Dean Baker

Recent Articles

The Times Versus Bush on the Deficit and the Dollar

The lead editorial in Saturday's New York Tim es noted the recent drop in the dollar. It then blamed President Bush's deficits and warned of an impending recession unless the budget deficit is reduced. As best I can tell, the editorial was incoherent, like much of the discussion on the trade deficit and the budget deficit. In the last quarter century, the conventional wisdom on the relationship between the dollar and the budget deficit has changed almost as frequently as the seasons. It may not be surprising that politicians would change their views on how the economy works whenever it is convenient. It is a bit more disappointing that the media would show similar flexibility. In the old days, economists used to say that large budget deficits lead to higher interest rates in the United States. When interest rates in the United States rise, more people want to hold dollar denominated assets (e.g. government bonds or money market accounts in U.S. banks). This increases the demand for...

The Fed and the Housing Bubble: Fool Me Once, …..

The financial press eagerly reported Federal Reserve Board Chairman Benjamin Bernanke's comments this week saying that he expected a gradual softening of the housing market, not a serious collapse. Mr. Bernanke's comments may reflect his true view of the housing market. However, it is also possible that these statements were made simply to soothe the financial markets. One of the most fascinating stories in the stock bubble was Alan Greenspan's view of the Fed's proper role in dealing with the bubble. Following the bubble's collapse, Greenspan has publicly stated that he recognized the stock bubble, but thought it was inappropriate for the Fed to take any steps to reign in the bubble. This included saying anything publicly about the bubble. Greenspan's comments about the stock market as it was soaring to unprecedented price to earnings ratios were carefully crafted comments of noncommittal nonsense. He never said that a 5000 NASDAQ could be justified by fundamentals, but he was also...

The Power of the Press: Congress Takes Back Tax Breaks for Big Oil

The New York Times had an article this morning about efforts in Congress to renegotiate federal oil and gas leases that gave the industry a windfall projected to be $20 billion over the next 25 years. The sums at stake are not huge for the country or the industry (the $800 million annual windfall is less than 1 percent of the industry's current profits), but the story does show the impact that the media can have when they do their job. The windfall was part of the energy bill approved by Congress last year. It included a provision that gave an incentive for the industry to drill in deep water off the U.S. coast, by not requiring royalty payments. The prior energy bill also included this incentive, except royalties would be required if the price of oil crossed $34 a barrel. The new energy bill dropped the $34 threshold provision, making all oil and gas from these wells royalty free. Times reporter Ed Andrews wrote a series of pieces earlier this year exposing this little-known clause...

Budget Reporting Without Context

The Times ran a piece this morning on a budget resolution passed by the House last night. According to the article, the resolution provides for a substantial increase in defense spending (not counting war expenditures) and some degree of cuts for everything else. However, it is not clear where (if anywhere) adjustments have been made for inflation (now between 3.0-4.0 percent) so I doubt that many readers have any clear sense of what spending changes would be implied by this resolution for a $2.7 trillion budget ($2.8 trillion on NPR). In fairness, this bill was passed at 1:00 A.M. and the Senate will almost certainly not approve it, but if it was worth writing about, it was worth writing about in a way that provided information to readers. --Dean Baker

The Conservative Nanny State in html

To increase sales, we now have my new book, The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer , available for free download in html format . It is still possible to get a free PDF download, or you can also order a paperback copy. Also, for those interested in asking questions on the book, or just questioning my competence and integrity, I will be guest blogging at Maxspeak on Wednesday, May 24, from 1:00-2:30 (EDT). --Dean Baker