Dean Baker's Blog, page 275

The Retirement Situation: It's Worse Than You Read In the NYT

Floyd Norris (who unfortunately has accepted a buyout and will be leaving the paper) had an interesting piece on the disappearance of traditional defined benefit pensions. He notes that millions of workers in multi-employer plans are at risk of sharp reductions in benefits. Detroit city workers and retirees have already seen sharp declines in benefits.

After pointing out that few workers now have secure pensions, he then refers to a new book by Alicia Munnell, Charles D. Ellis and Andrew D. E...

Chris Rock, Ezra Klein, and the Second Great Depression Myth

I have to take some issue with Ezra Klein in his criticisms of Chris Rock. Ezra is upset with Rock's suggestion that Obama would have been best off letting the financial industry and the auto companies collapse, and then picking up the pieces. Rock argued that Obama would have gotten more credit from this path than he is getting now for having bailed out firms and effectively muddled along.

Ezra responds that Rock's plan is:

"morally odious: it would have meant putting millions of Americans...

Obama Claims that Economic Reality Will Make It Hard to Get Political Support for His Trade Deals

A Washington Post article on President Obama's efforts to secure fast-track trade authority in order to pass the Trans-Pacific Partnership (TPP) included an incredible comment from Obama:

"'It is somewhat challenging because of ... Americans feeling as if their wages and incomes have stagnated' because of increasing global competition, Obama said. 'There’s a narrative there that makes for some tough politics.'"

Of course President Obama is correct that this "narrative," which most economists...

The Meaning of Slow Growth in China

Eduardo Porter ends an interesting piece on declining income inequality in Latin America with a warning that the decline may not continue, insofar as exports of commodities was a major cause. The argument is that China's growth is slowing, and since China was a major market for exports, this means that growth in demand in the future might be much slower than growth in demand in the last decade.

The problem with this view, which is frequently repeated in the media, is that it ignores the fact...

Edsall and Obamacare: More Confusion

Thomas Edsall used his column today to agree with Charles Schumer that the Democrats made a mistake by pushing through Obamacare and should have instead focused on the economy. As I've noted previously, this is wrong on both sides.

On the economy side, what does Schumer think the Democrats would have accomplished if they had never said a word about health care? Would they have gotten another $20 billion a year in stimulus spending, $30 billion, $40 billion? Plug in your number, but it doesn't...

Bankers Who Commit Fraud, Like Murderers, Are Supposed to Go to Jail

Wow, some things are really hard for elite media types to understand. In his column in the Washington Post, Richard Cohen struggles with how we should punish bankers who commit crimes like manipulating foreign exchange rates (or Libor rates, or pass on fraudulent mortgages in mortgage backed securities, or don't follow the law in foreclosing on homes etc.). 

Cohen calmly tells readers that criminal prosecutions of public companies are not the answer, pointing out that the prosecution of...

Andrew Ross Sorkin on Wall Street Paying to Get Regulators

Andrew Ross Sorkin used his column today to complain about the AFL-CIO and others making an issue over Wall Street banks paying unearned deferred compensation to employees who take positions in government. He argues that the people leaving Wall Street for top level government positions are victims of a "populist shakedown."

Sorkins's complaint seems more than a bit bizarre given recent economic history. In the housing bubble years the Wall Street folks made themselves incredibly wealthy packa...

Horrors! Germany Will See a Decline in the Ratio of Workers to Retirees Over the Next Fifty Years

Yep, that's right, just as it did over the last fifty years. Nonetheless, the NYT thinks we should be very worried telling us:

"The population shift will be a major problem by 2060, when there will only be 1.3 workers per retiree, against 2.3 now."

Of course if we go back 50 years it would have been almost 5.0 workers to retiree. (The OECD puts the ratio at 4.9 in 1964, compared with 2.9 today and a projection of 1.5 in 2064.) So basically we will see the sort of demographic crisis going forw...

Question for Brad DeLong and the Debt School of the Downturn: What Would Our Saving Rate Be If We Didn't Have Debt?

Brad DeLong tells us that he is moving away from the cult of the financial crisis (the weakness of the economy in 2014 is somehow due to Lehman having collapsed in 2008 -- economists can believe lots of mystical claims about the world) and to the debt theory of the downturn. Being a big fan of simplicity and a foe of unnecessary complexity in economics, I have always thought that the story was the lost of housing wealth pure and simple. (And yes folks, this was foreseeable before the collapse...

Robert Samuelson Dedicates Column to His Own Ignorance: He Didn't Know Keynesians Predicted Weak Recovery

Robert Samuelson apparently didn't know that all sorts of good Keynesian types, starting with Paul Krugman, predicted that the recovery would be weak due to inadequate stimulus. (Here, here, and here are a few of my own contributions along these lines.)

The basic story is pretty damn simple. When the housing bubble collapsed we lost well over $1 trillion in annual demand. Housing construction fell from a record share of GDP to near record lows, as the boom had led to enormous overbuiilding. I...