Dean Baker

Recent Articles

Why the "Jobs Bill" Won't Creat Jobs

The NYT article on the jobs bill passed by the Senate yesterday included the views of economists Timothy Bartik and John Bishop as to why the bill will likely create few jobs. It would have been helpful to include the fact that the private sector adds roughly 4 million jobs a month, most of which are replacing jobs lost due to either workers quitting or being laid off. The jobs bill would allow firms to take the credit for any of the workers that they would have hired anyhow, as long as the workers has been employed less than 40 hours in the last sixty days. Since the credit provided in the bill is relatively small (6.2 percent of wages for the rest of 2010 and $1,000 if the worker stays on the payroll for 1 year), the vast majority of workers for whom the credit is claimed almost certainly would have been hired even without the credit. In other words, it is money for nothing. --Dean Baker

Senator Simpson's China Bashing

The NYT ran a profile of former Senator Alan Simpson, who was selected as one of the co-chairs of President Obama's deficit reduction commission. The article quotes him as saying: “when Medicare, Medicaid and Social Security suck up the entire revenue stream, we will be going to China and others to finance two wars, and that means borrowing it.” This statement reflects either Mr. Simpson's ignorance of economics or his antipathy towards China, or possibly both. The reason that the United States borrows money from China is due to the over-valuation of the dollar. At the current level of GDP and current value of the dollar, the United States would be borrowing just as much from China if its budget was balanced. Anyone who is concerned about foreign borrowing by the United States should be discussing the value of the dollar, not the budget deficit. --Dean Baker

More Europe Bashing

The NYT notes the recent decline in the euro and points out some of the negative economic effects (e.g. higher oil prices), then tells readers: "more important, there is a queasy feeling that the decline of the euro makes an uncomfortable statement about Europe’s chronic tendency to underperform the United States in economic growth." Hmmm, "there is a queasy feeling." Where does one find this queasy feeling? The NYT quotes the chief executive of a German health care company who seems to feel somewhat queasy, but that is the only evidence presented in an article with the headline: "ailing Euro Seen as a Signal of Deeper Woes on Continent." They may have overstated their case somewhat. --Dean Baker

The Fed Controls the Consumer Protection Agency's Budget

At this point people are still combing through the fine print of Senator Dodd's financial reform bill to determine all its ramifications, however one point is very clear in assessing the independence of the new Consumer Financial Products Protection Agency. The Fed will have control over the agency's budget. This means that if the Fed believes that the agency is causing too much trouble to the financial industry, it would have the power to squeeze its budget so that it would become less troublesome. It is also worth noting in this context that the Fed sets its own budget. (It gets its money the old-fashioned way: it prints it.) Every year the Fed sends a budget showing its major budget lines to Congress. This is purely informational, Congress does not approve the budget. Given the way Dodd proposes to set it up, if the Fed were to decide to squeeze the new agency Congress would have no immediate recourse. This fact should be mentioned in news coverage of the issue. --Dean Baker

Manufacturing Output: Which Way Is Up?

The Post article on the Fed's monthly industrial production report told readers that "February's numbers gave economists other signs that manufacturing would continue to recover this spring, as the capacity utilization -- portion of plants used for production -- climbed to 72.7 percent from 72.5 percent." Umm no, that's not quite right. Overall industrial production did rise, but that was due to increases in mining and utility output. Manufacturing output actually fell by 0.1 percent in February from a level that was revised down by 0.1 percent from its previously reported level. Capacity utilization in manufacturing fell from 69.1 percent in January (previously reported as 69.2 percent) to 69.0 percent. This decline was undoubtedly in part attributable to bad weather, but the Fed's data certainly is not pointing towards an uptick in manufacturing. --Dean Baker