Dean Baker

Recent Articles

Defense Spending: 4.7 Percent Is Closer to 5 Percent Than 4 Percent

The NYT told readers the defense spending in the United States is equal to 4.0 percent of GDP. The Congressional Budget Office reports that it was 4.6 percent of GDP in fiscal 2009 and will be 4.7 percent of GDP in fiscal years 2010 and 2011. --Dean Baker

The Fed Can Control Long-Term Interest Rates

The Washington Post had another piece pushing deficit scare stories. This time it tells readers that Greece's problems could spillover to the U.S. According to the piece, fears of a Greek default could lead investors to become more worried about a U.S. default, pushing up interest rates on U.S. government bonds. There are two logical problems with the assertions in the piece. If investors flee U.S. bonds because they fear default, where are they going to put their money? If the U.S. actually did default, then almost any other asset will also take a huge hit. For example, holding U.S. stock or bonds would be really really stupid if you thought that the U.S. government was going to default on its debt. This would in turn imply a general flight from dollar denominated assets, which in turn would lead to a plunge in the value of the dollar. A plunging dollar would in turn lead to soaring exports and a would cause the economy to boom rather than crash, as the article claims. The other...

David Brooks Is Worried About the Invasion of Martians

Okay, he said "runaway federal spending," but as long as you're making stuff up, you might as well make it invading Martians. It's no less true and a hell of a lot more exciting. As those of us here on planet earth know, there is no credible story of runaway federal spending. The budget deficit exploded because of the recession, which in turn was caused by the collapse of an $8 trillion housing bubble. But, Brooks needed copy for his NYT column, so runaway federal spending it is. I still think he should have talked about invading Martians. --Dean Baker

Good News From Ireland?

The NYT contrasts the resistance to austerity measures in Greece with the enthusiastic embrace of budget cutbacks by the Irish government. It is worth noting that Ireland's unemployment rate has increased from 4.6 percent before the crisis to 13.0 percent in the most recent data. It is unlikely that many of the economists and policymakers who promoted policies that lead to the crisis, or the bankers who profited from these policies, are among the 13.0 percent of the labor force who are unemployed. --Dean Baker

Secret Data Source Overlooked by the Media

On Wednesday of every week the Mortgage Bankers Association releases its index of mortgage applications which provides data on applications for mortgages for both purchase mortgages and refinancing. For some reason this index is almost completely ignored by economic reporters . This is difficult to understand. While a single week's data is of limited value, because it is so erratic, a four week average can provide important up-to-date information on the state of the housing market. While speculators have played some role in buying up blocks of homes, especially after foreclosure, the vast majority of homes are purchased with mortgages. This means that the applications index is giving analysts an early glance on the state of the housing market. (Applications typically precede sales by 4-6 weeks.) The news last week is pretty bad in this respect. While applications are up some from prior weeks, applications over the last month have been running close to 10 percent below the badly...

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