Dean Baker's Blog, page 285

It Doesn't Matter That Oil Is Priced in Dollars

Morning Edition committed one of the seven deadly sins of economic reporting when it told listeners that Europe is hurt and we are helped because oil is priced in dollars and the dollar is rising. (The biggest sin is reporting large budget numbers without any context -- which will result in an unpleasant afterlife for most budget reporters.) It actually doesn't matter that oil is priced in dollars, as some simple arithmetic quickly shows.

Let's imagine that oil is priced in wheat. Assume the...

Even When Facing Deflation Lower Oil Prices Are Still Good News (Mostly)

Neil Irwin chronicles the evidence of worldwide economic weakness by showing data from a variety of markets in an Upshot piece. He is mostly on the money, most economies do face serious problems of insufficient demand, but his concluding comments could use some qualification.

He tells readers:

"Moreover, investors lack confidence that policy makers have the tools they would need to avert a new slide into recession after years of throwing everything they have at it to try to encourage recover...

Getting the Score Right on Dynamic Scoring

Matt O'Brien had a good discussion in Wonkblog of dynamic scoring of budget proposals, the holy grail of conservatives everywhere. The idea of dynamic scoring is that people respond to changes in incentives. This means that lower tax rates can lead to more growth and therefore more tax revenue to offset the cost of tax cuts.

O'Brien's point is that this effect is real, but nowhere near as large as many conservatives like to claim. For example, it doesn't mean that tax cuts will pay for themse...

Defending Germany from Paul Krugman

I would not typically defend Germany's economic policies against Paul Krugman, but I will say a word in its favor this morning. Krugman trashes Germany for running large trade surpluses, telling us that Germany actually has a weak domestic economy. He concludes a short post by saying that Germany can't be any sort of model, since we can't all run large trade surpluses.

While there is much truth to Krugman's comments, it is worth stepping back for a moment. First, the claim that Germany's dome...

Robert Samuelson Tells Us It's All So Complicated!

Unfortunately that is not an exaggeration. He concludes his column this morning about the difficulties the folks at the I.M.F. meetings have in promoting growth by telling readers:

"We’re witnessing a historic break from the past. I think the IMF forecasters deserve some sympathy. They’re dealing with a global economy that strains our intellectual understanding and is outside their personal experience. We don’t know what we don’t know."

Samuelson tells us that there are three huge problems. F...

The New York Times Dream Pension Plan: Lower Benefits and Higher Contributions In Economic Downturns

Economists usually think it is a good to try to make spending countercyclical. This means that we want more spending when the economy is weak and less when the economy is strong.

Traditional defined benefit pensions in the United States at least partly fit this bill. They do sustain benefit levels in a downturn. In addition, their funding formulas average the impact of market swings so that they don't have to have large increases in contributions if the economy goes into a downturn and their...

David Leonhardt Wonders Why It's Cold In the Winter and Wages Aren't Rising

Sometimes a question can be really annoying. Try asking a homeless person why he doesn't have a nice apartment or Al Gore why he lost the election in 2000. David Leonhardt got in the game of really annoying questions when he speculated as to why wages aren't rising this week. Is it really necessary to ask?

The economy is still way below potential GDP. If Leonhardt ever looked at the data from the Bureau of Labor Statistics or read his own paper, he would know that the employment to population...

David Leonhardt Wonders Why Its Cold In the Winter and Wages Aren't Rising

Sometimes a question can be really annoying. Try asking a homeless person why he doesn't have a nice apartment or Al Gore why he lost the election in 2000. David Leonhardt got in the game of really annoying questions when he speculated as to why wages aren't rising this week. Is it really necessary to ask?

The economy is still way below potential GDP. If Leonhardt ever looked at the data from the Bureau of Labor Statistics or read his own paper, he would know that the employment to population...

Franklin Foer Confuses Amazon's Subsidies from the Government With Profits

Franklin Foer has an interesting, but ultimately badly confused article in the New Republic about Amazon and its growth. The article is debating the appropriate anti-trust approach to Amazon, questioning whether it merits government intervention to protect producers and not just consumers.

This is a reasonable question, but the confusion comes in the first sentence of the second paragraph, which tells readers:

"Rather than pocketing the profits from this creation, Amazon has plowed revenue in...

Franklin Foer Confuses Amazon's Subsidies From the Government With Profits

Franklin Foer has an interesting, but ultimately badly confused article in the New Republic about Amazon and its growth. The article is debating the appropriate anti-trust approach to Amazon, questioning whether it merits government intervention to protect producers and not just consumers.

This is a reasonable question, but the confusion comes in the first sentence of the second paragraph, which tells readers:

"Rather than pocketing the profits from this creation, Amazon has plowed revenue in...