Dean Baker's Blog, page 297

Condos Are Multi-Unit Properties

Floyd Norris has an interesting piece documenting the surge in construction of multi-family units at the same time that construction of single-family homes remains weak. He attributes this to a weakness in the sales market with more people renting rather than owning.

This conclusion does not necessarily follow from the data. Many multi-family units are built as condos (come to DC and you will see what I mean). The price of condos in many markets has soared in recent years. The five cities fo...

It's Hard to Find Good Help: Chicago Cubs Edition

The media have been full of reports of employers who are too incompetent to raise wages and therefore can't find the workers they say they need (e.g. here). Today Talking Points Memo gave us a story of an employer that apparently doesn't even know the basics of the Affordable Care Act (ACA).

According to the story, the Chicago Cubs cut back the hours of their grounds crew to keep them under the 30 hour weekly limit above which employers are required to provide insurance or pay a fine. As a re...

There Is a Simple Solution to the Conflict of Interest of Bond Rating Agencies

Floyd Norris had an interesting piece discussing the conflict of interest problems with company auditors and also the bond rating agencies that rate securities issued by banks. The basic problem is that since both are paid by the companies who hire them, they have a strong incentive to give an positive assessment regardless of the reality of the situation. This was a huge problem in the housing bubble years when the credit rating agencies gave trillions of dollars worth of mortgage backed sec...

Name Calling at the NYT: Argentina and the Vultures

For some reason the folks at the NYT business desk are having a hard time understanding what is going on with the dispute over Argentine debt. An article today refers to the hedge funds that have forced Argentina into a second default as "holdout investors." It reports that Argentina refers to them as "vultures."

This hugely obscures the basic facts, which are not really in dispute. The funds that have pressed their suit in U.S. courts against Argentina did not hold its debt at the time of th...

NYT Condemns French for Believing In Economics

There are tens of millions of people in the United States who completely reject the theory of evolution and believe that humans were created more or less in their current form in the recent past. Similarly, there are many people who completely reject modern economics and insist that countries cannot suffer due to a lack of demand. In their creationist economics view, the main reason that economies experience economic stagnation is government protections for ordinary workers. These economic cr...

The Federal Reserve Board Responds to Bankers

The Washington Post had an article on grassroots efforts to try to influence the Federal Reserve Board's decisions on monetary policy. It would have been helpful if the piece provided more background on the Fed's institutional structure and decision-making process.

The Fed's decisions on monetary policy (e.g. raising or lowering interest rates and quantitative easing) are made by the 19 member Federal Reserve Open Market Committee (FOMC). This committee includes seven governors who are appoi...

Too Much Democracy in Corporate America?

That's the complaint of Steven Davidoff Solomon in a NYT column today. His complaint is that three people, who are small shareholders, repeatedly bring resolutions that have to be voted on by all shareholders. His argues that these resolutions rarely pass, however they cost the companies tens of millions of dollars a year to field votes.

There are two problems with the logic of this argument. First, we have no sense of the potential payoffs from these resolutions. Since most corporations are...

Prosecutors Could Send Bankers to Jail

William Cohan had a column in the NYT noting that the Justice Department's settlements with the major banks over their securitization of fraudulent mortgages largely let the banks off the hook. His alternative route would have been criminal (as opposed to civil) prosecutions of the banks. While this may have led to more severe consequences for the banks and their current shareholders, it still would have allowed most of the people responsible off the hook.

In most cases, the top executives wh...

Frank Bruni Wants Lower Quality Public School Teachers

That's what can be inferred from his column calling for an end to tenure for public school teachers. Job security is part of the pay package for public school teachers. If they can expect less job security, it effectively amounts to a cut in pay. This would be expected to make teaching a less attractive career path compared with the alternative choices.

As a practical matter, there are few (if any) school districts that do not have provisions that allow even tenured teachers to be fired if t...

How Should Social Security Benefits Respond to an Economic Collapse?

This is the issue that Andrew Biggs implicitly raises in his Wall Street Journal column highlighting the jump in the size of the projections of the Social Security shortfall since 2008. Biggs complains that progressives have responded to the economic collapse by proposing an increase in benefits that would make the shortfall even larger rather than supporting plans for eliminating the projected shortfall. While Biggs' focus is explicitly the solvency of the program, the actions of progressive...