Dean Baker's Blog, page 418

Lessons from Harley-Davidson: Protectionism Can Work

When the Post ran a piece on the lessons that Harley-Davidson teaches us about the economy readers naturally assumed that it would mention it as an example of successful protectionism. In 1982, in the middle of a steep recession, President Reagan imposed tariffs on imported motorcycles. This gave Harley-Davidson the breathing room it needed to survive the recession and modernize its operations. It continues to be a healthy profitable company.

Anyhow, this history didn't make the Post's list,...

Banks Charge Workers Fees to Get Their Unemployment Benefits

This is yet another case where the free market fundamentalists are using big government to fatten their profits. Associated Press has a nice piece on how several states are paying their unemployment insurance benefits through electronic cards issued by banks rather than checks or direct deposits. The banks place various fees on these cards that people with bank accounts, who are most of the unemployed, would not otherwise see. Needless to say, these banks are very happy with big government an...

Consumer Expectations Are Always Erratic

Floyd Norris is worried about a sharp drop in consumer confidence. He shouldn't be.

The cause of the drop is a fall in consumer expectations about the future. Expectations jump around because most people aren't in the business of sitting down and thinking about where the economy will be in 6 months. For the most part, people answer this question based on what they hear in the news. Since news reporting on the economy is very fickle, people's views about the future are very fickle.

Fortunate...

Thomas Friedman is Way Off Today

That's a cheap shot derived from the information that the NYT gave us at the end of Thomas Friedman's column: "Maureen Dowd is off today." Nonetheless it seems an appropriate response to a piece that tells real wages for most workers are stagnating because:

"In 2004, I wrote a book, called 'The World Is Flat,' about how the world was getting digitally connected so more people could compete, connect and collaborate from anywhere. When I wrote that book, Facebook, Twitter, cloud computing, Link...

Pharmaceutical Companies Lead the Fight Against the Free Market

The NYT tells us that biotech firms want the government to prohibit pharmacists from giving patients generic substitutes for biological drugs. This is a great story for a couple of reasons.

First it is a great example of the sort of abuses that economic theory predicts would result from having the government grant patent monopolies. When companies call sell drugs for prices that are a hundred or even a thousand times their cost of production, we should expect that they will lie, cheat, and st...

Fiscal Cliff Notes: Afterword

Can we get a heaping helping of ridicule for all the reporters and their favorite economic experts who told us that uncertainty over the fiscal cliff was a drag on the economy in the second half of 2012? The data just refuse to comply with this assessment.

Yesterday the Commerce Department reported a big jump in durable goods orders for the month of December. This was right when we stood at the precipice waiting to see if we would slide over the cliff. Orders jumped 4.6 percent for the month....

The Financial Markets Agree With President Obama and Disagree with Paul Ryan

It probably would have been useful to remind readers that Representative Paul Ryan's claim that country is facing a fiscal crisis is sharply at odds with the views of market participants in a NYT article reporting on his latest interview. The article quotes Ryan:

"I don’t think that the president thinks that we actually have a fiscal crisis, ... He’s been reportedly saying to our leaders that we don’t have a spending problem, we have a health care problem. That just leads me to conclude that...

Fun With Robert Samuelson: The Good News Is Bad News

It's always entertaining to read Robert Samuelson's columns on Monday mornings. They are so deliciously orthogonal to reality. Today's column, asking whether America is in decline, is another gem.

He starts with a set of "good news" items from a paper issued by Goldman Sachs:

"For starters, the U.S. economy is still the world’s largest by a long shot. Gross domestic product (GDP) is almost $16 trillion, “nearly double the second largest (China), 2.5 times the third largest (Japan).” Per capit...

Larry Summers Says the Clinton Administration Didn't Have Access to Government Economic Data

Okay, that is not exactly what he said, but if Chrystia Freeland's account of Summers' comments at Davos are to be believed that Summers is badly misinformed about the state of the U.S. economy in 1993 when he was one of the top advisers in the Clinton administration. According to Freeland, Summers said:

"In 1993, here’s what the situation was: Capital costs were really high, the trade deficit was really big, and if you looked at a graph of average wages and the productivity of American worke...

Housing Wealth Effects: Arithmetic Lesson for Neil Irwin and the Washington Post

Knowledge of arithmetic is a skill in short supply for people involved in economic policy debates. This is especially the case for the Washington Post (Wonkblog excepted).

Neil Irwin gives us an example of the problem when he expresses the hope that increasing house prices will provide a large boost to consumption and thereby spur growth. Irwin cites a recent academic paper on the size of the housing wealth effect:

"In a paper last year, Charles Calomiris, Stanley Longhofer, and William Miles...