Dean Baker's Blog, page 536

George Will Is Upset Because Barney Frank Wants to End the Banks' Control Monetary Policy

That's right, Representative Barney Frank, the ranking Democrat on the House Financial Services Committee, proposed legislation that would take away the votes that the banking industry has on the Federal Reserve Board's Open Market Committee (FOMC). As the FOMC is currently structured, 12 of the 19 members are essentially appointed by the banks, with 5 of the 12 voting at any one time.

George Will is outraged that Frank would take away the banks' direct control over the country's monetary...

The Post Does Mind Reading at the European Central Bank

The Washington Post explained the reluctance of European Central Bank president Jean-Claude Trichet to support a large write down of Greek debt that would force creditors to take large losses by saying:

"Trichet and others worry that a default or even a steep devaluation of Greek bonds would wreck the euro zone's credibility and make it harder for countries, banks and companies to raise money."

Actually, the Post doesn't know what Mr. Trichet and others are worried are actually about, it...

Germany Is a Slow Growing Rich Country, China Is a Fast Growing Developing Country

In a useful anti-austerity editorial the NYT makes the mistake of equating the trade surpluses of China and Germany. There is a fundamental difference between these countries. China is a fast growing developing country. In standard economic theory we would expect that it would be a capital importer (meaning it has a trade deficit) since capital gets a much higher return in China than elsewhere. The fact that China and other developing countries are growing by running large trade surpluses...

AP Says a Financial Speculation Tax Could Lead to an Attack By Martians

Close, but not quite; citing no evidence whatsoever, an AP article on plans to impose a financial spepculation tax told readers that:

"though the tax could dent growth and employment, it has won a fair degree of support across the 17-country eurozone, including France and Germany, the EU's two biggest economies."

This should have caused readers to scratch their heads and some people at AP to get fired.

Okay, we know that rich and powerful people don't like the idea of taxing financial...

Ruth Marcus Is Right: Don't Focus on Budget Trivia

It's nice to see Ruth Marcus use some simple common sense in her Post column today. She criticizes the flap over the $16 breakfast muffin (which turns out not to be true). She then points to other big flaps over very little money.

The points are well-taken. Many budget battles are over trivial portions of the budget. (John McCain made a $1 million appropriation [0.00003 percent of federal spending] a centerpiece of his 2008 presidential campaign.) It would be great if the Post would use its n...

USA Today Says Republicans Want Joe the Plumber to Subsidize Corporate Jet Gang

Actually, USA Today didn't put it in quite these terms, and readers of its piece on raising airport fees probably missed it, but that is the clear implication of one of the statements in the piece. The piece told readers that:

"The security fees that passengers pay now cover about 43% of its costs of providing security in the air."

If this is accurate, then opponents of raising the fees believe that average taxpayers should subsidize the travel of frequent flyers and especially users of...

A More Serious Way to Cover Street Protests

The NYT had a good piece on the wave of world-wide protests driven by economic policy today. This piece contrasts with a piece last weekend which clearly had the purpose of making the protests against Wall Street look foolish. Reporters would have little problem finding ill-informed inarticulate people at any of the protests mentioned in today's piece. However, these people would not be representative of the protest and their views would not explain the cause of the actions.

David Brooks on Stimulus: The Food is Poison and the Portions are So Small!

Jonah Gelbach takes me to task for not reading David Brooks column carefully enough. Had I done so, I would have noted this part about President Obama's latest jobs plan:

"Look at the recent Obama stimulus proposal. You may like it or not, but it's trivial. It's simply not significant enough to make a difference, given the size of the global mess."

After telling us that stimulus does not work, Brooks is now telling us that Obama's plan is too small to make a difference.

David Brooks Is Upset at Liberals Who INSIST on Applying Arithmetic to Economics

David Brooks is really upset, we may have a lost decade because he is sitting there being right, standing in the middle, and the two extremes who control public debate won't agree with him. How do we know Brooks is right? Well, he is in the middle between the two extremes he just told you about, how could he not be right?

How do we know that the liberals/progressives are wrong? Brooks tells us:

"Many Democrats are predisposed to want more government spending. So they pick up on the one...

How Did NPR Determine that the Political Deadlock Is Slowing the Economy?

Cokie Roberts told listeners that the political deadlock between President Obama and Congress is slowing the economy [sorry, no link yet]. It is far from clear that this is the case. Consumption as a share of disposable income is actually higher than its post-war average. Investment in equipment and software is nearly back to its pre-recession share of output, which is striking given the large amount of excess capacity in most sectors of the economy. It is not clear what component of GDP that...