Dean Baker's Blog, page 78

Washington Post Says Second Round of Republican Tax Cuts Would Cost 1.0 Percent of GDP between 2028 and 2037

Actually the Post didn't tell readers this, it instead told them that the tax cut would, "would add an additional $3.2 trillion to the federal deficit over a decade," according to a projection from the Tax Policy Center. Since next to no one reading the Post has any idea of how much money $3.2 trillion between 2028 and 2037 is, it might have been useful to put this number in some context. As it is, the paper just told them that the cost of the tax cut would be really big.

Samuelson and the Great Recession

Yes, we must thank The Washington Post for running Robert Samuelson. He can always be counted on to get almost everything wrong. He shows this talent yet again in his column on the financial crisis.

He gives us three lessons, with number 1 being the most important, that we could have another great worldwide Great Depression. Yes, this is true, but not because of some mysterious force descending on the world economy.

If we have another Great Depression it will be because governments and centra...

Stiglitz, Summers, and Secular Stagnation

Last week Joe Stiglitz wrote a piece that included criticisms of the Obama administration for having an inadequate stimulus in response to the Great Recession. Larry Summers, who had been head of Obama’s National Economic Council responded by defending the administration. Stiglitz had a follow-up response to Summers.

Both Stiglitz and Summers are very capable of speaking for themselves so I won’t try to summarize their arguments, but I do want to take issue with one point in Summers’ piece. I...

Four Day Work Weeks Are Sort of Happening

The NYT has a strange piece which treats the idea of a four day work week as a sort of alien concept that perhaps we will see in the 22nd century. It is bizarre because there has been a consistent shortening of the length of work years for well over a century. In Germany, France, and other northern European countries the average work year is between 1400 and 1500 hours. This is due to the fact that workers are now guaranteed 5 to 6 weeks a year of vacation, in addition to paid sick days and p...

Is Trump's Trade War Going to Cause China to Have a Problem With Inflation?

That was one of the items on the list of factors adding to inflationary pressures in China in this NYT article, but it doesn't seem very plausible. China is on track to import a bit less than $140 billion worth of goods and services from the United States this year. This is less than 1.0 percent of China's GDP measured at its exchange rate value. (Using a purchasing power parity measure this would be about 0.6 percent.)

Suppose that China's trade war tariffs add 30 percent to the price of the...

The Housing Bubble and Financial Crisis Was Easy to See Coming

Ten years ago we saw the culmination of a period of ungodly economic mismanagement with the collapse of Lehman Brothers and a full-fledged financial crisis. The folks who led us into this disaster rushed to do triage and tend to the most important problem: saving the bankrupt banks.

They also had to cover their tracks. They insisted that the financial crisis was some sort of fluke event — a lot of bad things went wrong simultaneously — and who could have predicted or prevented that? They had...

If Prime Age Employment Rates are the Same in August as February, Has the Economy Hit Its Limits?

In a NYT piece assessing the state of the labor market after Friday jobs report, Neil Irwin notes that the employment rate for prime age workers (ages 25 to 54) stood at 79.3 percent in August. That is the same as the 79.3 percent rate in February, indicating that there had been no increase over a six-month period.

However, this may be less compelling as an argument that the labor force is hitting its limits than it initially seems. In August of 2017 the employment rate (EPOP) for prime age w...

Bernanke, Geithner, and Paulson Still Don't Have a Clue About the Housing Bubble

NYT readers were no doubt disturbed to see a column in  which former Fed Reserve Board chair Ben Bernanke, Obama Treasury Secretary Timothy Geithner, and Bush Treasury Secretary Henry Paulson patted themselves on the back for their performance in the financial crisis. First, as they acknowledge in the piece, all three completely failed to see the crisis coming.

During the years when house prices were getting way out of line with both their long-term trend and rents, Bernanke was a Fed go...

Federal Student Loan Programs: Food Stamps for For-Profit Colleges

The New York Times had a piece on how education secretary Betty DeVos is trying to block state efforts to prevent abusive practices by student loan servicers after she had weakened federal protections. Her argument is the same one that the federal government used to weaken state rules on mortgage lending practices during the housing bubble years, that federal law preempts state law.

I'll leave it to the lawyers to decide the legal question here, but the economic one is straightforward. If ser...

Medicare for All Battles

(This post originally appeared on my Patreon page.)

The Fact Check gang has been having a field day going after Bernie Sanders, Alexandria Ocasio-Cortez and other proponents of Medicare for All. The latest battle is over a study produced by the right-wing Mercatus which showed that a government-run health care program could reduce national health expenditures by $2 trillion over the course of a decade (roughly 0.8 percent of GDP).

Sanders and Ocasio-Cortez seized on this projection of savings...