Dean Baker's Blog, page 304

Enough Magical Thinking on Trade

In his Financial Times column Adam Posen gets out the old trade magic story, throwing away conventional economic to make bizarre arguments about trade's wondrous impact on the U.S. economy. Among other things, he tells readers:

"Econometric studies have established that when US companies invest abroad, the net result is increased employment, stronger demand and more investment at home. This makes sense, since it should on average be the more competitive businesses that have the resources and...

Researchers Who Know Economics Worry About Per Capita GDP Growth, Not Overall Growth

The Washington Post had an interesting piece reporting on how many young couples are putting off having children for economic reasons. At one point the piece told readers:

"Births have slowed so sharply that researchers note that future economic growth could be stunted by a smaller labor pool. Immigration is often seen as a fix. But the downturn crimped supply lines for both babies and new foreign faces. The change was so dramatic that the Census Bureau in 2012 was forced to revise the 2050 U...

That Boom In Investment: Waiting for Godot

Neil Irwin argues the case that a rise in investment would provide a much needed boost to the economy. The point is well-taken, but there is little reason to expect a marked upturn any time soon.

The basic story is, while there is some room for investment to expand, it is not especially low by historical standards. Non-residential fixed investment was 12.2 percent of GDP in 2013. This compares to an average of 12.8 percent of GDP in the years from 1970 to 2007. Irwin reports a larger gap by j...

Government Administered Saving Accounts Go Back Before 2006

Steven Pearlstein has a good piece on a proposal in Illinois to have the state administer retirement accounts for workers who don't have access to one at their workplace, however he gets one part wrong. Under the proposal, 3.0 percent of a workers paycheck would be automatically deducted for a retirement account, but she would have the option to not have the deduction or to reduce (or increase) the amount. He tells readers:

"This concept goes by the name of “Automatic IRA.” It was first propo...

Yes, It's Another Monday and Robert Samuelson Is Yelling About the Deficit

Last week the Congressional Budget Office issued its new long-term budget projections. They were little changed from prior projections, but Robert Samuelson still wants to use them as a warning of impending doom.

"Under favorable assumptions, the CBO projects deficits of $7.6 trillion from 2015 to 2024. Under less favorable (maybe more realistic) assumptions, the added debt would total $9.6 trillion. The big drivers are an aging population and rising health spending. ...

"The CBO pronounces p...

Question for Thomas Friedman: Is Airbnb So Cool and Hyperconnected That it Can Put People in Fire Traps?

It would be nice if someone could force Thomas Friedman to learn a little bit about the topics of his columns. Today he ran another ad for Airbnb, touting its hyperconnectiveness. While Friedman is ecstatic over the company's hyperconnectiveness, he fails to answer the most basic questions.

Can Airbnb guarantee that its rooms are safe? If not, can we sue and imprison its executives if people who use the service die in fires? What about the nuisance of living next to a hotel room when you paid...

Just Because the World's Poor Benefitted Partly at the Expensive of the Middle Class, Doesn't Mean It Could Not Have Been Otherwise

Suppose a mob boss has his thugs go around and shake down a bunch of small business people. Imagine he then gives a portion of the haul to poor children. When the business people complain, the mobster then tells them they are being greedy, after all don't they care about the poor children?

This is esentially the argument that Tyler Cowen gives us in the NYT this morning. There is little doubt that hundreds of millions of people in developing countries like China and India have benefited from...

Why Is the NYT Editorial Board So Protectionist When It Comes to Doctors?

Most economists agree that trade is one of the main reasons that less-educated workers have seen a decline in their relative wages over the last three decades. The story is pretty straightforward. Trade policy has been designed to put manufacturing workers in the United States in direct competition with workers in developing countries like Mexico or China, who sometimes earn less than $1 an hour. This causes many workers in the United States to lose their job and puts serious downward pressur...

Fraudulent Subprime Auto Loans: The Cost of Obama's Soft on Crime Policy

It is fraud when an issuer of a loan knowingly puts down false information in order for the loan to be approved. When a securitizer includes large numbers of these loans in securities, as Floyd Norris reports was the case with Citigroup during the housing bubble, this is fraud. 

The Obama administration decided not to pursue criminal cases against executives at the major banks who likely committed fraud on a large scale. As a result, most of these bank executives are almost certainly bet...

The Washington Post Says It Doesn't Miss Lower Unemployment and Rising Wages

That might not be a surprise to regular readers of the paper, but there it was in black and white in a column talking about the budget deficit. The piece notes how the deficit has gotten much smaller in recent years and therefore people are paying much less attention to it. The last line in the piece told readers;

"Well, we don’t miss the deficit. But we sure miss that clock [a debt clock used as campaign prop by Governor Romney]."

Actually, people who care about jobs and wage growth do very...