Dean Baker's Blog, page 277

Because Stock Prices Have Soared, Returns in the Future Will Be Lower

The Washington Post had a piece on the wealth gap between whites and African Americans. It attributes much of the gap to the fact that African Americans with some amount of wealth are less likely to invest it in stocks and mutual funds and instead tend to hold lower yielding assets. It notes that this made a large difference as the stock market soared in recent years.

While this is true, because the stock market soared, and price to earnings ratios are above historic averages, it is likely to...

Robert Samuelson Isn't Satisfied that China Agreed to Cap Its Per Capita Emissions at Less than Half U.S. Level

That's essentially what he said in his column today dismissing the importance of China's agreement to target peak emissions at 2030 levels. The refusal of China to agree to emissions limits has often been cited as a reason why the United States should not bother trying to reduce greenhouse gas emissions. Now Samuelson apparently feels that an agreement to restrict at a peak that is less than half of U.S. peaks is not a significant concession. (The obvious logic in this sitiation is that the U...

Falling Interest Rates and Rising Stock Prices Can be Related

Neil Irwin has an interesting piece noting the worldwide fall in commodity prices and interest rates has been accompanied by a rising stock market in the United States. While the piece approaches the issue from the standpoint that these movements present a seeming contradiction, that is not necessarily the case.

Falling commodity prices and interest rates can be the result of economic weakness, which is undoubtedly in part the case now. Other things equal, a weaker economy will mean lower fut...

The Congressional Budget Office Has Consistently Over-Estimated the Cost of Obamacare

A Washington Post editorial argued that the Republicans would be best-served by re-appointing Doug Elmendorf as the director of the Congressional Budget Office (CBO) rather than picking someone who is a conservative ideologue. The basis for this argument is that Elmendorf, in the Post's view, "has a well-earned reputation for refusing to tell policymakers what they want to hear."

Ironically, in the example given in the editorial Elmendorf told the Republicans exactly what they wanted to hear:...

NYT Abandons Distinction Between News and Editorial Page to Push Trade Deal

Some people at the New York Times apparently feels so strongly about pushing the Trans-Atlantic Trade and Investment Pact (TTIP) that it is prepared to abandon the longstanding separation between the news and editorial pages. A news article reporting on a statement from the new European trade commissioner on her commitment to achieving a deal with the United States described the deal as:

"a pact aimed at lowering tariffs and reducing regulatory barriers to encourage job creation and economic...

Charles Krauthammer Thinks that Colombia and Togo Should Be Able to Emit as Much Greenhouse Gases as the United States

That's the only conclusion that can be drawn from his column denouncing President Obama's agreement with China on restricted emissions as a "swindle." Krauthammer is upset that China would be allowed to continue increasing emissions until 2030, whereas the United States is expected to hasten its pace of emission reductions beginning immediately.

It is only possible to see this arrangement as being somehow unfair to the United States if we ignore how much each country is emitting per person. B...

Final Demand in Japan Grew at a 0.8 Percent Annual Rate in Japan in Third Quarter

The NYT used the reported drop in third quarter GDP as the basis for pronouncing the death of Abenomics in Japan with a piece headlined "with bad economic news for Japan, Abe's magic seems to evaporate." A closer examination of the data indicate that Abe's program may not be dead yet.

While GDP did fall at a 1.6 percent annual rate in the third quarter, following a much steeper drop in the second quarter, the decline was entirely driven by a sharp falloff in the pace on inventory accumulation...

Public Schools and Logic 101 for George Will

George Will apparently has a hard time understanding why private schools that receive public school vouchers should have to meet the same requirements as public schools, specifically the requirement that they serve children with disabilities. He calls the requirement "bullying," and its application to private schools "tortured logic."

The story is actually a very simple one. Public schools have an obligation to provide an education for our children. That means all of our children, including t...

Quick, Some Meaningless Budget Numbers from the NYT

Okay folks, how big a deal is $608 billion over the next ten years to the federal government? Yeah, that comes to 1.3 percent of the $48.5 trillion that we were projected to spend over this period. You all knew that, right?

Yes, the NYT is again doing the meaningless budget numbers routine, telling us that plans by House Republicans to extend a set of tax breaks over the next decade would cost $608 billion in lost revenue. A Senate plan to cover 2015 and 2014 would cost $84.1 billion (roughly...

Tufts Economist Documents Inefficiency of Patent System for Financing Drug Research

Joe DiMasi, a professor at Tufts University, presented the findings of a study updating his prior work on the cost of developing new drugs. He reported that the study estimated the average cost at $2.6 billion. It is worth noting that this figure only applies to a small fraction of drugs. DiMasi looked at drugs based on new chemical entities, which are less then 20 percent of all new drug approvals. He also is looking at drugs for which the drug companies paid for all the research (as opposed...