Dean Baker's Blog, page 215

Washington Post Editorial Page Editor Fred Hiatt Pushes for Higher Unemployment

It's hardly a surprise to see a column in the Washington Post opinion pages calling for lower federal budget deficits. In spite of the continued weakness of the labor market and the economy, the Washington Post continues to push for less demand, growth, and employment.

Fred Hiatt did the job today by praising Rhode Island Governor Gina Raimondo for cutting public employee pensions, and contrasting these cuts with increased tax cuts and spending at the federal level. Hiatt's complaint is that...

Brad DeLong on Piketty's Likely Response to Rent Argument

Brad posted a short note commenting on my paper on rents as the basis for upward redistribution in the last thirty five years. The paper outlines ways in which rents in various areas can explain this upward redistribution, as opposed to the sort of argument advanced by Thomas Piketty that it is some natural process that is inherent to capitalism.

Brad suggested that Piketty would respond by saying that the beneficiaries of this upward redistribution are behind the mechanisms (e.g. stronger an...

The Washington Post's Non-Political Fed Looks a Lot Like Wall Street's Fed

In its usual bipartisan way the Post took even-handed swipes at Republican Representative Jeb Hensarling and Bernie Sanders, a senator and candidate for the Democratic presidential nomination, over their criticisms of the Federal Reserve Board. Never mind that Hensarling's criticisms were over the Fed's failure to raise interest rates to prevent hyper-inflation over the last five years, while Sanders' criticism was over the fact that the Fed's recent rate hike will slow growth and the rate of...

Bubbles that We Have to Worry About and Bubbles We Don't

The NYT reported on the reaction in financial markets to the Federal Reserve Board's decision to raise interest rates on Wednesday. The piece notes the generally calm reaction, but also indicates there continue to be some concern about asset bubbles. It comments:

"Regulators have pointed to a number of worrisome signs in recent weeks. A federal agency said on Tuesday that credit risks were 'elevated and rising' for American corporations and many foreign borrowers, even as investors are demand...

GDP Forecasts Have Consistently Been Too High

In an article on the Federal Reserve Board's decision to raise interest rates, the Washington Post referred to the 2.4 percent median growth forecast of the Fed's Open Market Committee. For example, last December their median forecast for growth in 2015 was 2.8 percent. It now appears growth will be around 2.2 percent for the year. The Fed was not out of line with other forecasts. For example the Congressional Budget Office, which quite explicitly tries to be near the middle of major forecast...

News for NYT: Democrats Who Voted to Delay Medical Device Tax May Not Care About Innovation

Most people realize that politicians don't always give the true explanation for their actions. For example, few politicians are likely to say that they vote against gun control measures because the NRA is a powerful lobby that could derail their political career, even if this is the real reason for their vote. They are more likely to claim they vote against gun control measures because of their belief in the rights of gun owners.

While most people may recognize this fact, apparently the folks...

Private Profit with Public Guarantee: The Real Issue with Fannie and Freddie

The NYT had a column by Jim Parrot and Mark Zandi on reforming Fannie Mae and Freddie Mac. (Jim Parrott is a senior fellow at the Urban Institute and the owner of Falling Creek Advisors, a financial consulting firm. Mark Zandi is the chief economist at Moody’s Analytics.) The article argues that the problem with Fannie Mae and Freddie Mac was that they were considered too big to fail. It therefore puts forward the case for ending their monopoly on issuing government guaranteed mortgage-backed...

Robert Samuelson Keeps Arguing with the Data About Consumer Spending and Investment

Robert Samuelson again gives us his data free explanation for the weak recovery in his Monday column. He contrasts the current weak recovery with the strong recovery of the eighties. He notes the Fed's efforts to boost the economy in both periods, then tells readers:

"In the 1980s and ’90s, consumers and businesses were eager to spend. The Fed accommodated that demand but did not create it. By contrast, consumers and businesses now are conditioned to be wary. Having lived through events — th...

Dan Balz and the Pew Research Center Discover Wage Stagnation

Okay, this one is a bit personal, but it reflects a larger issue. The Pew Research Center just put out a study showing that a declining share of the U.S. population is middle class, with greater percentages falling both in the upper and lower income category than was the case four decades ago. Washington Post columnist Dan Balz touted this declining middle class story as an explanation for the rise of Donald Trump.

The problem here is that there is zero new in the Pew study. My friend and for...

In Paris Talks, Rich Countries Pledged 0.25 Percent of GDP to Help Poor Countries

In case you were wondering about the importance of a $100 billion a year, non-binding commitment, it's roughly 0.25 percent of rich country's $40 trillion annual GDP (about 6 percent of what the U.S. spends on the military). This counts the U.S., European Union, Japan, Canada, and Australia as rich countries. If China is included in that list, the commitment would be less than 0.2 percent of GDP.

Addendum

I see my comment on military spending here created a bit of confusion. I was looking at...