Dean Baker's Blog, page 448

Since Romney Raised the Issue of Freeloaders, What Is Erskine Bowles?

Since we seem destined to have a national debate on the topic of government freeloaders in the wake of the Romney fundraising video, it might be worth asking how we think about someone getting hundreds of thousands of dollars a year for sitting on a corporate board for which they did little obvious work. Erskine Bowles, a possible future Treasury Secretary, is of course the poster child for such people.

Mr. Bowles has earned millions of dollars sitting on corporate boards over the last decad...

Trade Arithmetic and China

The NYT article on the decision by the Obama administration to file a WTO case against China told readers that the subsidies in dispute come to at least $1 billion since 2009. By comparison, China has exported $56 billion of car parts over this period. This implies that the subsidies have been around 2 percent of the price of the goods.

By comparison, if the dollar is 20 percent over-valued against the yuan, this would imply an effective subsidy of 20 percent of the price. In this case, the i...

Robert Samuelson Is Tired of Stimulus

That's the gist of his column today. After all, it really gets exhausting watching folks like Ben Bernanke try to create jobs for people who are unemployed because folks like Alan Greenspan and Ben Bernanke were too incompetent to recognize an $8 trillion housing bubble.

I'm not kidding. Here's the opening line:

"We are reaching — or may already have passed — the practical limits of 'economic stimulus.'"

Samuelson concludes the paragraph by telling us:

"The average response of 47 economists s...

Home Ownership and Retirement Savings

The NYT had an editorial discussing how unprepared most workers are for retirement. While most of the points in the piece are well-taken, it would have been worth saying a bit about homeownership, since housing equity is the main source of wealth for most middle income people.

Many families were badly burned by buying a home in the middle of the housing bubble. So-called experts who should have known better and warned people, didn't. This should have people very very angry.

However even in mo...

The Non-Debt Overhang: Economics and Arithmetic #5467

Economists tend not to be very good at arithmetic. That's why almost all of them failed to recognize the $8 trillion housing bubble and to understand that it's collapse would wreck the economy.

Unfortunately their arithmetic (or logic) skills have not improved in the wake of the crash. Hence we have many economists telling us that the economy's problem is a debt overhang. This gets picked up endlessly (e.g. Joe Nocera's column today).

Let's think this one through for a moment. As a result of...

The Inflation that Concerns the Fed Does Not First Affect Food and Energy Prices

In an article on the Fed's decision to buy more bonds and to extend its commitment to a low interest rate policy, the Washington Post told readers:

"Fed officials have been sympathetic to concerns about inflation, which would first affect middle-class purchases of necessities such as food and gas."

Actually, inflation in food and gas prices are of the least concern to the Fed because they are largely out of its control. The price of food and gas are determined in international markets. When t...

What Does Moody's Mean If It Downgrades U.S. Debt?

The NYT tells us that Moody's, the bond-rating agency that thought all those subprime mortgage backed securities were Aaa, is threatening to downgrade U.S. government debt if Congress doesn't meet its conditions. While the markets will probably ignore a downgrade from Moody's, just as they did the downgrade from Standard and Poor's last year (the price of U.S. Treasury bonds soared in the period immediately following the downgrade), it still would be worth asking what Moody's might mean by a...

Did Public Schools Fail David Brooks?

Readers of his column on the Chicago public school strike will no doubt be asking this question as they wade through this morass of error of fact and logic. Brooks starts the piece by telling readers:

"Modern nations have two economies, which exist side by side. Economy I is the tradable sector. This includes companies that make goods like planes, steel and pharmaceuticals. These companies face intense global competition and are compelled to constantly innovate and streamline. They’ve spent t...

Pity the Savers, Not

As the Fed has attempted to push interest rates down with the purpose of boosting the economy, there have been numerous stories mourning the situation of savers who see little return on their money. The NYT gave us such a piece on Tuesday.

While those who have all their savings in short-term assets like savings accounts and money market funds are seeing low returns, the low return story does not apply to all savers. Of course those who have money in the stock market have done quite well, wit...

More on the Chicago Teacher Strike

I've heard many folks complain that Chicago's teachers are only concerned about their wages and benefits and not over the education received by the children. As my friend Larry Mishel reminds me, there is an important reason that the teachers' union is only talking about wages and benefits in the context of the strike: it's the law.

These are mandatory topics for negotiation under U.S. labor law. Issues about how the schools are run fall under management prerogatives. While the union and mana...