Dean Baker's Blog, page 271

For David Ignatius, Wrecking the Economy Is a Credential

That's right, he complains that Elizabeth Warren opposed Larry Summers' nomination for Federal Reserve Board chair even though he played a central role in designing the policies that led to the housing bubble and the subsequent collapse. Yep, that's just irresponsible populism to hold someone responsible for policies that are likely to cost us more than $10 trillion in lost output and lead to millions of ruined lived.

On the Economic Boom: Too Much Eggnog?

I hate to put a damper on the party, but the some of the reporting on the economy is getting a bit out of hand. The Post gave us an example, with a piece on the revised fourth quarter GDP numbers headlined, "Robust Economic Growth in the third quarter raises hopes that a boom is on horizon." That's not what Mr. Arithmetic says.

First, just to be clear, the third quarter numbers were definitely good news. Five percent GDP growth is a solid economic performance by any measure, so there is no do...

John Cochrane Versus the Keynesians, #23,127

I see that John Cochrane is once again attacking Keynesian economics, giving an “autopsy for Keynesians” in the Wall Street Journal. His central line is that Keynesian economics has been repeatedly proven wrong in the recovery. He sees the U.K.’s turn to austerity as a brilliant success; and the continued U.S. growth, in spite of deficit reduction, as further proof of the failures of Keynesian economics. He tells us that even Greece and Italy are sticking with the euro, rejecting the course o...

The Two Percent Inflation Trap

Neil Irwin had an interesting piece in the Upshot section of the NYT on the origins of 2.0 percent as an inflation target for central banks. He concludes the piece by arguing that, while the target may be too low, it would be very difficult to move away from it.

There are a few issues worth noting on this point. First, the 2 percent target has not been precisely defined in most countries. In the United States, Fed chairs have been quick to note that it is an average, not a ceiling. This means...

The Profit on the TARP and Bernie Madoff

For folks like Timothy Geithner it is a big thing to boast about the profit the government made on the TARP. We got more of this children's story in the NYT yesterday in an article reporting on the end of the TARP. It is worth understanding the meaning of profit in this context.

The basic story is fairly simple. The TARP was a program through which we lent otherwise bankrupt banks, and actually bankrupt auto companies, hundreds of billions of dollars at interest rates that were far below the...

China and the United States: Who Is Number One?

A NYT article on China's growth seems to have gotten data from the International Monetary Fund backward. It told readers:

"On the purchasing power basis, the I.M.F. forecasts the American economy at $17.6 trillion this year, while China’s is estimated at $17.4 trillion."

That's not what my I.M.F. data say. On my screen, it is China with $17.6 trillion and the U.S. with $17.4 trillion. Of course if we add in Hong Kong (which also appears to be under China's control), China would be over $18.0...

WaPo Reports on Vladimir Putin's Economic Miracle in Russia

A chart accompanying a Washington Post article on Russia under Putin tells readers that Russia's per capita GDP rose from $1,771 when Putin took power in 1998, to $14,611 in 2013. This would imply an increase in per capita GDP of 725 percent in 15 years for an annual rate of more than 15 percent. Such rapid growth in income would be unprecedented in world history. If it were true, then Russians would have cause to hold Putin's accomplishments in awe. Of course it isn't (although there was a s...

If You Can Find a Way to Show Middle Income Families Are Gaining, the Washington Post Will Give You Lots of Coverage

While the Washington Post might generally be sympathetic to the idea of giving a few bread crumbs to the hungry and having shelters for the homeless, it hates the idea that middle class people should be able to enjoy a decent standard of living and share in the gains of economic growth. This explains its never ending quest to cut Social Security and Medicare along with the pensions of public sector workers. This stems form a basic philosophical principle that a dollar that is in the pocket of...

A Bit More on Chronic Lyme Disease: Scientists Ignoring the Science

Last week I had a blogpost commenting on a snide article in Slate that ridiculed the possibility that people could have chronic Lyme disease for which long-term antibiotic treatment could be useful. (Here's a similar piece in Slate.) As I pointed out in that post, the science on chronic Lyme is far less settled than our snide columnist claimed.

Since then I was sent a study that found clear evidence that long-term antibiotic treatment is effective in alleviating the symptoms of chronic Lyme....

Schumer Should Focus on Keeping Government from Redistributing Income Upward

There is a bizarre cult in Washington policy circles that likes to say that the markets are causing inequality, but the government can reverse the problem. E.J. Dionne treated up to an example of this cult, declaring that New York Senator Charles Schumer is a main ally. The basic story is that technology and trade have displaced large numbers of middle class workers, and thereby redistributed income upward, but government can redress this problem.

Every part of this story is wrong. Let' start...