Dean Baker's Blog, page 179

No One Told Robert Samuelson About the Shift to Austerity

Europe and the United States both shifted their fiscal policies from stimulus to austerity in 2011. Most economists see this as a major factor explaining the weak recovery from the 2008-2009 recession. Incredibly, in his latest Washington Post column assessing the weakness of the economy, Robert Samuelson never mentions the shift to austerity.

Actually, the column is more than a bit confused since it starts by making the case that the Fed actually should be raising interest rates since the ec...

Big Numbers and Confusion on Infrastructure Spending

The NYT had an article discussing proposals by Hillary Clinton and Donald Trump to increase spending on infrastructure. The article likely left many readers confused.

First, it briefly described the two candidates' proposals:

"Mrs. Clinton has said that if she is elected president, her administration would seek to spend $250 billion over five years on repairing and improving the nation’s infrastructure — not just ports but roads, bridges, energy systems and high-speed broadband — and would pu...

NYT's Public Pension Birtherism

The NYT seems determined to do the equivalent of birtherism with public pensions, implying that there is some conspiracy in the way they do their accounting. The paper ran a major business section article today headlined, "a sour surprise for public pensions: two sets of books."

The "surprise" should hardly be a surprise to anyone familiar with public pension systems. Pensions calculate liabilities based on the expected rates of return for the assets they hold. This calculation tells governme...

EpiPen Lobbying Campaign: Fruits of Protectionism Like TPP

The NYT had a good article on the lobbying effort by Mylan, the manufacturer of EpiPen, to have its product labeled as a preventive drug by the federal government. If EpiPen can get this label, then insurers will not be allowed to require patients to make a copayment. This means that patients will not directly see the price of the drug, although it will be passed on in the form of higher insurance premiums. Mylan is betting that this will make it easier to charge prices that are several thous...

How Much Do We Learn About Trade and Poverty in the Developing World from a NYT Article Ostensibly Telling Us About Trade?

Honesty goes out the door when a major trade deal is being debated. This means that politicians, academics, and major news outlets, like the NYT, discard normal standards to push the trade pact. The basic point is that lots of profits are on the line for the corporations for whom the deal was negotiated, and in that situation, truth is a luxury that can't be afforded.

In this vein, we get the NYT Magazine piece by Nathaniel Popper asking in its title, "how much do we really know about trade?"...

Men Who Don’t Work: When Did Economists Stop Being Wrong About the Economy?

By Cherrie Bucknor and Dean Baker

The 4.9 percent unemployment rate is getting close to most economists’ estimates of full employment. In fact, it is below many estimates from recent years and some current ones. Many policy types, including some at the Federal Reserve Board, take this as evidence that it’s necessary to raise interest rates in order to keep the unemployment rate from falling too low and triggering a round of spiraling inflation.

The argument on the other side is first and fore...

Would Bernanke's Negative Interest Rate Policy Lead to Larger Unbanked Population?

In a blog post earlier this week, former Fed Chair Ben Bernanke argued for a policy of negative nominal interest rates as being preferable to a higher inflation target for boosting the economy in a severe slump. While his concerns about the downsides of a higher inflation target seem somewhat overblown, there is an important negative aspect to his proposal for negative rates that his post overlooks.

If banks have to pay money on the reserves they hold, then they have less incentive to acquire...

Republican Latino Group Spokesperson is Wrong, Unemployment Rate for Hispanics is Not 20 Percent

This is another problem with numbers story. Steve Inskeep interviewed Daniel Garza of the Libre Initiative, a Republican group targeting Latino voters in Nevada and Florida, on Morning Edition on Tuesday. In making his case Mr. Garza brought up the issue of the minimum wage:

"On the issue of minimum wage, which is one that is always used as, you know, you don't care for decent wages, here is a case where you have Latino minorities who are at 20 percent unemployment and you want to double the...

Ireland's Government Doesn't Want $1 Trillion From Apple

That's what a NYT article told readers, although the $1.0 trillion figure may not have been clear. The European Union determined that Apple owes Ireland $14.5 billion in back taxes. While the article indicated that this is a substantial sum, since most readers are probably not familair with the size of Ireland's economy, they likely would not realize how substantial it is.

Since Ireland's GDP is projected to be 229 billion euros this year, the back taxes would be roughly the equivalent of $1...

Esther George and Financial Speculation

In an article on the prospect of a September interest rate hike by the Fed, the NYT pointed out that Esther George, the President of the Kansas City Federal Reserve Board Bank, expressed concern that low interest rates are fueling financial speculation. She has repeatedly given this as a basis for raising interest rates.

It is worth noting that George has never identified an area where prices are obviously out of line with fundamentals. In the two cases in the last 80 years where the collapse...