Dean Baker's Blog, page 256

Ben Bernanke and the "Ask Nicely" Strategy for the Trade Deficit

Josh Barro comments on the exchange between former Federal Reserve Board Chair Ben Bernanke and Larry Summers and Paul Krugman. The key issue is whether the main problem with inadequate demand stems from the trade deficit or weak consumption and investment demand. I weighed in earlier on Bernanke's side.

Josh's question for Bernanke is that if the problem is the trade deficit, what do we do about it? Of course the main reason for the trade deficit is the over-valued dollar, which makes our g...

Postal Banking: Charles Lane Edition

Charles Lane doesn't want the Postal Service to get involved in banking. That much is clear from his column, even if his argument doesn't necessarily support the case.

The argument seems mostly that the government can't compete with the dynamic private sector, although he also seems to worry about the opposite:

"(Yes, postal banking also undermines check-cashing liquor stores and pawn shops, a desirable goal if you buy into the stereotype that these are unscrupulous exploiters, as opposed to...

Krugman and Summers Versus Bernanke on Secular Stagnation

I see that Paul Krugman and Larry Summers are debating Ben Bernanke on the relative importance of weak domestic demand and our trade deficit in explaining shortfalls in demand. I have a busy morning, but let me throw in a quick tidbit and pronounce our former Fed chair the winner.

Suppose that our trade deficit was 1.0 percent of GDP (@$180 billion) instead of 3.0 percent of GDP (@$540 billion). Does anyone doubt that this difference of two percentage points of GDP would make a massive diffe...

The Housing Bubble and the Financial Crisis #25,452

It's always a great day when I have the opportunity to have a substantive exchange with the incredibly erudite Brad DeLong, especially when I am quite sure that I am right. Brad is convinced that the fiinancial crisis is the evil doer responsible for our prolonged downturn instead of the good old-fashioned housing bubble often featured in these pages. He points to the surge in non-residential investment coming in 2007 and 2008. He argues that this surge, along with a rise in exports, would ha...

Rising Employment in Japan

The media regularly report the mixed signals from Japan on the state of its recovery (here, for example), but for some reason, they never seem to mention the state of the labor market. The news here is actually quite impressive. Since Shinzo Abe took over as prime minister in 2012 the employment to population ratio (EPOP) for adults under 65 rose by 2.4 percentage points. By comparison, the rise in the EPOP in United States over the same period, which has frequently been celebrated as a boom,...

Another Piece on the Trouble of Deflation Caused by Falling Commodity Prices

A generous donor has agreed to give BTP big bucks for every case of a silly article complaining about deflation caused by a drop in energy prices. (I wish.) Anyhow, the NYT gave us another one today, thankfully with at least some qualifying language.

As I've pointed out many times before (most recently here), it doesn't matter if prices are falling if the decline is primarily due to an imported product like oil. The reasons that low inflation or deflation are troubling do not apply. Let's see...

Unemployed Older Workers Have More Difficulty Getting New Jobs

Good piece on a study by AARP. (I was a discussant on a panel yesterday.) It will be interesting to see how Obamacare affects this story.

Since older workers can now get insurance through the exchanges, employers will be less concerned about picking up an older worker's health care costs. It will be interesting to see if this has a positive effect on their reemployment prospects.

Generic Sovaldi Costs Less than $1,000 in India

It would have been worth mentioning this fact in a Washington Post article on the cost of providing Medicare and Medicaid patients with Sovaldi. Gilead Sciences, the manufacturer of Sovaldi, can get away with charging $84,000 for a treatment because the government will arrest anyone who tries to produce the drug without its permission.

Of course there is nothing to prevent people from going to India to get treatment there. It would be possible to pay $20,000 for the treatment and travel of a...

It's Monday and Robert Samuelson Wants to Cut Social Security and Medicare

Yes, once again Robert Samuelson stresses the urgency of cutting Social Security and Medicare. It's the usual pox on both your houses story, but as usual he leaves his thumb on the scale. In discussing the Republicans' proposals to save money by cutting spending, he says that their budget saves $2 trillion over the next decade (@ 0.9 percent of GDP) by repealing Obamacare. This is not quite right. The Republican proposal repeals the spending in the program, but leaves most of the revenue that...

The Invisible Skills Gap in Almost Every Industry

Alexandra Levit tells readers of her NYT column that we should be thankful that Generation Z is entering the workforce because, "the United States is facing a skills gap in most industries."

Really? I wonder how Ms. Levit knows about this skills gap? Usually we would look to things like high vacancy rates, longer hours for the workers that employers can find, and of course, rapidly rising wages. We don't see this for any major occupation group. So what is the basis for asserting there is a sk...