Dean Baker's Blog, page 358

Can We Cut the Pay of NPR Reporters by 3.0 Percent?

What put the suggestion in my mind was Tamara Keith's comment on Morning Edition that the Democrats support "small" cuts to Social Security and Medicare as part of a small bargain with Republicans over the budget. The preferred cut to Social Security is to reduce the annual cost-of-living adjustment by roughly 0.3 percentage points annually. If the typical beneficiary collects benefits for twenty years this would amount to roughly a 3 percent reduction in benefits.

Social Security accounts fo...

The Fed Becoming Insolvent: Things to Worry About After We're Dead

If the economy were humming along at 3.0 percent growth and 4.0 percent unemployment it would be reasonable for economists and economics reporters to worry about strange and unlikely state of affairs with little consequence. But at a time when the economy is down almost 9 million jobs from its trend level, wages are going nowhere, and growth is not much above zero, worrying about the Fed losing money on its bond purchases is more than a bit bizarre. But apparently this is the concern that occ...

The Fed Really Needs Someone Who Can Think Clearly on Bubbles

That's what Neil Irwin tells us in his column today. Irwin says the Fed is divided:

"There has been a long-simmering battle within the central bank over this basic question: Should they still be focused all-out on fixing the economic damage wrought by the last crisis? Or should they worry more about risks building in the financial system that could contribute to a future crisis?"

The idea that the Fed should be worried about bubbles in the price of platinum or Twiiter stock is just silly. In...

The Fed, Inflation, and Wages

If the Fed were to pursue a policy of deliberately promoting a higher rate of inflation, it is not necessarily the case that the higher inflation would precede a rise in wages, as suggested in Binyamin Appelbaum's Economix post. The point of a higher inflation policy is to convince businesses that prices will be higher in the future than they would have thought otherwise. For example, if they expected 1.0 percent annual inflation, they would think that prices would be 5 percent higher in 5 ye...

The WSJ Thinks Jamie Dimon and JP Morgan are Being Persecuted

That's what readers of the paper's Review and Outlook column would discover today. The basic point is that a large part of the $13 billion settlement that JP Morgan reached with the Justice Department involves payments to Fannie Mae and Freddie Mac over misrepresentations about the quality of mortgages in mortgage backed securities sold at the peak of the bubble. The WSJ rightly points out that Fannie Mae and Freddie Mac are really big actors, who should have known what they were doing.

Unfor...

Robert Samuelson, Alan Greenspan and the Bubble Economy

There are two major schools in economics, those who know accounting identities and those who don't. Alan Greenspan and Robert Samuelson are both members of the later group, as Samuelson proudly proclaims in his column.

Samuelson wants to give the blame for the economy's collapse on the complacency that followed a quarter century of relatively stable growth with low inflation. He tells readers:

"But there was an unrecognized downside: With a less-risky economy, people — homeowners, bankers, in...

Ross Douthat: Conservative Who's Scared of a Free Market in Health Care

It's always fun to see conservatives arguing for the preservation of big government, especially when they don't even seem to understand this as their position. Ross Douthat gave us a great example of such an argument as he warned that squeezing costs in the U.S. health care system might not just damage the quality of the U.S. health care system, but the quality of health care worldwide.

The story is that without government guaranteed patent monopolies, drug companies and medical device compan...

Obamacare Needs Healthy People to Sign Up, It Doesn't Matter Whether or Not They Are Young

For some bizarre reason there is an obsession in the media about Obamacare needing young healthy people to sign up for the program to work (e.g. see Ezra Klein today). Actually, the program needs healthy people to sign up regardless of their age.

The logic is that healthy people who get little care are in effect subsidizing the care of the less healthy. This is every bit as much true for older healthy people as it is for younger ones. In fact, the subsidies are considerably larger in the cas...

Senator Cruz's Health Care Plan Costs Taxpayers $8,000 a Year

A New York Times piece profiling Senator Ted Cruz's wife, Heidi Nelson Cruz, allowed an erroneous comment from the Senator's staff go uncorrected. The piece noted that Senator Cruz is on his wife's health care plan which it reported as costing $20,000 a year. It then presented a statement from a spokesperson for Mr. Cruz:

"The senator is on his wife’s plan, which comes at no cost to the taxpayer and reflects a personal decision about what works best for their family."

The cost of health insur...

Educating Robert Samuelson: "Affordable" Insurance is in Reference to the Person Buying It

Robert Samuelson thinks that he has news for Obamacare supporters. He tells readers:

"Obamacare supposedly makes insurance more affordable. Not really. Health costs are simply shifted. To subsidize insurance for some means raising taxes for others, cutting other programs or accepting larger deficits. Only reducing costs or increasing efficiency can make health care more affordable."

Apparently Samuelson didn't realize that "affordable" is in reference to the person buying the insurance. The i...