Dean Baker's Blog, page 473

David Brooks Calls for Dissolving the People

Nope, I'm not kidding. His column today is devoted to "the follower problem." He is upset that people are cynical and don't seem to trust the elites. Brooks tells us:

"I don’t know if America has a leadership problem; it certainly has a followership problem. Vast majorities of Americans don’t trust their institutions. That’s not mostly because our institutions perform much worse than they did in 1925 and 1955, when they were widely trusted."

Let's leave aside 1925 since it was a very differen...

Getting Around the Mortgage Pool Problem With Condemnation

A group of investors has a novel way of forcing mortgage write-downs. They want county governments to condemn the mortgages on underwater homes allowing them to be bought out of mortgage pools at fair market value. Their plan is to then issue new mortgages to current homeowners that reflect the market value of their homes.

It's a neat idea. I can't vouch for the legality of this approach, but serious people have spent a lot of time developing it. If it works, it could allow hundreds of thousa...

More Tales of Latvia

To the great dismay of the IMF, the ECB, and proponents of austerity everywhere, the world is in danger of finding out the truth about Latvia. The austerity gang has been touting Latvia as a model of successful austerity hoping that no one would be able find the tiny country on a map.

But, the game is over. Mark Weisbrot pointed out that Latvia both did not really follow the austerity plan (the IMF went along with a weakened plan) and is not much of a success story. Its GDP is still well belo...

When It Comes to Europe, Robert Samuelson Is Upside Down

Robert Samuelson tells readers today:

"the economies of many European countries are no longer strong enough to support their welfare states."

This would be more obviously true if Europe seemed to be suffering from a problem of excess demand. That would be a story in which government spending on the welfare state was driving up interest rates and crowding out private investment and consumption.

Nowhere in Europe do we see anything that resembles this story. Instead we see an economic collapse...

Why Would an Economist Expect Home Sales to Rise From Current Levels?

Economists seem to specialize in saying silly things about the economy. In a NYT article that discussed the prospect of consumers leading a recovery, Nigel Gault, chief domestic economist at IHS Global Insight, is cited as saying that it would take a jump in employment to bring about a rebound in house sales.

It is difficult to understand why any economist would expect sales to move substantially above current levels. Existing home sales have been around 4.6 million in recent months. By compa...

Why Does the Work Force Have to Be Replenished?

The Post featured an interesting piece by William Frey which contrasts the ethnic and racial composition of the baby boom cohorts with those under age 30. At one point the piece tells readers:

"Between now and 2030, there will be an absolute decline of 10 million (mostly baby-boom) whites from the ranks of our working-age population.

Those ranks can be replenished only by the growing minority youth population. Much of this growth will occur because of births, regardless of immigration trends....

Math Is Hard: David Ignatius Edition

As we all know, the folks at the Washington Post have some trouble with arithmetic. Back in 2007 a lead editorial on NAFTA told readers that Mexico's GDP had quadrupled from 1988 to 2007. The actual increase was a bit more than 83 percent.

In the same vein, columnist David Ignatius sang the praises of Turkey's economy in the paper today. He told readers:

"its economy has grown an annual average of 5.3 percent since 2002, the fastest rate of any country in the Organization for Economic Coopera...

Take Away the Patent Protection: The Answer to Uwe Reinhardt's Question

In a blogpost in the NYT Uwe Reinhardt asked how much we would be willing to pay to extend a person's life by a year. The examples he refers to in the piece involve drugs that are very expensive, but can be expected to extend life.

This is an unfortunate way to frame the issue. With few exceptions drugs are cheap to produce. The reason they are expensive is because the government gives drug companies patent monopolies. This allows them to charge very high prices for drugs that extend life, si...

Correction for Fareed Zakaria: Tax Cuts Sort of Work and There Was No Simpson Bowles Commission Plan

No one expects great insights from the people who write on economic issues on the Post's opinion pages, but Fareed Zakaria's latest piece is an extraordinary exercise in confusion. Zakaria is anxious to tell us that tax cuts "don't work," but he never tells readers what he means by "work."

The story on tax cuts is pretty simple: people either spend the money or they save it. Whether or not tax cuts "work" will depend on the extent to which they do one or the other and the extent to which we w...

Hint to NYT: People Sometimes Don't Tell the Truth

It may seem incredible, but there are occasions in politics where people sometimes don't tell the truth. That is why newspapers are supposed to report what people say and do and not tell readers the motives behind their statements and actions, since they don't know their motives.

The NYT blew it today in a piece on Republican efforts to repeal a tax on medical equipment that is part of the Affordable Care Act when it told readers:

"In anticipation of the tax, some manufacturers have announced...