Dean Baker's Blog, page 370

NYT: Larry Summers Already Costing Jobs

Even before he has been officially designated as President Obama's pick to be Fed chair, Summers is already slowing the economy and costing jobs according to the New York Times. This remarkable possibility is due to the fact that investors do not see Summers being as committed to maintaining an easy money policy as the current Chair Ben Bernanke or his main rival Janet Yellen. The result is that interest rates are higher now in expectation of future rises. This is of course speculative, but i...

Excellent Investigative Piece in NYT on Factory Inspections in Developing World

The NYT had an excellent piece describing the system of factory inspections that Walmart and other major retailers use to ensure both the quality of products produced overseas and safety and fairness of working condition. The piece explained how the inspection system can be gamed so that factories can continue violating company rules without being detected.

Labor Economics 101: Few Jobs Means Bad Jobs

Everyone knows the story about the two old men in a retirement home. The first one complains that, "the food here is poison." His friend agrees with him then adds, "and the portions are so small."

We have been getting this story the last several years in assessments of the labor market. The economy remains far below full employment by every measure. The employment to population ratio is still more than 4 percentage points below its pre-recession level. We are almost 9 million jobs below trend...

Scary Thought on Labor Day Weekend: Obama's Economic Team Think They Are Doing a Good Job

Ezra Klein gives us some terrifying news in a Bloomberg column today. President Obama's economic team think they are doing a great job, hence the desire to bring back former teammate Larry Summers as Fed chair. This is terrifying because the economy this Labor Day is described by a set of statistics that can only be described as horrible.

We are almost 9 million jobs below the trend level of employment. The number of people involuntarily working part-time is still up by almost 4 million from...

Second Quarter GDP: Strong Growth Ain't What It Used to Be

The Commerce Department release of revised data showing that GDP grew by more than originally reported in the second quarter was generally reported as very positive news. This is striking since the growth rate was only 2.5 percent. (One fifth of this growth was due to more rapid inventory accumulation.)

Most economists estimate the economy's trend growth rate as 2.2 percent to 2.4 percent. The Congressional Budget Office estimates that the economy is currently operating at almost 6 percentage...

Lessons from Sweden

C Fred Bergsten suggests that Obama could get some lessons from Sweden when he visits there next week. His piece emphasizes the market orientation of Sweden's government. While the country has definitely rolled back some of its social welfare state over the last quarter century, readers could be misled by some of the items in Bergsten's column.

For example, Bergsten tells readers:

"Swedish social security became a true insurance system, rather than a pay-as-you-go one with huge unfunded liab...

The Old Blame Technology for Inequality Story

There are a lot of economists who are determined to say that technology is responsible for inequality rather than policy. There are many parts to this story that seem absurd on their face.

Are doctors, dentists and lawyers really whizs at technology? These occupations make up a very large share of the 1 percent. They sustain their income the old-fashioned way, they have the government arrest the competition. When more middle income workers like nurses and computer engineers start to see their...

The Mining Vote Will Probably Not Be a Big Factor in Virgina's Gubernatorial Race

A NYT story on how demographic change seems to be helping Democrats in Virginia noted as an offsetting factor that mining areas are increasingly Republican. According to the Bureau of Labor Statistics, Virginia has 10.700 people employed in mining and logging. This is less than 0.3 percent of the state's labor force. It is unlikely that this group will have much impact on the outcome of 2013 election.

Financial Crises and Economic Crises

Robert Samuelson wrote about the recent downturn in financial markets in several major developing countries in response to the rise in long-term interest rates in the United States. While he notes that this is not likely to lead to a larger crisis given the current circumstances in the developing world, he concludes his piece by telling readers:

"Every major financial crisis of the past 20 years has begun with some relatively minor event whose significance seemed isolated: weakness of the Tha...

Patent Monopolies Lead to Corruption #43,781

The New York Times had an article reporting on how the two largest dialysis clinics are lobbying to increase reimbursements from the government. The issue stems from a change in the way the government paid for an anemia drug.

The government had been paying per dosage of the drug. As economic theory predicts, the huge mark-up over the free market price provided by patent monopolies encouraged the massive overuse of the drug. The government swtiched to a flat fee per treatment, which led to a s...