Economics 210a: Introduction to Economic History: U.C. Berkeley: Spring 2008

Covering the Economy: Gasoline Prices

Democrats are (because of the environmentalist wing of the party) generally in favor of higher gasoline taxes and higher gasoline prices--except when gasoline prices are high). Republicans are in favor of letting oil markets "work"--except when gasoline prices are high.

Here's a sampling of stories:

Here's AP:

AP Josef Hebert | Plans Produced to Attack High Gas Prices : WASHINGTON — High gasoline costs and the political fallout they may create are producing a flurry of proposals from both Republicans and Democrats aimed at soothing motorists' anger. But nobody is predicting prices will ease anytime soon. Democrats are blaming Republicans, especially President Bush, while Republicans argue that congressional Democrats have stood in the way of more domestic oil production.

Bush directed his environmental agency Tuesday to stand ready to ease clean air rules if they interfere in gasoline supplies this summer. Industry analysts said that likely would have only a marginal influence on prices. The president also announced that the government would not take 10 million barrels of oil out of the market for the U.S. emergency reserve as had been planned. Bush maintained that "every little bit helps," even though industry analysts said that was so little oil it would have no impact on prices.

The president expressed frustration at his inability to force down prices. "What people are seeing at their gasoline pumps reflects the global economy in which we live," he acknowledged in a speech aimed at countering critics who have accused him of being soft on oil companies and ignoring high prices at the pump.

Bush vowed to pursue any collusion or price gouging and directed the Justice Department to help states pursue allegations that "gas prices have been unfairly manipulated." But the White House opposes additional federal laws to address price gouging or strengthen antitrust laws as they pertain to oil companies, as some members of Congress have proposed. "There are very good laws on the books," said Al Hubbard, the president's chief economics adviser. "What's important is that those laws are enforced aggressively."...

Here's Gary Richards from the Mercury News:

MercuryNews.com | 04/26/2006 | Soaring gasoline prices forecast: By Gary Richards Mercury News: California's average gasoline price jumped two cents Tuesday to $3.14 a gallon, and some analysts said drivers could be paying $3.35 or more by Memorial Day, May 29. The gloomy forecast came on the same day President Bush announced measures he said could curb rising prices -- freeing up oil reserves and temporarily waiving regional clean-air requirements.

Those moves may have calmed the energy market -- crude oil and gas futures fell slightly Tuesday. But most experts say they will provide little significant relief over the next few weeks. ``We wish we could tell you there's light at the end of the tunnel, but it's probably an oncoming train,'' said Sean Comey, spokesman for AAA of Northern California.

Bush called for a nationwide probe into possible price manipulation. He directed the Energy Department to delay oil shipments this summer to the Strategic Petroleum Reserve, the government's fuel stockpile. The change would free up about 12 million barrels of oil over the summer, a small percentage considering the nation consumes 20 million barrels a day. ``It's more symbol than substance,'' said David Sandalow, an energy expert at the Brookings Institution.

Skeptics, including Sen. Barbara Boxer, D-Calif., questioned Bush's call to investigate price gouging, saying the Federal Trade Commission is already probing the issue because of legislation Democrats pushed through Congress. The agency's findings are expected late in May.

And here's Chris Cilizza from the Washington Post:

The Fix -- Chris Cillizza's Politics Blog on washingtonpost.com: Parsing the Polls: The Politics of Gas Prices: You can't swing a cat in Washington, D.C., this week without hitting a politician talking about the rapid increase in gas prices and what should be done about it. President George W. Bush on Tuesday sought to address the problem, calling for an investigation into possible price gouging the increased in alternative fuels like ethanol. The president ruled out setting a fixed price for gas.

The rising cost of gas -- now around $3 a gallon across the country -- has Republican strategists concerned (and Democrats elated) about its impact on the national political environment this fall. Already on the defensive over Iraq and the handling of Hurricane Katrina, congressional Republicans are seeking to project a proactive response to gas prices -- although most members admit that there is no quick or easy solution. (Expect GOP leaders to do a series of events on Thursday as Exxon Mobil announces its profits.) Democrats, for their part, have tried to tie gas prices to Republicans' alleged "giveaways" to oil companies over the past few years.

Who will win this rhetorical fight? And is the public paying attention? Let's parse the polls to find some answers.

Two things immediately become apparent when examining recent polling on gas prices: Americans see the rising costs as a major burden and are generally unhappy about what the Bush administration has done to address the problem.... 70 percent of those tested said the "recent price increases in gasoline" have caused "financial hardship" for their families.... 23 percent of respondents said gasoline prices have caused "a severe hardship that affects your ability to maintain your standard of living," while 26 percent identified it a "moderate hardship that affects you somewhat but does not jeopardize your current standard of living." Just more than one-quarter of voters (28 percent) said the gas price increase has caused them no hardship.... [C]onsiderable anxiety exists in the general public about gas -- its price and availability. It is a prototypical pocketbook issue -- one that every American (Democrat, Republican and independent) can identify with and one that people want the government to address.... [T]he public is dissatisfied with the Bush administration's approach to solving the problem. In the Post-ABC survey, just 23 percent approved of the job the White House was doing on the "situation with gasoline prices," while 74 percent disapproved....

Putting aside the fact that more than one-third of the sample put the blame on President Bush, the finding that a near-majority of voters cite U.S. oil companies as the root of the problem should concern Republican strategists.... [V]oters are much more open to believe that Republicans are helping out their friends in Big Oil -- especially when the president and vice president have each served as high-ranking officials in oil or energy services companies.

Expect Democrats to hammer home those connections in the weeks and months ahead of the fall election, and they're likely to lay out a broad vision of their own on energy policy. These numbers seem to suggest a considerable opening for Democrats on the issue (much more so than corruption in Congress), but it remains to be seen if any alternative they offer will resonate with disgruntled voters. A plan should emerge before this summer, according to an informed party strategist...

Covering the Economy: Julie Rovner

Julie Rovner:

NPR : Julie Rovner: Julie Rovner is a health policy correspondent for National Public Radio, specializing in the politics of health care. She is also a contributing editor for National Journal's CongressDaily. In 2005, she was awarded the Everett McKinley Dirksen Award for distinguished reporting of Congress for her coverage of the passage of the 2003 Medicare prescription drug bill and its aftermath...

One of her best:

NPR : Bush Skips White House Conference on Aging: Bush Skips White House Conference on Aging: All Things Considered, December 13, 2005· The once-a-decade White House Conference on Aging is meeting in Washington this week, with the future of Medicare high on its agenda. Medicare was on President Bush's agenda Tuesday, too. But he skipped the White House conference -- making him the first president not to speak to delegates in the event's half-century history.

While the conference on aging delegates was meeting in a hotel uptown, the White House motorcade set out in the opposite direction, to Greenspring Village, a high-end gated retirement community in suburban Virginia.

Once there, President Bush met with residents and staff to tout the new Medicare drug benefit he helped shepherd into law. "It's a good deal for our seniors, and so one of the reasons we have come today is to encourage people to see what is available in the new law."...

---

Some nuggets about NPR:

• Julie Rovner is on air for perhaps eight minutes a week
• 22 million afternoon listeners
• 14 million morning listeners
• Capitol Hill doesn't understand the reach of radio
• Differences--big differences--between Republican and Democratic attitudes, along the lines of what Bruce Barlett said: "if I had come across Gene Sperling, one of Clinton's closest economic adviser... he would have come straight at me with a laundry list of facts and arguments for why I was wrong to be critical. I would have been invited to the White House mess to carry on the conversation, and I would have left with an armful of studies and statistics explaining the virtues of whatever Clinton program I was attacking. By contrast, the Bush administration never provides its supporters with any ammunition... beyond the endless repetition of the day's talking points..."

Covering the Economy: Brad's NABE Speech

Tuesday lunchtime: We're OK! We're Really OK! Well--Probably

2006 Washington Economic Policy Conference: Policies to Boost Economic Growth and Security--What's Needed?March 13-14, 2006. Marriott Crystal City at Reagan National Airport

The current draft:

Giving a luncheon talk is always an interesting task, a kind of verbal high-wire act. Normal conference sessions are set up for the speaker's convenience: to try to force you to pay attention: to make everything else in the room as boring as possible, so that you have little choice but to focus your attention on the podium.

That's not true at meals. The people at your table who you're looking in the eye aren't boring. The coffee isn't boring. There's lots of motion as the waiters work back and forth. And I've tried all my life to convince myself that desserts are boring--and conspicuously failed.

If this were fifteen or twenty years ago, I would be standing up here ready to give my "Age of Diminished Expectations" talk. I would have talked about the collapse of American productivity growth--that we were, collectively, getting rich at a much slower pace than anyone back in the 1960s would have believed possible. I would have talked about intractable short-run budget deficits, the combination of overoptimism on the part of Reagan administration policymakers and the collision of limited resources with expansive demands for government nurtured in the fast productivity growth first post-WWII generation. I would have talked about how Social Security as we knew it was unsalvageable: that the resources simply would not be there. I would have talked about how Medicare and Medicaid were in even greater long-run trouble. I would have talked about slow growth and rapidly-rising inequality were together political poison.

I would have, fifteen to twenty years ago, talked about how very, very hard decisions needed to be made about resources and their uses--and how the American political system seemed to be incapable of making them, politicians being eager to tell Americans pleasing lies about how all kinds of benefits and goodies could be provided with "read my lips, no new taxes."

But then things changed. We were fortunate enough to elect some politicians who understood enough macroeconomics to know that if the government does not set out to raise the revenue to meet its spending commitments, then the market will do it and do it in a way you don't like--witness Argentina in 2001. The government shifted from being a source discouraging investment and productivity growth through the crowding-out of productive investment to being a source encouraging investment through crowding-in. We caught the leading edge of the wave of technological revolution to give us the best macroeconomy seen in a generation--and caught the leading edge of the wave in a way that neither Japan nor western Europe has managed to do.

But today--since 1995--our private sector-wide rate of productivity growth is back up to nearly 3% per year, with no current signs that it is going to fall back down to "Age of Diminished Expectations" levels. We once again look forward to our standrds of living and levels of productivity doubling every generation or so. The Social Security system no longer looks way out of whack--relatively small, marginal changes should keep it from being a problem for generations. And there is great, huge news abroad: the world-changing economic revolutions in India and China.

Even Medicare and Medicaid and the long-run fiscal crises of America's public health-care programs and the employer-funded health-care system... Let me put it this way: it's not a crisis, it's an opportunity. If technological progress in medicine were to stop tomorrow--if what doctors and nurses and druggists and researchers do and how they do it were to freeze--then we wouldn't be looking forward to a health-care funding crisis. We would have no difficulty funding Medicare and Medicaid, as underlying economic growth boosted tax revenue by more than a stagnant health care system could spend, even with the aging of America. It is only because we--rationally--expect that our doctors, nurses, druggists, and researchers will learn how to do new things, marvelous new things, incredibly expensive new things, that we project health-care spending into the future and blanch in terror. And I do blanch in terror. But it is important not to forget that this is an opportunity: how many wonderful, medical things will we as a society decide to purchase, in how egalitarian a fashion will we as a society distribute them--will only the rich be offered clone-eye transplants when macular degeneration sets in in our nineties--and how will we pay for them? We may fail to grasp this opportunity, or fail to grasp it well. And to miss this opportunity would be a catastrophe. But it is an opportunity, not a crisis.

So why are things now going so--relatively--well? From a public policy standpoint, is it due to good luck or good skill? If it's good luck, it's good luck that we haven't shared with the other major post-industrial core areas of the world economy. Japan and Western Europe are, largely, still mired in their own Ages of Diminished Expectations. And there have been important acts of public-policy skill:

1. The 1986 Baker-Bradley-Rostenkowski tax reform--the true pro supply-side tax bill of the past thirty years
2. The 1990 Bush-Mitchell-Foley deficit-reduction bill
3. More important, the PAY-GO changes in congressional procedures that George H.W. Bush's aides like Richard Darman demanded as a price for the 1990 deficit-reduction deal.
4. The 1993 Clinton-Mitchell-Foley deficit-reduction deal.
5. Yet more important, enormous payoffs from generations of government support for education and research--especially computer and medical research.
6. And most important of all: we are still immigrant-welcoming entrepreneur-loving upward-mobility-seeking America. We care about the startup of the builder of the better mousetrap much more than about the fortunes of established old-technology mousetrap producers.

Nevertheless, there have been lots of acts of public-policy non-skill as well:

1. The Reagan administration did not intend to destabilize America's government finances, turn the federal government into a capital sink, and thus become a drag on investment, manufacturing production, and economic growth. Some hoped for a more growth-promoting tax bill than they managed to pass in 1981, others for a burst of inflation to give one last episode of bracket creep to offset the tax cut, others that it would be easier to cut spending. All were wrong.
2. The Bush I and Clinton administrations--we spent $20 trillion of today's dollars fighting the Cold War. We spent about 2% of that on the post-Cold War recontruction of Eastern Europe. A hideous waste of opportunity.
3. The collective fumbling of our last attempt in the early 1990s to fix the funding of health care in America.
4. Alan Greenspan advised George W. Bush in 2001 that tax cuts should contain provisions that would reduce their magnitude should forecasts be overoptimistic and deficits reemerge. George W. Bush ignored him.
5. Ex-HHS Secretary Thompson says that he warned George W. Bush that a drug benefit that did not allow Medicare to bargain over drug prices would be much too expensive to be a good deal. George W. Bush ignored him.
6. Ex-Treasury Secretary Paul O'Neill warned George W. Bush that flirting with protectionism--whether Chinese-made bras or imported steel--was not just bad economics but bad mercantilism and counterproductive politics as well. George W. Bush ignored him.
7. His entire National Economic Council warned George W. Bush that the 1990 BEA PAY-GO procedural restrictions on congressional spending were extremely valuable and important and should not be allowed to expire. George W. Bush ignored them.
8. Secretary of State Powell and Staff Chair Shinseki warned George W. Bush that stabilizing and rebuilding Iraq would be much harder than conquering it. George W. Bush ignored them.

I could go on. There is a certain pattern here.

When I look at the economic policies of the Bush administration, I--well, with respect to Republican economic policy, I understand small-government trim-back-the-social-insurance-state-and-cut-taxes policy, and there's a case that that's the right thing to do. I understand cut-taxes-and-then-starve-the beast policy, but the case for policies based on the hope that your political adversaries will be less cynical and more public-spirited than you are is very weak. I understand dish-the-whigs-let's-do-what-Democrats-do-but-do-it-better policy. But this administration's policies... There's an exchange from the movie "Apocalypse Now": "I hear you disapprove of my methods." "I see no methods at all here, sir."

Nevertheless, we are--still--OK. Yet more evidence that, as my grandfather used to say, the Lord protects dogs, children, fools, and the United States of America. We all mourn at the opportunities that have been wasted by the George W. Bush administration, but--so far at least--they are opportunities wasted, nothing much worse. The big cost from Bush policy mistakes so far would have been the drag on economic growth and the crowding-out of investment produced by the swing back to large structural budget deficits. But--so far--that crowding-out has been offset by larger and stronger crowding-in, as Asian governments anxious to continue export-led growth buy up as many U.S. government bonds as the Treasury can issue.

But part of my job here is to warn. How could lack of feck produce something worse than missed opportunities? What steps should we be taking now to minimize dangers in the future?

The first big danger is a long-run danger. Up until 1900 or 1930 we were--for English-speaking white guys--the country of upward mobility and opportunity that we think we are. Since 1930 measures of upward mobility have declined: we are no longer a society in which it is materially easy for families to move from class to class across the generations. And we are returning to Gilded-Age levels of income inequality: differences in class matter more. Everything we have seen from the history of Europe and Latin America over the past century tells us that immobile societies with large class differences produce a uniquely poisonous and destructive brand of politics.

To guard against this, we need to do a number of things. Increase mobility: the University of California at Berkeley alone has more students from families with incomes under $50,000 a year than the entire Ivy League--a thing that my friend and patron Larry Summers of Harvard was trying to change. Make class differences matter less: more progressive taxes, a stronger safety net, more public provision of public amenities from parks to schools. What's called for isn't a single megainitiative, but a lot of pressure on a lot of margins to make sure American society remains a place for consensus rather than conflict politics.

The second big danger.... Well, you all know it, it's been growing for the past eight years or so. This year we in the United States may import $1 trillion more of goods and services than we export. Since American citizens and residents are going to buy perhaps $400 billion of assets abroad this year, that means that our current configuration of trade and asset prices can last only as long as foreigners are willing to buy $1.4 trillion gross of American assets each year. How long will they want to do this? How long will we let them do this? Certainly everybody thinking of acquiring assets in America is thinking harder after the recent episode of the Peninsular and Oriental Steam Navigation Company. When foreign asset purchases fall back to sales, our exports have to be priced to be as attractive to them as their exports are to us--which means a dollar 40% lower in value than it is today.

What form of compensation are foreign investors demanding in exchange for running dollar-decline risk? What form of compensation will foreign investors demand in the future for running dollar-decline risk? If you all leave here, and this afternoon convince your organizations that now is the time to be first out the door as far as hedging dollar-decline risk is concerned, and if all your organizations convince their clients, then:

1. All of you are big heroes, because your organizations and clients are first out the door and avoid loss.
2. The dollar at the end of the month is 40% lower than it is today.

Consequences in this scenario, in which all of you sprint for the phones and are unusually persuasive? Ten-year Treasury up by 200bp from the end of foreign net demand, plus 200bp for inflation compensation premium, plus an unknown x bp for financial crisis risk.

We here in the United States have to move--and move now--ten million workers out of construction and consumer services and supporting occupations and into export and import-competing and supporting occupations.

The Federal Reserve will multiply a 40% decline in the dollar by a 1/6 import share of GDP by a 50% passthrough and get an impact effect on the price level of 3.5%, and will start raising rates further to reestablish its inflation-fighting credibility.

Asian countries will have to move 40 million workers out of export and supporting occupations and into occupations fueled by domestic demand--and Asian countries have not, historically, been too good at figuring out how to do this.

Now, we are probably going to be OK. You all are not going to run for the phones. While a run on the dollar is possible--the bad equilibrium is out there--runs on banks or currencies are often possible, yet rarely occur.

So what would a prudent U.S. government be doing right now?

1. We're in the up-phase of the business cycle, so we should be running a budget surplus in any event, considerations only reinforced by the unsustainable current-account deficit.
2. We should be making it very clear that as a deficit country we value foreigners who want to invest in us--that we are grateful rather than xenophobic when we think about foreign capital.
3. The Federal Reserve should be making it clear that it is more interested in stabilizing measures of domestic prices than of measures that have a high weight on import prices.
4. International consensus on what to do should market prices move, and should demand for the products of 40 million Asian workers in export industries and 10 million American workers in construction and consumer service industries disappear.

Are any of these things happening?

Still, we're probably going to be OK. Opportunities, not crises.

Covering the Economy: Budget: What Do You Do When Officials Lie?

What can a working journalist do when official sources and documents tell lies? That was, we all thought on Wednesday, a difficult part of what those journalists covering the budget this year had to do.

We have this same question coming up in another context: Daniel Froomkin writes:

The Captive President: Media Matters, the liberal media watchdog Web site, raises an interesting point about Time Magazine's coverage of the Valerie Plame affair. Back in this October 2003 story, the magazine reported: "White House spokesman Scott McClellan said accusations of Rove's peddling information are 'ridiculous.' Says McClellan: 'There is simply no truth to that suggestion.'" It is now clear that several reporters and editors at Time knew very well that McClellan's statement was false.... Is there any excuse for a news organization to print a statement that they know is untrue, without at least trying to clue their readers into the truth? That seems to defeat the central purpose of journalism. So what should Time have done?...

Here's Time reporter Michael Duffy's paragraph in context:

[T]he Democrats saw an opening.... Democrats immediately raised a public alarm: How could Justice credibly investigate so secretive an Administration, especially when the investigators are led by Attorney General John Ashcroft, whose former paid political consultant Karl Rove was initially accused by Wilson of being the man behind the leak?.... White House spokesman Scott McClellan said accusations of Rove's peddling information are "ridiculous." Says McClellan: "There is simply no truth to that suggestion." Recalling the torture inflicted on Bush's predecessor by a squad of special prosecutors, congressional Democrats demanded that a special counsel be appointed in this case. By Wednesday some had christened the scandal Intimigate and were trying to link it to every political issue in sight...

So I called Michael Duffy, who strongly disagrees. He thinks that it would have been unprofessional of him to send any signal in that story that McClellan's statements were false. He had a duty to his readers. He had a duty to Time's confidential sources to protect their identity. And the duty to the sources trumps. Sending a signal that Time knew that McClellan was wrong when he said that Rove was involved--"remember, he still has not been charged," Duffy said--would have revealed that Rove was one of Time's confidential sources.

There is, I think, a certain tension and inconsistency in Duffy's position. On the one hand, Duffy points to all the pictures of Karl Rove in the issue of Time and talks about how Rove's involvement was an open secret, talks about how everyone knows how limited is the truth value of statements from the White House podium. "This wasn't the first story about Plame we had written." He is sure that Time's readers were definitely not misled by McClellan's denials.

But if that is so, how can Time be protecting Rove's confidential status>

On the other hand, Duffy says that Time will go all the way up to the Supreme Court, at great expense, to protect the confidentiality of its sources.

But if that is so, how can Time justify all the big pictures of Karl Rove that Duffy implies--"look at the images in that issue? What's on the spread?"--said nudge nudge, wink wink, we all know that most of what Scott McClellan says is so is not in fact so?

Not that it's bad that there's a certain tension and inconsistency in Michael Duffy's position. There is extraordinary tension in Duffy's situation. I think that the tension should be diminished by a greater willingness to blow sources sky-high when the alternative is to mislead your readers and the stakes get high enough. Michael Duffy thinks not.

I suspect that the most important element of this mishegass is that Time believes that its readers know more of the "open secrets" of the Washington insider political journalistic community than they (or, indeed, I) in fact do.

Rasky-DeLong "Covering the Economy": Discussion Notes: Week of January 24

Seven background graphs on employment statistics:

Payroll Survey Employment Growth since 1994
Long-Term Unemployment
Unemployment and Underemployment
The Employment-to-Population Ratio
Thirty Years of the Unemployment Rate
Three Years of the Unemployment Rate
Unemployment: The Importance of Seasonal Adjustment

New claims for unemployment insurance emerge every Thursday...

Monthly Employment Report released by the Bureau of Labor Statistics every month, at 8:30 AM on the first Friday:

Statement by Commissioner of Labor Statistics Kathy Utgoff.
The January 6, 2006 Employment Report itself.

• Household survey: the CPS or Current Population Survey:
  • Unemployment rate
    • Underemployment rates
    • Long-term unemployment rate
  • Employment-to-population rate
    • Female labor force participation
    • What is the participation trend?
      • Why are the unemployment rate and the employment-to-population ratio telling different stories since 2000?
• Payroll survey of businesses
  • Watched by Wall Street
    • As an indicator of economic activity
    • As an input into the Federal Reserve's decision-making policy
      • Federal Reserve sets interest rates
      • Federal Reserve wants to keep inflation low
      • If inflation is low, Federal Reserve would like employment to be as high as possible
  • Since 2000, the payroll and household surveys have been telling different stories...
  • Benchmark for payroll survey: 140,000 per month as neutral result
  • Payroll survey also contains workweek data and wage data--but save that for next week

Now let's look at some stories:

January 6, 2006: Reuters: Reuters's initial story on the January 6, 2006 BLS Employment Report: "Job growth below expectations in December" Fri Jan 6, 2006 9:20 AM ET: By Glenn Somerville..."
January 6, 2006: Economist Forecasters' Immediate Reactions to the Employment Report release.
January 7, 2006: Greg Ip: writes about Friday's employment report for the weekend edition of the Wall Street Journal
January 7, 2006: Edmund Andrews's next-day article on the January 6, 2006 Employment Report.

Broader Perspectives:

January 6, 2006: Tim Duy Looks at the Fed: and guesses what the Federal Reserve's reaction will be to the January 6, 2006 Employment Report.
Mark Thoma of the University of Oregon tries to provide perspective on the January 6, 2006 Employment Report.
Kash Mansouri of Colby College on the January 6, 2006 Employment Report: "the US economy continues to disappoint when it comes to the creation of new private-sector jobs."
The Heritage Foundation's Tim Kane.

The impact story: for bond traders. The opinion-sample story--the WSJ has it up by 10:02 AM! Greg Ip's story: state of the economy in a broader perspective Edmund Andrews's story: political context and consequences of employment report.

Four webloggers: Tim Duy, Mark Thoma, Kash Mansouri, Tim Kane.

Rasky-DeLong "Covering the Economy": Discussion Notes: Week of January 17

We thought about Robert Pear:

"Senate Passes Budget With Benefit Cuts and Oil Drilling." By ROBERT PEAR; CARL HULSE CONTRIBUTED REPORTING FOR THIS ARTICLE. November 4, 2005 http://select.nytimes.com/search/restricted/article?res=F00B11FB3C5A0C778CDDA80994DD404482

The Senate on Thursday narrowly approved a sweeping five-year plan to trim a variety of federal benefit programs and to allow drilling for oil and natural gas in a wilderness area of Alaska, increasing the chances that the energy industry and Alaska officials will achieve a long-sought goal. The budget bill, the most ambitious effort to curb federal spending in eight years, was approved by a vote of 52 to 47. Five Republicans opposed the measure; two Democrats voted for it. Senator Judd Gregg, Republican of New Hampshire, the chairman of the Senate Budget Committee, said, "This bill is a reflection of the Republican Congress's commitment to pursue a path of fiscal responsibility." It will, Mr. Gregg said, reduce the deficit and save roughly $35 billion over the next five years...

Susan Rasky calls this an excellent example of a standard New York Times lead. There is a lot of information in here. There is no excessive jargon. There is nothing that is not true.

Brad DeLong says: not so.

First, the lead lacks scale variables. Is it more important to know that the plan saves $35 billion, or that the plan saves 0.3% of federal spending, or that the plan saves 0.06% of GDP? Is it more important to know that the plan saves $35 billion, or that it saves $27 per person per year in the context of the federal government's spending $9,000 per person per year?

There is also the question: "What's the narrative?" The narrative that Pear's lead supports is:

• Judd Gregg works very hard, and passes through the Senate a seeping, ambitious effort to curb federal spending (and open the Alaska NWR to drilling) that demonstrates the Republican Congress's commitment to fiscal responsibility.

But ten years ago--when the economy was half its size--five-year deficit reduction packages had numbers like $500 billion attached to them. Relative to the size of the economy, Judd Gregg's effort is only 1/30 as large as the deficit-reduction measures of 1993 or 1990. And Judd Gregg's $35 billion spending cut was to be followed a week or so later by a $70 billion tax cut. In a normal year the two bills would be combined into one. This year the Reconciliation Bill was divided into two by the Republican leadership in the hope that passing the spending cuts first would get, well, would get stories like Robert Pear's that got Republicans credit for fiscal responsibility.

The narrative that Pear's lead support is--no ifs and buts about it--false. Here are three alternative true narratives:

• Nothing happens as a result of the Reconciliation process this year: spending cuts of $27 per capita per year and tax cuts of $54 per capita per year in the context of a federal government that spends $9,000 per capita per year and taxes $7,500 per capita per year.
• Republicans pull a procedural trick to try to fool reporters into writing stories that give them credit for fiscal responsibility--and it works.
• Judd Gregg labors like a mountain to convince his fellow Republicans to reduce the deficit, but when the dust clears the mountain has birthed a mouse: the "sweeping five-year plan," the "most ambitious effort... in eight years," is of a trivial and insignificant magnitude.

Robert Pear is an excellent reporter--as Dan Froomkin points out in email, not even the crankiest and pickiest economist has complaints about the substance of his coverage of health care issues, which are his home base. So why does he write a story whose lead leaves Brad DeLong frothing at the mouth when he writes about the budget?

Possible answers:

• If Robert Pear is going to cover the federal budget in the long-run--cover this beat--he needs to keep Senate Budget Chair Judd Gregg happy. Beat reporters have to be polite. (But is it really the case that Robert Pear needs Judd Gregg more than Judd Gregg needs Robert Pear?
• Robert Pear doesn't cover the federal budget on a regular enough basis for his sources to fear him, so they tell him pleasing lies: the Republicans that this is significant progress on deficit reduction; the Democrats that the Medicaid benefit cuts are horrifying large and truly devastating.
• The New York Times doesn't have a big enough budget bench--if Robert Pear were writing for the Wall Street Journal news pages, he would have an enormous amount of backup and institutional memory at his disposal. At the New York Times he doesn't--after all the New York Times reporter who covered the Reagan budgets is... sitting right here.
• Robert Pear hasn't taken Stan Collender http://nationaljournal.com/members/buzz/2006/budget/ out to lunch enough times. Two lunches with Stan Collender at Signatures, and Pear would have nothing to fear when he is handed a budget story to write.

Next time: sources of data and information; how journalists can arm themselves against writing stories whose leads carry untrue narratives. Things to read:

• Stan Collender's "Budget Balance" column: http://nationaljournal.com/members/buzz/2006/budget/
• The Economic Report of the President: http://www.gpoaccess.gov/eop/
• The Statistical Abstract of the United States: http://www.census.gov/statab/www/
• The House Ways and Means Committee Green Book: http://waysandmeans.house.gov/Documents.asp?section=813
• The Economic Policy Institute's State of Working America: http://www.epi.org/content.cfm/books_swa2004
• For recent data, CEA-JEC Economic Indicators: http://www.gpoaccess.gov/indicators/index.html