Dean Baker

Recent Articles

Libeling Social Security

One of the disadvantages of having a public Social Security system is that people are free to make all sorts of untrue statements about it without facing any consequences. For example, an oped in the Washington Post this morning described the Social Security trust fund as "largely an accounting fiction." This statement is of course absurd. The trust fund consists of U.S. government bonds, which the government is obligated to repay under the law. There is no sense whatsoever in which it can accurately be described as fictional. Because Social Security is an agency of the government, the author is free to impugn the soundness of Social Security's financial situation with impunity, and the Post need not fear any consequences from printing this libel. On the other hand, if the author had made similarly untrue claims about the financial status of General Electric or Microsoft, the paper would be quickly greeted with an angry call from some honcho corporate lawyer. The correction would...

There's Still Good Paying Jobs for CEOs

Gretchen Morgenson had a good piece in the Times documenting some of the ways in which corporate boards manage to dish out bonuses to CEOs even when they miss performance targets. With all the scandals in CEO pay over the last decade, it is remarkable that this sort of nonsense persists unchecked. Clearly there is a structural imbalance, with top executives being able to pilfer corporate coffers to enrich themselves at the expense of shareholders. It would be a simple matter (legally, if not politically) to change some of the rules of corporate governance to redress this imbalance. For example, how about requiring that the compensation of packages get sent out for shareholder approval at regular intervals? Suppose the rules also require that shareholder proxies that don't get returned don't count? (The standard practice now is that unreturned proxies are counted as supporting management.) How about also making corporate directors personally liable for not using proper care in setting...

Does Henry Paulson Advocate a Large Trade Deficit?

According to press accounts, Mr. Paulson is an ardent believer in a strong dollar. Regardless of what you think of the budget deficit, the strong dollar IS the reason for the trade deficit. This is not really a contestable point. No one opts to buy imported goods rather than domestically produced goods because of the budget deficit. They buy imported goods because the strong dollar makes them cheaper. It really is that simple. Of course, the United States cannot continue to run large trade deficits indefinitely. And the trade deficit is more than twice as large as unified budget deficit (it's more than 50 percent larger than the on-budget deficit). It might be cause for concern that our new Treasury secretary is a big advocate for enlarging the country's most unsustainable deficit, but you wouldn't get this from any of the reporting. The high dollar policy is also redistributive since it puts downward pressure on prices and wages in the sectors of the economy exposed to international...

Should Anyone Care About Consumer Confidence?

I have always considered the consumer confidence index to be one of the least valuable releases of economic data. Consumer spending is hugely important for the state of the economy, but the index provides very little information about the direction of spending. The index includes two components, a current situation component, which does track current spending reasonably well (and therefore has little predictive value about the future), and an expectations component which is highly volatile and has very little predictive value. The Times had a piece on the recent dip in consumer confidence this morning that backs up my view. The article includes a chart that shows the latest reading for the index is near its 2002 levels, when real consumer spending rose at a respectable 2.5 percent annual rate and the savings rate fell by more than a percentage point. In other words, a low consumer confidence index did not seem to have much impact on consumption growth. The index probably does give...

Washington Post Corrects Mexico's Post-NAFTA Growth Rate

It took 43 days, but the Washington Post did finally correct an April 17th news story that had Mexico's economy growing at a 17.5 percent annual rate in the period since the passage of NAFTA. This is longer than one would hope, and it required much more prodding from my colleagues at CEPR than should have been necessary, but it is still good to see that the paper felt a responsibility to correct such a blatant mistake. --Dean Baker