Dean Baker's Blog, page 348

Taxing All Internet Sales Is Consistent With Support for Small Businesses

A NYT blogpost by Robb Mandelbaum noted the findings of a study showing that more than 40 percent of Internet sales would escape taxation if a small business exemption was put into the law. The last paragraph tells readers:

"Somewhat surprisingly, given their claims to unwavering support for small businesses, House Republican leaders appear to be leaning toward legislation that would offer no small-seller exemption at all."

Actually, this is not the least bit surprising. The current exemption...

If People Act Differently Than Economists Want Them to Act, It Doesn't Mean They Are Irrational

Economists like to think that they get to define the word "rationality." They don't. Economists tend to define a certain type of narrow behavior as "rational," implying that anything else is "irrational."

Binyamin Appelbaum falls into this trap at the end of an interesting piece on Stanley Fisher, when he refers to work by Janet Yellen and others which he says assumes that people are "predictably irrational." Actually much of the behavior assumed in this work is entirely rational, even if it...

NYT Gets Almost Everything About UK Austerity Wrong

People who follow economic data know that quarterly growth numbers are highly erratic. For example, the 3.6 percent growth rate reported for the third quarter in the United States was driven largely by inventory accumulations. As a result, most analysts expect growth to be close to 1.0 percent for the fourth quarter. It would be foolhardy to tout the 3.6 percent growth in the third quarter as evidence of a robust economy, while it would be equally wrongheaded to treat a weak number in the fou...

Can't the NYT Print a Budget Article Without Editorializing About Cutting Social Security and Medicare?

The answer seems to be no. Its piece on the budget deal negotiated by Senate Budget Committee Chair Patty Murray and House Budget Committee Chair Paul Ryan told readers:

"The deal, while modest in scope, amounts to a cease-fire in the budget wars that have debilitated Washington since 2011 and gives lawmakers breathing room to try to address the real drivers of federal spending — health care and entitlement programs like Medicare and Social Security — and to reshape the tax code."

It would be...

Can Someone Teach Steve Rattner How CBO Does Its Projections?

Steve Rattner is upset that Congress isn't voting to cut Social Security and Medicare, complaining about this fact in a NYT column this morning. Much of the problem seems to stem from Rattner's misunderstanding of budget projections and his failure to pay attention to recent developments in health care spending.

At one point Rattner gives us the distressing news that a do nothing scenario will give us a debt to GDP ratio by 2035 of 99 percent (@ 19 percentage points less than the post World W...

Getting Banks to Spin Off Trading Desks Was the Point of the Volcker Rule

The Washington Post had a useful piece on the Treasury Department's adoption of a stronger than expected version of the Volcker Rule, which is likely to seriously limit the extent of proprietary trading at the major banks. At one point the piece tells readers;

"In anticipation of the Volcker rule, many large banks, including JPMorgan, have shuttered or spun off their proprietary trading desks, as well as their private-
equity arms and hedge funds. That could blunt the full force of the rule, a...

In Pushing Trials of Heart Device, Economists Would Argue Money Plays a Role

The NYT had an interesting piece on a dispute over continuing a clinical trial of a heart device that has been tied to a number of incidents of blood clots. While the device had originally been used in patients who likely risked death without it, the trial is designed to examine its effectiveness in patients with less severe heart disease. The incidents of blood clots raise the possibility that the risk exceeds the potential benefit.

At one point the article noted that the doctors working wit...

David Brooks Leaves Out an Important Category In His Future Economy

David Brooks presented readers with an outline of the types of people who will exist in a future economy in which, by his assessment, 15 percent of the people will thrive as a result of being able to work with computers and the 85 percent will struggle. While his list includes synthesizers, humanizers, and motivators, it left out justifiers.

Justifiers are likely to be an important category of worker in high demand in an economy where 15 percent of the population thrive at the expense of...

Charles Lane Is Confused About the Republican Agenda

Washington Post columnist Charles Lane argues that President Obama's newly proclaimed focus on inequality is misplaced, saying that it is not likely to be a popular agenda. He concludes by noting some polling results and then commenting:

"Create jobs, slash debt, then worry about equality. Isn’t that the Republican pitch?"

Actually this is not at all the Republican pitch. The Republican pitch is to reduce taxes for rich people and corporations. It also calls for reducing regulations that prev...

Post Uses Front Page News Story to Condemn Budget Deal That Doesn't Meet Its Deficit Cutting Agenda

According to the Congressional Budget Office, the country is foregoing close to $1 trillion a year in output because the budgets produced by Congress do not provide enough demand to bring the economy to full employment. These losses are disproportionately incurred by minorities, the young, and the poor, since these are the groups most likely to be unemployed or working fewer hours at lower pay because of Congress's failure.

However the failure of Congress to produce a budget that would spur g...