Dean Baker's Blog, page 209

Paul Krugman, Bernie Sanders, and the Fed

Paul Krugman used most of his column this morning to take some well-aimed shots at the Republican presidential contenders and congressional leadership. He points to their hostility to the Federal Reserve Board’s efforts to boost the economy because of fears of hyper-inflation. These fears have been shown to be completely ungrounded, as inflation continues to be far lower than the Fed’s target of 2.0 percent.

However, Krugman also takes a shot at Senator Bernie Sanders for supporting a bill to...

David Brooks Doesn’t Like Bernie Sanders or Northern Europe

David Brooks used his column today to tell readers how Bernie Sanders program would destroy the dynamism of the U.S. economy. I don’t have time to go through the whole story, but it is important to make one point.

Brooks complains that Sanders agenda would raise total spending at all levels of government from the current 36.0 percent to 47.5 percent. He argues this would require higher taxes on most people thereby depriving them of the freedom to spend their own money as they see fit.

It is w...

Will Sanders’ Financial Transaction Tax be a Free Lunch for Those Who Don’t Live on Wall Street?

Morning Edition had a good piece this morning on Senator Bernie Sanders’ proposal for a financial transactions tax (FTT). There are a couple of additional points worth making.

First, while the piece noted a wide range of estimates of the amount that could be raised through such a tax, we do have some real world experience. As was noted, the United Kingdom has had a transactions tax on stock trades since the 17th century. This tax raises an amount equal to roughly 0.2 percent of GDP, which wou...

Strike Three for the Congressional Budget Office? Social Security Retirement Income Projections

Yesterday the Congressional Budget Office (CBO) corrected an error that it made in projecting the share of earnings that will be replaced by Social Security for those nearing retirement. In a report published last fall, CBO projected that for people born in the 1960s, the annual Social Security benefit for those retiring at age 65, would be 60 percent of their earnings for middle income retirees and 95 percent of earnings for those in the bottom quintile. The correction showed that benefits w...

The Pent-Up-Demand for Quits

Yesterday the Labor Department released data from its December Job Openings and Labor Turnover Survey (JOLTS). One of the items that got lots of attention was a rise in the quit rate to its highest level of the recovery. In fact, it is now pretty much back to pre-recession levels. (This is especially true of workers in the public sector -- interesting story for another day.)

While it is good news if workers feel they can leave a job where they are unhappy or which does not fully utilize thei...

With Inflation Well Below Targets and Interest Rates Near Record Lows, the Washington Post Wants to Reduce the Deficit

Yep, we have such clear warning signs of imminent disaster. I should probably also point out that the interest burden measured as a share of GDP (net of money refunded from the Fed) is at the lowest level since before World War II. You can see we are imposing a terrible burden on our children. At least the Post is honest and says that its deficit reduction means cutting Social Security and Medicare.

Oh well, here on Planet Earth low interest rates and low inflation are a very good market sign...

Budget Deficit Mania and the Congressional Budget Office

By Dean Baker and Nick Buffie

The Peter Peterson gang has been hard at work lately trying to get people worried about the budget deficit. After all, with interest payments on the debt as a share of GDP at a post-war low and an interest rate on long-term Treasury bonds of almost 2.0 percent, things look pretty bleak. (That’s sarcasm.)

But the Washington deficit hawks (great name for a NFL team) have never let the real world interfere with their ranting about deficits, which invariably turn to...

Wars, the Draft, and Upward Mobility

Binyamin Appelbaum has an NYT piece arguing that many economists oppose a draft. At the risk of losing my economist card, let me raise a couple of points of dissent.

First, Appelbaum dismisses the argument that requiring everyone to share the risk of fighting a war, regardless of class, as being a deterrent to politicians’ adventurism. He refers to research that shows this is not true.

While I have not seen the research, I would be skeptical. Even if the children from wealthier families can u...

Breaking Up the Big Banks is Easy

Steve Eisman, the hedge fund manager of Big Short fame, argued against breaking up the big banks in a NYT column today. His basic argument is that we now have things under control because the regulators have effectively limited the banks’ ability to leverage themselves. He also says that even if we wanted to break up the banks, we don’t know how to do it:

“Furthermore, no advocate of a breakup has come forward with a plan on how to do it. Large banks are global, complex, integrated institutio...

Krugman on Bernie Sanders’ Electability

Okay, I’m not going to get in the habit of responding to everything Paul Krugman writes on Bernie Sanders, but there are a few quick points worth making about his latest post on Sanders’ electability.



1)      Krugman is raising an entirely reasonable point that voters should consider, so no one should be upset at him for putting the issue on the table. (No, he is not looking for a job in the Clinton administration.)

2)      We should be clear...