Dean Baker's Blog, page 552

German Exports Are Slowing

This one is almost too painful to write about. The Post tells us that:

"Even some of the recent bright spots in the global economy are starting to dull. German economic growth, for example, appears to be slowing. Germany exports heavily to the European nations that are experiencing a debt crisis."

Is there anything in the world that was more predictable? Why on earth didn't the people making policy at the ECB see this?

David Wessell Is Seriously Wrong, There Is Much More That the Fed Could Do

David Wessel, the Wall Street Journal's economics editor, badly misled NPR listeners this morning when he told them that there is little that the Fed could do to boost the economy. This is not true.

The Fed could do another round of quantitative easing, although this is likely to have a limited impact. It could also target a long-term interest rate, for example putting a 1.0 percent interest rate target on 5-year Treasury bonds.

Alternatively, the Fed could pursue a path that Bernanke...

Arghhhhhh! China's Desire to Slow Growth is Good News for the U.S., Not Bad

Ezra Klein is one of the more knowledgeable columnists writing on economic policy today. He puts the rest of the Washington Post team to shame. But he gets it wrong in a really huge way in his front page column today.

He says that China's desire to slow its economy means that there will be no engine for economic growth in the world. This is 180 degrees wrong. If China wants to slow its economy because it is worried about inflation, then the simple textbook method would be to raise the value o...

NPR Still Doesn't Know About the Housing Bubble

Morning Edition had a segment on the current turmoil in financial markets in which it asserted that the United States still has not recovered from the effects of the financial crisis. This is not true.

The economy is not in any obvious way suffering from the effects of the financial crisis. Potential homebuyers have little difficulty getting mortgages. We know this because the Mortgage Banker Association's mortgage application index has not been rising. This index measures applications, not m...

National Public Radio Insults the Washington Policy Community

National Public Radio showed either its ignorance of the policy community in Washington or its bias in supporting Peter Peterson's efforts to cut Social Security and Medicare in a news story on the deficit and taxes. It described Maya MacGuineas, the head of the Committee for a Responsible Federal Budget, as:

"about as close to an independent voice on tax policy as you'll find in the nation's capital."

While Ms. MacGuineas has been critical of both political parties, this is true of many of t...

The Military Is Projected to Spend $7.8 Trillion Over the Next Decade

The Washington Post is trying to win yet another Pulitzer for bad reporting. Today's entry is a page 4 story discussing the impact of potential cuts to the military budget. The Post told readers that the Pentagon could face $600 billion in cuts over the next decade.

That is supposed to sound really really big. But is it? It would have been helpful if the Post had bothered to tell readers the baseline level of spending. The Congressional Budget Office baseline is $7.8 trillion over the...

The European Central Bank: The Main Cause of the Debt Crisis

The Post forgot to mention the role of the European Central Bank (ECB) in worsening the European debt crisis. The original crisis stemmed from the failure of the ECB to notice and respond to the huge housing bubbles that were driving the economies of countries like Spain and Ireland.Instead, it allowed these bubbles to grow to sizes where their collapse would inevitably sink the economy.

However, the ECB has compounded this damage by its limited response the downturn. It never pushed its...

Erskine Bowles Gets $350,000 a Year from Morgan Stanley

For some reason the media never find room to mention the fact that Erskine Bowles is a director of Wall Street investment bank Morgan Stanley (an otherwise bankrupt beneficiary of the bailout). Bowles was a co-chair of President Obama's deficit commission and is now apparently one of the people whose name is being mentioned as a possible successor to Timothy Geithner if he were to resign as Treasury Secretary.

If Bowles was getting $350,000 a year from the United Auto Workers it seems likely ...

Erskine Bowles Get $350,000 a Year from Morgan Stanley

For some reason the media never find room to mention the fact that Erskine Bowles is a director of Wall Street investment bank Morgan Stanley (an otherwise bankrupt beneficiary of the bailout). Bowles was a co-chair of President Obama's deficit commission and is now apparently one of the people whose name is being mentioned as a possible successor to Timothy Geithner if he were to resign as Treasury Secretary.

If Bowles was getting $350,000 a year from the United Auto Workers it seems likely ...

How Supply Affects Employment in a Downturn: Another Exchange With Casey Mulligan

Casey Mulligan seems to believe that because some groups (i.e. older workers) can increase their employment in a downturn, that the problem is one of supply and not demand. As I noted in my past exchange, a recession does not mean that some demographic groups will not be preferred to others. In the downturn there has been an increase in employment for college grads also.

There is nothing inconsistent with the idea that demand is a constraint on employment yet some individuals may be able to b...