Dean Baker

Recent Articles

Instant Lie Detector Test: Small Business Hiring Delayed by Uncertainty

There is a line being pushed by some on the right (e.g. David Brooks today ) that small businesses are putting off hiring because of uncertainty over the costs they may face from health care reform, global warming restrictions, or other tax and regulatory changes. It is understandable that small businesses would be reluctant to commit themselves to having another employee on the payroll if we were in a country like Italy or Spain where permanent employees have a substantial degree of employment protection. Employers in these countries (and most other wealthy countries) cannot simply lay off workers any time they choose. However, if we live in the United States, we know that employers here can lay off anyone they want, any time they want, with no restrictions whatsoever. This assumes that there is not a union contract, which is the case for 93 percent of private sector employees and close to 100 percent of employees of small businesses. Suppose that we have a conscientious small...

WSJ Gets Carried Away With Optimism on Jobs

I was one of the economists who thought the February jobs report was relatively good given the weather. Still, that was only compared with an expectation of a very bad report. The WSJ went a bit overboard with a headline: "Outlook Brightens for Jobless." The report still showed a loss of 36,000 jobs. It is certainly possible that if we remove the effect of the weather, that the number would have been a small positive, but this is nothing to write home about. The economy has to generate about 125,000 jobs a month just to keep even with the growth of the labor force. No one thinks the economy would have created that many jobs in February even if the weather had been great. Given the severity of the downturn, we should be seeing job growth in the neighborhood of 300,000 to 400,000 a month. There is no plausible story that gets us there any time soon. And, there are many downside risks with the withdrawal of supports for the housing market, state and local government cutbacks, and the...

Will Millennials Suffer Because Retirements Create Job Openings for Them?

Robert Samuelson argues that they will . Samuelson apparently believes that people's standard of living is determined only by their tax bill. According to Samuelson's world view, Bill Gates is much worse off than the typical middle class family because he pays so much more in taxes. Of course in real world land, well-being is determined by after-tax income. The greater sum that Bill Gates pays in taxes is trivial compared to his enormous income. The same story applies for the millennials. The projections from the Congressional Budget Office, the Fed and all other standard sources show that before-tax compensation will rise on average at the rate of about 1.4 percent a year. This means that after 20 years their compensation will be more than 30 percent higher than what workers get today. This means that even if they pay substantially higher taxes than workers today, they will still have substantially higher living standards. The retirement of the baby boomers is likely to help...

Car Complaints by Company: Bad Numbers at the NYT

The NYT has a piece discussing efforts by Ford and GM to improve their quality. There is a chart accompanying the article showing the trend in complaints for the three automakers over the last decade. It shows a sharp drop in complaints by model year for both Ford and GM, while the numbers for Toyota remain almost flat. The picture is somewhat distorted since it doesn't take account of sales. GM and Fords sales both fell by roughly one-third over this period, while Toyota's doubled. This means that Toyota also saw a sharp fall in complaints per vehicle, while the declines on a per vehicle basis for Ford and GM are not as steep as indicated by the graph. --Dean Baker

Missing the Story on Iceland: Can the Bankers Steal Your Kids' Money

The NYT's piece on Iceland's referendum on using public money to pay debts to foreign bank depositors failed to explain the real issues involved. During the boom, several Icelandic banks courted deposits outside the country, mostly in the UK and the Netherlands, by offering higher interest rates. The banks then used these deposits to finance a range of highly speculative investments. As long the bubbles kept expanding, this model was hugely successful. However, when the bubbles burst, the value of the banks' assets collapsed and they had no ability to repay their depositors. This would have all been a private matter, except that the government insures bank deposits up to a certain level (like the FDIC in the United States). Iceland, as a matter of its treaty obligations with the European Union, is obligated to maintain a system of public deposit insurance which applies to both domestic and foreign depositors. The issue here is whether private banks can effectively create enormous...

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