Dean Baker

Recent Articles

Escaping With the Trust Fund

Folks, I am off for a weeklong vacation. I will not be back at my blogging duties until Monday, June 12th. In the meantime, my colleagues at CEPR, Heather Boushey, David Rosnick, John Schmitt, and Mark Weisbrot will be intermittently filling in. I should also warn that there may be somewhat more delay before your comments get posted. Comments to the blog are moderated, and I can't guarantee the pace at which items get posted in my absence. I am sorry to leave in the middle of a lively debate on the Social Security trust fund. I am sure that there will be no difficulty reaching consensus on this issue in my absence. --Dean Baker

Fiction on the Social Security Trust Fund

Nothing like some comments on the trust fund to get the blogging juices flowing. It is amazing how metaphysical these discussions on the trust fund get. I don't really see anything very complicated here. I am simply referring to the law as it stands. Under the law, Social Security can only pay benefits out of the money that it has in its trust fund. Yes, that means it has a separate account from the rest of the budget. If the budget has an enormous surplus, but the trust fund is empty, then no benefits get paid, that's the law. On the other side, if the government has an enormous deficit, but the trust fund still holds bonds, then Social Security benefits still get paid, that's the law. I have not commented on whether I like the law or not, I am simply describing the law. (By the way, Medicare is currently being financed in part by the bonds held in its trust fund, and I have not heard a single politician make an issue of this.) Under the law, there is absolutely nothing that would...

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...

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