Dean Baker's Blog, page 364

NYT Falls for Cheap Obama Administration Propaganda on the Debt Ceiling

The New York Times committed an astounding blunder when it took at face value a release from the Obama Treasury Department showing how the 2011 debt ceiling standoff hurt the economy. The three pieces of evidence for the standoff imposing a large price is a plunge in the consumer confidence index, a sharp fall in the stock market, and a big rise in an index measuring investors' expectations of the volatility of the S&P 500.

These measures in fact tell us little about the economy. None of...

Repealing the Medical Device Tax: The Republican Plan to Give More Tax Dollars to General Electric

Give the NYT and the rest of the media a really big "F" for their coverage of the medical device tax. Next to no one knows where it came from and why it was included in the Affordable Care Act (ACA). That means the media have done a terrible job, just as we might think school teachers aren't doing a very good job educating students if they graduate high school without being able to read.

If you read the NYT cover to cover every day for the last year, you would probably think that the medical...

Reuters Column Strikes Out on Pension Math

Allison Shrager's Reuter's column on the problems facing public pensions badly misled readers. It noted the pensions reported funding ratios and then told readers:

"But these estimates rely on the assumption that pension assets will earn at least 7 percent to 8 percent each and every year."

This is absolutely not true. The estimates only assume an average return in the range of 7-8 percent. If returns fall below this for a year or two, to stay on target the fund will have to achieve higher r...

Did the Markets or the Media Force Passage of TARP?

In a piece that told readers that the financial markets will force Congress and President Obama to resolve the debt ceiling dispute the NYT told readers that such market pressure had forced the passage of the TARP:

"There are precedents for such a denouement. After the House rejected initial legislation authorizing the bank bailout known as the Troubled Asset Relief Program during the financial crisis in late September 2008, the Dow Jones industrial average plunged more than 700 points in one...

More Which Way Is Up Problems in Washington

We know that the people who conduct and write about economic policy are not very good at economics, otherwise we would not still be mired in this downturn almost six years after the start of the recession. The Washington Post gave us another example of the incredible confusion that dominates Washington debates in its coverage of the budget and debt ceiling standoff.

The piece warns that a debt default could jeopardize the status of the United States as the world's reserve currency. At one poi...

Politico Says Republicans Push for Budget Cuts to Slow Growth and Raise Unemployment

Okay, Politico only said the first part. However it would have been useful to remind readers of the second part since some may not realize that in the current economic environment cutting the budget will hurt the economy.

In an economy that is near full employment, budget cuts can free up resources for the private sector. However in an economy that is operating at close to $1 trillion below its potential, with extraordinary low interest rates, it is implausible that cutting the budget would...

The Hill Can't Remember Way Back to 1995 When Republicans Controlled BOTH Houses of Congress

If the Hill had anyone on staff old enough to remember the 1995 budget standoff surely they would have pointed out to readers that Republican Senator Richard Burr was being misleading when he unfavorably compared President Obama's conduct in the current crisis to President Clinton's conduct in the earlier standoff.

The Hill piece told readers:

"Burr said Obama has been much less involved in resolving the shutdown than then-President Clinton was in 1996. 

"'The president is totally disen...

How We Know Protectionists Control Trade Policy: The Case of Medical Trade

Macroeconomists knew too little about the macroeconomy to recognize the $8 trillion housing bubble whose collapse gave us the Great Recession. Trade and labor economists show little more understanding of their fields. This is why we routinely hear stories about how trade causes us to lose less-skilled manufacturing jobs to the developing world or that technology is leading to a hollowing out of the distribution of occupations, with middle wage jobs disappearing.

The logic behind these views i...

The Debt Ceiling Intelligence Test for the Wall Street Boys

Annie Lowrey presents a scenario in which a partial debt default would lead to a full-fledged financial crisis. The basic story is that some government bonds will be in default. Defaulted bonds cannot be used as collateral in the huge repo market where hundreds of billions of dollars of money and bonds are traded every day and is the basis for the country's systems of payments. Since there is no simple mechanism for marking defaulted bonds that distinguishes them from other bonds, there will...

October 17th and a Government Shutdown Don't Mix

The national media continue to express their disdain for logic and arithmetic when they warn that we will face a debt ceiling, in addition to a government shutdown, on October 17th. That one doesn't make sense.

The government shutdown means that much of the spending that would otherwise be going to support the $1.2 trillion discretionary portion of the federal budget are not being made. As a result, the government's borrowing needs will be considerably lower over this period. Depending on ho...