Dean Baker's Blog, page 51

The U.S. Economy Is NOT the World's Largest

I know that reality often has little place in our political debates, but is there any way we can the New York Times and other news outlets to stop saying that the U.S. economy is the world's largest? It happens not to be true.

According to the I.M.F., using purchasing power parity measures, which most economists view as the best measure, China passed the United States in 2015 and is now more than 25 percent larger. Maybe reporters and editors get a kick out of saying that the U.S. is the worl...

Another Argument for Free Market Drugs: Limits on Supply of Patients for Clinical Trials

In a very interesting column in the Wall Street Journal, Peter Bach and Mark Trusheim argue that biosimilar drugs have been ineffective in providing effective competition for biological drug. The gist of the argument is that the testing process required for a biosimilar is lengthy and expensive.

Furthermore, this testing requires a large number of patients for clinical trials.This can lead to the perverse situation where testing for a biosimilar could be pulling potential patients from being...

Quick Note on Downward Jobs Revisions

The Bureau of Labor Statistics reported that its benchmark revision to its job numbers shows that the economy created 501,000 fewer jobs between March of 2018 and March of 2019 than previously reported.There are a few points to be made about this number.

First, there is nothing fishy here. Trump has zero to do with the data that comes from the Bureau of Labor Statistics (BLS). BLS is staff by committed professionals who would sure raise a big stink if Trump tried to tamper with the data.

I sh...

CEOs Say They Will Stop Maximizing Shareholder Value, Be Better If They Stopped Maximizing CEO Compensation

The Washington Post had a major front page article announcing in the headline "Group of top CEOs says maximizing shareholder profits no longer can be the primary goal of corporations." The piece refers to a statement by the Business Roundtable, a group comprising many of the country's largest companies, which argues for an alleged shift in direction.

The problem with the statement and the piece is that that there is little evidence companies have been maximizing shareholder profits in the las...

NYT's Upside Down Economics on Germany and the Euro Zone

Paul Krugman already jumped on this New York Times piece, but the paper really deserves a thrashing for it. The story is that Germany's economy had been driving the euro zone economy. It now appears on the edge of recession, having shrunk at a 0.4 percent annual rate in the second quarter. The article then asks whether the rest of the euro zone will now be able to support Germany's economy and restore it to growth.

The problem with this story, as Paul points out, is that Germany has been runn...

Good News: The Stock Market is Plunging

The stock market enjoys a mythological place not only among mainstream media types, but also among many progressives. For some reason this measure of expected future corporate profits is taken as a measure of economic well-being.

The fact that the media obsesses over the stock market hardly needs to be mentioned. If there is one item about the economy that we can be sure will be repeated every day, it is the movement in the Dow or the S&P 500. And, needless to say, an upward movement is g...

The Markets Are Going Crazy and So Is Economics Reporting

It was big news when the interest rate on the 10-year Treasury bond fell below the interest rate on a 2-year note earlier this week. This interest rate inversion has generally signaled a recession in the near future. While I am skeptical of the causality here, the bond markets do have good reason to expect a weaker economy in the immediate future, which will presumably mean future rate cuts by the Fed.

The Washington Post noted the extraordinary low interest rate environment, beginning by hig...

Yet Another New York Times Column Gets the Story on Automation and Inequality Completely Wrong

I am a big fan of expanding the welfare state but I am also a big fan of reality-based analysis. For this reason, it’s hard not to be upset over yet another column telling us that the robots are taking all the jobs and that this will lead to massive inequality.

The first part is more than a little annoying just because it is so completely and unambiguously at odds with reality. Productivity growth, which is the measure of the rate at which robots and other technologies are taking jobs, has be...

Why Would the Democrats Want to be "Tough" on Trade, as Opposed to Smart on Trade?

The New York Times has created an absurd dilemma for Democrats, "how to be tougher on trade than Trump." This framing of the trade issue is utterly bizarre and bears no resemblance to reality.

While Trump has often framed the trade issue as China, Mexico, and other trading partners gaining at the expense of the United States because of "stupid" trade negotiators, this has little to do with trade policy over the last three decades. The United States negotiated trade deals to benefit U.S. corpo...

In a Tight Labor Market, the Profit Share of Income Is Falling

Last month’s GDP report also included revisions to previously reported profit data for the last three years. The earlier reports showed a slight increase in the profit share in 2018; the revised data showed that the profit share of corporate income had fallen by 0.4 percentage points from the prior year. This is important both because it means that workers are now clearly getting their share of the gains from growth and also because of what it tells us about the structure of the economy.

On t...