Dean Baker's Blog, page 302

Curb Your Enthusiasm: One Percent GDP Growth Is Nothing to Get Excited Over

The Washington Post went a bit overboard with its lead article reporting on the second quarter GDP data. The article begins:

"After suffering the sharpest contraction since the recession ended, the U.S. economy rebounded this spring, providing fresh evidence that the recovery is finally turning a corner.

"Government data released Wednesday shows the economy expanded at an annual rate of 4 percent during the second quarter. Consumers pulled out their wallets, businesses restocked their in...

The Nerd Hour: Why Gross Domestic Income Grew More Rapidly Than GDP

In his write-up of the new data on GDP, Wonkblog's Matt O'Brien noted that Gross Domestic Income grew considerably more rapidly (or more accurately, shrank less rapidly) than GDP in the first quarter. O'Brien sees this as evidence that the economy grew more rapidly than the GDP data indicate.

That is possible, but it is also possible that the GDI data are simply in error. In principle GDP and GDI should be the same. GDP measures everything that was produced based on the sales of goods and ser...

NYT Gets the Story of Argentina and the Vulture Funds Badly Wrong

A NYT article on the possibility of a default by Argentina seriously misrepresented the issues involved and the origins of the term "vulture" in reference to the funds involved in a lawsuit against Argentina. The article implies that the funds had been bondholders at the time of Argentina's default in 2001 who refused to accept the terms that were offered to bondholders following the default:

"Through two restructurings, the government eventually struck a deal with a majority of its bond inve...

Will Protection of Microsoft in China Cost the Jobs of Manufacturing Workers?

The NYT had an article reporting on the possibility that China will use anti-monopoly laws and other regulations to limit Microsoft's operations in the country. This raises an interesting issue. Presumably the Obama administration will step in to try to protect Microsoft's interests. Since the United States cannot just dictate policy to China, if it wins concessions on the treatment of Microsoft then it presumably will make less progress in other areas like getting China to raise the value of...

More Fun and Games With Export-Import Bank

It is great fun watching the establishment get so upset over the possibility that Boeings' the Export-Import Bank may not be reauthorized to issue more loans. Just to remind everyone, the Export-Import Bank issues the overwhelming majority of its loans and guarantees to benefit a small number of huge corporations. It is a straightforward subsidy to these companies, giving them loans at below market interest rates. (Yes, they are almost all paid back. This means that our financial wizards have...

If Germany Has a Hole of 2.3 Million Workers in Its Labor Force, Does that Mean It Will Be Hard to Get Good Help?

It's hard to know what else it could possibly mean, but the Washington Post dutifully reported to readers:

"The aging population is shrinking here, with the 2011 census showing a loss of about 1.5 million people since the 1980s. As the decline accelerates, by 2030 the government predicts a hole as big as 2.3 million workers in the German labor force."

In a market economy, wages adjust to equilibrate supply and demand. If there are fewer workers in Germany it means that workers will...

New Jersey Has a Pension Shortfall Equal to 0.3 Percent of Its GDP

The Washington Post told readers that New Jersey's public pension face a shortfall of $40 billion. Just in case some readers aren't familiar with the size of New Jersey's economy over the next 30 years (the relevant period for pension planning), it will have a discounted state product of more than $12 trillion. This means that the shortfall is roughly equal to 0.3 percent of future GDP. This is considerably larger than the shortfall faced by most states.

Median Wealth Is Down by 20 Percent Since 1984

A NYT article reported on a study from Russell Sage reporting that median household wealth 36 percent lower in 2013 than 2003. While this is disturbing, an even more striking finding from the study is that median wealth is down by around 20 percent from 1984.

This is noteworthy because this cannot be explained as largely the result of the collapse of house prices that triggered the Great Recession. This indicates that we have gone thirty years, during which time output per worker has more tha...

Argentina Didn't Come Up With the Term "Vulture"

Morning Edition had a piece on the possibility that Argentina will again default on its debt. The risk follows the decision by the Supreme Court to refuse to review a New York district court judge's ruling that Argentina had to pay a group of holdout bondholders 100 cents on the dollar and requiring U.S. banks to help enforce this ruling. As the piece explains, this is likely to lead to a second default since a provision in the agreement with the bondholders who had settled from the 2001 defa...

If We Didn't Have the NYT to Tell Us That Spain's Structural Reforms Were Working So Well, We Probably Would Never Know It

That's because the data don't give any evidence of a great success. Nonetheless after noting the difficulties that France and Italy are facing in the implementation of labor market reforms, the NYT told readers:

"By contrast, the idea of making Luis De Guindos the new head of the Eurogroup, which brings together the zone’s finance ministers, is a good one. Spain’s finance minister is in a perfect position to explain to his colleagues the value of structural overhauls, because they have worked...