Dean Baker's Blog, page 542

Recessions Mean Negative Growth

The Washington Post told readers that the economy is at risk of a double-dip recession because reported job growth fell to zero in August. Actually, the zero figure was due to some quirks (e.g. the Verizon strike). The only double-dip recession of the last 50 years (1980-81) was quite deliberately engineered by the Fed. A major component of GDP will have to turn sharply negative to cause growth to go in reverse. This will require more than the gradual shrinking of the government sector, and t...

The Payroll Tax Cut Did Not Cost Security Revenue

The NYT wrongly told readers that the payroll tax cut cost Social Security, "resulted in $67.2 billion of lost revenue for Social Security in 2011." This is not true. The tax cut was fully offset by money from general revenue so that the trust fund was unaffected by the tax cut.

Predicting Double Dips: Bad Induction

David Leonhardt does some seriously bad induction when he tells readers that:

"Over the last 50 years, every time that job growth has been as meager as it has been over the last four months, the economy has been headed toward recession, in a recession or in the immediate aftermath of one."

The problem in this story is that over most of this period the underlying rate of labor force growth was close to 2 million a year. It currently is around 1 million a year. The reason for the falloff is t...

Vice-President Biden Gets China Badly Wrong

Joe Biden seems badly confused after his recent trip to China. In an oped column he told NYT readers that:

"according to the International Monetary Fund, America's gross domestic product, almost $15 trillion, is still more than twice as large as China's; our per-capita G.D.P., above $47,000, is 11 times China's."

Mr. Biden was looking at the wrong table. It seems that he was using GDP measures based on exchange rate comparison. This would lead to an understatement of China's GDP if its...

Thomas Friedman Wants YOU to Sacrifice

That's right, he said it in his column today. He approvingly quoted Kishore Mahbubani, a retired diplomat who is now the dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore:

"No U.S. leaders dare to tell the truth to the people. All their pronouncements rest on a mythical assumption that 'recovery' is around the corner. Implicitly, they say this is a normal recession. But this is no normal recession. There will be no painless solution. 'Sacrifice'...

The Post Decides to Scare Readers About the Finances of Public Pensions

The Washington Post used a front page story to scare readers about public sector pensions, implying that they faced an enormous unfunded liability. It refers to "states facing, by one estimate, a combined $3 trillion in unfunded pension liabilities."

It is unlikely that readers are able to assess the meaning of this $3 trillion figure in any meaningful way. It is worth noting first that it assumes that the stock market will provide a return that is approximately half of its historic average o...

David Brooks Is Being Ignorant on the Economy Again

David Brooks told readers today that there are no jobs in the green economy. While many political figures may have oversold the prospect for green jobs, the case that Brooks musters is much less clear than he suggests. For example, he tells us that:

"California was awarded $186 million in federal stimulus money to weatherize homes. So far, the program has created the equivalent of only 538 full-time jobs."

While that may sound like a pretty bad spending to jobs ratio, if we go to the

The Post Goes Nuts on Demographics, Again

Just after I say something nice about the WAPO's reporting, the paper does its best to make up for its good deed. We find the Post trying to blame the slow recovery on demographics. See, the big problem is that because of the retirement of the baby boomers the labor market isn't growing as fast as it had in prior recoveries.

Okay, let's get this one straight. We have more than 25 million people unemployed, underemployed, or out of the workforce altogether because they have given up looking...

Jobs and the Environment: Being Careful With Numbers

The NYT had an article discussing jobs and the environment today. It told readers about research by Michael Greenstone, an economics professor at M.I.T, that found that the Clean Air Act and amendments from 1972-1987 led to a loss of 600,000-700,000 in the industries directly.

It is important to note that this is not a measure of the job loss to the economy as a whole. Money that was not spent in these industries was mostly spent elsewhere. This means that the job loss to the economy as a...

The Post Checks With Businesses and Finds No Signs of a Double-Dip

Neil Irwin at the Post did some real reporting today. He talked to business executives and reviewed conference calls to determine if there was evidence that they were scaling back their expansion plans. Irwin found considerable nervousness, but little evidence that businesses planned to curtain investment and hiring. This supports the view that the economy's near-term prospects are for a continuation of weak growth, but no double-dip. Of course the current growth rate is not rapid enough to e...