Dean Baker's Blog, page 95

Krugman on Drugs

I was glad to see Paul’s short post explaining some of the economics of the US government negotiating drug prices with the drug companies: the route Donald Trump rejected. I thought I would add a few more points.

First, the monopoly profits earned by the drug companies provide a powerful incentive for rent-seeking. This is the standard story that economists always complain about with trade protection, except instead of talking about a tariff that raises the price of the protected item by 10 o...

The U.S. Subsidizes Pharmaceutical Research for Europe and Other Children's Tales

Donald Trump is relying on a silly myth in his latest pharmaceutical industry America First crusade. He is claiming that because other countries don't give our drug industry unchecked patent monopolies, we are subsidizing research for them. The numbers disagree.

According to the National Science Foundation, our pharmaceutical industry spent $62.5 billion on research worldwide in 2013, the most recent year for which data are available. If we increase this by 25 percent to account for growth b...

On Drug Pricing NYT Does Serious Pro-Trump Editorializing

The NYT did some serious editorializing in a headline that told readers:

"to lower drug costs at home, Trump wants higher prices abroad."

Sorry folks, the NYT does not know what Trump wants. In fact, a reasonable first guess might be that Trump wants to increase the profits of the pharmaceutical industry, with whom he is very close. The NYT would be on sounder footing with a headline saying "to increase pharmaceutical industry profits, Trump wants foreigners to pay more for drugs." This headl...

Why Did NYT Emphasize Cost of Solar Power Requirement in CA Rather than Savings?

The second paragraph of an article on a new requirement in California — that all new homes have solar power — told readers:

"It will add thousands of dollars to the cost of home when a shortage of affordable housing is one of California’s most pressing issues."

It then added:

"That made the relative ease of its approval — in a unanimous vote by the five-member California Energy Commission before a standing-room crowd, with little debate — all the more remarkable."

The piece then...

The State of the Labor Market, What the JOLTS Data Tell Us

The Bureau of Labor Statistics released data from its March Job Openings and Labor Turnover Survey (JOLTS) yesterday. It got some attention because the job openings figure rose substantially, bringing the job opening rate to 4.3 percent, the highest since the survey was first fielded in December of 2000. This is somewhat higher than the 3.7 percent hire rate. Since the hiring rate had previously exceeded the job opening rate, as seen below, this was taken as fresh ammunition by the "hard to g...

Correcting Krugman: Health Care Exchanges Need Healthy People, It Doesn't Matter If They Are Young

I generally agree with Paul Krugman's columns, and this is the case with his piece today on Republican efforts to kill Obamacare. However, there is one point where I have to take issue. Krugman tells readers:

"G.O.P. sabotage disproportionately discourages young and healthy people from signing up, which, as one commentator put it, 'drives up the cost for other folks within that market.'"

The problem with Krugman's comment is the "young" part. The exchanges need healthy people, it doesn't matt...

Washington Post Promotes Confusion On Trump Tax and Spending Cuts

Heather Long's piece in the Washington Post telling readers, "Trump wants a $15 billion spending cut. That's about 1 percent of the cost of his tax bill," badly misled readers. The $1.5 trillion cost of the tax bill is a ten-year figure. The $15 billion in spending cuts are meant to hit in a single year. Presumably, Trump and his Republican allies will look for similar cuts in future years. This means that the cuts are 10 percent of the cost of the tax bill.

Of course, being larger doesn't ma...

Helping Blue States Preserve the SALT: We Know the Beneficiaries Are Higher Income People

I see my friend Jason Furman is jumping into the debate on efforts by states like New York to develop workarounds for the limit on the State and Local Tax (SALT) deduction in the Republican tax plan. Jason reminds us that the beneficiaries of the workarounds (like New York's plan to replace a portion of the state income tax with an employer-side payroll tax) are overwhelmingly higher income taxpayers. This doesn't bother me.

As I've pointed out before, limiting the SALT deduction is not about...

If There Is a Shortage of Construction Workers, Why Aren't Employers Raising Pay?

It looks like another case where we have a skills mismatch. In a NYT column criticizing Sean Hannity's housing investments, Bill Sapotio tells us that the housing industry:

"still needs some 200,000 workers, with some of that shortfall no doubt linked to current immigration policy, or the fear of it. The need is so great that the Home Depot Foundation is putting up $50 million to help train and hire skilled workers."

The problem with this story is wages are not rising especially rapidly in co...

Economists Ignore Economic Data in Views on Trade Policy

Ben Casselman's NYT piece on economist Tim Kane's run for a congressional seat in Ohio called my attention to an economists' poll that I had missed. The poll posed the following question to a group of elite economists:

"An important reason why many workers in Michigan and Ohio have lost jobs in recent years is because US presidential administrations over the past 30 years have not been tough enough in trade negotiations."

Of the whole group, 64 percent either strongly disagreed or disagreed...