Dean Baker

Recent Articles

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

NPR Covers Up for Economists' Responsibility for Pennsylvania Pension Shortfall

A Morning Edition piece on the shortfall in Pennsylvania's public employee pension funds told listeners that just 10 years the funds were over-funded, then the good times went away. Actually, 10 years ago the stock market was in the middle of a huge bubble. This temporarily inflated the assets of pension funds, including the public pension funds in Pennsylvania. While competent economists recognized this bubble and warned of the consequences of its collapse, virtually all of the economists who were steering economic policy, and being relied upon as sources by media outlets like NPR, insisted that stock prices would continue to rise and that the stock market would offer 7 percent real returns on average in the years ahead. Because Pennsylvania and other states listened to these incompetent economists in planning its pension contributions and benefit levels, they now face enormous funding shortfalls. Few, if any, economists have suffered at all in their careers for this incredible...

$85 Billion is 2 Percent for the Pharmaceutical Industry

The NYT article on the passage of the health care reform package noted that the pharmaceutical industry had agreed to reduce their charges by $85 billion over the next decade. It would have been helpful to tell readers that this is a bit more than 2 percent of projected revenues over this period for the industry. The patent monopolies granted by the government on prescription drugs give them about three times as much money every year. --Dean Baker

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