Dean Baker's Blog, page 337

More Frat Boy Budget Reporting at the Washington Post

The Washington Post gave us some good frat boy budget reporting in a front page story on the farm bill this morning. Frat boy budget reporting is when you write a piece that provides no information to the vast majority of readers but lets you go down to the budget reporters' frat house and give each other the budget reporters' secret handshake. In this case, the piece told us that the farm bill will cost $956.4 billion over the next decade, it will reduce spending on SNAP by $8 billion and sa...

Charles Lane is Wrong on NAFTA and the Trans-Pacific Partnership

Charles Lane is wrong, as usual, in arguing that the Trans-Pacific Partnership (TPP), like its predecessor NAFTA, is good for U.S. workers. However, the piece is useful in providing an opportunity to explain some basic economics.

Most of the piece is dedicated to saying that NAFTA, which to some extent is a model for the TPP, was really good for the country. Lane starts by disputing that NAFTA contributed to the $181 billion trade deficit that the United States ran with Canada and Mexico. He...

Fiscal Surpluses in States Likely Driven by Capital Gains Income

The NYT had a piece noting how states across the country are seeing better budget pictures than they had projected. While this is attributed to growth, economic growth in 2013 was pretty much in line with expectations (worse in first half, better in second). The more plausible explanation is that the run-up in the stock market to both more capital gains taxes (a point that is noted) and also for capital gains income in many cases to be reported and taxed as normal income.

For tax purposes, sh...

It's Monday and Robert Samuelson Is Defending the One Percent, Again

Yes, not much of a surprise here. (I had to check the date to be sure I wasn't reading an old column.) Anyhow, let's start with the punch line:

"Economic inequality is usually a consequence of our problems and not a cause. For starters, the poor are not poor because the rich are rich.

"The two conditions are generally unrelated. Mostly, the rich got rich by running profitable small businesses (car dealerships, builders), creating big enterprises (Google, Microsoft), being at the top of lucrat...

The Value of Health Insurance

The Washington Post has a very good piece about what having health insurance means to poor people in Eastern Kentucky with chronic health care conditions. As a famous vice-president once said, "it's a big f***ing deal."

That's not an excuse to overlook the huge flaws in Obamacare. For many people care will still be unaffordable. And the insurance companies, drug companies, medical supply companies and doctors are still ripping us off. But as this piece shows, it is already having a huge impac...

Mayor Richard M. Daley Is Credited With Leaving Chicago an Unpayable Debt Burden

We've been reading stories in the NYT and elsewhere about how Chicago has pension obligations to its workers that it can't possibly meet. Most of these accounts are exaggerated and seem intended to provoke excessive fears in order to facilitate default on the city's pension obligations. Nonetheless, there is no doubt that the city has seriously underfunded pensions.

This is why it is striking that when the NYT ran a piece on former Mayor Richard M. Daley going to the hospital, it failed to me...

Why Aren't the Prospects of Higher Rates In the United States Leading to Higher Rates In the United States?

The NYT had an article discussing the extent to which political unrest in Thailand might have an impact on its economy. At one point it notes a flight of foreign capital from Thailand and other developing countries which it attributes to the Fed's taper and the "prospect of higher interest rates" in the United States.

The problem with this story is that long-term interest rates have actually been falling in the United States. If investors are fleeing Thailand and other countries because they...

NYT Says Economists Still Don't Understand Inflation/Deflation

There has been a bizarre cult of deflation phobia over the last decade in which we are supposed to be terrified that very low positive rates of inflation can decline further and turn into low rates of deflation, which then create really big problems. The NYT tells us this cult is still dominating economic thinking. In an article on the latest data on inflation and unemployment in the euro zone, it noted that European Central Bank President Mario Draghi unexpectedly lowered interest rates in N...

Steve Rattner on Bernanke: Defining Down the Meaning of "Godsend"

Steve Rattner gives us a glowing appraisal of Ben Bernanke on his departure from the Fed. I have written on Bernanke elsewhere, but the basic story is that he bears a large amount of responsibility for the housing bubble and its subsequent bursting, since he was a Fed governor and chief economic advisorin the Bush administration as policymakers allowed it to grow to ever more dangerous levels. The result has been a loss of more than $7.6 trillion in output to date ($25,000 per person) and an...

If Businesses Reduce Their Inventories in the First Quarter, the Economy Will Shrink

Firms added inventories at a record $127.2 billion (in 2009 dollars) annual rate in the fourth quarter of 2014. This increase did not draw much attention because it was only $11.5 billion above the third quarter pace, adding 0.44 percentage points to GDP growth in the quarter. The extraordinary pace of inventory growth in the last two quarters means it is likely that inventory growth will slow in future quarters, which will be somewhat of a drag on growth.

However, it is worth noting that we...