Dean Baker's Blog, page 244

Krugman, Inequality, and Growth

Paul Krugman questions whether there is an existence of positive relationship between equality and growth. He rightly cautions those on the left against being too quick to accept the existence of such a relationship.

He uses a simple graph showing the relationship between inequality and growth per working age person in the years 1985 to 2007. His takeaway is that there is not much of a positive relationship, but there clearly is no negative relationship between equality and growth. In other w...

Pharmaceutical Company Invented Diseases, One of the Incentives Provided by Patent Monopolies

The Washington Post ran a column by Steven Woloshin and Lisa Schwartz complaining about drug companies inventing diseases to market their products for unapproved uses. The immediate target is the marketing campaign for testosterone supplements to treat "Low-T." Low-T comes down to a set of symptoms that are essentially those associated with aging. Aging cannot be treated effectively with testosterone supplements.

While the column calls for more effective regulation from the Food and Drug Admi...

Robert Samuelson Says That Young People Are Subsidizing Peter Peterson's Interest Payments on His Government Bonds

Just kidding, in a piece noting high levels of youth disengagement from the labor market (neither employed, nor looking for work) Samuelson complains:

"Those with jobs subsidize their usually better-off elders through Social Security and Medicare payroll taxes."

Of course workers pay for these benefits. On average workers pay slightly more for their Social Security than the benefits they can expect to get back in retirement. They pay less than the cost of Medicare benefits, but this is becaus...

Neil Irwin on the Productivity Slowdown

In his Upshot piece discussing the May jobs report, Neil Irwin noted both the healthy job growth and the implication for productivity growth. I was troubled by the same issue when I wrote up the jobs report yesterday.

The point here is quite simple, we are seeing relatively rapid job growth, just under 2.0 percent over the last year, when the rate of economic growth is quite weak. The drop in first quarter GDP was clearly an anomaly. (One of the great pointless economic debates of all time is...

Charles Krauthammer Argues Physicians' Services Should be Included In the TPP

No, Krauthammer didn't actually come out in support of free trade. Instead he wants us to be concerned that doctors in the United States are quitting (to become shoe salespeople?) because they don't like Obamacare.

Since our doctors get paid on average roughly twice as much as those in other wealthy countries and even more relative to doctors in less developed countries, there should be little problem attracting large numbers of people willing to train to U.S. standards and work as doctors in...

Critics Dispute Claims that TPP Will Open up "Huge" Markets

An AP article in the Washington Post on the release of Commerce Department data showing a sharp drop in the trade deficit in April concluded with a discussion of the Trans-Pacific Partnership (TPP). The piece told readers:

"Obama and backers of the trade deal argue that it would open huge markets to U.S. goods by lowering tariffs and other trade barriers. But critics, including labor and environmental groups, say that the trade agreement would subject American workers to unfair competition fr...

Washington Post Argues for Protectionism and TPP in Front Page Story

The Washington Post is apparently pulling out all the stops in pushing its agenda on trade. It ran a front page news story that included several heroic acts of mind reading and flagrant misrepresentations to help push the deal to its readers.

In the later category, the second paragraph told readers:

"members of the New Democrat Coalition [a group of centrist Democrats in Congress] heard from frustrated tech executives who pleaded with them to help boost global growth and demanded to know why...

Arguing for an Unaffordable Housing Policy

The NYT ran a column on helping low income homeowners by Elysse Cherry, the chief executive of Boston Community Capital. The piece includes various proposals designed to help low income homeowners who were hit by the collapse of the housing bubble, but it also includes the bizarre complaint:

"In many areas, housing prices are stuck below their inflated pre-bubble levels. Until we deal with this fact, entire communities will continue to struggle with high foreclosure rates and a lack of econom...

Are Public Pension Funds Making Unrealistic Assumptions on Asset Returns?

American Enterprise economist Andrew Biggs again warned about public pension funding in a Wall Street Journal piece. He’s not altogether wrong. Biggs points out that many states continue to badly underfund their pensions. He also cautions against pension funds taking too much risk with their investments. These points are well taken, but I would raise a few issues about Bigg’s argument.

First, it’s good to see that Kansas is Bigg’s poster child as one of the states with a poorly funded pension...

Deflation Nonsense in NYT

It is amazing how economic reporters continue to repeat nonsense about deflation. As fans of arithmetic and logic everywhere know, deflation is bad for the same reason a lower rate of inflation is bad. It raises the real interest rate at a time when we want a lower real interest rate and it increases the real value of debt when we want to see the real value of debt reduced. (The real interest rate is the nominal interest minus the inflation rate.) 

Crossing zero means nothing, which shou...