Dean Baker's Blog, page 238

Birthday Boasts: 2015

I seem to have missed the annual boastfest last year, but I will put in a few words this time. (For those interested, you can find the original set here and a 2013 sequel.)

Financial Transactions Taxes

First, one of big five predictions of things to come seems to be happening. The idea of a financial transactions tax (FTT) has made it into polite circles. Two of the declared presidential candidates openly support it, with long-time proponent Bernie Sanders leading the way. The Tax Policy Cent...

NYT Reports Pharma Is Able to Overcome Partisan Divisions to Get Special Interest Legislation

That's not quite how the paper put it, but it is in fact what it reported. The story according to the headline is "bipartisan partnership produces a health bill that passes house." According to the article the bill instructs the Food and Drug Administration (FDA) to use information from doctors' practices and drug registries in determining whether to approve new drugs rather than just relying on clinical trials. The problem with this approach is that the industry often pays doctors to say goo...

Because La Grange, Ill Used Bad Life Expectancy Assumptions, Does That Mean the Country Faces a Pension Crisis?

That's what a NYT article seemed to be telling people. The center of the story is the fact that it appears that La Grange, Ill (population 15,550) was using grossly out of date mortality tables in calculating the pension obligations for its police and fire fighters. Without directly saying as much, the piece implies that this is a common problem with much larger pension funds and that such practices are the basis for the underfunding of many public sector pensions.

In fact, the main reason th...

Washington Post Says Return of China's Stock Market to February Level Threatens Regime's Legitimacy

The media seem to think it's a really huge deal that investors in China's stock market have not made any money since February. The Washington Post told readers that it could even threaten the regime's legitimacy in a front page story headlined, "stock slide sandbags China's leaders."

The article begins:

"For decades, the Chinese Communist Party has been able to keep control of democracy protests, dissidents, the legal system and the military, but it is now facing an even more intractable foe:...

U.S. Trade Policy Is Pro-Rich, Not Free Trade

Thomas Edsall had a very good piece on divisions in the Democratic Party over trade policy in the NYT this morning. The piece cites a large body of academic research pointing out that U.S. trade policy has played a large role in destroying manufacturing jobs and redistributing income upwards. It notes that this is the basis of the opposition of unions to trade policy, which has caused the overwhelming majority of Democrats in Congress to oppose the Trans-Pacific Partnership (TPP).

However the...

More on Greece and Argentina

With the prospect of Grexit increasing, there have been numerous news stories pronouncing this as a disaster for Greece. There have also been many accounts telling us that Greece will not have the same positive prospects as Argentina. 

As Paul Krugman reminds us Argentina recovered fairly quickly after it broke the link between its currency and the dollar. As he points out, the real disaster was in the period leading up to the break.

While many people have emphasized ways in which Argent...

China's Stock Market Plunges Back to February Level!

Yes, the bottom is really falling out in China, prepare for another Great Depression there. I won't claim any great expertise on China's economy, but the exasperated reporting on the recent fall in China's stock market should also note that it followed an enormous boom. Undoubtedly many people who bought into this boom will be hurt, but it's not clear that it is a disaster for China's economy if it's stock market returns to its level of five months ago.

It is also worth noting that its market...

Quick Thoughts on Wage Stagnation

Steve Rose has a new piece on wage growth being published by the Urban Institute which was previewed in a blog post in the Wall Street Journal. It shows a considerably better picture than most of us are used to seeing. Whereas my friends at the Economic Policy Institute (EPI) show the real median wage for men has fallen by 7.4 percent between 1979 and 2011, Rose finds that real annual compensation for men has risen by 13.4 percent. EPI’s data show that the median hourly wage for women has ris...

Neil Irwin Gets His Power Politics on Greece and the Euro Wrong

Neil Irwin generally has insightful economic analysis in his NYT Upshot pieces, however he strikes out in his turn to power politics today. He tells readers:

"German leaders genuinely believe that a new deal along those lines would be bad economic policy for Greece. Many economists at the International Monetary Fund and American officials would argue it is entirely sensible. The fact is that the time for those debates is over for now; we’re in a realm of power politics, not substantive econom...

It's Monday Morning and Robert Samuelson Is Once Again Confused About the Economy

Yep, some things never change. Robert Samuelson tells us the tragic story of Greece, it needs to reduce its debt, but to do so it has to raise taxes and/or cut spending. That slows growth, which raises unemployment and also lowers its GDP, quite possibly raising its debt to GDP ratio. After telling us that there is no easy exit from this problem for Greece, Samuelson goes on:

"But it’s important to note that Greece’s predicament, though extreme, is shared by many major countries, including th...