Dean Baker's Blog, page 382

Why On Earth Does Anyone Pay Economists for Their Work?

That is what readers of this interview by Binyamin Appelbaum with Stephen King must be wondering. King's main point is that growth is grinding to a halt and we are facing an era of prolonged stagnation. Okay, how does this fit with the story that we will see mass unemployment because robots will do all the work?

The answer is that it doesn't fit at all. The weather person on channel 5 told just told us that it will 95 degrees and sunny, while the weather person on channel 9 told us to expect...

Birthday Boasts: Round II

No, I won't bother everyone with the list again. Those who are interested can see the original. But I thought I should do an update on the 5 things I said that I would be proved right about in 5-10 years. Here's the list:

1) Patents Are An Incredibly Inefficient Way to Finance the Development of Prescription Drugs

2) We Will Need Alternative Mechanisms to Copyrights to Finance Creative Work

3) Medical Trade Will Help to Keep Down Health Care Costs in the U.S. If We Don’t Fix the Health Care S...

Robert Samuelson Has Not Heard About the Collapse of the Housing Bubble and the Recession

That is what readers of his column on the state of the world economy will conclude.  He told readers:

"Europe, the United States and Japan also face unsavory choices. All wrestle with what the IMF calls “fiscal consolidation” — reducing budget deficits. The underlying problem: costly welfare states with aging populations."

Actually this is completely wrong. The United States and most other wealthy countries had relatively modest deficits until the collapse of the housing bubbles threw th...

WAPO Tosses The Big Budget Numbers at Readers

How concerned are you that the House farm bill would spend $195 billion on farm subsidies over the next decade? How about the baseline of $740 billion for spending on food stamps. Would you be more or less concerned if the numbers were $19.5 billion and $74 billion? Would you have any idea what these numbers mean?

The government is projected to spend $47.2 trillion over the next decade. This makes the farm subsidies equal to 0.4 percent of projected spending. The $740 billion figure for food...

The Fruits of Deficit Reduction in France

The NYT had an article about how French consumers are cutting back on their spending, hurting retailers and the economy. The piece notes that unemployment is rising and that the French economy is struggling to recover from its second recession since the 2008 collapse.

It would have been worth mentioning that this is a direct and predictable outcome of the government's austerity policies. The government has cut spending and raised taxes. This directly reduces demand in the economy. Unless the...

Good News for Italy: NYT Says Its National Debt Is Just $2.6 Billion

The folks in Italy must be pretty happy. After years of being forced to worry about deficits the NYT told readers:

"Faced with record unemployment and a public debt of more than €2 billion, or $2.6 billion, the grand coalition was already under pressure for the slow pace of its reforms."

That would be great news since the NYT's numbers imply that Italy's debt is just over 0.1 percent of GDP. According to the IMF, Italy's debt is more than 2.0 trillion euros, more than 130 percent of GDP.

Of c...

Real Newspapers Report a Drop in Projected Deficits as a "Reduction," Not an "Improvement"

A NYT blogpost repeatedly refered to lower projections of a deficit as "improvements." The reductions in the deficit imply slower growth and fewer jobs. That may lead many to question the extent to which this development can be termed an "improvement."

While the piece did include statements from an Obama administration official boasting about the economy's growth it would have been appropriate to include the views of an analyst who would have reminded readers that the economy is not even grow...

Wall Street Journal Turns News Section Over to the Financial Industry

Everyone knows that the Wall Street Journal has a strong pro-rich perspective in its opinion pages. Its guiding philosophy is a dollar in a pocket of a poor or a middle class person is a dollar that could be in the pockets of the rich. But its news section is mostly reasonably fair.

That may no longer be the case. The financial industry is on the warpath against a financial transaction tax in Europe. The proposed tax would be 0.1 percent on stock trades (one fifth the size of the tax that has...

Income Tax Payments Rely to a Substantial Extent on Self Reporting

It might have been worth reminding readers of this fact since it seemed that Speaker John Boehner had forgotten it. A NYT article on the Obama administration's decision to rely largely on individual's self reporting of their eligibility for employer provided insurance when awarding subsidies through the health care exchanges includes a quote from Boehner:

“The president’s decision to use the honor system to hand out subsidies, I think, exposes taxpayers to massive fraud and abuse.”

The govern...

Celebrate: EU-US Trade Agreement Could Raise Growth by 0.03 Percentage Points!

Nope, that is not a typo. According to a study (Table 16) cited in an NYT article on a possible trade deal between the United States and the European Union, GDP in the United States could be 0.39 percentage points higher in 2027 as a result of a trade deal. Of course this is their optimistic scenario in which most of the barriers they do not like are eliminated. In their less optimistic case, the gains would be just 0.21 percentage points by 2027, implying an increase in the annual growth rat...