Dean Baker's Blog, page 222

Choice in Health Care Plans: A Way to Subsidize Economists and People Like Them

Austin Frakt had an interesting piece discussing people's abilities to select the lowest cost health care plan to meet their needs. He cites a number of studies that indicate people often make mistakes. For example, they frequently will pay way too much for plans with low deductibles and they fail to switch drug plans, even when they would have clear savings. (These behaviors are not necessarily irrational. If people know that a high deductible will discourage them from getting necessary care...

Washington Post Reports Social Security Overpaid Disability Benefits by One Percent Over Last Nine Years

That is sort of what the Post reported. It told readers that:

"One of the largest federal programs that provides cash benefits to disabled workers overpaid $11 billion during the past nine years to people who returned to work and made too much money, a new study says."

The Post article never bothered to tell readers that the program paid out roughly $1.1 trillion in benefits over this period, making the overpayment equal to 1.0 percent of benefits. It also would have been worth not...

Contrary to What You Read in the WSJ, the Shift to Benefits Does Not Explain Sluggish Pay Growth

The Wall Street Journal had an article on slow pay growth in recent years that was headlined, "shift to benefits from pay helps explain sluggish wage growth." The article goes on to explain that one of the reasons that wages are not growing is that an increasing share of compensation is going to benefits like health insurance.

The problem with this explanation is that it is clearly not true. According to data from Bureau of Economic Analysis, wages accounted for 83.2 percent of labor compensa...

China and Demographics: Lessons for the Washington Post

The end of China's one child policy is producing an outpouring of nonsense about demographics. Nowhere is the confusion greater than in the opinion pages of the Washington Post, which gets the gold medal for confusion on this issue. In honor of this occasion, BTP will explain the issue in a way that even a Washington Post editorial page editor could understand.

The key point here is that the ability to support a given population of retirees depends not only the ratio of workers to retirees, b...

Debating the Economy with Neil Irwin

Neil Irwin, a writer for the NYT Upshot section, had an interesting debate with himself about the likely future course of the economy. He got the picture mostly right in my view, with a few important qualifications.

First, his negative scenario is another recession and possibly a financial crisis. I know a lot of folks are saying this stuff, but it's frankly a little silly. The basis of the last financial crisis was a massive amount of debt issued against a hugely over-valued asset (housing)....

David Brooks Praises Marco Rubio for Pushing 20-Year-Old Ideas on Welfare Reform

We all know how hard it is for folks like David Brooks, living in remote corners of Washington, to find out about changes in public policy. Therefore, it wasn't surprising to see him praise Marco Rubio, Brooks' favored candidate for the Republican presidential nomination, for a welfare reform proposal that was put in place almost 20 years ago.

The context was the installation of Paul Ryan as speaker and Brooks' perception that Rubio has emerged as the likely Republican presidential nominee. B...

China's Two Child Policy and the Which Way Is Up Problem in Economics

Economists constantly have difficulties figuring out what problem we are trying to solve. The NYT's discussion of the Chinese government's decision to switch to a policy that allows most families to have two children, instead of just one, provides an excellent illustration of this situation. At one point the piece explains the policy shift:

"Now the party leadership has acted more forcefully, apparently in the hope that a burst of children will replenish the nation’s work force and encourage...

Economists Say the Darndest Things

A NYT article on the prospects of an interest rate hike by the Federal Reserve Board at its December meeting told readers:

"The case for raising rates hinges in part on the Fed’s forecast that the economy will continue to add jobs at a healthy pace and that inflation will begin to rise more quickly. Moreover, some analysts argue that maintaining near-zero interest rates is now doing more harm than good by encouraging businesses to invest in things like share buybacks to lift their stock price...

The Fed Had Enough Money to Bail Out Lehman

In his recent book, former Fed chair Ben Bernanke claimed that the Fed did not choose to let Lehman fail, he said that it had no choice because it could not bail it out. The NYT is insisting that this account is true.

"During his remarks, Mr. Bernanke sought to dispel a perception that the Fed and other policy makers made a conscious decision to let Lehman Brothers fail. Even today, nearly a decade after the financial crisis, the view still persists among some.

"'The tools we had were inadequa...

Can High Unemployment Slow Productivity Growth?

I see that my co-author Jared Bernstein has been pondering this question. While this sort of thinking can get you thrown out of the church of mainstream economics, I think that he is very much on the mark. Let me throw out a few reasons.

First, there is an issue about the money available to firms to invest. While larger and more established firms likely to have little problem financing investment in the current low interest rate environment, smaller and newer firms may find it difficult to ge...