Dean Baker's Blog, page 388

Brad DeLong Says We Can't Do Anything to Raise Employment Because Billionaire Wall Street Bankers Are Still Too Dumb to Breathe

Brad DeLong has a set of ruminations on the economic situation that we now face, the gist of which is that we better be cautious in using fiscal policy because "we" are worried that the bankers may sink themselves again if interest rates rise back to more normal levels. Let's look at the argument starting with figuring out who "we" is.

While Brad never tells exactly, when he says "we" he is obviously referring to the mainstream of the economics profession. And his "we" actually got considerab...

NYT Prints Nuttiest Idea Yet on Financing Creative Work

Jaron Lanier must have won an award for most ridiculous idea on the digital economy with the grand prize being a lengthy column in the NYT. The great gift of the Internet is that it can costlessly deliver massive amounts of information and creative material almost anywhere in the world.

So what is Jaron Lanier's brilliant idea? He wants to set up a tollgate charging for every bit of information. What a great idea -- maybe if we give Mr. Laner more time to develop ideas he will come up with a...

More Thoughts on Job Creation in the Recovery

Having gotten a few e-mails I thought I would add a few more words on job growth in the recovery. There are a some basic facts on the growth and jobs story that I thought were not entirely clear in this NYT piece.

First, the basic problem is that growth has been extremely weak in this recovery. Annual growth has averaged just over 2.0 percent in this recovery. That is pathetic, it is below the underlying trend rate of growth, which is in the neighborhood of 2.4 percent. This means that the ec...

NYT and Justin Wolfers Get it Wrong, the U.S. Is Doing Very Well in Translating Weak Growth Into Jobs

The NYT picked up a twitter comment from Justin Wolfers and told readers that the United States is lagging other countries in job creation. The blogpost has a graph showing a higher rate of job growth in several other wealthy countries. The piece then tells readers that the United States is doing a poor job translating economic growth into job growth.

Actually the U.S. has been doing a very good job translating very weak growth (@ 2.0 percent over the last two years) into jobs. This is shown...

Low Inflation Is the Same Sort of Problem as Deflation

I'm glad that Paul Krugman made this point clearly in his blog today. I wish that he had done it five years ago. I made this point repeatedly (here, here, and here).

It is remarkable how many economics reporters and even economists seem to think that something magic happens when inflation crosses the zero line and turns negative. This is absurd on its face. The inflation rate is an aggregate of millions of different price changes (quality adjusted). If it is near zero then a very large number...

Post Runs Another Front Page Editorial on Social Security and Medicare

The "grand bargain" to cut Social Security and Medicare is looking increasingly dead these days. Projections for future deficits have fallen sharply because of the sequester, higher than expected tax revenues (although with slower than expected growth), and much slower projected health care cost growth.

This situation has made the Post very unhappy. It ran a front page piece with the headline, "urgency on the debt fades with big issues unsolved." Of course this is not true.

The big issues ha...

Fun With Numbers: Means Testing Social Security

Todd Ganos at Forbes Magazine is upset that people earning $150,000 a year get Social Security. Hey, I'm upset that people earning $1 million a year get interest on government bonds. In both cases they don't need it, but you know what? They paid for it.

But let's skip the morality play and have some fun with numbers. We want to figure out how much money we could in principle save by taking away Social Security benefits from these rich retirees. Ganos tells readers:

"According to the Congressi...

Weak Productivity Growth, the Secret to Job Growth in the Obama Recovery

Some of us (well at least me) are surprised that an economy growing at a rate of 2.0 percent or less can create around 1.8 million jobs a year. That doesn't seem to fit. We had been seeing productivity growth of close to 2.5 percent. At that rate the economy could grow 2.0 percent a year with no additional labor. So what is going on?

Well, we aren't seeing productivity growth of 2.5 percent a year any more. In fact, in the last two years productivity growth has grown at less than a 1.0 percen...

When Business Is Bad, The Partners Quarrel: The Beginning of the End of Austerity?

The Wall Street Journal reports that Olli Rehn, the European Union's top economic official, is very upset over a new IMF report acknowledging mistakes in the bailout of Greece. Rehn apparently feels no mistakes were made. Hey 25 percent unemployment? What could be wrong?

Robert Samuelson Wants to Abolish Peter Peterson's and Bill Gates' Bank Accounts

Sorry, I misread the piece. It was the Social Security and Medicare trust funds that he wants to abolish. It would be the same thing -- destroying large amounts of wealth, just different people involved.

In the case of Peter Peterson and Bill Gates, we would be destroying the wealth of two very rich people. In the case of the Social Security and Medicare trust funds we would be destroying $3 trillion in wealth that belongs to the country's workers. Of course I should have realized off the bat...