Dean Baker's Blog, page 419

NYT Cleans Up Bank of America's Books

The NYT told us that Bank of America made $5.7 billion from "trading" last year. It then added:

"For the sake of clarity and consistency, it makes sense to relabel this type of revenue “market-making.” That’s because it mainly represents the gain Bank of America makes when it buys securities and sells them on to clients at a higher price."

Really? The NYT knows that it just turned out that the price of assets rose by $5.7 billion between the time when Bank of America acquired them and when th...

David Brooks Is Right, but He's Also Wrong

Okay, I'm stealing from Paul Krugman today. Brooks' column today points out that modest redistributional measures implemented by Obama don't amount to a hill of beans next to the enormous upward redistribution going on in before-tax income. The restoration of Clinton era tax rates at best take away 2-3 years of growing inequality of before tax income.

Where Brooks is out to lunch is when he tells readers:

"On the one side, there is the meritocracy, which widens inequality."

That one is more t...

What Does an $850 Million Loss in Annual Tax Revenue Mean to Kansas?

I didn't have a clue and I suspect that 99 percent of other NYT readers also didn't have a clue. This raises the question of why did the NYT use this number, referring to the size of the income tax cuts being proposed by Kansas Governor Sam Brownback, without any context?

Kansas 2013 budget was $13.4 billion, making the proposed tax cut equal to 6.3 percent of last year's budget. Most NYT readers would have a reasonably good sense of the meaning of 6.3 percent.

Republicans Want to "CUT" Social Security and Medicare not "Change" Them

An NYT on the Republicans latest plans in upcoming budget debates told readers:

"Republicans have made clear that they are willing to let the government shut down at that time to force deep spending cuts or changes to Medicare and Social Security that would bring down deficits in the long run."

The Republicans are interested in cutting these programs, that is how their plans would bring down deficits. While a "cut" can be termed a change, in the same way that a punch to a person's head can be...

Reuters Reinvents the Euro Zone Debt Crisis

Deficits throughout the euro zone were relatively modest prior to the economic collapse in 2008 according to data from the IMF. In fact, some euro zone countries, like Spain and Ireland, were even running budget surpluses. This didn't stop Reuters from telling readers in the first line of an article picked up by the NYT:

"Public debt levels in the euro zone neared their projected peak last year after more than a decade of huge borrowing."

This is seriously misleading since it implies that lar...

The Skills Shortage: It's on the Management Side

Yes, we have a mismatch of jobs and skills. The problem is that it seems to be on the side of the managers who can't seem to figure out how to get good help. An excellent review of Peter Cappelli's new book by Trey Popp.

David Brooks' Trouble With Arithmetic Leads Him Astray Again

David Brooks would benefit hugely from a remedial course in grade school arithmetic. It might keep him from saying silly things in his NYT columns like:

"We are now a mature nation with an aging population. Far from being underinstitutionalized, we are bogged down with a bloated political system, a tangled tax code, a byzantine legal code and a crushing debt."

If he were more acquainted with arithmetic he would be able to go to government publications and discover that far from being "crushin...

Washington Post Is Confused on the Origins of the Deficit

It told readers:

"The country faces a fast-growing national debt as a result of waves of retiring workers who expect health care and pension benefits."

This is not true. The reason the debt has been rising rapidly in recent years is that the economy plunged due to the collapse of the housing bubble. In 2007, before the collapse, the deficit was just 1.2 percent of GDP and the debt to GDP ratio was falling. The Congressional Budget Office projected that the deficit would remain in this neighbo...

The Burden of the Debt Depends on How You Measure It

A Reuters article in the NYT told readers that:

"Japan's public debt burden is already the worst among major economies at more than twice the size of its $5 trillion economy."

While Japan does have the highest ratio of debt to GDP among wealthy countries, it also has one of the lowest ratios of interest to GDP. Its net interest payments are less than 1.0 percent of GDP. This number would be even lower if payments made to the central bank were subtracted out. (These are refunded to Japan's tre...

NPR Says Japan's Stock Market Fell in Response to Commitment to Stimulus, WSJ Says the Opposite

Morning Edition's top of the hour news segment (sorry, no link) told listeners that the Nikkei dropped in response to the Bank of Japan's commitment to support stimulus. The Wall Street Journal said the opposite, pointing out that the bank's asset purchase plans were quite modest. According to the WSJ, the decline in Japan's stock market and rise in the yen was due to the concern that the bank was insufficiently committed to stimulus.