Dean Baker's Blog, page 186

Meritocracy In America? Ask the Folks Who Uncovered VW's Cheating

The NYT had an article on the research lab that uncovered Volkswagen's cheating on its emissions. Apparently, the lab was run on a grant of $70,000. That would be less than 0.5 percent of your typical CEO's pay. In fact, it would be less than 10 percent of the pay of the top executives at major foundations that are supposed to care about doing good in the world.

The story is hardly a surprise to anyone who knows the world of research, but still striking.

Robert Samuelson Gives Us Economic Wisdom from His Parents

Samuelson told readers that we "can't borrow ourselves to prosperity." We can only assume that this is something that his parents told him because it surely has no basis in evidence. If the argument is that excessive borrowing has somehow caused us problems then Samuelson would have some serious work to make that case. The interest rate on 10-year Treasury bonds is 1.6 percent. The inflation rate remains well under the Fed's 2.0 percent target.

It's hard to imagine what on earth Samuelson can...

Ross Douthat's Rich Person "Free Trade" Says Much About Support for Trump/Brexit

Ross Douthat inadvertently told readers much about why large segments of the public in the U.S., U.K., and Western Europe are rejecting the policies pushed by elites. In his NYT column he complained about Donald Trump's acceptance speech (which provided much ground for complaint):

"That message was a long attack, not on liberalism per se, but on the bipartisan post-Cold War elite consensus on foreign policy, mass immigration, free trade. It was an attack on George W. Bush’s Iraq war and Hilla...

If the U.S. Textile Industry Was Losing Jobs Then the New York Times Says It Would Prove the United States Was Not Protecting Textiles

The NYT, like much of the rest of the media, feel the need to argue that our trade policies could not possibly be hurting manufacturing workers. Its latest effort in this direction was a piece arguing that China could not possibly be "stealing" U.S. jobs because it is losing jobs itself to other countries.

The basic story is that China has seen a sharp rise in its wages (29 percent over the last three years, according to the article) so it is no longer the low cost producer for many items. Th...

Catherine Rampell Gets Nanny State Story Partially Wrong: Breaking Up Big Banks Is Free Market

Catherine Rampell correctly points out that the Donald Trump Republicans want a nanny state, going through various ways in which they want government to intervene in people's lives and the economy to make life better for them. You can add some important items that Rampell left out, like stronger and longer copyright and patent monopolies, to redistribute money from people who work to people who own patents and copyrights. They also seem fine with the protectionist barriers that keep our docto...

The Republican's Glass-Steagall Is Not Elizabeth Warren's Glass Steagall

There have been many pieces in the media noting that the Republican platform calls for restoring Glass-Steagall and arguing that this is stealing an item from Elizabeth Warren's agenda. While the Republican proposal would presumably restore the separation of investment banks from commercial banks that take government guaranteed deposits, the 21st Century Glass-Steagall Act being pushed by Senator Warren goes well beyond this.

Most importantly, the act would change the priority given to deriva...

Paul Ryan's Calls for Eliminating Almost the Entire Federal Government

No, that is not some new concession that the Speaker made to appease Donald Trump, this is his budget wonkiness. According to the analysis of Ryan's budget by the Congressional Budget Office, he would reduce the non-Social Security, non-Medicare portion of the federal budget, shrinking it to 3.5 percent of GDP by 2050 (page 16).

This number is roughly equal to current spending on the military. Ryan has indicated that he does not want to see the military budget cut to any substantial degree. T...

Obamacare Cost Problem is Skewed Population, not Health Care Costs

An NYT article on insurers' requests for higher premiums in the health care exchanges set up by the Affordable Care Act (ACA) might have misled readers about the reason that insurers face higher costs. The piece noted the request to the federal government for large increases in several states, ranging from 34 to 60 percent. It then quoted Gregory A. Thompson, a spokesman for Blue Cross and Blue Shield plans in five states. 

"...the reason for the big rate requests was simple. 'It’s unde...

Creative Stories on Carried Interest Deduction: Private Equity Partner Explains Why Workers Don't Have to Pay Social Security Taxes

See, it's all very simple. If a father pays his kid $10 to mow his lawn, no one expects the kid to pay Social Security taxes on the money. It's the exact same thing when people work 40 hours a week for an employer, why would we expect them to pay Social Security taxes on their wages?

That is the nature of the argument Steven B. Klinsky, the founder and chief executive officer of the private equity firm New Mountain Capital, gave in a NYT column in defense of the carried interest deduction. Th...

Core Inflation Rate Falls to 1.4 Percent if Shelter is Excluded

The Fed rate hike gang got excited yesterday about the release of the June Consumer Price Index data. As the NYT reported, a 0.2 percent June rise in the core CPI took the year over year rate to 2.3 percent. That is slightly above the 2.0 percent target set by the Fed, although the Fed uses the core personal consumption expenditure index, which shows a 1.6 percent advance over the last year.

However even the CPI figure can be a bit deceiving. The shelter component (essentially rent and owners...