Dean Baker

Recent Articles

NPR: "Republican Leader Senator Judd Gregg Has No Understanding of Health Care Bill"

That should have been the lead to an NPR piece following up a Morning Edition interview with New Hampshire Senator Judd Gregg. Senator Gregg, who is often held up as a thoughtful fiscal conservative, concluded his interview by asserting that the health care bill approved by Congress would increase the size of government from 20 percent to 25 percent of GDP. That's not what the Congressional Budget Office says. According to CBO's projections the bill would increase government spending by about 1.0 percent of GDP in 2019, the last year in CBO's budget horizon. This means that Senator Gregg is off by an amount equal to 4 percentage points of GDP or the equivalent of $560 billion a year in today's economy. It would be reasonable for NPR to highlight the fact that one of the Republicans' leading spokespeople on fiscal issues apparently has no idea what he is talking about when it comes to the health care debate. Instead, NPR allowed Gregg's outlandish assertion to be communicated to...

The NYT Features the Views of the Mysterious "Many" Who Don't Understand Social Security's Finances

Serious newspapers don't pull down ghosts from the sky to present their views to readers. However, in an a rticle discussing the implications of the health care plan, the NYT told readers:"many have come to believe that the system [Social Security] must change or go broke, the battle Mr. Bush fought and lost in 2005." Of course people who are familiar with the finances of the system don't believe such things. The Congressional Budget Office projects that the program can pay all scheduled benefits through the year 2044 with no changes whatsoever. Even after this date it could still pay more than 75 percent of projected benefits long into the future (a level far higher than current benefits) even if no changes were ever made. In fact, these projections show that Social Security is on a sounder financial footing today than it has been through most of its history since it can go 34 years with no changes being made at all. This was not true at any point in the first 40 years of the program...

The NYT Does Not Like Social Security

That is what can be concluded from its decision to call the Treasury bonds held by the Social Security trust fund "IOUs." This is not the normal term applied to government bonds in the New York Times or anywhere else. This is a pejorative term that has the effect of undermining the credibility of the trust fund. That is the sort of comment that is usually reserved for its opinion pages. The article also wrongly tells readers that: "By 2016, Social Security will begin paying more in benefits than it collects in payroll taxes, according to the annual report of government trustees." Actually, Social Security is currently paying out more in benefits than it collects in taxes. This fact has no special relevance for the program since it has already accumulated more than $2.5 trillion in government bonds to cover future projected shortfall. Opponents of Social Security have long sought to hype the date when benefits would exceed annual tax collections in order to promote the sense of crisis...

Robert Samuelson's New Economic History

While rightly blaming Greenspan for the economic downturn, Robert Samuelson gets a few things wrong in his Post column . First, he attributes the revitalization of the U.S. economy to the end of the double-digit inflation of the 70s. Actually, most of the drop in inflation had been completed by the early 80s. However, there was no uptick in productivity growth from the inflation-wracked 70s until the mid-90s. It is also worth noting that the whole world saw a sharp drop in inflation over this period with no noticeable uptick in productivity growth in the vast majority of countries. In short, there is no plausible link between the fall in inflation and economic revitalization that he touts. It is also wrong for Samuelson to claim that the 2001 recession caused by the stock market crash was mild. In fact, the economy had considerable difficulty recovering from this crash, which is why Alan Greenspan left the federal funds rate at 1.0 percent for almost two years. While the recession...

Japan's Central Bank Holds Much of Japan's Debt

An AP story in the Washington Post on the IMF's warnings about debt levels told readers that: "Japan's debt is proportionately even bigger -- about twice its GDP -- but the impact is cushioned because most is held by Japanese households." Actually the fact that the debt is mostly held by Japanese households by itself is of little consequence. If Japan had been running large trade deficits and foreigners had bought private assets but not government bonds, then Japanese households and its economy would be in the same situation as if foreigners had bought its debt. The key point is that Japan has been running trade surpluses so that it has accumulated foreign assets rather than selling off domestic assets. It is important that a very high portion of Japan's debt is held by its central bank. This means that the interest on the debt is paid to the bank. It is then refunded to taxpayers so this debt does not impose any burden whatsoever. --Dean Baker

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