Dean Baker's Blog, page 397

Excel Errors, Debt, and Stimulus: Is Our Politicians Learning?

That's the question we ask this week in honor of the commemoration of the George W. Bush Library. According to Politico the answer appears to be "yes."

Politico tells us that the Democrats in Congress who argue that there is no urgency to deal with the debt and that instead the focus of policy should be boosting the economy and getting the unemployment rate down are now increasingly occupying the center stage in the Democratic Party:

"These Democrats and their intellectual allies once occupie...

Washington Post Editorial Condemns Austerity in Europe!

I double-checked to see that this is in fact April 28 and not April 1. This does seem to be real, a Washington Post lead editorial on Europe that calls for Germany to ease up on austerity and to allow the peripheral euro zone countries to grow again.

I could nit-pick and point out that the editorial doesn't get everything right (nothing wrong with Germany running trade surpluses, if the surpluses were with fast-growing countries in the developing world), but we should just sit back and enjoy...

A Second American Century Led by People Who Can't Do Arithmetic?

That's what Richard Haass is promising in his Washington Post Outlook piece. He tells readers that the United States is still the world's largest economy and will be for long into the future.

"This country boasts the world’s largest economy; its annual GDP of almost $16 trillion is nearly one-fourth of global output. Compare this figure with $7 trillion for China and $6 trillion for Japan. Per capita GDP in the United States is close to $50,000, somewhere between six and nine times that of Ch...

Government Granted Patent Monopolies Lead to Corruption #42,347

When the government grants drug companies patent monopolies that allow them to sell drugs at hundreds or even thousands of times the free market price it gives them an enormous incentive to do things like pay off doctors to prescribe drugs. Everyone who has ever taken an intro economics class understands that fact.

Unfortunately our leading economists do not seem aware of how protectionism in the prescription drug industry leads to corruption that can both raise costs and jeopardize the publi...

Interest Burdens and Debt

Since the NYT is doing Reinhart and Rogoff 24-7, I suppose BTP should follow suit. One point that some of us keep making that continually disappears into the ether (as opposed to eliciting a response from our Harvard duo or their accomplices) is that rather than being high, the interest burden of the debt is near post-war lows. It is currently less than 1.5 percent of GDP. In fact, it is less than 1.0 percent of GDP if we subtract the $80 billion that the Fed refunds to the Treasury from the...

Mervyn King Led the UK Economy to Its Worst Downturn Ever

David Ignatius used his Washington Post column yesterday to give a glowing tribute to Mervyn King, the outgoing governor of the Bank Of England. The whole piece is a paean to King's wisdom that concludes by telling readers that King is:

"the only person I’ve ever seen who could intellectually intimidate former Treasury secretary Larry Summers. King couldn’t fix the British economy, but he did understand it."

While silencing Larry Summers is certainly commendable, the claim that King understan...

Reinhart and Rogoff Are Not Being Straight

Carmen Reinhart and Ken Rogoff, used their second NYT column in a week, to complain about how they are being treated. Their complaint deserves tears from crocodiles everywhere. They try to present themselves as ivory tower economists who cannot possibly be blamed for the ways in which their work has been used to justify public policy, specifically as a rationale to cut government programs and raise taxes, measures that lead to unemployment in a downturn.

This portrayal is disingenuous in the...

Robert Samuelson Tries to Salvage Reinhart-Rogoff and Austerity

I have a policy of not discussing items that directly refer to me in this blog, but I will make an exception today because the issues raised by Robert Samuelson are important. In his column Samuelson makes two key arguments. First, that the Reinhart-Rogoff conclusions about high debt leading to slow growth still stand even after the errors in the original paper were corrected, and second, that this work was never really the basis for austerity anyhow.

Taking these in order, Samuelson construc...

Did Janet Yellen Argue With Greenspan for Higher or Lower Interest Rates?

There are often shades of grey in interpreting people's views, but the NYT seems to be giving us assessments of Federal Reserve Board Vice Chairman Janet Yellen's views that are 180 degrees apart. An article today on Dr. Yellen's prospects of being chosen to replace Ben Bernanke as chair tells readers:

"In July 1996, the Federal Reserve broke the metronomic routine of its closed-door policy-making meetings to hold an unusual debate. The Fed’s powerful chairman, Alan Greenspan, saw a chance fo...

Poor Case for Low Down Payment Loans

One of the big issues left to be resolved in the debate over housing finance is the size of the down payment that homebuyers must put down in order for a mortgage to be considered a "qualified" mortgage. If a mortgage fits this definition, securitizers would not be required to hold capital against the mortgage.

NYT's Dealbook had a post discussing the topic which highlighted research by Roberto G. Quercia, director of the Center for Community Capital at the University of North Carolina at Cha...