Monday , June 1 2020
Home / Dean Baker
Dean Baker

Dean Baker

I am a senior economist at the Center for Economic and Policy Research (@ceprdc). I also run the blog Beat the Press (@beat_the_press)

Articles by Dean Baker

Trump Veto Student Loan Debt Relief Measure Will Save Government 0.02 Percent of Projected Spending

2 days ago

Yesterday Donald Trump vetoed a resolution passed by Congress, which would have left in place rules making it easier for students to default on debt owed to for-profit colleges that had engaged in deceptive marketing practices. The Washington Post told readers that this veto is expected to save the government $11 billion over the next decade.
Most readers may not have a good sense of how much money $11 billion over the next decade is. The government is projected to spend 60,700 billion over this period. That means the savings from this veto will be a bit less than 0.02 percent of projected spending.
The post Trump Veto Student Loan Debt Relief Measure Will Save Government 0.02 Percent of Projected Spending appeared first on Center for Economic and Policy Research.

Read More »

Washington Post Tells Readers About Trump’s “Existential” Threat to China

4 days ago

Thankfully, it is not a nuclear war. Apparently the Washington Post thinks plans considered by Trump to delist Chinese companies from U.S. stock exchanges and to make it more difficult for the country to trade in dollars will pose an “existential” threat to the country.
While these plans, which put into practice, will almost certainly sink the stock market and further alienate the United States from its traditional allies, it is very hard to understand how this could be an existential threat to China. Chinese companies that are already listed on U.S. stock exchanges are not currently raising capital. If they are delisted, the price of their shares will fall sharply, but that does not directly affect their ongoing operations. Other Chinese companies will presumably be blocked from being

Read More »

A Gilead-Remdesivir Fix: The Ten Percent Solution

5 days ago

The Washington Post had an excellent piece documenting how the government put up most of the money for developing remdesivir, a drug that now offers the hope of being the first effective treatment for the coronavirus. As the piece explains, in spite of the substantial contribution of public funds, Gilead Sciences holds a patent monopoly on remdesivir, which will allow it to charge whatever it wants without facing competition from other manufacturers.
There is a simple and obvious solution to this problem. The government should simply take possession of the patent, putting it in the public domain so that anyone can manufacture the drug and also conduct further research, subject to the requirement that any subsequent developments are also in the public domain. (This would be analogous to the

Read More »

Restaurants in the Pandemic

8 days ago

The NYT ran a column by a bar-restaurant owner telling of the horrible circumstances facing restaurants during and after the shutdown period. While the restaurant industry is among the hardest hit sectors, and many will not survive, a few of the complaints in the piece need some qualification.
For example it tells readers:
“Rent is obviously one of our biggest expenses, especially in larger cities. Rent easements are not voluntarily coming from landlords afraid that they will not be able to pay their taxes and other expenses. For commercial rent forgiveness to become a given, it would have to be mandated by state government, and for that to work the landlords would in turn have to be granted easements of property taxes. That might mean drawing a straight percentage line, cutting rents by

Read More »

The Sure Way to End Concerns About China’s “Theft” of a Vaccine: Make it Open

11 days ago

In the last couple of weeks both the New York Times and National Public Radio have warned that China could steal a vaccine against the coronavirus, or at least steal work in the U.S. done towards developing a vaccine. Both outlets obviously thought their audiences should view this as a serious concern.
As I wrote previously, it is not clear why those of us who don’t either own large amounts of stock in drug companies or give a damn about Donald Trump’s ego, should be upset about the prospect of China “stealing” a vaccine. Concretely, if China gained knowledge from labs in the United States that allowed it to develop and produce a vaccine more quickly, this would mean that hundreds of millions of people might be protected against a deadly disease more quickly than would otherwise be the

Read More »

Can You Make Stagnating Incomes Go Away? The New York Times Wants You!

13 days ago

There is an endless market for pieces that tell us that the typical worker is doing quite well, in spite of all the gloom and talk we hear constantly. Michael Strain, who is actually a pretty good economist, took on the job in a column in the NYT yesterday.
The gist of Strain’s piece is that we shouldn’t be upset about inequality because the great fortunes at the top are really helping to make us all richer. He contrasts the 1990s, when inequality grew a lot, with the period from 2007 to 2017, when there was little rise in inequality. Strain notes the much slower income growth in the second period and tells us:

“I would argue that part of the answer must be that inflation-adjusted wages for typical workers grew 44 percent more in the 1990s than in the 10 years beginning in 2007. “

That

Read More »

Washington Post Runs Major Article Saying Landlords Are Morons

16 days ago

The piece tells readers that small businesses in cities with high rents face a serious risk of bankruptcy. The point is very clear in the headline, “small businesses in high-rent cities face disaster. If they go under, urban life will change.”
The obvious problem with this story is that if large numbers of businesses go under, then it is hard to see how rents stay high. Landlords may not be the smartest folks in the world, but it doesn’t take a genius to realize that you get more money from a rent that is 20 or 30 percent lower than from a vacant building. If rents drop sharply, the high-rent cities would no longer be high-rent cities.
Of course the Post could be right and landlords may not be able to figure out that they are better off with a tenant paying lower rent than not getting any

Read More »

NYT Has Trouble Talking Seriously About the Swedish Approach

17 days ago

Opinion columns are always given more leeway than news articles, but it would be reasonable to expect that an opinion column in a major newspaper have some connection to reality. That does not appear to be the case with this one that tells us “I live in Sweden. I’m not panicking.”
The piece is a defense of Sweden’s decision to not have a shutdown period in which most businesses are closed and people are restricted from traveling for non-essential purposes. This has resulted in far higher infection rates in Sweden and most importantly far higher death rates. 
The only acknowledgment of this failure is when it tells readers:

“Sweden’s approach differs even from that of our Scandinavian neighbors, where society swiftly closed and many fewer deaths have been reported. Critics argue that our

Read More »

Corruption and the Pandemic Bailout

18 days ago

(This piece was originally posted on my Patreon page.)
Neil Irwin had an interesting New York Times piece on how concerns about moral hazard in the bailout may damage the recovery. The gist of the article is that the fear that bad actors will be wrongly rewarded will prevent us from spending enough money to get the economy back on its feet. Irwin’s point is very important, but it does require some further examination.
We might agree for example, that it is silly to oppose an airline bailout because it will help shareholders if the bailout will also save tens of thousands of jobs. The priority should be to preserve jobs and, as much as possible, keep viable corporations intact through this crisis. This is not only to keep employment as high as possible during the crisis but also to preserve

Read More »

Hot Tip for CNN: People Eat Food When They Are not in Restaurants

20 days ago

I happened to catch a few minutes of a CNN story featured an interview with a famous chef (sorry, didn’t catch his name) he was discussing the crisis hitting the restaurant industry. After explaining how restaurants will find it almost impossible to survive operating at 25 percent of capacity, he then described the chains of suppliers — the truckers, the wholesalers, the food processors and the farmers — who will also go under because of the collapse of the restaurant industry.
There is a small problem with this logic. The people who are foregoing meals at restaurants will still be eating, they just will be eating at home instead. This means we will need truckers, wholesalers, food processors and farmers to produce and transport the food that people eat at home. This could be different

Read More »

Here We Go Again, the Washington Post Tells Us that Politicians Are Philosophers

22 days ago

It is bizarre how reporters continually feel the need to tell us about politicians’ philosophies. Why on earth would they think that politicians are guided by any philosophy. Politicians get elected by getting the support of key constituencies, not by having wonderful philosophies. I would not think that is seriously contested claim.
This is why everyone should be upset at a Washington Post article on the prospects for another big economic rescue package when it tells us:
“As some states move to reopen, a deep philosophical divide has emerged between the two parties about the proper role for the federal government in producing an economic recovery. Many Republicans say they should focus on creating the best conditions possible for people to go back to work. That would include steps such as

Read More »

White Unemployment Rose More than Black Unemployment and No One Notices

23 days ago

One of the most striking items in a very striking employment report yesterday is that white unemployment has actually risen slightly more than black unemployment in this crisis. White unemployment has risen from 3.1 percent in February to 14.2 percent in April, a rise of 11.1 percentage points. Black unemployment rose from 5.8 percent to 16.7 percent, an increase of 10.9 percentage points. 
While the difference is small and surely statistically insignificant, it does go opposite the usual pattern in a downturn, in which blacks see their unemployment rate rise by twice as much, or more, than the increase in white unemployment. Unfortunately, the difference is probably not for a good reason. Blacks are more likely to be working at jobs where they are classified as essential workers and

Read More »

Why Did the NYT Tell Readers that Republicans “Distrust” Food Stamps?

25 days ago

It was a very bizarre choice of words. In a useful and lengthy article on Republican efforts to cut food stamp benefits, we are told:
“The Republican distrust of food stamps has now collided with a monumental crisis. Cars outside food banks have lined up for miles in places as different as San Antonio, Pittsburgh and Miami Beach.”
The piece gives no evidence whatsoever that Republicans “distrust” food stamps. It provides plenty of evidence that they dislike food stamps, just as they dislike anything that helps low and moderate-income people.
It would be good if the paper stopped its mind-reading and just told readers that the Republicans have continually tried to cut food stamps and not imply that there is any question of trust at issue.
The post Why Did the NYT Tell Readers that

Read More »

Fixing the Bailout Scammers: The Ten Percent Solution

26 days ago

The pandemic crisis created a rare economic opportunity. In effect, the whole economy was thrown up for grabs, with the winners and losers determined by who had the political power to get a nice bailout. Needless to say, those who were already rich got the big handouts, those at the bottom got crumbs if anything at all. 
Suppose we had let the market work its magic on the airlines, on the hotel chains, the restaurant chains, the aircraft industry (i.e. Boeing), and on the oil industry. With few exceptions, the big actors in these sectors would all have been bankrupt. The companies would have been reorganized, with the ones that were otherwise viable being restructured. Debtors would take large haircuts only collecting a fraction of what they had been owed. Shareholders would be wiped it,

Read More »

As Betting Odds for Yankees Improve, Economists Anticipate Strong Recovery: The Stock Market and the Economy

26 days ago

Daniel W. Drezner used his Washington Post column to contribute to the confusion around the stock market and the economy. He picks up from prior pieces by Paul Krugman and Desmond Lachman as to whether the recent run-up in the economy means investors are expecting a strong recovery.
(Drezner unfortunately refers to the question of a V-shaped recovery. The Congressional Budget Office projects that the economy will shrink at a 39.6 percent annual rate in this quarter, and then grow at 23.5 percent and 10.5 percent annual rates in the third and fourth quarters, respectively. It would be hard not to view the projected 3rd and 4th quarter growth rates as “V-shaped,” but they would still leave the economy more than five percent smaller than it was in the fourth quarter of 2019. The question is

Read More »

More Thoughts on a Wealth Tax and Alternatives

April 30, 2020

(This post first appeared on my Patreon page.)
Last week the Boston Review (BR) published an exchange on a wealth tax that included a proposal from Berkeley economists Emmanuel Saez and Gabriel Zucman, with a number of responses, including one from me. I was critical of the proposal for both political reasons and because I think avoidance and evasion will be massive problems.
On the political side, in addition to the difficulty of getting a wealth tax through Congress, there is the virtual certainty that the current Supreme Court will rule it unconstitutional. This is not an abstract question of whether a wealth tax should be viewed as constitutional. I realize that many legal scholars have argued that such a tax is not inconsistent with the power to tax granted to Congress by the

Read More »

More Quick Thoughts on the Recovery from the Crisis: Evidence from China

April 29, 2020

I have seen several accounts where people have warned that the recovery of the economy from the shutdown period will be very slow, with China being used as a major point of reference. For example, see this piece in the New York Times. I won’t claim expertise on China’s economy, but the evidence seems to suggest the opposite.
The highlight of this piece is the week recovery of retail sales which, if I’m reading the chart right, are still 16 percent below year ago levels, one month after a shutdown ended. Industrial production has almost fully recovered to year ago levels, although it had been running about 7 percent above year ago levels, so it still has a way to go before getting back to its pre-crisis trend.
The retail sales story actually is not as bleak as indicated. The one-month

Read More »

Serious Class Bias at the NYT: How Much Money Should Taxpayers Give to Someone Who Owns a Large Bakery in Detroit?

April 29, 2020

Apparently the New York Times thinks we should give this person lots of money or at least that we should hear her argument that we should give her lots of money. Jackie Victor, the owner of a bakery that had employed 135 people is unhappy that the loan she got through the Paycheck Protection Program will only be forgiven for the portion spent on wages, rent, and other limited categories of expenses.
Ms. Victor complains that this money must be spent within 60 days, which apparently is finding difficult to do. The portion not spent on designated expenses over this period is a near zero interest loan that must be paid back over the next 18 months. Ms. Victor thinks this is too short a period of time she wants it to be ten years.
Let’s see how much money Ms. Victor gets under this program. If

Read More »

Key Point on Those Going Back to Work: Low-Paid Workers Tend to Be in Poorer Health

April 28, 2020

Jim Tankersley had a very good piece in the NYT pointing out that those being forced back to work as the economy reopens are mostly lower paid workers, who don’t have the option to telecommute and disproportionately people of color. One important point that was left out is that these workers are also more likely on average to have health conditions, such as diabetes, which hugely increase the risks they face from the coronavirus.
While even relatively healthy people face serious risks from the coronavirus, it poses far greater risks to those who already have health issues. For this reason, the people who are being forced back to work face even greater risk to their health than the virus would pose to the people who have the luxury of being able to stay home.
The post Key Point on Those

Read More »

Comment on the Recovery from the Shutdown

April 24, 2020

The Congressional Budget Office came out with its new economic projections and they look realistically bad to me. They show the economy declining at a 39.6 percent annual rate in the current quarter and then rebounding at a 23.5 percent rate in the third quarter and closing out the year with a 10.5 percent increase. Unemployment averages 14.0 percent in the current quarter and rises to 16.0 percent in the third quarter. It falls back to 11.7 percent in the fourth quarter, but still averages 10.1 percent in 2021.
While this looks like a pretty bad story to me, I saw comments on Twitter arguing it was too optimistic. The gist of these comments was that people will be too scared when the shutdown period ends to carry on anything like their normal life.
I don’t really see that. First, as we

Read More »

Saving Journalism Will Require Some New Thinking

April 23, 2020

There has been a new wave of despair among journalists in the last couple of weeks as several major news outlets, including the Los Angeles Times and McClatchy News Service, announced layoffs and/or pay cuts. The immediate cause is the coronavirus. Pandemics sharply reduce advertising opportunities, but the underlying model is clearly not viable for most news outlets.
There is a limited amount of money that businesses are willing to pay for web ads, which is now by far the largest form of distribution. This is especially the case when Facebook and Google can offer much better targeted advertising. Subscriptions can raise some money, but apart from the New York Times and a few other elite publications, this source of revenue will not go far in supporting the people who produce and edit

Read More »

Can We Stop Using the 60,000 Death Projection Number?

April 23, 2020

I’m not trying to be morbid, but it is obviously wrong. As of this moment, we have 47,700 reported coronavirus deaths. We have been seeing this number increase at a rate of more than 2,000 per day.  Furthermore, the number of people who are now dying typically got the disease two or three weeks ago, so unless we somehow develop a miraculous cure very quickly, a substantial percentage of the people who contracted the disease in prior weeks are going to die.
For this reason, it would be good if articles, like this update in the NYT, stopped referring to “the 60,000 projected virus-related deaths in the U.S.” This is clearly not a realistic number and the media should stop using it.
The post Can We Stop Using the 60,000 Death Projection Number? appeared first on Center for Economic and Policy

Read More »

The Washington Post’s Debt Cult

April 19, 2020

The Washington Post is always telling us that debt, especially government debt is bad, very bad. It’s not quite sure why or how, but debt is definitely bad.
We got the latest confused entry from the Post’s debt cult today, warning us about some”tipping point” that we are at risk of passing. The notion of a tipping point on government debt had its shining hour when a paper by Harvard professors Carmen Reinhart and Ken Rogoff purported to show that when a country’s debt-to-GDP ratio crossed 90 percent, it led to sharply slower growth. While this paper was used to justify austerity in countries around the world, it turned out that the result was driven by an Excel spreadsheet error, as shown in a paper by University of Massachusetts economists Thomas Herndon, Michael Ash, and Robert Pollin.

Read More »

Bret Stephens’ Employers May Keep Big Pharma Haters Out of the New York Times, but We Are Everywhere Else

April 18, 2020

The sub-headline of Bret Stephens’ latest column tells readers “there should be no big-pharma haters in pandemics.” The point is that researchers at Gilead Sciences, one of the biggest pharmaceutical companies, are working tirelessly on the testing of remdesivir, which at the moment is the most promising treatment for the coronavirus. Stephens’ column focuses on Diana Brainard, the lead researcher on the project. Somehow the fact that Dr. Brainard is apparently a dedicated researcher is supposed to mean that we should love big pharma.
Stephens is apparently unaware of the debates over access to medicine over the last three decades, which is understandable, given that he is a conservative columnist at the New York Times. This battle has nothing to do with whether big pharma had dedicated

Read More »

It’s the End of the World Economy as We Know It, Just Like the Great Recession

April 16, 2020

Neil Irwin tells us there will be fundamental changes in the world economy as a result of the pandemic. While he repeats many things that are conventional wisdom, as is often the case, the conventional wisdom is not very wise.
First, the pandemic is supposed to teach us the dangers of having foreign sources of supply, as parts of our supply chain from China shut down when it was hard hit by the virus in December and January. While this is supposed to be a key take-away from the pandemic, it makes little sense.
We have seen major factories shut down in the United States as a result of the pandemic, most recently a South Dakota processing plant that produces five percent of the nation’s retail pork. The United States does have a huge domestic market, so it can see shutdowns in certain

Read More »

More Thoughts on the Post-Pandemic Economy: Think 1970s Stagflation

April 14, 2020

I wrote a piece last week giving some quick thoughts on the post-pandemic economy. I have a few more items to toss in the mix.
As I said in the last piece, I think many people will have money to spend and be anxious to spend it. For most people who kept their jobs, the $1,200 check from the government will be a pure bonus. Also, many of the unemployed will be kept whole or even come out somewhat ahead with the $600 supplement to regular benefits. (Remember, the median weekly wage for full-time workers is just $933, and many of those getting benefits were not working full-time prior to the crisis.)
Most people were not spending money on anything other than necessities during the crisis. Not only were people not going to stores, restaurants, and movies, they were also not buying cars and

Read More »

A Special Gift for Donald Trump’s Friends: An Excess Profits Tax

April 13, 2020

When he fired the inspector general who would have overseen the bailout fund, Trump made it clear that he fully intends to use the money to advance his re-election campaign, just as he has done with his presidential powers throughout his term in office. While the Democrats ceded their ability to prevent the corruption of the fund (they could have just made rules for how the money would be distributed, with zero discretion – like the small business loan program), they still can act to ensure that there is a limit to the extent that Trump’s friends are able to profit at the expense of the rest of us. They can impose an excess profits tax that would nail the corporations that do especially well in this crisis.
The best route to do this is to require corporations to give notional shares of

Read More »

The U.S. Government Pays 0.01 Percent of Its Budget to the World Health Organization

April 13, 2020

That’s for those of you who saw the Washington Post article telling us that we are committed to paying $893 billion over two years to the World Health Organization (WHO). If Trump moves to cut back or eliminate this funding it is not going to have a major impact on our budget situation.
On the plus side, if the U.S. cuts back support for the WHO, it may be better positioned to promote compulsory licensing of drugs produced by the U.S. pharmaceutical industry. This could radically reduce the prices paid for drugs by many developing countries. (European countries with large pharmaceutical companies are likely to continue to oppose compulsory licensing.)
The post The U.S. Government Pays 0.01 Percent of Its Budget to the World Health Organization appeared first on Center for Economic and

Read More »

Bernie Sanders Forced Open the Books on the Last Bailout

April 13, 2020

A Washington Post piece that noted the lack of disclosure requirements in the current round of bailouts referred to efforts to force disclosures in the last bailout. It only noted a suit by Bloomberg to force the Fed to make disclosures:
“During the global financial crisis, the Federal Reserve refused to turn over to reporters the records of some of its emergency bank lending. Bloomberg, the media company, sued for their release and, in a case that went to the Supreme Court, won three years later.”
There were also major disclosures as a result of an amendment that Bernie Sanders got attached to the Dodd-Frank financial reform bill. Sanders amendment had the support of a number of very conservative Republicans, which together with more progressive Democrats gave Sanders the ability to force

Read More »

The Post-Pandemic Economy

April 11, 2020

(This post first appeared on my Patreon page.)
We have a lot of economist type people telling us how awful the economy will be once we get through our near-term shutdown period. At the risk of being accused of unwarranted optimism, I am not sure I buy the pessimists’ story.
Before saying anything about the economy, we have to outline where we think our containment efforts are headed. I will throw out my story, which people here who know what they are talking about can correct.
Let’s assume that after two months we have the coronavirus reasonably well-contained. People are still getting sick, but the numbers are much more manageable so that our hospitals are no longer overflowing and health care personal are no longer being worked to exhaustion and beyond.
At least as important, let’s

Read More »