Dean Baker's Blog, page 463

Medicare Vouchers Increase Costs: That's a Fact

If one of the major party presidential candidates started to claim that the sun orbits the earth, reporters would suddenly treat the issue as a matter of debate. We would be told that candidate X claims that the sun goes around the earth, however candidate Y maintains that the earth actually circles the sun.

That is the conclusion that one would get from an ABC news piece that discussed Governor Romney's proposal to replace the existing Medicare system with a voucher system. This would in fac...

Pension Fund Return Projections are Based on Arithmetic, not Just History

Morning Edition had a segment on a change in public pension fund accounting that will show many funds have a much larger shortfall. The piece included comments from a Stanford business school professor, Joshua Rauh, that complained that the discount rate assumed by pension funds assumed that future pension fund returns will be like past returns.

Rauh's statement to this effect is inaccurate, or at least incomplete. The main question mark in pension fund returns is the return on stock, which t...

Patent Monopolies On Prescription Drugs Lead to Corruption #26753

The Post did readers a great service in providing another example of how the government makes rich people rich. The article is about how a set of drugs intended to anemia, turned out to be both ineffective and potentially harmful.

The two companies that had government-granted patent monopolies on these drugs, Amgen and Johnson & Johnson, gained tens of billions of revenue from these drugs over the last two decades. The article points out that they attempted to conceal evidence that their drug...

New York Times Tells Readers that Presidential Election is a Philosophy Debate

Most people probably think that presidential campaigns are about getting the support of powerful political actors and interest groups. However the NYT told readers that they are wrong to believe this. Instead, the NYT told readers in a headline that:

"philosophical clash over government's role highlights parties divide."

In fact, as the article makes clear there is not really a philosophical clash at stake here. Governor Romney was deliberately misrepresenting a comment made by President Obam...

WAPO Runs Another Piece About Defense Contractors Unhappy About Being Thrown Off Welfare

Apparently military contractors hold an especially warm place in the hearts of the Washington Post editors. How else can one explain another story devoted to the fact that they will lose money and reduce employment if the military cuts slated to go into effect in January actually occur.

Some folks may recall a major news article the paper ran last month that was devoted to a study commissioned by military contractors that hyped the job loss that would result from these cuts. Of course in a do...

Apple Gets Government Help to Boost Profits

Apple got the government to impose a tax on tablet computer sales and to turn over the revenue to the company. That's not exactly what happened, but pretty close when it managed to persuade a California judge to pull Samsung's Galaxy tablets off the shelves in a patent infringement suit. This will allow Apple to sell more of its iPads at a higher price than would otherwise be the case.

The Fed, the LIBOR Scandal, and the Incredible Hulk

Simon Johnson has an interesting column discussing the Fed's response to the rigging of the LIBOR rate. He refers to the memo that Treasury Secretary Timothy Geithner (then the head of the New York Fed) sent to the Bank of England in 2008 and notes evidence that the Fed knew of rigging as early as 2005. Johnson then cites comments from Fed Chairman Ben Bernanke that the Fed couldn't do anything more than it did in calling the Bank of England's attention to the problem.

This is known as the In...

Washington Post Gives Up News Space to Publicize Another Business Financed Study-- Taxes This Time

A couple of weeks ago the Washington Post (a.k.a. "Fox on 15th Street") gained notoriety for running a major news article based on a study funding by military contractors that warned of large job losses from cuts in military spending. Of course folks who know economics realize that in a downturn cuts in any type of government spending will lead to job loss. In fact, cuts in most forms of government spending will lead to larger job losses than cuts in military spending. In other words, there w...

The Travails of Single Parents

The NYT devoted a lengthy article to the difference in experiences and opportunities for women and their children when there is a second earner in the household as opposed to a situation where the woman is raising children by herself. While the growth in the number of single parent families has been one of the factors increasing inequality among families with children, most of the impact of this change in family structure had been felt by 1985 according to a study by Bruce Western, which is c...

Three Years of Pension Returns Do Not Tell Us Much About Thirty Years

Pensions saw strong double-digit returns in the last years of the 90s. They had negative returns in the first years of the last decade. If anyone extrapolated from the last three years of the 90s and predicted double digit returns for the decades ahead or the first three years of the last decade and predicted flat or negative returns, they should have been taken far away from any position with any responsibility for pensions.

Unfortunately, the world does not work this way. Such absurd extrap...