Dean Baker

Recent Articles

Sweatshops in Jordan

Steven Greenhouse had an excellent piece in today's New York Times about sweatshops in Jordan that manufacture apparel for export to the United States. This industry has been developed largely as a result of a trade agreement that Jordan signed with the United States in the late nineties. The article describes slave-like conditions, as foreign workers routinely have their passports confiscated by factory owners so that they cannot freely leave. According to the article, workers can be forced to work up to 48 hours straight, are routinely ripped off for their pay, and are beaten if they complain. Two aspects of the article raise especially interesting questions. First, the article indicates that the apparel jobs have gone almost exclusively to foreign (largely Bangladeshi) workers. It is unlikely that the trade agreement was sold in Jordan based on the jobs that it would create for guest workers. The benefits to Jordan's economy from this trade would be very limited. Second, the Jordan...

Cash Out Refinancing and the Housing Crash

At the risk of damaging my standing as one of the leading proponents of the housing bubble argument, I would take issue with the assessment of a Washington Post article . The article reported that the percentage of people refinancing homes with mortgages that are larger than the original mortgage (in other words, pulling equity out of their home) hit a 16 year high in the first quarter. The article rightly notes that people cannot use their homes as banks indefinitely, and that this process depends on continually rising house prices. This is all fair enough, but there is a key issue that is missing in this analysis. The main reasons to refinance are to save money on interest by taking advantage of lower interest rates and to pull equity out of your home by taking out a larger mortgage. Well, mortgage interest rates are back up to levels not seen since 2002. This means that few homeowners can save money by refinancing at a lower interest rate. Those looking to do so almost certainly...

Stock Market Tips

I was struck by the reporting on the increases that the Commerce Department reported for March consumer spending and the personal consumption expenditure deflator (PCE). Both figures were presented as being higher than expected. It seems that the financial markets were surprised by the news, since the yield on 10-year treasury bills rose by 6 basis points. I am surprised by the surprise because the spending and price data released on Monday was not new information. It was actually imbedded in the first quarter GDP data that was released on Friday. The Commerce Department needed to include March data for both consumption and inflation in order to compile GDP data for first quarter data. This means that anyone who cared could have pulled out the previously released data for January and February (which is subject to revision) to calculate the numbers that would appear in the March release. I have occasionally done this myself when I had no better use of my time. Unless the first two...

Reporting on Social Security and Medicare: Better, but not Good

The reporting on the release of the annual Social Security and Medicare trustees reports was better this year than in the past, but still not very informative. Most reports did not include the context that would have made the information understandable to most readers/viewers. In the case of the Social Security report, there was less mention of the scary sounding multi-trillion dollar shortfall projections that are meaningless without being placed in any context. (The 75-year shortfall projected by the Congressional Budget Office [CBO] is equal to 0.4 percent of GDP over this period, approximately 40 percent of the size of the post September 11th boost to the defense budget.) Much of the reporting still portrayed the projected 2040 date of the trust fund's depletion (2052 according to CBO) as a looming crisis demanding prompt action, implying that Congress needs 34 year lead time to deal with a problem that was dealt with in 8 months back in 1983. Given the size and uncertainty...

What's the Problem With Less Crowding?

It would be reasonable to think that a densely populated island with exorbitant land and housing prices would be happy to alleviate its crowding problem. That's not the thinking at the Washington Post . The Post had an article this morning noting the surprising fact that the number of obstetricians in Japan is declining along with its dropping birth rate. The article notes that Japan's population is currently shrinking, and that if current trends continue, its population will fall from over 127 million to just 100 million by 2050. The Post then describes this drop in population as a "problem." Well, fewer people, rising capital labor to ratios (and therefore higher wages), less crowding, and less pollution is not a problem in any economics I know. Maybe the Post will explain its reasoning in some future article, but for now, this front page story simply doesn't make sense. --Dean Baker