Dean Baker's Blog, page 259

The Problem is not the Specter of Deflation, the Problem is the Inflation Rate Is Too Low

Okay, this is no longer amusing. Can we stop the nonsense about deflation. It doesn't make a f***ing bit of difference whether prices are rising at a small positive rate or whether they are falling at a slow rate, except for the fact that the inflation rate is lower.

This really should not be hard to understand. The inflation rate is a composite of millions of price changes. When the inflation rate is very low, as it is now in the euro zone, a large portion of these price changes are already...

David Brooks' Moral Revival and the Federal Reserve Board

David Brooks' used his column today to bemoan the fact that the vast majority of children of parents with just high school degrees grow up in single parent families. By contrast, the vast majority of children with college educated parents grow up in two parent families. Following Robert Putnam's new book, he refers to a long list of disadvantages faced by children of non college-educated parents compared with children raised by college-educated parents. His column then turns to the need to ha...

Wall Street Journal Soon to Run Piece on Improper Denials of Disability Claims

That's inevitable, since any fair-minded newspaper that ran a column on improper approvals would surely want to balance it out. For those who missed it, the Wall Street Journal had a column by George Mason economist Mark Warshawsky and his grad student Ross Marchand complaining about a limited number of administrative-law judges who approve disability appeals at a very high rate.

The piece referred back to data from 2008, which showed that 9 percent of Social Security administrative law judge...

Larry Summers Gets It Largely Right on Trade

In a Washington Post column on the Trans-Pacific Partnership (TPP) Summers raises the right cautions. He argues that a trade deal should have rules that prevent countries from gaining a competitive advantage by deliberately lowering the value of their currency. He also argues that a deal should not be about special privileges for corporations. And, he says that a trade deal should not jeopardize public health by raising drug prices.

Nonetheless it looks like Summers is likely still going to c...

David Brooks' Name-Calling

It's too bad the NYT can't find a conservative columnist who doesn't have to resort to name-calling to make his arguments. Apparently he is upset that some of the economists close to Hillary Clinton now believe that the upward redistribution of the last three decades is a problem and that education is not the answer. He describes these people as "redistributionist" and insists that redistribution cannot do much to help the poor and middle class.

In fact, there is nothing inherent in the "redi...

Data Refuses to Cooperate with Mainstream Education Story

We all know that robots are making it impossible for people without a college degree to get jobs. That's a basic fact about the economy known to all right-thinking people. And, just like most of the other "facts" about the economy known by right-thinking people, it happens not to be true.

The figure below shows the change in the employment to population ratio (EPOP) for people over 25 from before the recession to the present. (It compares the average for the last four months with the year-ro...

George Will Argues that People Should Support Trans-Pacific Partnership Because NAFTA and other Trade Agreements Led to Record Imports of Manufactured Goods

My mistake, Will said record exports, but of course both are true, and in the real world (as opposed to the Washington Post opinion pages) it is the net that matters, and that has soared into negative territory in the last two decades. But, I don't won't to get into the sort of arithmetic that is clearly over Will and his editors' heads.

Just to explain the logic, many of our manufacturing exports are items are assembled overseas to be re-imported back to the United States. For example, if w...

Can We Talk About the Trade Deficit?

The answer appears to be no, given the lack of news coverage. Anyhow, the Commerce Department released data on the January trade deficit yesterday. The nominal numbers were good, with a drop in the deficit from $45.6 billion to $41.8 billion, but this decline was driven mostly by lower prices for imported oil.

If we look at the deficit measured in constant dollars (i.e. adjusted for inflation), it rose by almost $3 billion compared to the average monthly deficit for the prior quarter. On annu...

Wage Growth Did Not Plummet In February

You may have heard reports on Friday's jobs numbers saying that wage growth slowed sharply from January. It did not.

As I point out each time this becomes an issue, the data on hourly wage growth are highly erratic. This means the change from one month to the next is largely driven by errors in the data. Since errors do not tend to repeat in the same direction, a sharp uptick is likely to be followed by a sharp downtick and vice-versa. This pattern should be familiar to any economist or econo...

Krugman Nails It on NAIRU

I generally agree with Paul Krugman in his arguments on macro policy, but sometimes it is worth emphasizing a point of agreement. Krugman really nails the issue today in discussing the Fed's approach to tightening.

The question is at what point should the Fed start raising interest rates to keep the unemployment rate from falling further. The concern is that if unemployment gets too low, the inflation rate would start to accelerate. Krugman points out that we really don't know the level of u...