Dean Baker's Blog, page 430

Capital Gains on Homes Are Tax Exempt (see correction)

At least the first $250,000 of gains is exempt for individuals and $500,000 for couples. For this reason, the Post is likely off the mark in telling readers about middle class homeowners rushing to sell their homes to take advantage of the lower capital gains tax rate.

A couple would have to have a gain of at least $500,000 for this to be an issue. That would imply a gain that is a bit less than three times the median house price nationally. That doesn't sound like a middle class couple. Furt...

Can Anyone Tame the Washington Post's Deficit Hysteria?

That seems unlikely as it ran another shrill front page piece warning about the need to "tame" the national debt. Newspapers would ordinarily use a a word like "reduce" in their news section, saving phrases like "tame the national debt" for the opinion pages.

The piece is also highly misleading by insisting there is an urgency to arriving at a deal before the end of the year. There is no obvious reason that it is important to have a deal by December 31 rather than the first or second week in...

USA Today Roots for a Market Plunge in Response to Budget Negotiations

I'm not kidding, it's right here. The piece expresses great disapppointment that markets have not plummeted in response to the budget deadlock telling readers:

"Despite daily warnings about the effects of the fiscal cliff — tax increases and budget cuts that could cripple the economy — the markets seem supremely convinced that all will be fixed before the Dec. 31 deadline."

Of course it is bizarre that the article would connect the "Dec. 31 deadline" with the markets' calm since in fact almos...

Fans of Economic Recovery Need Not Worry About Banks Being Penalized for Law Breaking

The NYT reported that a new round of lawsuits could potentially cost banks hundreds of billions in damages and penalties from fraudulently marketing bad mortgages. The piece warned readers:

"Depending on the final price tag, the costs could lower profits and slow the economic recovery by weakening the banks’ ability to lend just as the housing market is showing signs of life."

Actually it is quite unlikely that the outcome of these suits would have a noticeable effect on the housing market. T...

The Food is Poison and the Portions are Too Small II: Krugman and Productivity Growth

Paul Krugman had an interesting column today calling attention to the rise in the profit share of income. The point is that we seem to be seeing rapid improvements in productivity growth (he cites the progress in the development of robots) that are drastically reducing the demand for labor. Yet all the gains from these improvements seem to be going to owners of capital as the labor share of output has been falling sharply.

The dsitributional issue raised by Krugman is extremely important, bo...

New York Times Tries to Make Readers Believe that Obamacare Means Big Tax Increases

Newspapers are supposed to be in the business of informing readers. It's hard to see what information was provided when an article on the tax increases associated with the Affordable Care Act (ACA) told readers:

"Among the most affluent fifth of households, those affected will see tax increases averaging $6,000 next year, economists estimate."

It's difficult to know what this is supposed to mean. The most affluent fifth of households would be around 26,000 million households. If the tax incre...

How Does the Post Know that Both Democrats and Republicans Ignore Financial Markets?

The fact that the United States can borrow long-term at very low interest rates indicates that actors in financial markets are not concerned about large U.S. budget deficits. Odds are that these people recognize that the large current deficits are the result of the economic collapse that followed in the wake of the bursting of the housing bubble. They probably also know that if the deficit were smaller it would just mean slower growth and higher unemployment.

Given this reality, it is interes...

Washington Post Uses Headline to Cover Up Republican Efforts to Cut Social Security and Medicare

The Washington Post used a headline to help conceal the efforts of Republicans to cut Social Security and Medicare, telling readers that:

"some in GOP urge lawmakers to back tax hikes for changes in safety-net programs."

Of course the Republicans actually want cuts to these programs, not random changes. The piece itself also refers to "changes" in these programs. Newspapers are supposed to be trying to inform readers of what politicians are doing, not helping them advance an unpopular agenda...

Why Does a Q&A on the "National Debt Crisis" Appear in the Washington Post?

Fans of reality will note that the immediate threat to the economy is the prospect of a sharp increase in taxes and cut in spending that will begin in the new year. How does this look like a "debt crisis?"A debt crisis is when no investors will buy your debt.

The Post has to tone down the scare tactics in its push to cut Social Security and Medicare. Its slipping behind Fox News and the National Inquirer in the credibility category.

[Thanks to Michael Cushman for calling my attention to this...

David Ignatius and the Washington Post Flunk Trade Arithmetic Again

The Washington Post is notorious for getting numbers terribly wrong when it comes to trade. It once ran a lead editorial touting the wonders of NAFTA that claimed Mexico's GDP had quadrupled from 1987 to 2007. According to the IMF the number was 83 percent. But the Post is willing to toss numbers, logic, and arithmetic to the wind when it comes to pushing the trade agreements that have been on the political agenda in recent years.

Hence we have Post columnist David Ignatius telling us this mo...