Dean Baker's Blog, page 425

Steve Rattner's Defective Social Security Chart in NYT

Steve Rattner had a series of mostly useful charts in the NYT this morning describing the state of the economy. The major exception is the one on Social Security shown below.

It is not clear what information this chart is supposed to convey. The average annual benefit in 2012 for a retired worker was $14,760 according to the Social Security Administration. It's not clear where Rattner got $23,135. The chart also shows adopting a chained CPI, presumably for adjusting the annual cost of living...

David Brooks Reports that the NYT Can't Find Conservative Columnists Who Know Arithmetic

Some of us didn't take the skills deficit seriously, but David Brooks shows us that it is a real problem. Apparently the New York Times cannot find a conservative columnist who can deal with basic issues of logic and arithmetic. Brooks is very upset because the budget deal apparently does not include any cuts in Medicare.

He also is very angry that so many people insist on relying on arithmetic and pointing out that the "$1 trillion" deficits are almost entirely due to the economic downturn c...

Pentagon Warns that Sequester of 8 Percent of Its Budget Could Lead to Furloughs for 140 Percent of Its Employees

Yes, it's the season of the whopper here in DC as the dreaded Mayan apocalypse (a.k.a. "fiscal cliff) approaches. According to the Washington Post, unnamed Pentagon officials warned that it may have to furlough up to 800,000 civilian employees if the budget sequester goes into effect this week. That sounds really scary since the Labor Department says that the Defense Department has less than 560,000 civilian employees. How is this supposed to work exactly?

[Note: Typos corrected, thanks Eliz...

Wall Street Journal Tries to Build Fiscal Cliff Hysteria

A WSJ article told readers that the "fiscal cliff" has already caused damage to the economy. The piece began:

"The damage may already be done.

"Even if lawmakers manage to avoid most of the $500 billion in tax increases and spending cuts set to take effect this week, the risks to the U.S. economy have risen as consumers and investors recoil from Washington's latest budget spectacle."

That ain't what the data show. The piece trumpets the plunge in consumer confidence in December, while noting...

New York Times Gets It Fundamentally Wrong on the Budget Impasse

The NYT doesn't seem to keep up to date with writings on the budget deficit even in its own paper. As I have often pointed out, the large budget deficits of recent years are entirely attributable to the plunge in the economy caused by the collapse of the housing bubble. Paul Krugman has recently been harping on this point in his NYT column and blog. For this reason, its news story claiming that:

"Years of increased spending on everything from wars to expanded entitlement programs — combined w...

Robert Samuelson is Upset that Manufacturing Jobs Seem to be Returning to the United States

That is the gist of his column today. He presents some evidence that the gap in costs between the United States and the developing world, most importantly China, has been reduced and therefore jobs are coming back to the United States. It's very hard to understand the negative in this story. It could mean that a trade deficit that was leading to ever more foreign indebtedness is beginning to moderate. It's not clear why this would be bad.

The complaint is especially ironic coming from Samuels...

Bernanke Helps the Economy and the Masses with Low Interest Rates

William D. Cohan had a bizarre opinion piece in the Sunday Post claiming that the Fed's low interest rate policy was hurting savers and helping hedge funds. The gist of the story is that low interest rates hurt small savers with bank deposits while they make it easier for hedge funds to borrow money to speculate. Both sides seem more than a bit off the mark.

On the small savers story, it's not clear how much anyone could be hurt. It's not clear what interest rate Cohan would expect the Fed to...

The $28,000 Prescription: Drug Companies Run Wild

The NYT had a fascinating piece on how Questcor raised the price of its drug Acthar to $28,000 per prescription. Since it raised its price it has begun pushing the drug for a number of uses for which it may not be suited. It is able to do this because the drug was initially approved by the FDA in 1952, before restrictions on off-label marketing applied.

Until recently the drug sold for less than $2,000 per prescription. (Apparently, the manufacturing process is complicated and expensive.) At...

Republicans Are Demanding a 3 Percent Cut in Social Security Benefits as Part of a Budget Deal

Readers of the NYT article on the latest developments in the budget negotiations may have not realized that the Republican demands for changing the indexation formula for the Social Security cost of living adjustment is equivalent to a 3 percent cut in benefits for a typical retiree. The new formula would lower the adjustment by approximately 0.3 percentage points each year. This means that a retiree would be receiving 3 percent lower benefits after 10 years, 6 percent lower benefits after 20...

When It Comes to Recoveries, "Rip-Roaring" Ain't What It Used to Be at the Washington Post

The Post had a major business section article promising that 2013 could be the year of a "rip-roaring" recovery, if nothing bad gets in the way. While there are reasons to think that 2013 could be better than the prior two years, it's not clear that "rip-roaring" would be the right term to apply.

The high-end of growth forecasts is around 3.0 percent. This assumes that the budget standoff is resolved relatively quickly on terms that do little damage to the recovery. According to the Congressi...