Dean Baker's Blog, page 352

And Everyone Knows How Much 2.0 Billion Euros Is to Germany

That's why the NYT didn't feel any need to put the number in context for its readers when it told readers of a deal between the Christian Democrats and Social Democrats to form a coalition government. According to the article the agreement calls for spending up to 2.0 billion euros a year on infrastructure above current spending levels.

Since many readers may not have a good idea of the size of Germany's economy it might have been helpful to tell readers that this spending is equivalent to 0...

Obamacare Needs Healthy People and It's Better If They Are Not Young

I can't quite understand the persistence of the ageist nonsense about how the health care exchanges need young and healthy people to sign up for them to work. There is a real issue about adverse selection.

If the only people who sign up are unhealthy and therefore have high expenses, then insurers will have to raise their prices. This will make plans less attractive to all but the very sick, which will force further rises in prices, leading to a further narrowing of the market.

But the key is...

Stephen Roach is Badly Confused About China and the United States

Stephen Roach managed to get the basic economics 180 degrees backwards in his discussion of China's turn to a more consumption based economy and its implications for the United States. After commenting that China will likely export less to the United States as it produces more for its domestic economy, he tells readers;

"The coming transition to a rebalanced China changes the rules of engagement in this co-dependent relationship. America seems unprepared for this possibility. Long dependent o...

The Importance of Bubbles: Who's Pocketing the Cash

The NYT had an interesting piece discussing the bubble in social media type companies, however the article misses a couple of important issues. The bursting of the current bubble will not have the same consequences for the economy because it has not yet grown large enough to move the economy in the same way as the stock bubble of the 1990s or the housing bubble in the last decade. Both of those bubbles led to consumption booms through the wealth effect, in addition to a boom in whacky Interne...

China's Central Bank Announces Job Creation Program for the United States

That may be a bit of an overstatement, but the comments from Yi Gang, a deputy governor at China's central bank, deserved much more attention than they received. According to Bloomberg, YI announced that the bank would no longer accumulate reserves since it does not believe it to be in China's interest. The implication is that China's currency will rise in value against the dollar and other major currencies.

This could have very important implications for the United States since it would like...

Greg Mankiw Is Concerned About Accelerating Inflation

With the Fed promising to keep the overnight money rate at zero long into the future, while it throws $85 billion a month into the economy with its quantitative easing policy, many are no doubt wondering who is on watch against another outbreak of inflation.

Greg Mankiw gave us the answer to that question in his NYT column today. After noting that the job vacancy had risen to 2.8 percent, which Mankiw describes as "almost back to normal," he tells readers;

"Data on wage inflation also suggest...

Frackers Could Protect Their Secrets with Patents

It might have been worth including this piece of information in a NYT piece on a new set of regulations that Wyoming is imposing on fracking. The piece notes that companies engaged in fracking are not required to disclose the mix of chemicals they use in the process in order to avoid giving away secrets to competitors.

This is precisely the reason that we have patents. If a company has an especially innovative mix of chemicals they would be able to get it patented and prevent their competitor...

Robert Samuelson Is Upset that the Government Gives One Thousand Times as Much Money to Billionaires Like Peter Peterson as It Does to Poor Children

Actually he is not upset by this fact, but he would be if he applied the logic in his column consistently. The column makes a point of highlighting how large transfers are to the elderly relative to transfers paid out to the young (e.g. food stamps and Temporary Assistance to Needy Families). Transfers to the elderly are large, but there is a good reason for this fact. People paid for their Social Security and Medicare benefits in their working years.

Samuelson wants us to ignore the fact tha...

Kevin Drum and the Retirement Crisis: Eye on the Ball?

Kevin Drum poses a reasonable question about the existence of a retirement crisis in a recent blogpost. He notes that retirement income projections from the Social Security Administration's MINT model show income for older households rising from 1971 to the present, while incomes for those in the age 35 to 44 were nearly stagnant. The model also shows income for older households continuing to rise over the next three decades. Kevin's conclusion is that we are wrong to spend a lot of time worr...

The Cost of Protectionism: Limited Choice of Doctors and Hospitals

The United States pays roughly twice as much for its doctors as people in other wealthy countries. The reason is that physicians in the United States use their political power to limit the supply of doctors both by restricted med school enrollments and excluding foreign trained physicians. (Yes, 25 percent of U.S. physicians are foreign-trained. Without protectionist measures that number could be more than 50 percent -- just like with farm workers.) As a result of this protectionism almost on...