Dean Baker's Blog, page 73

Does China's 2.5 Percent Inflation Rate Really Explain the Decline in the Value of Its Currency Against the Dollar?

In an article on the decline in the Chinese yuan against the dollar the NYT gave as one explanation:

"Inflation has begun to tick upward, and rising prices tend to make holding the relevant currency less attractive."

That one really doesn't seem plausible to me. In the most recent data, China's year over year inflation rate was 2.5 percent, virtually identical to the U.S. rate. If we look to 2019, the I.M.F. actually projects China's inflation rate will fall slightly to 2.3 percent, a hair lo...

Yes, the Republicans Want People with Health Problems to Pay Up the Wazoo

The discussion of health care has been badly warped ever since the debate over the Affordable Care Act (ACA) in 2009. A central feature of the ACA was the requirement that everyone get insurance, or pay a penalty if they don’t. While many resented having the government force them to buy insurance, especially in a context where they had to buy it from a private insurance company (i.e. there was no public option), this was actually a central feature of the ACA.

The main point of the ACA was to...

Nerd Talk: Growth Trends and Final Sales to Private Domestic Purchasers

Matt O'Brien had a good piece on yesterday's GDP numbers noting that we are not seeing the investment boom promised by promoters of the tax cut. However he argued that growth was likely to remain close to 3.0 percent based on the 3.1 percent growth rate reported in final sales to private domestic purchasers. In my GDP write-up I was somewhat less optimistic about near-term growth prospects, pointing to the 1.4 percent growth rate in final sales.

The difference in these two measures is that th...

Diverting Class War Into Generational War, Again

The wages of a typical worker have barely risen in four decades, many recent college grads are facing unbearable student loan burdens, housing costs are hugely outpacing inflation in many cities, making life especially hard for low- and moderate-income households. Naturally, the problem is the Social Security and Medicare received by baby boomers.

That's what Glenn Kramon, a former assistant managing editor at The New York Times, would have us believe according to his NYT column, seriously. H...

House Sales Fall Again In September, More Evidence Tax Cut is Hitting Housing Market

New house sales were down 5.5 percent in September from their August level and by 13.2 percent from year ago levels. This is pretty much the textbook story of crowding out from the tax cut.

The story holds that if the government runs large deficits when the economy is near full employment, it will lead to higher interest rates. Higher rates then discourage home buying and construction, investment, and raise the value of the dollar, thereby increasing the trade deficit.These factors together o...

Sears and Amazon: Differences for Workers

The NYT had an interesting piece noting the differences between the way Sears and other large employers of the last century treated their workers and the way Amazon treats its workers. The focus of the piece is a profit sharing plan which gave 10 percent of Sears before-tax profits to workers in the form of a retirement fund that purchased company stock.

While this plan did allow many employees to accumulate substantial assets to support themselves in retirement, it is worth noting that a sim...

Wage Growth Still Doesn't Look Like the Late 1990s Boom

Ernie Tedeschi has a very useful piece in the NYT Upshot section noting that wage growth is still far below its 1990s boom pace, even though unemployment is actually slightly lower. He notes that the slowdown is pretty much across the board, hitting all demographic groups and industries and occupations. This rules out stories that seek to explain this slowdown as a result of some group of workers lacking the right skills.

He notes three plausible stories that could explain weaker wage growth....

Containing CEO Pay: Shareholders are Allies

Note: This post first appeared on my Patreon page.

Last week Roger Lowenstein had a piece in the Post about GE's hiring of a new CEO after the prior one served less than a year. According to Lowenstein, the new CEO's contract will give him incentives worth $300 million over the next four years if he does well by the shareholders. He will walk away with $75 million if he does poorly. This follows the hiring of an inept CEO who was dumped in less than a year and long-term CEO Jeffrey Immelt, wh...

Trump Regulatory Reform, Allowing Homeowners to Dump Sewage on Neighbors' Lawns, Will Save $1.6 Billion Annually

The reporting on Trump's regulatory reform really fell down big time. The Trump administration has been boasting about $23 billion in savings over the indefinite future. As this Bloomberg article points out, this comes to $1.64 billion a year.

What this and other articles neglect to mention is that this is not net savings. This figure is the savings to the person subject to the regulation, for example the homeowner who wants to dump their sewage on their neighbor's lawn rather than putting in...

The Cost of Extending Medicaid Coverage in Georgia Would be Between $30 and $45 Per Person

For those who were wondering what the conflicting estimates of $300 million a year by Democratic Gubernortial candidate Stacey Abrahms and $450 million a year by her Republican opponent, Brian Kemp, would mean for the people of Georgia, these figures might be helpful. The NYT article should have included something like this.