Dean Baker's Blog, page 308

Really Big Numbers and Early Retirement in Germany

The NYT had an article about a plan to allow some workers in Germany to retire early and collect Social Security benefits. According to the article, workers who have paid into the system for 45 years will be able to start collecting benefits at age 63 instead of the standard age of 65. (This is being raised to 67, as is the case in the United States.)

While the piece provides interesting background about the economic and political context for this decision, it gives no context for the number...

The Case for Bashing Tony Blair

It seems that Matthew D'Ancona is upset that people are criticizing former Prime Minister Tony Blair, who is apparently making vast sums in a second career in the financial industry and on the speaking circuit. There are several points worth noting.

First, as is the case with Bill Clinton, his generational counterpart in the United States, the public certainly has good cause to be upset that Blair set the economy on a path of bubble driven growth, even if the bubble blew on the watch of his s...

Robert Samuelson Wants People to Be Unemployed: The Economics of the Economics of the Great Recession

The basic story of the Great Recession is about as simple as they come. The economy was being driven by a housing bubble and the bubble burst. The combination of the loss of housing construction, due to the enormous overbuilding of the bubble years, and the loss of the consumption that had been driven by bubble generated housing wealth, created a gap in annual demand of more than $1 trillion. That's all simple and easy.

And what did economists think would fill that gap in demand, manna from h...

The Post Has Problems With Its Scorecard in Assessing State Enrollment in the ACA

The Washington Post did an assessment of which states had the largest share of their eligible population enroll in the exchanges and which states were least successful. California topped the charts with 42 percent of the eligible population followed by Vermont. Picking up the rear was Hawaii, where it tells us less than 15 percent of the eligible population enrolled.

There is a big problem with the Post's scorecard. The states didn't start in the same place. In last place Hawaii only 8 percen...

Problems With Measuring Health Care in GDP Didn't Begin With Obamacare

Neil Irwin's Upshot column rightly points to the fact that Obamacare may have an ambiguous effect on the economy over the next few years. The point is that we want to slow health care cost growth, but in a weak economy less spending on health care means lower GDP and fewer jobs.

This is true, but this is part of a larger story. Since the economy is operating well below its potential and millions of workers are unemployed or underemployed, anything that creates demand would boost GDP. This is...

Faulty Labor Economics at the NYT

Kevin Carey has an interesting piece in the NYT's Upshot section which notes evidence that U.S. college grads seem to perform markedly worse on standardized exams than their counterparts in other countries. While this discussion is interesting his conclusion is completely wrong.

He concludes by telling readers:

"This reality should worry anyone who believes — as many economists do — that America’s long-term prosperity rests in substantial part on its store of human capital. The relatively hi...

What Sort of Loans Does the NYT Expect Investment Banks to Be Securitizing?

That's the obvious question that readers should be asking after seeing the paragraph at the end of an article on the Treasury Department's plan to help low income people stay and/or become homeowners:

"The Treasury had promised that Mr. Lew would address the expansion of credit to potential home buyers, millions of whom are unable to get a mortgage with today’s tight standards. No new programs were offered, though Mr. Lew said the Treasury was working to jump-start the all-but-vanished market...

Trillions of Dollars to Help the Poor?

The NYT had an interesting piece on the persistence of poverty in eastern Kentucky and rural areas more generally. However the piece is seriously misleading when it refers to "the trillions of dollars spent to improve the state of the poor in the United States and promote development." This comment would likely lead readers to believe that we are spending large amounts of money on anti-poverty programs. That is a very questionable claim.

Current spending on TANF, the main federal anti-poverty...

NYT Says the European Union Tortured Greece

My mistake, it actually began an article on Jean-Claude Juncker, the likely next president of the European Commission, by referring to the "rescue" of Greece. This seems a rather dubious characterization of an economic program that caused a plunge in Greece's GDP of more than 20 percent and pushed its unemployment rate above 25 percent. Greece would almost certainly have fared much better if it had defaulted on its debt, abandoned the euro, and re-established its own currency. In any case, it...

The Drop In Health Care Spending in First Quarter Followed Surge in Fourth Quarter of 2013

The NYT noted that a sharp drop in health care spending reduced the first quarter growth rate by 0.16 percentage points. It is important to recognize that this drop followed a surge in health care spending reported for the fourth quarter of 2013 that added 0.62 percentage points to growth in quarter. That compares to an average of 0.28 percentage points for the prior four quarters. It is likely that the data overstated the actual increase in spending in the fourth quarter and therefore also o...