Dean Baker's Blog, page 127

Republican Claims About Tax Cuts and Growth Depend on Potential GDP Levels not Debt

The Washington Post misled readers in its discussion of Republican claims that its tax cuts will lead to a large boost to GDP growth. The piece quotes Kent Smetters, an economist at the University of Pennsylvania, as saying the Republican growth projections did not take account of debt. This is wrong.

The real issue is whether the projections take account of how close the U.S. economy is to its potential level of output. If the current level of demand is near the point where the economy is hi...

Horrible Budget Reporting: A Big Help to Republican Plans to Destroy Obamacare

Paul Krugman does a nice job dissecting the logic, or lack thereof, of Republican efforts to dismantle Obamacare. He points out that one of the games played by the Republicans is claiming that the Graham-Cassidy bill would increase Medicaid spending. It makes this claim based on the fact that nominal Medicaid spending would increase under the bill. While this is true, the bill would hugely cut spending compared with the baseline which factors in both projected increases in the number of peopl...

Doesn't Anyone Care About Budget Deficits? The Fed Sells Off Assets

It is more than a bit bizarre that no one seems to pay any attention to the budgetary implications of the Fed's decision to start sellling off its assets. The impact is potentially fairly large in the scheme of things, possibly as much as $600 billion over the next decade. This is equal to roughly 0.5 percent of GDP. It's pretty much the same number at stake in the various Obamacare repeal efforts.

For some reason none, as in absolutely zero, of the news stories I have seen or heard on the as...

NYT Overstates German Unemployment Rate by Two Percentage Points

Germany's official measure of unemployment is constructed differently than the U.S. measure. They count people working part-time who want full-time jobs as being unemployed. In contrast, these people are counted in the United States as being employed. As a result, the official measure is not directly comparable to the U.S. measure. Fortunately, the OECD constructs a "harmonized" unemployment rate which essentially applies the U.S. methodology to the unemployment measures for other countries.

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The NYT Is Far Too Generous on the Republican Tax Cut Plan

The NYT the Republican tax-cutting plans. In particular, it focuses on the plan to apply a 15 percent or 25 percent corporate tax rate for all business pass-through income. This is in place of the current individual income tax rate, which could be as high as 39.6 percent.

The editorial argues that this would be a huge tax break for partners in hedge funds and real estate developers (like Donald Trump), who typically get their income through pass-through corporations. While this is...

Why Don't Normal Liability Rules Put Equifax Out of Business?

Bryce Covert has an interesting column in the NYT arguing that Equifax and the other two private credit agencies be replaced with a public system. There does seem to be a good case here.

After all, what do we get from competition in this story? As Covert points out, the credit agencies don't work for consumers, they work for the people who buy the data. This means that they don't really have much incentive to ensure their information about us is accurate and to make sure their systems are not...

Eduardo Porter Criticizes NYT Editorial Calling for Increased Protectionism

It's good to see the NYT has diverse voices on economic issues. In his "Economic Scene" column on the economy's supposed labor shortage, Porter argued that "raising barriers to imports — inviting retaliation from trading partners — is exactly the wrong approach." Three days ago, the NYT had an editorial arguing strongly for increased protectionism in the form of stronger and longer copyright and patent protections. These forms of protection not only raise prices and slow growth, but they redi...

NYT Covers Up For Republicans Planning Big Tax Cut for Rich Backers

After screaming about budget deficits throughout the Obama administration, Republicans in Congress are apparently planning to pass tax cuts that will substantially increase the budget deficit from the baseline projections. The NYT decided to help them in this effort by printing without comment their absurd claims about growth.

According to the NYT, Senator Ron Johnson, a member of the Budget Committee, said:

"Just going from 2 to 3 percent growth adds about $14 trillion of economic activity o...

A Warning for the Washington Post's Fact Checker on Single Payer Costs

Glenn Kessler, the Washington Post's Fact Checker, is trying to be even-handed in assessing the claim by advocates of single-payer health insurance of large potential administrative savings from switching to a universal Medicare-type system. Unfortunately, he gives too much credence to an insurance industry funded report (identified as such in the piece), which whittles away at the difference.

The basic story is that Medicare's administrative costs, as shown in the Medicare Trustees Report co...

Washington Post News Article Argues It is Better to Tax Work Than Vacant Property in London

Economists usually argue that it's best to tax the things you want discourage, like cigarettes, alcohol, and gasoline, not things you want to encourage, like work. That is why it is striking that that the Washington Post could not find one economist who thought that a plan in London to tax vacant housing units is a good idea. 

The only expert cited in the piece argued that the tax would have little effect on the housing market because the rich would not care if their property taxes were...