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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

To Prevent the Resurgence of the Pandemic, Can We Talk About Open-Source Research?

February 26, 2021

As the vaccination campaign picks up steam, we have many public health experts warning us about a possible resurgence of the pandemic due to the spread of new vaccine-resistant strains. The logic is that, as more people are protected against the predominant strain for which the vaccines were designed, it will allow room for mutations to spread, for which the current vaccines may not be effective. This can leave us in a whack-a-mole situation, where we have to constantly alter our vaccines and do new rounds of inoculations to limit the death and suffering from the pandemic.
This situation would seem to make the urgency for open-sourcing our research on vaccines even greater than in the past. The point is that we would want evidence on new strains to be shared as quickly as possible. We also

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Bartenders and Pension Fund Investment Advisers

February 25, 2021

If you were worried that you had a drinking problem, you probably would not ask your neighborhood bartender for advice (Let’s assume the bartender owns the bar, so they pocket the cash from the drinks.). The bartender may be a very nice person, and may actually be your friend, but they obviously have a material interest in keeping you coming back to the bar.
It is the same story for pension funds when it comes to their various pension advisers. The pension funds’ boards (the people who actually are in charge of running the fund) are often on good terms with the people who manage their money. In many cases, they have used the same group of advisers for years or even decades.
Nonetheless, the fund’s investment advisers are in the same relationship to the pension fund as the bartender is to

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Bitcoin and Baseball Cards

February 22, 2021

I saw this piece last week on the soaring price of baseball cards, and naturally started thinking about Bitcoin. The article begins with a story about how a rare LeBron James trading card (it’s all sports cards, not just baseball cards) would now sell for over $3 million, more than ten times its price in 2016. It then reports on how the prices for rare cards of other famous players have also gone through the roof, with even cards of less great players selling for several million dollars.
The reason this got me thinking about Bitcoin is that the price of Bitcoin has also been soaring. In fact, it has risen considerably faster than the price of baseball cards, increasing more than a hundredfold over the last five years.
 
Bitcoin as a Currency
 
Bitcoin proponents see this soaring price as

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The Green New Deal Threatens Republicans’ Bread and Butter, it’s Not Just Competition in the Battle of Ideas

February 22, 2021

Naomi Klein has an interesting piece in the New York Times on the implications of the Texas disaster. I would disagree with some parts, which attack the Texas approach to energy as “free market.” To my view, this is far too generous.
Even Texas’ deregulated energy market is still highly regulated. It is possible to have hugely different outcomes and incentives by structuring the market in slightly different ways. For example, since the supply of electricity to individual homes is inherently a monopoly relationship (no one will have two electrical hookups), the burden can be placed on the provider to ensure electricity in a specified price range, rather than structuring the market so the risk lies entirely with consumers.
The latter makes little sense for free market types, since consumers

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The Failure of the Media in Responding to the Lying Right

February 17, 2021

I posted this Twitter thread this morning. It should be self-explanatory, but it is more than a little infuriating to see the media (not just Thomas Edsall) act like they are innocent bystanders in the rise of an anti-democratic right-wing movement that constantly lies to advance its agenda. The media have agency, but have thus far largely sought to pretend to just be observers. As a result, they allow themselves to be played endlessly by liars like Cruz, Hayley, and Trump.
I saw this Thomas Edsall piece in the NYT that includes a variety of genuflections about social media and democracy. What the piece never addresses is the responsibility of the mainstream media (thread):
It is one thing for random individuals to spew nonsense on social media sites. That is a real problem with no

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How Will Our Children Know They Face a Crushing Debt Burden?

February 15, 2021

That may seem like a silly question. Of course they will know because there are a number of well-funded policy shops that will be spewing out endless papers and columns telling them that they are facing a crushing debt burden. And, because these policy shops are well-funded and well-connected we can be sure that major media outlets, like the New York Times, Washington Post, and National Public Radio, will give their complaints plenty of space.
But let’s imagine a world where our children weren’t constantly being told that they face a crushing debt burden, how would they know? It might be hard if the latest budget projects are close to the mark. The Congressional Budget Office (CBO)just released new projections for the budget and the economy. They show in 2031, the last year in their budget

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Being Wrong in Elite Jobs Doesn’t Have Any Consequences

February 15, 2021

I just read Nicholas Kristof’s column about his childhood friend Mike Stepp. The piece is actually very moving.
Mr. Stepp grew up next door to Kristof. As he explains in the column, he grew up with an abusive father. Their family didn’t value education, so neither Mike or his brother ever finished high school. While previous generations of workers (white male workers) could work in a factory job without a high school degree and still enjoy a middle class standard of living, this was no longer a possibility for Mike. As a result, he struggled with periods of unemployment, low-paying jobs, drug addiction, mental health problems, and homelessness. He ended up dying last year at age 55.
Kristof tells us that Mike was a decent intelligent person who was let down by society. As he explains, we

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More on the Summers v. Biden Spending Debate

February 9, 2021

I already weighed in on Larry Summers’ complaint that the Biden rescue package may overstimulate the economy. As I said, I thought that while he could be right, the risks of going too small were so much greater than the risks of going too big, that it was worth going forward with the Biden package.
One of the points I made in that post was that excessive demand could be siphoned off in the form of a larger trade deficit, thereby limiting the extent to which it creates inflationary pressures in the United States. I  thought I would show the fourth-quarter data on the growth in GDP and the growth in the trade deficit to make this point.

Source: Bureau of Economic Analysis and author’s calculations.
As can be seen, the increase in the trade deficit in the fourth quarter was over 55 percent

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Wealth Inequality: Should We Care?

February 8, 2021

I have been dismissive of many of the folks, mostly progressives, who highlight wealth inequality as a measure of overall inequality. As most of us know, the richest people in the country have gotten a lot richer since the start of the pandemic. (Of course, the story isn’t quite as dramatic if we use February of 2020, before the hit from the pandemic, as the base of comparison.) As much as I am not a fan of rich people, this doesn’t especially trouble me.
I have never considered wealth a very good measure of inequality for several reasons.

Wealth depends on financial asset values (e.g. stocks and bonds) that fluctuate wildly;
Wealth can be a very bad measure of people’s economic circumstances;
Wealth and social insurance are very direct substitutes.

There is also the very important issue

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Excessive Stimulus and Other Things Larry Summers Worries About

February 5, 2021

It seems that Larry Summers is worried that the stimulus proposed by President Biden is too large. I will say at the onset that he could be right. However, at the most fundamental level, we have to ask what the relative risks are of too much relative to too little.
If we actually are pushing the economy too hard, the argument would be that we would see serious inflationary pressures, which could result in the sort of wage-price spiral we saw in the 1970s. As someone who lived through the 1970s, it actually wasn’t that horrible.
Okay, the fashions and hair styles might have been horrible, and I was never a fan of disco, but the period as whole wasn’t that bad. We didn’t have mass starvation and homelessness, but yes, the inflation of the decade was definitely a problem and we would not want

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Should People Who Want to Save the World from the Pandemic Be Demanding We Pay China to Produce Billions of Vaccine Doses?

February 5, 2021

I have written repeatedly on how we should have been looking for a collective solution to the pandemic, where countries open-source their research and allow anyone with manufacturing capacity to produce any treatment, test, or vaccine. (We pay upfront, like with Moderna, for those wondering why anyone would do the work.) Anyhow, we obviously did not go that route under Donald Trump.
Along with many others, I have argued that we should still go this route, sharing all our technology freely, as has been proposed in a WTO resolution put forward by India and South Africa. The U.S. and most European countries have vigorously opposed this measure thus far.
A main argument in the case of vaccines, is that the mRNA vaccines (Pfizer and Moderna — the only two approved thus far in the U.S.) involve

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Getting Lazy in Discussing Winning in the Stock Market

February 4, 2021

Neil Irwin had an interesting piece reporting on returns to investors who just held stock index funds over long periods of time. The point of the piece is that people who just held an index, rather than trying to speculate on individual stocks, have seen very healthy returns over the last three decades.
While the basic point is well-taken (most people will lose money by trading, both because they tend not to make the right calls on average and because of the fees associated with trading), there is an important qualification that should be made. Future returns over any long period will depend on the market’s current valuation relative to corporate earnings. This means that in periods where price-to-earnings ratios are high, we can anticipate lower future returns.
Irwin sort of notes this

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The Price of Wheat Doesn’t Tell Us About the Strength of the Economy and Neither Does the Stock Market: Why Is This so Hard for Intellectual Types to Understand?

February 3, 2021

The stock market tells us about the expected value of future after-tax corporate profits. At least, that is when it tells us anything at all.
That is not radical lefty ranting, that is from the Econ textbook. If the economy is expected to boom next year, because Joe Biden is going to use the revenue from a big corporate profits tax to finance huge investment in green projects, there is no reason to expect the stock market to rise. People will not pay more money for shares of Microsoft, GE, or any other stock because they expect the economy to boom. They will pay more money for shares of the stock in these companies if they expect their after-tax profits to be higher. And if Biden’s tax increase on profits is going to more than offset any plausible increase in profits due to higher sales,

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Dealing with a Pandemic as If Human Lives Mattered

February 2, 2021

It’s fair to say that the U.S. performance in dealing with the pandemic has been disastrous. With the effort led by Donald Trump, this is not surprising. His main, if not only, concern was keeping up appearances. Preventing the spread of the pandemic, and needless death, was obviously not part of his agenda.
Unfortunately, many other wealthy countries, like France, Belgium, and Sweden, have not done much better. They don’t have the excuse of having a saboteur in charge who was actively trying to prevent the relevant government agencies from doing their jobs.
Anyhow, I thought it would be worth throwing out a few points about how we should have approached the pandemic. While some of this is 20-20 hindsight, I was making most of these points many months ago. I should add, I claim zero

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The Robinhood/GameStop “Scandal”

January 31, 2021

As I understand it, there are many folks out there who think that we saw some major sleaze by the Wall Street big boys, screwing the little guy, when Robinhood stopped taking buy orders on GameStop, as the stock was soaring to record highs. They resumed taking buy order after a pause of a day or so.
The story is that this allowed for Robinhood’s hedge fund friends to get out of their short positions, thereby saving themselves from huge losses. Yet another case of the big money Wall Street crew ripping off ordinary investors.
I have to admit, I don’t quite see the scandal here. First, the official story from Robinhood was that they needed to raise capital to met SEC leverage requirements. That seems to me to be outwardly plausible, since the company did in fact raise a substantial amount of

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The GameStop Game and Financial Transactions Taxes

January 29, 2021

The Wall Street crew is furious over the masses at Robinhood and Reddit ruining their games with their mass buying of GameStop, which wiped out the short position of a big hedge fund. The Robinhood/Reddit masses are touting this as a victory over Wall Street. The Wall Street insiders are decrying this effort to turn the market into a casino. It’s worth sorting this one out a bit and answering the question everyone is asking (or should be), would a financial transactions tax fix this problem.
First of all, much has been made of the fact that the hedge fund Melvin Capital was shorting GameStop, as though there is something illicit about shorting a company’s stock. This one requires some closing thinking. In principle, a major purpose of the stock market (we will come back to this) is to

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Quick Thoughts on the “Evils” of Share Buybacks

January 29, 2021

This is a Twitter thread from a couple of months back. I thought I would post it here since there may be some interest.
Someone sent me a diatribe from some progressive about the evil of share buybacks. I have a few thoughts.
First the claims: they allow companies to inflate share prices, top management to manipulate share prices to maximize the value of options, divert money from long-term investment, and allow for tax avoidance. I’ll start with the tax story.
Buybacks, as opposed to dividends, do allow shareholders to avoid paying taxes as long as they hold their stock. This is a gift to rich people, but let’s not get carried away on the size of the gift.
First, as many progressives (including me) complain, shares typically turn over very quickly. That is one reason many of us support a

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Quick Thoughts on the Minimum Wage

January 27, 2021

President Biden’s proposal to raise the minimum wage to $15 an hour by 2025 is prompting a backlash from the usual suspects. As we hear the cries about how this will be the end of the world for small businesses and lead to massive unemployment, especially for young workers, minorities, and the less-educated, there are a few points worth keeping in mind.
While $15 an hour is a large increase from the current $7.25 an hour, this is because we’ve allowed so much time to pass since the last minimum wage hike. The 12 years since the last increase in the minimum wage is the longest period without a hike since the federal minimum wage was first established in 1938. Few workers are now earning the national minimum wage, both because of market conditions and because many states and cities now have

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Thomas Friedman: The Donald Trump of the New York Times

January 27, 2021

Donald Trump is a person who glories in his own ignorance. He seems to know little about anything and clearly doesn’t care. Any evidence that contradicts his pronouncements is simply “FAKE NEWS.”
Thomas Friedman seems to have the same attitude as he makes grand pronouncements about the economy that are transparently absurd. I discovered this in his latest column, which carried the promising headline, “Made in the U.S.A.: Socialism for the Rich. Capitalism for the Rest.”
It turns out that the gist of Friedman’s “socialism for the rich” is low-interest rates. Following Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management, Friedman is upset that we don’t have recessions and have more businesses fail. I am not kidding, he literally says this:
“Meanwhile, he added, as

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The Coronavirus Vaccine Fail and International Elites

January 26, 2021

The vaccine rollout process has been painfully slow in the United States. More than 40 days after the first vaccine was approved for emergency use by the Food and Drug Administration, just over 6.0 percent of our population has been vaccinated. And that is with just the first shot, very few having gotten the two shots needed to hit the targeted levels of immunity. Thankfully the pace of the vaccination program is picking up, both as kinks are worked out and now that we have an administration that cares about getting people vaccinated.
But we still have to ask why the process has been so slow. We have an obvious answer in the United States, the Trump administration basically said that distribution wasn’t its problem. As Donald Trump once tweeted, he considered the distribution process the

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The New York Times Has Not Heard About China’s Vaccines (or Russia or India’s)

January 25, 2021

It is more than a bit bizarre that the New York Times can run a major piece about the lack of access of developing countries to Covid vaccines and never once mention the vaccines developed by China, Russia, or India. The piece is very useful in highlighting the fact that the United States and Europe have secured the vast majority of the 2021 production of the vaccines developed by western drug companies, leaving relatively few doses for the developing world. As a result, developing countries may continue to be afflicted by the pandemic well into 2022, with enormous human and economic costs.
That is an important story that needs to be told, but another aspect of this picture is that China, Russia, and India are making vaccines available to many countries in the developing world. China is

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More Mind Reading at the Washington Post

January 23, 2021

I wonder if the Washington Post lists mind reading abilities as requirement for its economic reporters. They so often feel the need to do it.
The latest is a piece about the response of Republicans in Congress to President Biden’s proposed rescue package. At one point the piece tells us:
“But when Biden’s relief plan rang in at nearly $2 trillion this month, and included liberal priorities like an increase in the federal minimum wage to $15 an hour, some Republicans saw it as a sign that Biden wasn’t really serious about getting their support.”
Really, the Washington Post knows how Republicans “saw” the relief package? While all politicians stretch the truth to some extent, in recent years Republicans have made a point of saying things that are, at best, orthogonal to the truth. I’m sure

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Trump Crazy and Intellectual Crazy

January 19, 2021

It’s hard not to be appalled and scared by the reality denial of Donald Trump’s followers. Their willingness to insist an election was stolen, with no evidence whatsoever, is difficult to understand for those of us who like to think that people respond to facts and logic.
I don’t have any easy answers to get these people to start thinking clearly, but I will point out that it is not just ignorant and/or crazed Trumpers who have trouble dealing with reality. Many of our leading intellectuals and our major media outlets have similar difficulty dealing with reality when it doesn’t fit their conceptions of the world.
In particular, I am referring to my standard complaint about the unwillingness to acknowledge the ways in which the economy has been structured to redistribute income upward. I

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The DeFazio Bill: Reducing the Financial Industry’s Tax on Retirement Savings

January 15, 2021

Representative Peter DeFazio, along with seven House co-sponsors, introduced the “Wall Street Tax Act” today. This bill would impose a tax of 0.1 percent of sales of stocks, bonds, options, and other derivatives. According to the Congressional Budget Office, it would raise almost $800 billion over the course of the next decade. This would be more than enough to cover the entire food stamp budget over this period. It would be almost enough to fully replace the annual research spending of the pharmaceutical industry, which would mean that all new drugs could be sold as cheap generics from the day they approved by the Food and Drug Administration. In short, this is real money.
The financial industry is already screaming bloody murder over this bill for an obvious reason – it comes out of

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Even In the Face of Coup Attempt, NYT Continues Propaganda for Upward Redistribution Through Trade

January 15, 2021

I have repeatedly raised the point that media accounts routinely use the term “free trade” when they can more accurately say simply “trade” or trade policy. It is amazing to me that this practice continues.
We saw it yet again in a NYT article on how many Republicans continue to be faithful to Trump even after last week’s coup attempt. The article told readers:
“Anthony Sabatini, a Florida state representative, described Ms. Cheney and other Republicans who voted for impeachment as ‘artifacts,’ saying they were out of step in a party that has embraced a more populist platform opposed to foreign interventions and skeptical of free trade.”
As I have pointed out endlessly, we do not have a policy of “free trade.” We do not allow foreign trained professionals, such as doctors and dentists, to

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Debt and Deficits, Yet Again

January 14, 2021

With a Democrat in the White House, the season of the deficit hawk has returned. So, it’s worth going through the old arguments just to remind everyone that the best response to these people is ridicule.
It looks like President Biden will propose a robust stimulus package of well over $1 trillion. According to press accounts, the package is likely to include another check for $2,000. (I believe it is supposed to $1,400 above the $600 in the last package.) It is likely to include a refundable child tax credit that will do much to reduce child poverty.
It will also include money to state and local governments to make up massive pandemic induced shortfalls. There will also be money for mass transit and a down payment on green new deal programs. Biden also plans to increase the subsidies

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New York Times Joins Trump’s Anti-China Crusade

December 30, 2020

There is no doubt that bureaucratic bungling and authoritarian practices slowed China’s response to the coronavirus. A New York Times piece documents many of these failings. But, it is a big step to go from the evidence presented in the article to the assertion in the first paragraph:
“Beijing acted against the coronavirus with stunning force, as its official narratives recount. But not before a political logjam had allowed a local outbreak to kindle a global pandemic.”
The clear implication of the second sentence is that if China’s leadership had responded effectively to the pandemic, it could have been quickly contained in Wuhan and not spread around the world. The biggest problem with this assertion is that there is evidence that the pandemic was already present in Europe before the end

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End of the Year Thoughts on Inequality and Its Remedies

December 29, 2020

The approach of the end of the year seems a good time to sum up thoughts. My comments here will not be news to regular readers, but may be to others. Also, this exercise is helpful for me to keep my thoughts clear. (I also expect to take next week off, so you won’t be hearing from me for a while.)
Most of my work for the last several years has been focused on ways to reduce before tax inequality by reducing the amount of before-tax income that goes to those at the top of the income distribution. For better or worse, there don’t seem to be a lot of progressives that share this beat. There are a few points that are worth making.
First, my focus on reducing income at the top doesn’t mean for a second that I don’t see efforts at raising income for those at the bottom (and middle) as being

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All In for $2K

December 29, 2020

A few weeks ago I had exchanges with people on Twitter in which I argued against across the board payments to individuals. I was concerned that these were likely to come out of other provisions (most importantly unemployment insurance) in the pandemic relief package. Since most people have actually not seen their income cut from the pandemic (they are still working) and many are saving on commuting costs, there is no obvious reason they need another check.
On the other hand, the people who have lost their jobs or are unable to work because of care giving responsibilities or health, really do need their unemployment benefits. (One item often overlooked in these exchanges is that the Pandemic Unemployment Assistance Program gives benefits to more than 9 million people who would not

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