Dean Baker's Blog, page 416

Background on the $15.9 Billion Loss by the Postal Service

The Washington Post, along with most other news outlets, reported without comment that the United States Postal Service (USPS) lost $15.9 billion last year. Some comment would have been appropriate since almost 70 percent of this shortfall is due to a payment of $11.9 billion to the postal workers' retiree health fund.

This is noteworthy because Congress has required that the Postal Service prefund its retirement fund at a level that has no match in the private sector. It also mandated that i...

What's the Relationship Between Concern About Cheap Foreign Labor and Support for Immigration Reform?

The NYT told readers that a widely expressed concern about losing jobs to "cheap foreign labor ....does not bode well for political support for an amnesty program now being discussed in Washington." It's not clear that this would be the case. One of the factors that reduces the wages of undocumented workers is their legal status. Undocumented workers are likely to get lower pay because they risk deportation if they try to unionize or take other measures to increase their wages and improve the...

Specific Military Cuts Were Chosen by Panetta, Not "Forced" by Sequester

The NYT reported on cuts in military spending that Secretary of Defense Leon Panetta said could happen if the sequester goes into effect on March 1. The NYT referred to these cuts as "forced," implying that they were required by the sequester.

This is not accurate. The sequester requires a cut in military spending of approximately 6 percent. The specific cuts chosen presumably reflects the fact that Mr. Panetta views the items to be the least important to the country's defense. Alternatively,...

Huffington Post Notices that Patents Slow Growth

The Huffington Post reported on a recent paper published by the St. Louis Federal Reserve Bank that produced evidence showing that patents impede innovation and growth. Maybe other news outlets will be allowed to talk about such isssues one day.

Corporate America: Saving the Twinkie but Not the Workers

No, I am not kidding. Steven Davidoff has a DealBook column touting the fact that Hostess Twinkies are likely to survive as a product, even though the company that makes them has gone bankrupt. The Twinkie brand, along with other iconic brands owned by the company, will be sold off in bankruptcy to other companies who expect to be able to profitably market them. Of course there is no guarantee that they will restart the old factories and rehire the Hostess workers, likely leaving them out in...

The Wall Street Big Boys Are Neanderthal Protectionists

One of the arguments that the Wall Street boys put forward to preserve their too big to fail subsidy from the government is that if we broke up the behemoth banks then big corporations would turn to foreign banks for many of their financial needs. The Post presents this assertion as a serious argument in a Neil Irwin column reporting on a paper arguing the case for big banks.

It is difficult to understand why anyone should give a damn if corporations get financial services from overseas. We...

The Post Couldn't Find CBO's Projection that Higher Interest Rates from the Fed Will be the Major Driver of Deficits

Currently net interest rate payments are 1.4 percent of GDP. The Congressional Budget Office (CBO) projects this will rise to 3.3 percent of GDP by 2023. This 1.9 percentage point rise in projected interest payments is by far the largest cause of projected increases in deficits over the decade. In addition, the interest refunded from the Fed to the Treasury is projected to fall by 0.3 percentage points, meaning that higher interest costs are projected to add a total of 2.2 percentage points t...

Thomas Friedman Doesn't Read His Columns, Why Should You?

On Sunday Thomas Friedman told us that one in three people in China is a blogger, today he tells us that the country has a:

"gigantic youth bulges under the age of 30, increasingly connected by technology but very unevenly educated."

This would be news to China. The country adopted its one child policy back in the 1970s leading to sharp drop in birth rates. Since that was more than 30 years ago, it means that China actually has a relatively small share of its population under the age of 30. F...

The NYT Has Determined that the United States Has a Spending Problem

Okay all of you liberals who thought that the deficits were due to too little tax revenue and all you economists who pointed out that the large deficits were due to a collapsed economy, you're wrong. The United States has a spending problem the NYT said so.

A NYT article on President Obama's speech on the budget told readers:

"New deficit projections will define the scope of the nation’s spending problem."

See, it's a spending problem!

Addendum:

I see from readers' comments that the NYT has...

Tyler Cowan's Keynes Versus the One We All Know and Love

Tyler Cowan argues in his column today that we should let the sequester cuts go into effect but his argument is a bit hard to follow. He tells readers:

"One common argument against letting this process run its course is a Keynesian claim — namely, that cuts or slowdowns in government spending can throw an economy into recession by lowering total demand for goods and services. Nonetheless, spending cuts of the right kind can help an economy."

He then goes on to point out that we can have cuts...