Dean Baker's Blog, page 565

The Trade Deficit Jumps While the Politicians Play Debt Ceiling Poker

The Commerce Department reported that the trade deficit jumped in May to $50.2 billion from $43.6 billion in April. The monthly data are erratic, but this is definitely bad news. This means that growth in the U.S. economy is likely to be very weak in the second quarter. (Measured in constant dollars, the deficit increased by $3.9 billion.) It does not look like trade is about to become a major driver of growth and jobs.

This is also bad news for fans of income accounting. If we have a trade d...

Italy's Crisis: The ECB Could Just Print the Money

It would have been worth reminding readers that the debt crisis in Italy and other euro zone countries is first and foremost a political crisis. The European Central Bank (ECB) can just print euros which can be used to address any potential default risk among its member countries. There would be little obvious economic downside to this policy since most European counties have large amounts of unemployment and excess capacity due to inadequate demand.

If there is a risk of default it is...

Let's See, If President Obama Commits To Making Large Cuts in Future Budgets Then He Will Have Lots of Money to Spend in the Future

That seems to be Ruth Marcus's argument in her column today. The point is that he needs money for his education and infrastructure agenda, but he will only get this money if he commits to make large cuts, including in areas like education and infrastructure. Okay, no one expects the Washington Post to make much sense, but does anyone have any idea what she is talking about?

Republicans Claim That They View Restrictions on Light Bulbs as an Excess of Big Government, NPR Doesn't Have a Clue What They Believe

Politicians sometimes say things that they don't believe. Reporters really should know this. That is why NPR seriously misinformed listeners when it told them that Republicans oppose regulations on incandescent light bulbs intended to reduce energy use because they believe it is an excess of big government.

This is their claimed motivation. They may be opposing this regulation for entirely different reasons. For example, they may not care at all about the future of the planet, they may have g...

Morning Edition Spreads Nonsense on Investment and Innovation

Morning Edition spread a bit of nonsense this morning in a segment on innovation. It told listeners that firms are not investing much right now, which it attributed to uncertainty. It's not clear what metric it is using, but investment in equipment and software as a share of GDP is almost back to its pre-recession peak. Given that many sectors on the economy are still operating far below full capacity, this is a fairly high level of investment.

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Is Peter Peterson a Major Driver of the Country's Debt?

Let's imagine that Wall Street investment banker and long-time Social Security foe Peter Peterson had $1 billion in government bonds (also known as "IOUs"). Suppose that he decided to sell them. According to Glenn Kessler, the Washington Post's fact checker, this would create a burden for the U.S. government.

This sale of bonds would displace other bonds that the United States might want to sell in the financial market. This would lead to higher interest rates on U.S. debt. Therefore Mr...

David Brooks Says All We Can Do Is Sit Back and Throw People Off Medicare

David Brooks is such a moderate guy. He doesn't have the hubris of people who think that we can control risk, boost growth and employment, or never raise taxes. He just thinks that we have to reduce Social Security and Medicare.

And Speaker Boehner and President Obama apparently agree with him. They were reportedly prepared to raise the age of eligibility for Medicare from age 65 to age 67. Unfortunately, the people who think that we can never raise taxes and the people who support Medicare a...

Douthat Is Hiding the Military Budget

Ross Douthat did a little pundit slight of hand when he told readers that:

"For decades, the tug-of-war between left and right has kept government's share of the economy nearly constant, around 19 percent of G.D.P. But in what you might call the revenge of Lyndon Johnson, the ballooning cost of Medicare is poised to tilt the debate decisively toward liberalism."

Douthat has to assign a very loose meaning to "around." In fact, the Reagan military build-up caused spending to hit 23 percent ...

Robert Samuelson Covers Up for the Health Care Industry

Robert Samuelson did one of the great pox on both your houses pieces at which the Post excels. He criticized the right, as personified by Grover Norquist, for being unwilling to raise taxes. Then he trashed my friends at the Center on Budget and Policy Priorities for refusing to produce a balanced budget, which he argues would have to show large cuts in Social Security and Medicare.

Those of us who don't work for the Post, and therefore are free to speak honestly about the deficit, know that ...

WAPO Talks About Social Security "Changes"

Usually it is the politicians who use euphemisms to try to conceal the impact of their policies. However, the Washington Post decided to help them along in a front page article when it twice referred to Social Security "changes" that could be part of the budget agreement.

Of course "changes" don't reduce the deficit unless they are cuts. President Obama and the congressional leadership were discussing plans to cut Social Security. These cuts are likely to be very unpopular, so it is likely...