Dean Baker

Recent Articles

Pew Shows the Lack of Creativity Among Creative Workers

A new Pew poll of reporters and editors found a great deal of pessimism about the prospects for the newspaper industry. At one point, the article reports the poll's finding that: "about three-quarters of the editors who took part said they would have serious objections to accepting direct support from either the government or interest groups, and a similar number said their organizations had not seriously thought about taking donations from nonprofit groups." Of course there are other ways in which new media can be supported. Currently the government supports newspapers by granting them copyright monopolies. Without this special protection anyone would be able to use content without paying for it, including for commercial purposes. So these editors are already taking government support, even if they don't realize it. In the Internet era this mechanism of financing newspapers is obviously no longer adequate. It is striking that Pew failed to consider any of the obvious alternative...

Ben Bernanke, Who Missed an $8 Trillion Housing Bubble, Warned About the Deficit

In an article reporting on the debate over extending unemployment insurance benefits the Washington Post told readers: "on Wednesday, Federal Reserve Chairman Ben S. Bernanke warned that growing budget deficits imperiled the economy's long-term stability." It is worth noting that in his capacity as a Federal Reserve Board governor from 2002 to 2005, chief economic adviser President Bush, and then Fed Chair since January of 2006, Bernanke never raised any concerns about the housing bubble and the threat it posed to the economy. Based on this history, readers may question Mr. Bernanke's ability to assess threats to economic stability. The Post should have informed readers of Bernanke's record on this issue. --Dean Baker

Texas and the Housing Bubble

Paul Krugman asks in his column this morning why Texas managed to largely escape the worst of the housing bubble while Georgia leads the country in the number of failed banks. Both are states in which the major cities have relatively few zoning restrictions or natural barriers, which allows for easy sprawl to meet new housing demand. Krugman explains the difference by the better consumer protection legislation in Texas. While this may have played a role, it is important to note that Texas had just been through a boom/bust cycle in the 80s. The state was at the epicenter of the S&L crisis. Land prices had soared with the oil boom at the start of the decade, but then collapsed along with the price of oil in the middle of the decade. Texas bankers who had lived through this experience might have had more realization that house prices could fall than bankers in other parts of the country. Of course, the experience of a recent boom and bust cycle did not affect in slowing the bubbles...

How Big Is China and How Ignorant Are They at the WAPO?

Those are the questions that readers of the WAPO's Sunday Outlook section must be asking. The Post told readers that: "this year, China's economy is expected to produce about $5 trillion in goods and services. That would put it ahead of Japan as the world's second-biggest national economy, but it would still be barely one-third the size of the $14 trillion U.S. economy." This reflects China's GDP measured on an exchange rate basis. However, economists typically use purchasing power parity measures of GDP for international comparisons. By this measure, China's economy is expected to be about $9.5 trillion this year . At its current growth rate, it will pass the size of the U.S. economy in about five years. By many measures it is already larger than the U.S.. For example, it has more Internet users, college graduates in science and engineering, a larger car market, and about twice as many cell phone users. The article also tells readers that the exchange rate will not have much impact...

NYT Goes Off the Deep End On Budget Deficits

The NYT notes that interest rates have recently risen and are generally predicted to continue to rise. It then told readers : "That, economists say, is the inevitable outcome of the nation’s ballooning debt and the renewed prospect of inflation as the economy recovers from the depths of the recent recession." Okay, what are they smoking there? We have just been through a period of extraordinarily low interest rates. Interest rates fell to their lowest levels in more than 50 years. This was a deliberate policy response to the worst downturn since the Great Depression. Once we are out of the worst of this downturn, everyone expected that interest rates would rise even if we had a balanced budget and moderate inflation, the latter of which is predicted by almost all economists. In other words, the standard projections from the Fed, the Congressional Budget Office and most private economists is that interest rates will be rising to normal levels from very low levels. Almost no one is...

Pages