Dean Baker's Blog, page 35

The Washington Post’s Debt Cult

The Washington Post is always telling us that debt, especially government debt is bad, very bad. Its not quite sure why or how, but debt is definitely bad.

We got the latest confused entry from the Posts debt cult today, warning us about sometipping point that we are at risk of passing. The notion of a tipping point on government debt had its shining hour when a paper by Harvard professors Carmen Reinhart and Ken Rogoff purported to show that when a countrys debt-to-GDP ratio crossed 90...

Bret Stephens’ Employers May Keep Big Pharma Haters Out of the New York Times, but We Are Everywhere Else

The sub-headline of Bret Stephens latest column tells readers there should be no big-pharma haters in pandemics. The point is that researchers at Gilead Sciences, one of the biggest pharmaceutical companies, are working tirelessly on the testing of remdesivir, which at the moment is the most promising treatment for the coronavirus. Stephens column focuses on Diana Brainard, the lead researcher on the project. Somehow the fact that Dr. Brainard is apparently a dedicated researcher is supposed...

Debt and Deficits with the Coronavirus

For all the suffering caused by the pandemic, one important positive effect is that it may lead to clearer thinking about government debt and deficits. To Congresss credit, it has focused on dealing with the problem of sustaining the country through a period in which much of the economy is shut down, rather than worrying about the large deficit it will run this year, as well as the amount it is adding to the national debt. (I strongly suspect that this would not be the situation if a Democrat...

It’s the End of the World Economy as We Know It, Just Like the Great Recession

Neil Irwin tells us there will be fundamental changes in the world economy as a result of the pandemic. While he repeats many things that are conventional wisdom, as is often the case, the conventional wisdom is not very wise.

First, the pandemic is supposed to teach us the dangers of having foreign sources of supply, as parts of our supply chain from China shut down when it was hard hit by the virus in December and January. While this is supposed to be a key take-away from the pandemic, it...

More Thoughts on the Post-Pandemic Economy: Think 1970s Stagflation

I wrote a piece last week giving some quick thoughts on the post-pandemic economy. I have a few more items to toss in the mix.

As I said in the last piece, I think many people will have money to spend and be anxious to spend it. For most people who kept their jobs, the $1,200 check from the government will be a pure bonus. Also, many of the unemployed will be kept whole or even come out somewhat ahead with the $600 supplement to regular benefits. (Remember, the median weekly wage for...

A Special Gift for Donald Trump’s Friends: An Excess Profits Tax

When he fired the inspector general who would have overseen the bailout fund, Trump made it clear that he fully intends to use the money to advance his re-election campaign, just as he has done with his presidential powers throughout his term in office. While the Democrats ceded their ability to prevent the corruption of the fund (they could have just made rules for how the money would be distributed, with zero discretion like the small business loan program), they still can act to ensure...

The U.S. Government Pays 0.01 Percent of Its Budget to the World Health Organization

Thats for those of you who saw the Washington Post article telling us that we are committed to paying $893 billion over two years to the World Health Organization (WHO). If Trump moves to cut back or eliminate this funding it is not going to have a major impact on our budget situation.

On the plus side, if the U.S. cuts back support for the WHO, it may be better positioned to promote compulsory licensing of drugs produced by the U.S. pharmaceutical industry. This could radically reduce the...

Bernie Sanders Forced Open the Books on the Last Bailout

A Washington Post piece that noted the lack of disclosure requirements in the current round of bailouts referred to efforts to force disclosures in the last bailout. It only noted a suit by Bloomberg to force the Fed to make disclosures:

During the global financial crisis, the Federal Reserve refused to turn over to reporters the records of some of its emergency bank lending. Bloomberg, the media company, sued for their release and, in a case that went to the Supreme Court, won three years...

The Post-Pandemic Economy

(This post first appeared on my Patreon page.)

We have a lot of economist type people telling us how awful the economy will be once we get through our near-term shutdown period. At the risk of being accused of unwarranted optimism, I am not sure I buy the pessimists story.

Before saying anything about the economy, we have to outline where we think our containment efforts are headed. I will throw out my story, which people here who know what they are talking about can correct.

Lets assume that...

Quick Comment on “Making Money” from the Bailout

Folks probably recall that the federal government made money from the last bailout. Guess what? Were going to make money from this one too.

Lets go through the simple logic here. The Fed is by far the lowest cost borrower in the country. It can borrow right now at an average interest rate of roughly 0.5 percent. (Thats averaging short-term and long-term rates.) It is going to lend to the bailout beneficiaries at a higher rate, lets say 4.0 percent. This means that it will net 3.5 percent...