Dean Baker's Blog, page 330

NYT Seems Confused About the Purposes of Japan's Pro-Inflation Policy

The NYT ran a piece that implied that Japan's policy of deliberately trying to raise the rate of inflation is not working when in fact most of the evidence cited in the piece showed the opposite. For example, at one point it tells readers;

"Rather than start an economic revival, this “cost-push” inflation, as economists call it, could become a rising threat to Japanese stuck in a deflationary mind-set. Such people could see their hard-earned savings eroded by rising prices, warned Yukio Sakur...

Real House Prices Still Down: WaPo Has Not Heard of Inflation

The Washington Post had a piece explaining the seeming anomaly that cash-out refinancing is still well below bubble levels even though house prices have recovered much of their ground. The piece explains this gap by the fact that homeowners are a wealthier group on average than they were in the bubble years and therefore less likely to tap equity for spending.

While this is in part true, the more obvious explanation that is that inflation adjusted house prices are still almost 30 percent belo...

The State of Manufacturing Employment in the United States

Lydia DePillis has a good piece in the WaPo on the increasing use of contract labor in manufacturing, focusing on the Nissan plant in Smyna, Tennessee. The piece points out that contract workers get lower pay and benefits and lack the security of workers employed directly by the company.

Shorting Herbalife Could be a Public Service

The NYT has a lengthy article on the decision by hedge fund billionaire William Ackman to do a large short of Herbalife, a nutritional supplement company,and then use political influence to undermine the company. While Ackman's efforts to manipulate the Securities and Exchange Commission are at least improper, if not actually illegal, they are not qualitatively different from the actions companies take all the time to advance their cause.

There seems to be a view that shorting a company, impl...

Growth and Inequality: The United States and France

Paul Krugman takes up the new paper from the IMF showing that redistributive measures do not appear to negatively impact growth. He offers a qualified maybe, noting that growth in the U.S. has outpaced growth in France in the last three decades. Krugman correctly points out that most of the gap is due to differences in hours worked, which he attributes to regulations in France. This one is probably worth a few more sentences.

In the United States, hours worked have been inflated by the fact t...

Does the Effort to Prevent Global Warming Distract Us From Helping the Poor?

There doesn't seem any obvious reason that preventing the destruction of the planet would obstruct efforts to help the poor, but I wonder if Harvard economist Sendhill Mullainathan has such fears. He writes today in the NYT that he worries that a focus on the extreme wealth and income of the one percent is blocking efforts to aid the bottom 20 percent. If that is the case, then presumably focusing attention on global warming would raise even greater fears.

Of course it's harder to see the co...

In the Real World the Trade Deficit Is More Important Than the Budget Deficit

Washington politicians like to hyperventilate about the budget deficit. However changes in the budget deficit are overwhelmingly a response to economic conditions rather than the result of deliberate policy. In other words, politicians didn't have much to do with the changes. Furthermore, since the budget is responding to economic changes, it is not giving us new information about the economy.

On the other hand the trade deficit is a direct measure of the amount of demand that is going overse...

Will There Be a Recession in the Next Decade?

Annie Lowrey's Economix blogpost on President Obama's budget concludes by telling readers:

"But it is worth noting that perhaps the single most important factor when it comes to deficits is largely out of the White House’s hands: economic growth. Mr. Obama’s budget assumes that there will be no recession for the next decade – indeed, he sees a moderate but strengthening recovery. History suggests those might be the most unrealistic numbers in the document."

Actually the lessons of history on...

Democrats Also Insist They Are on the Right Side of the Evidence on the Minimum Wage

A Washington Post article giving the "inside story" on how President Obama decided to push for a $10.10 minimum wage might have led readers to believe that it is only Republicans who claim to have economic evidence on their side in the minimum wage debate. It told readers:

"Republicans insist they are on the right side of the economic evidence in arguing against a minimum wage hike. But Obama is on the right side of popular opinion: Polls show that roughly two-thirds of those surveyed support...

The Washington Post Wants the Fed to Start Throwing People Out of Work

The Washington Post, which adheres rigidly to the philosophy that a dollar in a non-rich person's pocket is a dollar that could be in a rich person's pocket, argued in its Wonkblog section that it might be time for the Fed to start raising interest rates and throwing people out of work. The story is that when the unemployment rate falls below 6.5 percent, the inflation rate might start rising.

This one is almost too much to believe even from the Washington Post. Of course the unemployment rat...