Dean Baker's Blog, page 146

Baumol's Disease? George Will's Misdiagnosis of U.S. Health Care Costs

In his Washington Post column today George Will told readers that the problem of rising costs in the U.S. health care system is simply a case of Baumol's disease. This refers to the problem identified by economist William Baumol (who recently died), that productivity in the service sector tends to rise less rapidly than productivity in the manufacturing sector. The implication is that if workers get paid the same in both sectors, then the cost of services will always rise relative to the cost...

Tell the Alarmists to Calm Down, the Debt Crisis is Not Coming Back

There were a number of articles about the scary news that debt levels are again above their housing bubble peaks. If you need something to be scared about (really?) I suppose you can worry about this, but if you want to seriously consider the economic impact of this data point, there ain't much there.

There are two big differences between now and our previous peak ten years ago. One is that the economy and income is considerably higher today. The other major difference is that interest rates...

Why Fans of the Private Enterprise Shouldn't Want Private Insurers in Government Programs Like Medicare

We have all heard the argument from conservatives about the benefits of relying on the private sector rather than the government. Private companies are fast moving and can respond more quickly to changing conditions and technology. By contrast, the government is slow and bureaucratic. And, there is more than a bit of truth to this story.

So what happens when we have the slow-moving bureaucratic government making payments to fast moving dynamic insurers in a program like Medicare. Well, all go...

The Hedge Fund Boys Show There are Still Good Paying Jobs for People Without Skills

Who said it's not a good labor market when you can get paid hundreds of millions of dollars for losing your investors money (compared with a stock index). The big question is why do the people who sign these contracts (managers of pension funds and university endowments) still have jobs?

Morning Edition Interview Features Senator Sasse Dishonestly Talking About the Need for Honest Leadership

Morning Edition had an interview (sorry, not posted yet) with Republican Senator Ben Sasse talk about the need for honest leadership. He was critical of Donald Trump's claims that he would help manufacturing workers. While the criticism is justified, Sasse condemned the idea of turning to protectionism.

Of course, the United States would not have to turn to protectionism: it has been practicing selective protectionism for decades. We have maintained the barriers that largely protect our docto...

The Trade Deniers

Trade denialism seems to be a fast growing sector of the economy these days. Robert Samuelson, the Washington Post columnist, is one of the leading practitioners. In today's column he has a new study by Gary Clyde Hufbauer and Zhiyao “Lucy” Lu, from the Peterson Institute for International Economics, which tells us both that the job loss from imports was not a really big deal and also that we have gained hugely from trade.

The gist of the job loss exercise is to take the period from 2001 to 2...

WaPo Columnist Condemning Sanders' Drug Importation Bill Doesn't Realize Canada Can Expand Its Regulatory Agency

The Washington Post ran a column by Leona Aglukkaq, a former member of Canada's House of Commons and Canadian health minister, which complained that Senator Bernie Sanders proposal to allow mass importation of drugs from Canada would overburden the country's regulatory agency. As the piece tells readers:

"Canadian authorities do not inspect every shipment of products headed for the U.S. marketplace to ensure that packages don’t contain adulterated, counterfeit or illegal drugs. Canada d...

The Fed's New Excuse for Raising Interest Rates: Helping the Poor

Bloomberg reports that Esther George, perhaps the Fed's biggest inflation hawk, has a new argument for raising interest rates: she claims that inflation is a big tax on the poor. This is peculiar for two reasons.

First, the people who are denied work as a result of higher interest rates will be disproportionately those at the bottom of the ladder: African Americans, Hispanics, and workers with less education. Furthermore, higher unemployment rates mean that the workers who have jobs will have...

The Need for Job Killing Robots in Pension Fund Management

Gretchen Morgenson had a good piece this weekend on fees paid by public pension funds. These fees are large and have grown rapidly in recent decades. The fees go to some of the richest people in the country, such as private equity and hedge fund managers (think of Peter Peterson or Mitt Romney).

The fees often do not correspond to any benefits to the pension funds in the form of higher returns. In other words, these fees are the equivalent of a massive welfare program under which the taxpayer...

Protectionism Makes Dental Care Expensive

The Washington Post had a very useful front page piece on the poor quality of dental care received by large segments of the population. It noted the high price of dental care, but never examines why it costs so much in the United States.

A big part of the story is that dentists earn on average $200,000 a year, roughly twice the average of their counterparts in Western Europe and Canada. This is in large part because our dentists benefit from protectionism. We prohibit qualified foreign dentis...