Dean Baker's Blog, page 450

Debt Default, the End of the World and Timothy Geithner's Thoughts

Real reporters and newspapers don't try to tell audiences what political figures think because they don't know what they think. But Bob Woodward does not fit the description of the former and the Washington Post does not fit the description of the latter, hence we have a front page account of the battle over the debt ceiling that concludes with a section beginning:

"Geithner thought there was one other consideration. He did not mention it to anyone, not even the president, but he had thought...

Ross Douthat Gives Reason to Vote for President Obama

Douthat tells us that the birthrate has fallen below the replacement rate. I haven't checked this one, but that sure sounds like good news to me. Has anyone noticed a shortage of people anywhere? Do you want more crowded parks and beaches, more traffic congestion, more pollution and global warming?

If people who want kids can't afford to have them or feel too insecure in their economic situation, that is bad news. But if we are seeing our population decline rather than rise (immigration will...

Thomas Friedman Makes the Case That There Are Still Good Paying Jobs for People Without Skills

Of course he was arguing the opposite. But to make his case that everyone will need more education to get decent jobs he told readers:

"Which is why if we ever get another stimulus it has to focus, in part, on getting more people more education. The unemployment rate today is 4.1 percent for people with four years of college, 6.6 percent for those with two years, 8.8 percent for high school graduates, and 12.0 percent for dropouts."

If Friedman had the ability to use the Internet he could hav...

Uncertainty Does Not Explain Lack of Hiring

The Washington Post's article on the August jobs report included an assertion by Bernard Bamouhl, the chief global economist at the Economic Outlook Group, that:

"companies find it hard to justify hiring more people because the economic outlook is so unclear."

To use a technical economic term, this claim is wrong. We can see this by looking at average weekly hours. If companies would otherwise be hiring people, but are restrained by uncertainty, then they would be working their current workf...

AP Factcheck Should be Billed to Romney Campaign Bigtime

AP did a fact check of President Obama's speech that went way over the top in finding grounds for criticisms and implying misrepresentations when there were none. To start, it jumped on President Obama for claiming that he would use the saving from winding down the war to pay down the debt and create jobs:

"The idea of taking war savings to pay for other programs is budgetary sleight of hand, given that the wars were paid for with increased debt. Obama can essentially 'pay down our debt,' as...

President Obama Calls for Cutting Social Security by 3 Percent, Raising Normal Retirement Age in Acceptance Speech

The media and "fact checkers" seem to have missed it, but President Obama implicitly called for cutting Social Security by 3 percent and phasing in an increase in the normal retirement age to 69 when he again endorsed the deficit reduction plan put forward by Erskine Bowles and Alan Simpson, the co-chairs of his deficit commission.

The reduction in benefits is the result of their proposal to reduce the size of the annual cost of living adjustment by 0.3 percentage points by using a different...

The Value of the Dollar Is NOT Out of the Control of Politicians

The NYT bizarrely told readers that the value of the dollar is "almost entirely outside of American politicians’ control," in an pseudo fact check of the Democratic convention speeches last night. This is clearly wrong.

First, the actions of the Federal Reserve Board could have an enormous impact on the value of the dollar. Raising and lowering interest affects the willingness of foreigners to hold dollar denominated assets. This means that whether intended or not, monetary policy will affect...

Clinton's Surpluses Were Due to the Stock Bubble

The Democrats' discussion of the loss of the Clinton budget surpluses is a tale of paradise lost. Unfortunately, it was an illusory paradise that serious people should not concern themselves with. That is why it is disappointing to see Ezra Klein give us more tales of the evaporating budget surplus.

The huge surpluses of the last Clinton years were the result of a boom that was driven by a stock bubble. The boom was great. Millions of people got jobs who would not have otherwise. We also saw...

Pro-Growth and Pro-Wall Street is an Oxymoron

A NYT piece contrasting the politics of Elizabeth Warren and Bill Clinton tells readers that:

"Mr. Clinton is the president who made the sustained case to Democrats that they had to be pro-growth and pro-Wall Street, not just to get elected, but also to build a more modern economy."

There is considerable evidence that these are contradictory positions. Our bloated financial sector is a drain on growth as shown in a recent paper from the Bank of International Settlements. Resources that could...

Doctors Remove Bullet From Victim's Head: Seek to Determine Cause of Death, Dylan Matthews Edition

Dylan Matthews usually writes insightful pieces, but he really strays from the mark today in buying a story that unemployment in today's economy is to any significant extent an issue of skills. He picks up on a new paper by two economists (Nir Jaimovich from Duke and Henry E. Siu at the University of British Columbia) that argues that structural changes rather than weak demand is the main factor behind weak job growth in the last three recoveries.

Tying structural change to the last three rec...