Dean Baker's Blog, page 474

Can NPR Talk to Anyone Who Knows About the Weather?

Morning Edition had a segment on the state of the economy and the prospects for further stimulus. The discussion was framed by former Obama National Economic Advisor Larry Summers who told listeners that the economy seemed to be taking off last winter, but now seems much weaker. This position seemed to be confirmed by Alan Krueger, the current head of President Obama's council of economic advisers.

It would have been helpful to include the views of someone who noticed that the weather was the...

If Clinton's Economic Record Is Viewed Positively, Then It Speaks to the Horrible State of Economic Reporting

We evaluate teachers by how well their students do. If we applied a similar standard to economic reporters, then the whole lot of them would be sent packing tomorrow.

The Post told readers that Bill Clinton is an effective spokesperson for President Obama in part because:

"Clinton himself presided over an economic boom and a balanced budget gives him credibility to make the case against Romney and the Republicans."

Actually, the seeds of the current disaster were put in place by the policies...

Matt Miller's Pain

The Post is one of those papers that doesn't expect the people who write on economics to have any knowledge of the topic. Hence we have Matt Miller telling us this morning about how resolving the euro zone crisis will require that German Chancellor Angela Merkel devise a plan for "apportioning pain."

Of course the opposite is true. The pain is wholly unnecessary and self-defeating. The obvious way out of the euro crisis is to require that the European Central Bank abandon its obsession with r...

Washington Post Fires Another Shot in the Class War

The Washington Post doesn't leave its readers in doubt over whose side it takes in the class war. It routinely uses both its opinion and news pages to attack ordinary workers and the programs on which depend, like Social Security and Medicare. It rarely points out obvious facts, like the projections of exploding costs for Medicare are primarily driven by the excessive rents collected by folks like drug companies, suppliers of health care equipment, and highly paid medical specialists.

In keep...

On Public Pensions, NYT Continues to Rely Exclusively on Those Who Were Wrong

In the 90s, and in the years of the last decade before the housing crash, most economists and pension managers who made projections of stock market returns were making absurdly optimistic assumptions. Because price to earnings ratios in the stock market were well above their historic average it would be impossible for it to give its historic rate of return. This was simple arithmetic, which some of us tried to point out at the time.

Now that the market has plunged, it will be possible for it...

The Post Has Not Heard of the European Central Bank

This is what readers of a WAPO piece discussing the crisis in Spain must have concluded. The piece noted the financial problems facing Spain's banks and government, and told readers:

"Only Germany has pockets deep enough to push down countries’ borrowing costs, guarantee fearful depositors’ investments and kick-start listless economies."

This is not true. The European Central Bank (ECB), like the Federal Reserve Board, has essentially limitless ability to support banks in Spain and elsewhere....

Educating Thomas Friedman on the Economy

It's a tough job, but someone's got to do it. Today, Thomas Friedman tells us about the squandered opportunities around the world.

Someone else can straighten him out on China and the Arab world (the U.S. government's fondness for hereditary monarchies and autocratic regimes clearly is part of this story), but I'll pick up Europe and the United States. In the case of the former, Friedman joins German Chancellor Angela Merkel in lecturing the peripheral countries on their failure to take advan...

David Brooks on Debt: Can Someone Buy the Man an Intro Textbook?

David Brooks is again prominently displaying his misunderstanding of economics in the New York Times. He told readers in today's column:

"Every generation has an incentive to borrow money from the future to spend on itself. But, until ours, no generation of Americans has done it to the same extent."

He then goes on to tell us that we are borrowing because we are more secure, arghhhhh!

Okay, let's try to put this so that even David Brooks can understand it. First, we are not borrowing money fr...

Why Does Fred Hiatt Say That Democrats Are Opposed to Giving Less Money to Drug Companies and Overpaid Medical Specialists?

For some reason Fred Hiatt thinks (or at least says) that Democrats are opposed to cutting the excessive payments that our health care system makes to many providers. In yet another column bemoaning the budget deficit, Hiatt told readers:

"Revenue will have to go up, and the rising arc of health care and pension spending will have to be bent down. Democrats hate the latter, Republicans hate the former, and voters don’t like either."

While Democrats and Republicans (the voters, if not the poli...

Why Would the ECB Create Inflation by Printing Money, and Why Would That Be Bad?

In a column noting the bind in which the euro zone countries fund themselves, Robert Samuelson told readers that:

"Softening today’s austerity would require more borrowing. Who would lend? The ECB? Historically, excessive lending by central banks risks high inflation, though many economists discount that now."

Given the massive amounts of excess capacity in the euro zone it is difficult to see how additional lending in the euro zone would lead to inflation. The context in which central bank l...