Dean Baker's Blog, page 281

Minimum Wage Tracks Productivity: Fair Deal on the Minimum Wage

Charles Lane expresses his pain at the fact that the minimum wage remains hugely popular with large segments of the population. He tells readers:

"It works as a tax on business, whose benefits often accrue to middle-class teenagers, and whose costs — fewer jobs and higher prices — are partly borne by needier intended beneficiaries."

Imagine that, a policy that might have some consequences we don't like -- sort of like any policy that actually exists in the real world. Thankfully, unlike the E...

Dana Milbank Doesn't Remember the 2006 Election

It's too bad that the Post's political columnist Dana Milbank does not have a very good memory. He devoted his column to complaining that President Obama didn't offer any change in course yesterday, unlike President Bush after the Republicans lost Congress in 2006. Milbank points out that Obama offered no changes in policy or even in the structure of his cabinet, unlike Bush who dumped Donald Rumsfeld as Defense secretary. 

There is an obvious difference between 2006 and 2014. It was cle...

"Trade" Deals Have Little to Do With Trade

The folks at the NYT apparently haven't been reading much about the Trans-Atlantic Trade and Investment Pact (TTIP) or the Trans-Pacific Partnership (TTP), including what appears in the pages of the NYT. If they had done their homework, the paper wouldn't be telling readers:

"This is one area [trade] where the Obama administration and Republicans should be able to find common ground. Republicans are enthusiastic advocates of increased trade, and the president is eager to get the added authori...

If Shareholders Stopped Letting CEOs Rip Them Off It Would Reduce Inequality

Eduardo Porter has an interesting discussion of inequality, based in large part on the views of M.I.T. Professor Robert Solow. Solow views it as unlikely that it will be possible politically any time soon to have tax and transfer policies that do much to lesson inequality. However he does hold out the hope that changes in corporate practices could lessen before tax inequality.

This is an extremely important point. There is considerable research showing that CEOs and other top management essen...

Ending Experience Rating for Small Business is a Big Deal

The NYT had a piece discussing the extent to which small businesses are continuing to offer health care insurance to their workers through the exchanges created by the Affordable Care Act (ACA). Incredibly, the article never mentioned the prohibition on experience rating.

While many states had regulations that limited experience rating, prior to the ACA many small firms would see huge increases in premiums if one of their employees developed a serious illness. The ACA requires that insurers c...

Washington Post Pushes for Government Guaranteed Subprime Mortgage Backed Securities

Yes, that seems to be its fondest dream for the outcome of Tuesday's election. The bulk of its lead editorial touting the prospects for bipartisanship is focused on pushing the Johnson-Crapo bill, a measure that would replace Fannie Mae and Freddie Mac with a system whereby the government guarantees 90 percent of the value of privately issued mortgage backed securities (MBS). This means that Goldman Sachs, Citigroup and other folks who might issue MBS could now tell their customers that even...

"Secular Stagnation" Is Progress, Now Can We Talk About the Trade Deficit?

Matt O'Brien has a nice piece presenting charts from Larry Summers (yes, the rest of us had made this point long ago) showing that estimates of potential GDP have dropped as the economy has remained weak since 2007. The point is that a temporary downturn can have lasting economic consequences. Unemployed workers lose skills and can become permanently unemployed. And, by having a long period of weak investment, the economy's capacity will be expanding less rapidly than would otherwise be the c...

Holy Cowdroppings Batman, Medicare Spent 0.0003 Percent of Its Budget on Drugs for Dead People!

Yes that is the big scoop that the folks at AP uncovered today. According to a report from its Inspector General, $292,381 was paid out for HIV drugs after the patients were already dead. That undoubtedly sounds awful to many readers -- yet another case of bungling bureaucrats in Washington throwing our hard-earned tax dollars into the garbage.

It turns out the situation could be even worse. According to the article, the $292,381 is just for one narrow program. If we add up the cost of all th...

Misplaced Celebrations On Third Quarter Growth

There was much celebration in the business press over the better than expected third quarter GDP growth. (See, for example, this WaPo piece touting the U.S. recovery as the "envy of the world.") Many were quick to say that the 3.5 percent growth for the quarter implies that the economy is now on a higher growth path, possibly in excess of 3.0 percent. Mr. Arithmetic begs to differ.

First, if we can look all the way back to the beginning of 2014 we see that the average growth for the first thr...

In Case You Were Wondering What Folks Who Rate Subprime MBS as AAA Think of the Creditworthiness of the U.S. Government

The Washington Post has the answer. It devotes an article to Moody's assessment of the financial situation of the U.S. government.

Most people probably know of Moody's as one of the credit rating agencies that were paid tens of millions of dollars to rate mortgage backed securities as investment grade during the housing bubble years. It's not clear when its assessment of creditworthiness supposedly became more credible.

Anyhow, the ostensible good news is that Moody's says we don't have anyth...