even with “larger” vouchers, as he suggests, keeping them tied to inflation without addressing the reason for healthcare cost escalation is the same as cutting them out of healthcare altogether…at least the effect will be the same over time. Healthcare has grown at a rate far above inflation for years (6.2% average over the past 10 years). What this will do is to force low income seniors to skip medications, avoid physician visits, and avoid preventative care. This will end up being more costly down the road.

The second problem, is that Mr. Cannon is misrepresenting what the Council of Economic Advisors said about Medicare spending. That 30% represents waste within the system, not necessarily (although likely a small percentage is) over treatment of Medicare patients. It’s a dangerous statement to make.

Finally, the block grant idea has some merit, but let’s be honest. That’s not cost savings…..that’s cost shifting. By removing a percentage of federal funding for this patient population, you are forcing the state to pay for it, which is a problem for many cash strapped states already. Mr. Cannon knows all of this, however, he is trying to put a rosy face on an ugly dog.

John Lott Looks at Recessions and Rumors of Recessions and Concludes: Media Bias

Here is John Lott at Fox News telling us that all this talk about the economy being in recession is a media myth, and more, part of a pattern of the media trying to make Republicans look bad.

He writes:

During the 2000 election, with Bill Clinton as president, the economy was viewed through rose-colored glasses. According to polls, voters didn’t realize that the country was in a recession. Although the economy started shrinking in July 2000, most Americans through the entire year thought that the economy was fine.

I hate to break it to Mr. Lott, but the economy was not in recession in 2000 or at any other point during the Clinton administration. My guess is that this minor detail goes a long way toward explaining why “voters didn’t realize that the country was in a recession.”

Now, lest you think Lott was merely being hasty and didn’t mean to write that the economy was in recession in 2000:

Talk of recession is seemingly everywhere. While the majority of people rate their personal finances positively, consumer confidence in the economy has plunged to a 16-year low, well below what it was during the last year of the Clinton administration when we were in a recession.

But he’s also complaining that there’s talk of recession everywhere. Granted, it will be a long time before the NBER makes an official determination of recession, but I think most people who aren’t associated with Fox can tell the difference between the year 2000 and now.

Lott continues…

Or, even more telling, take the three months from July through September last year, when the GDP was growing at a phenomenal 4.9 percent.

The annual percentage change in GDP in 2007 was 4.9 percent. Interestingly enough, the economy grew at over 4.9% a year in more than 75% of the years beginning in 1930. The real growth rate in the economy (I’m too tired to go look for real GDP per capita right now) was 2.2%, and we had faster real growth than that in 70% of the years beginning in 1930. What to John Lott is phenomenal, to the rest of us is pretty ho-hum.

And since Lott seems to think that we were in recession during Clinton’s last year, its worth pointing out that the percentage change in real GDP was faster than 2.2% every single year of the Clinton administration. And since a 4.9% nominal growth rate is phenomenal, someone should point out to him that it was 5.9% in Clinton’s last year in office.

More Lott:

A little perspective on the economy would be helpful. The average unemployment rate during President Clinton was 5.2 percent. The average under President George W. Bush is just slightly below 5.2. The current unemployment rate is 4.8 percent, almost half a percentage point lower than these averages.

Ah, averages. But Lott doesn’t point out that the unemployment rate was 8% in January of 1993, and it had shrunk to 4.7% in January of 2000, when he left office. Conversely, it is now at 5.2%. Put another way – it shrunk under Clinton, and rose under GW. Lott might as well be bragging that the average real GDP is higher under GW than it was under Clinton.

Then he tells us this:

Indeed, research has indicated that media bias is real. Kevin Hassett and I looked at 12,620 newspaper and wire service headlines from 1985 through 2004 for stories on the release of official government releasing numbers on the unemployment rate, number of people employed, gross domestic product (GDP), retail sales, and durable goods.

Even after accounting for how well the economy was doing (e.g., what the unemployment rate was and whether it was going up or down), there was still a big difference in how positive or negative the headlines were. Democratic presidents got about 15 percent more positive headlines than Republicans for the same economic news.

So, after Mr. Lott and Mr. Hassett adjusted for how well the economy was doing, Dems got better press than Reps. Whether the press is biased or not is one thing, but I’m not ready to accept to accept the “accounting for how well the economy was doing” by a guy who tells us (twice in the same article) that the economy was in recession in 2000.

The alternative is that maybe, just maybe, there’s a reason there are more stories about recessions while Republicans are in office:

(Graph plus link to google doc with data here.)