Dean Baker's Blog, page 63

Austerity in UK: NYT Says Driving West in New Jersey is Unsustainable

The New York Times had a piece explaining what austerity (i.e. cuts in social services) has meant for the United Kingdom. While it is a useful account, at one point the piece tells readers:

"The austerity measures were imposed to eliminate budget deficits that ballooned to unsustainable levels in the aftermath of the financial crisis."

This seems to imply that the cuts were somehow economically necessary. This is not true. At the time, the UK had high rates of unemployment and large amounts...

The Trade Deficit: The Missing Part of the Story of Greater Room for Budget Deficits

Neil Irwin had an interesting Upshot piece pointing out that concerns about budget deficits have receded dramatically in recent years. This is of course true, as politicians of both parties have largely given up their concerns about the deficit. Many prominent economists have also moved away from previous positions that held that budget deficits were a major problem.

While the government can clearly run much larger budget deficits, without negative economic consequences, than many economists...

Confusion at NYT About China's Currency Management

An article on U.S. trade policy with China dismissed the idea that the United States should push China to raise the value of its currency. It told readers:

"Mr. Trump’s advisers have also pressed China to refrain from further devaluing its currency to lift its economy as American tariffs bite. A drop in the value of the Chinese currency in the past year has already neutralized much of the economic effect of the 10 percent tariffs that Mr. Trump placed on roughly $200 billion of Chinese export...

Why Do the Media Provide Cover for Austerity Cranks, Like the Folks Running the EU?

(This post first appeared on my Patreon page.)

It’s not uncommon to read new stories that quite explicitly identify economic mismanagement. For example, news reports on the hyperinflation in Zimbabwe routinely (and correctly) attribute the cause to the poor economic management by its leaders. We will see similar attributions of mismanagement to a wide range of developing countries.

One place we will never see the term mismanagement, or any equivalent term, applied is in reference to the auste...

Confusion on Investment at the Washington Post: Point Is to Displace Workers

The Washington Post had a rather confused piece that complained that investment encouraged by accelerated depreciation, which was a provision of the Trump tax cut (also the Obama stimulus), is "helping companies replace workers with machines." This is reported as though it is some sort of scandal, when it is in fact precisely the point of this provision.

The stated goal of the Trump tax cut was to promote investment. This was their rationale for having the bulk of the tax cut go to businesses...

MMT and Taxing the Rich

(This post first appeared on my Patreon page.)

I don’t consider myself an MMTer, but there is basic Keynesian concept which has been associated with MMT, which is both true and important. For the federal government, taxes are not about raising revenue, taxes are about reducing consumption to prevent inflation.

The point is that the federal government does not need taxes for revenue, since it can just print money. It instead taxes to create the room in the economy for government spending. This...

CBS Relies on Seriously Flawed Economics Textbooks

CBS News had a piece warning its audience about the problems of large government debt. It noted projections of rising U.S. government debt, commenting:

"The only countries with a higher debt load than the U.S. are Portugal, Italy, Greece and Japan. The first three have become synonymous with profligate spending and economic woes post-Great Recession, while Japan's "lost decade" of economic stagnation is a mainstay of economic textbooks."

The first three countries are all in the euro zone. The...

New York Times Is Badly Confused on European Data: Growth Is a Problem

The New York Times ran a piece headlined "Europe's middle class is shrinking. Spain bears much of the pain." The gist of the piece is that the middle class in Europe, and especially Spain is disappearing as the result of some mysterious process.

It tells readers:

"Spain’s economy, like the rest of Europe’s, is growing faster than before the 2008 financial crisis and creating jobs. But the work they could find pays a fraction of the combined 80,000-euro annual income they once earned. By...

It's Monday and Robert Samuelson Wants to Cut Social Security!

I guess we can always count on The Washington Post to print misleading pieces calling for cuts in Social Security. After all, what are newspapers for? Anyhow, Robert Samuelson gives us one of his usual tirades, misrepresenting most of the key items in the debate.

The basis of his outrage is a bill proposed by Representative John Larson to increase Social Security. The proposal is for a modest overall increase in benefits with a larger increase for the poor. The proposal also calls for indexin...

Steve Rattner Warns that Government-Granted Patent and Copyright Monopolies Are Imposing a Burden on Our Children

Of course, he wouldn't do that. Steven Rattner isn't concerned about the hundreds of billions (perhaps more than $1 trillion) that the government redistributes upward each year in the form of patent and copyright rents. These rents, which come to close to $400 billion annually for prescription drug alone, are a direct and intended result of the monopolies that the government gives companies and individuals as a way of paying for innovation and creative work.

But Steven Rattner isn't conc...