Dean Baker's Blog, page 150

Economics 101 for the NYT: Unauthorized Copies Are Not Necessarily "Counterfeits"

The NYT had a major story about a ruling from a Chinese court requiring shoe manufacturers there to pay New Balance for using its logo on their shoes. The article repeatedly used the term "counterfeit" to refer to items that are similar to those produced by a major brand, but sell at a far lower price. This is inaccurate.

For an item to be counterfeit, the buyer must be deceived. In other words, the people buying the shoes with the New Balance logo must wrongly believe that they are buying Ne...

NYT vs Trump on Budget Deficits and Trade: Point Trump

Donald Trump gets lots of things wrong, but he doesn't necessarily get everything wrong. On the link between budget deficits and trade deficits, Trump might be closer to the mark than the NYT.

The NYT right took Donald Trump to task for being lost in his trade policy. During his campaign Trump railed against NAFTA and repeatedly complained about China's currency "manipulation." Now that he is in the White House it is still not clear exactly what he hopes to do with NAFTA.

In the case of China...

Comparing the Pay of Federal and Private Sector Employees

The Washington Post ran an article about a new study from the Congressional Budget Office (CBO) comparing the pay of federal government employees with their counterparts in the private sector. The study found that less educated employees tend to earn more in the federal government than in the private sector, while more educated workers on average earn somewhat less. On average, it found there was a small pay premium for federal employees. The article also notes several other studies with diff...

Actually Curbing Tax Avoidance by Companies Shifting Profits Overseas Is Not Hard

The NYT had an article discussing various efforts to deal with companies shifting profits overseas to avoid paying the corporate income tax.The piece implies that we don't know how to ensure that companies pay taxes on foreign profits.

Actually, it is not hard to design a system where companies cannot avoid paying taxes on their foreign profits. If corporations were required to turn over an amount of non-voting shares equal to the targeted tax rate (e.g. if we want taxes to be equal to 25 per...

Can Tax Cuts Spur Growth?: #46,254

Yes, it's Groundhog Day. Republicans are once again claiming that tax cuts will spur enough economic growth to pay for themselves. Well, old-timers like myself remember Round I and Round II when we tried this grand experiment. It didn't work.

Round I was under President Reagan when he put in big tax cuts at the start of the presidency. These tax cuts were supposed to lead to a growth surge which would cover the costs of the tax cuts. Not quite, the deficit soared and the debt-to-GDP ratio wen...

Donald Trump's Big Tax Cut...For Himself

According to press accounts, Donald Trump seems prepared to put out a tax cut proposal that could net him hundreds of millions of dollars over the next decade. It probably won't do much to help the rest of us, but folks who were worried about whether President Trump would be able to pay off his debts should be relieved.

Here's the basic story. The word is that the Trump tax plan will include two measures that will personally help Trump enormously. The first is eliminating the alternative mini...

Donald Trump's Big Tax Cut . . . For Himself

According to press accounts, Donald Trump seems prepared to put out a tax cut proposal that could net him hundreds of millions of dollars over the next decade. It probably won't do much to help the rest of us, but folks who were worried about whether President Trump would be able to pay off his debts should be relieved.

Here's the basic story. The word is that the Trump tax plan will include two measures that will personally help Trump enormously. The first is eliminating the alternative mini...

People In France and Germany Work Much Less Than in the U.S.: Important for Cross Country Comparisons

The NYT had an article reporting on how the Pew Research Center had discovered work done by the Economic Policy Institute for a quarter century (the middle class is hurting). At one point the piece compares the United States with France and Germany:

"The United States, including the middle class, has a higher median income than nearly all of Europe, even if the Continent is catching up. The median household income in the United States was $52,941 after taxes in 2010, compared with $41,047 in...

The Struggle to Explain Things That Didn't Happen: The Non-Existent Shift Away from Wages

I see Noah Smith is struggling to explain "the mystery of labor's falling share of GDP." At the risk of jeopardizing good paying jobs for people with PhDs in economics, let me suggest that there is no mystery to explain.

Noah's piece features a graph showing the labor share of GDP declining from a range of 64 to 65 percent in the 1960s and early 1970s to just over 60 percent in the most recent data. He then gives us several possible explanations for this drop. Let me give an alternative one,...

Allowing Predatory Financial Practices Leads to Inefficiency and Slows Growth

It would have been worth including this point in an interesting column by Gretchen Morgenson noting how bank regulators remain close to the industry they regulate. The point is straightforward. If banks can make profits by writing deceptive contracts and finding ways to trick consumers, then they will devote resources to this effort, instead of concentrating on providing better services and reducing costs.

From the standpoint of the economy, devoting resources to ripping off consumers is a co...