Dean Baker's Blog, page 332

Camp Bank Tax

My friend Jared Bernstein makes many of the right points on the Camp tax reform proposal, but let me add a few.

First, it is good to see the proposal for taxing the large banks. The logic is that these banks are benefiting from implicit government guarantees through too big to fail insurance, which the tax would in part offset. The problem is that the tax is an order of magnitude too small.

The tax is projected to raises $64 billion over a decade. By comparison, Bloomberg News estimated the...

Washington Post Complains That Bill Gates' Riches Come at the Expense of Everyone Else

The Washington Post complained that the people of San Jose California are suffering because the city has to pay higher prices for computers and software because  of the patent and copyright monopolies the government has given to Microsoft and other tech companies. Okay, the Post would never write such a piece, but it has no problem headlining a news article:

"In San Jose, generous pensions for city workers come at the expense of nearly all else."

The central item in the piece is the comp...

NYT Says Homeownership Advocate Doesn't Realize House Prices Are High

The NYT had an article on Bruce Marks, a housing advocate, and his push to extend credit for home buying to moderate income households who are now being excluded because of bad credit ratings. At one point the piece tells readers;

"He [Marks] says low interest rates and housing prices have created a second chance — an opportunity to help lower-income families buy homes, but this time on terms they can afford."

Actually, house prices are not low. While they have not returned to bubble peaks, t...

For Fred Hiatt, the Point of "Entitlement" Reform Is to Hurt Middle Income and Moderate Income People

That's what readers of his column attacking President Obama for failing to cut Medicare and Social Security would conclude. The piece includes several quotes from Obama in 2009 and 2010 about the need to slow the growth in the cost of Social Security, Medicare, and Medicaid. He then complains that Obama has not followed through by pushing for cuts in these programs.

In fact, Obama did actually propose cuts repeatedly for these programs as part of a deal with Republicans that would include mor...

NYT Continues Its War on Public Sector Pensions

The NYT has devoted considerable print space to the problems of public sector pensions, often seriously exaggerating the size of the problems. It has also often overstated the generosity of the benefits, for example by failing to note that many public sector workers do not get Social Security, which means that their pensions will be their entire retirement income.

Today it went long on the exaggerating problems side of the picture telling readers that:

"The difference, $63 billion, is Nycers’...

Did Political Considerations Affect the Fed's International Bailouts?

The NYT's article on the Fed's decision to enter dollar swap agreements with other central banks at the peak of the financial crisis in 2008 strangely did not ask this question. The piece notes that swap lines of credit had been extended to Mexico, Brazil, South Korea, and Singapore. It also points out that several countries applied for lines of credit but were turned down.

The article asserts that these decisions were made exclusively over concerns about the impact of these countries' proble...

Robert Samuelson's Arithmetic Challenged Economics

Yes, it's Monday and Robert Samuelson is badly confused about economics again. Today he complains about the White House's "fairy-tale economics."

Robert Samuelson is upset because the Obama administration has been arguing that it is possible to raise the minimum wage without any job loss. He apparently feels that he can now dismiss this claim as fairy-tale economics because the Congressional Budget Office (CBO) issued a study that put its best guess of the job loss from the administration's p...

The Thumb on the Scale in the Winner Take All Economy

Robert Frank has an interesting discussion in the NYT of the "winner take all" dynamics created by the Internet economy, but he leavves out an important part of the picture. The notion of winner take all is that advances in modern technology allow the best in various areas to become hugely wealthy, while leaving almost everyone else out in the cold. There are reasons for disputing this view in general (see The End of Loser Liberalism: Making Markets Progressive --free download available), but...

The Decision to Let Lehman Fail

Gretchen Morgensen picks up an important point in the Fed transcripts from 2008. The discussion around the decision to allow Lehman to go bankrupt makes it very clear that it was a decision. In other words the Fed did not rescue Lehman because it chose not to.

This is important because the key regulators involved in this decision, Ben Bernanke, Hank Paulson, and Timothy Geithner, have been allowed to rewrite history and claim that they didn't rescue Lehman because they lacked the legal autho...

WaPo Tells Liberals That They Have No Political Power: The Case of Social Security

The WaPo gets infuriated at the thought that anyone who doesn't have lots of money could affect political outcomes in the United States. Hence it was quick to run a piece with the headline:

"Liberals didn't kill Obama's Social Security cuts: Republicans did."

The reference is to President Obama's decision to remove the proposal to reduce the annual cost of living adjustment to Social Security benefits. The proposal would have reduced benefits by roughly 0.3 percentage points annually against...