Dean Baker's Blog, page 174

The $173 Trillion Austerity Tax in the Infinite Horizon

By Lara Merling and Dean Baker

The Peter Peterson-Washington Post deficit hawk gang keep trying to scare us in cutting Social Security and Medicare. If we don't cut these programs now, then at some point in the future we might have to cut these program or RAISE TAXES.

There are many good reasons not to take the advice of the deficit hawks, but the most immediate one is that our economy is suffering from a deficit that is too small, not too large. The point is straightforward, the economy need...

Volcker and Peterson: Ignoring the Lack of Demand Problem

Former Federal Reserve Board Chair Paul Volcker and private equity billionaire Peter Peterson had a NYT column this morning complaining that not enough attention is being paid to the national debt. The piece uses wrong-headed economics and xenophobia to try to scare readers into backing their austerity agenda.

On the economic side, it implies that the prospect of a rising debt to GDP ratio implies an imminent crisis.

"Yes, this country can handle the nearly $600 billion federal deficit estima...

Government Granted Patent Monopolies

The Washington Post had an interesting piece about Iclusig, a cancer drug that now sells for almost $200,000 a year. The piece discussed the pricing pattern for cancer drugs. It noted that the pricing of Iclusig did not follow the normal pattern, with the price soaring as its range of approved uses was limited by the Food and Drug Administration.

While it presented this as evidence of this not being a normal market, the piece never made the obvious point: the drug market is certainly not norm...

Chris Wallace, Supply, Demand, and the Government Budget Deficit

At the debate last night, moderator Chris Wallace challenged both candidates on the question of cutting Social Security and Medicare. The implication is that the country is threatened by the prospect of out of control government deficits. The question was misguided on several grounds.

First, as a matter of law the Social Security program can only spend money that is in the trust fund. This means that, unless Congress changes the law, the program can never be a cause of run away deficits.

Seco...

Eric Rosengren and Experience of Unemployment Rates in the Low Fours

Binyamin Appelbaum had an interesting interview in the NYT with Boston Fed bank president Eric Rosengren. In the interview he argued that it was important to keep the unemployment rate from falling too low. In a response to Appelbaum saying "low unemployment sounds like a good thing," Rosengren said:

"During periods when the unemployment rate has gotten to the low 4s, we haven’t stayed there for a real long time. And that’s because we do start seeing wages picking up, and we do see prices st...

China Is Not at Risk of Running Out of People

The Washington Post keeps pushing the "hard to get good help" line, this time in reference to China. It told readers how the country is ending its one-child policy, but that many families are likely to still decide not to have more than one kid. The piece then told readers:

"That’s a problem for China. The people born in Mao’s era are growing old, and there will be far fewer people of working age to bear the economic burden."

Actually, the declining ratio of workers to retirees is likely to...

Robert Samuelson is Worried About Debt

Yes, what else is new? Today's column highlights the growth in debt-to-GDP ratios in both the public and private sectors in the last decade. There are three points worth making on this issue.

The first one is that Samuelson's concern, as noted in the headline, is that the growth of debt will leave us open to another financial crisis. The problem here is that it goes along with the myth that the financial crisis was something that sneaked up on us that no one could detect. In fact, the financi...

The Problem of Focusing on Men Not Working

The NYT had an editorial highlighting new work by Alan Krueger that examined prime-age men (ages 25–54) who are not working or looking for work. The work shows that 40 percent of the men who have dropped out of the labor force report feeling pain that keeps them from taking jobs. It reports that 44 percent report taking pain medication the previous day. Both Krueger and the editorial make it clear that the causation could go in both directions.

While this is interesting work, implying that th...

Obamacare: More People Insured for Less

Many people are aware of the increase the number of people insured as a result of the Affordable Care Act. Some also know about the slower rate of growth of health care costs. (Yes folks, that is slower growth in costs, not a decline -- no one promised a miracle.) Anyhow, it is worth putting these two together to see the pattern in health care costs per insured person under Obamacare. Here's the picture.

 

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A Little Pre-Election BS From the White House on Income Inequality

I respect Jason Furman, the chair of President Obama's Council of Economic Advisers. I think he is doing a great job in this position. He has called attention to many of the ways in which government interventions in the market, like professional licensing (think doctors), intellectual property rules (patents and copyrights), and other restrictions are acting to redistribute income upward. He has also attacked silly myths, like the idea that workers in the U.S. are dropping out of the labor ma...