Dean Baker's Blog, page 210

Cooked Study on Freedom of Contract (a.k.a. “right to work”) in West Virginia

The Washington Post had an article on a vote in West Virginia to make it a “right-to-work” state. This means that workers cannot sign enforceable contracts with employers, which require that workers covered by the contract pay the union their share of its operating costs.

The piece refers to a study that purported to find that states with “right-to-work” (RTW) laws had more job growth than other states. This study was fundamentally flawed in its design, since it was treated as a time series s...

Wages in January

In most ways the January employment report was weaker than most economists had expected (not me, my jobs prediction was 140,000). However many reporters seized on the 12 cent reported rise in wages in January to say that wages are finally starting to rise at a healthy pace. This was indeed a large one-month jump, but the 2.5 rise over the last year was pretty much the same we had been seeing for many months. (The Post piece took the 2.9 percent annual rate over the last six months to claim a...

Rents Didn't Rise in the Housing Bubble

In a piece on the difficulty that many people are having in paying their rent, Morning Edition told listeners that rents have risen back to their levels of the housing bubble years. Actually rents didn’t rise in the housing bubble, rather they pretty much tracked the overall rate of inflation. The sharp divergence between house sale prices and rents was one of the reasons that people who pay attention to data were able to recognize the bubble.

Recession Watch, with Neil Irwin

Neil Irwin had an Upshot piece this morning on the likelihood that the U.S. economy will fall into recession in 2016. He argues that a recession is unlikely, but then gives readers a scenario in which it is possible.

I will say first that I agree that a recession is unlikely. Recessions in the past were brought on by the Fed’s efforts to slow inflation with higher interest rates or by the bursting of an asset bubble.

The Fed’s December rate hike was a mistake, but that is not going to cause...

China’s Government Could Cover the Cost of Bad Loans

The NYT had a front page article on how bad debt is threatening world growth. The article focused on China, which it indicated could have as much as $6 trillion in bad debt.

It would have been worth mentioning that China’s government could easily cover the cost of bad debt and keep its economy moving forward. The government’s debt to GDP ratio is very low, its interest burden is less than 1.0 percent of GDP, and it is more worried about deflation than inflation.

In this context, there is no e...

New Yorker Joins Open Season on Bernie Sanders

It’s clear that Bernie Sanders has gotten many mainstream types upset. After all, he is raising issues about the distribution of wealth and income that they would prefer be kept in academic settings, certainly not pushed front and center in a presidential campaign.

In response, we are seeing endless shots at Sanders’ plans for financial reform, health care reform, and expanding Social Security. Many of these pieces raise perfectly reasonable questions, both about Sanders’ goals and his route...

Why Common Ground Between Left and Right Is Not Necessarily Shared

Eduardo Porter had a piece this morning about how a group of academics on the left and right came together around a common agenda. It is worth briefly commenting on two of the items on which the “left” made concessions.

The first is agreeing that Social Security benefits for “affluent Americans” should be reduced. There are three major problems with this policy. The first is that “affluent Americans” don’t get very much Social Security. While it is possible to raise lots of money by increasin...

Lower Drug Prices Without Saying No (see addendum)

Margot Sanger-Katz had a NYT Upshot column arguing that Hillary Clinton and Bernie Sanders plans to have Medicare negotiate drug prices ultimately won’t prove successful in lowering costs because Medicare can’t simply refuse to pay for a drug. There is much truth to this argument, but it is worth working through the dynamics a step further.

The reason why Medicare has to accept prices from a single drug company, as opposed to choosing among competing producers, is that the government gives dr...

Lower Drug Prices Without Saying No

Margot Sanger-Katz had a NYT Upshot column arguing that Hillary Clinton and Bernie Sanders plans to have Medicare negotiate drug prices ultimately won’t prove successful in lowering costs because Medicare can’t simply refuse to pay for a drug. There is much truth to this argument, but it is worth working through the dynamics a step further.

The reason why Medicare has to accept prices from a single drug company, as opposed to choosing among competing producers, is that the government gives dr...

Dueling Trade Models and the Great Recession

The NYT had an article on different trade models that are being used to predict the impact of the Trans-Pacific Partnership (TPP). It reported on the projections from a model from the Peterson Institute which shows that the TPP would add 0.036 percentage points to the annual growth for the United States rate over the next 14 years. On the other hand, it reported the projections of a model from Tufts University which showed that the deal would lose economy 450,000 jobs (@0.3 percent of total e...