Dean Baker's Blog, page 111

Why Is the NYT So Much More Worried About Protectionism Raising the Price of Washing Machines than Drugs?

That seems like a reasonable question to ask. After all, we spend far more on prescription drugs, probably more than $470 billion or 2.4 percent of GDP this year, than we do on washing machines. And the protectionist barriers are far larger with drugs than with washing machines. Rather than adding 20 percent or 50 percent to the price of a washing machine, government-granted patent monopolies typically raise the price by around 1000 percent and sometimes more than 10,000 percent. And people d...

The Example of Marvin Goodfriend: If You Work Hard and Get Everything Wrong, You'll Rise to the Top

Actually, I really have no idea how hard Marvin Goodfriend works, but he did get everything wrong. Paul Krugman has a nice piece on Goodfriend, who is Trump's nominee to be a governor of the Federal Reserve Board.

In this position, Goodfriend will have a major role in setting the country's monetary policy. Goodfriend had been a persistent critic of the Fed's efforts to boost the economy, expressing serious concerns about runaway inflation in the early days following the crash. He also thought...

French President Emmanuel Macron Proposes to Retrain 750 Workers

The 750 is a rough guess, but the NYT touted Macron's commitment to "invest more than €15 million" in retraining programs. If we assume that a program cost 20,000 euros per worker (about $24,000), then 15 million euros should be enough to retrain somewhere around 750 workers. Since France's labor force is almost 30 million, it may not be surprising that the French unions are not overly impressed with this commitment.

The piece presents France's economy as lacking dynamism. This is not consist...

NYT Says the Price of Bacon Would Fall if NAFTA Is Repealed

It didn't actually directly say this, but that is certainly a likely outcome of one of the scenarios it describes in its of some of the possible effects of ending NAFTA. After describing the ways in which the US and Canadian pork industries have become integrated and the possible impact of the end of NAFTA on this integration it tells readers:

"But this agricultural supply chain would be disrupted in other ways. American pork would face a tariff of 20 percent when moving into Mex...

Larry Summers' Warnings and the Robots Taking Our Jobs

In a Washington Post column this morning, Larry Summers rightly points out that there is little reason to believe that President Trump has much to do with the US economy's relatively good performance over the last year. As he notes, most other major economies have seen even larger upturns relative to their predicted growth path.

In addition, it is worth noting that some of the uptick in the US may simply be due to the continuation of the Obama–Yellen recovery. As Jared Bernstein and I pointed...

Lessons in Economics for Bret Stephens: Apple and Donald Trump's Big Tax Cut

We all know about the skills shortage. Many employers can't find workers with the necessary skills. For example, the NYT can't find columnists who understand economics, so they had to hire Bret Stephens instead.

Mr. Stephens is angry that many people won't join him in celebrating the decision by Apple and other big companies to repatriate foreign earnings back to the United States. He tells readers in his column, "Clueless Versus Trump":

"Apple’s announcement on Wednesday that it will repatr...

Good News: Wages Are Up

The Bureau of Labor Statistics released its eagerly awaited data on usual weekly earnings for the 4th quarter last week. The data for the 4th quarter were actually not very good, but the quarterly data are erratic. If we look at the full year data, we get a pretty good story. Real median weekly earnings were up 1.2 percent. Earnings for workers at the cutoff for the first quartile (earning more than 25 percent of workers and less than 75 percent) were up 2.9 percent. For workers at the cutoff...

Pennsylvania Added 200 Coal Mining Jobs Thanks to Donald Trump

Actually, it's not clear that the 200 jobs were due to Trump since the biggest factor appears to be higher world energy prices. Trump is not obviously responsible for rising oil and gas prices, but I suppose there is some way that his administration can take the credit/blame for people paying more for their gas and heat. Even with the new jobs, employment in the sector is still down by almost one-third from its average under President Obama.

In any case, the new coal mining jobs bring the tot...

Apple Transfers $252 Billion in Citigroup Account from Irish Subsidiary to Parent Company

This is what bringing money back to the United States means. Under the old tax law, companies often attributed legal control of profits to foreign subsidiaries, so that they could defer paying taxes on this money. However, the money was often actually held in the United States since Apple could tell the subsidiary to keep the money wherever it wanted.

For this reason, the economic significance of bringing the money back to the United States is almost zero. The legal change of ownership is lea...

Why Should the United States Be Concerned If China Stops "Manipulating" Its Currency?

The NYT printed a Reuters article which included the bizarre assertion that the United States would be in some way threatened if China stopped buying US government bonds. The assertion is bizarre because for years many people (included me) complained that China was deliberately keeping down the value of its currency against the dollar in order to support its exports.

Depressing the value of the Chinese currency resulted in the country building up a huge trade surplus with the United Stat...