Dean Baker

Recent Articles

NYT Reports on Private Equity Rip-Offs of State Pension Funds

The NYT had an excellent piece on how private equity funds (e.g. Peter Peterson's Blackstone Group) ripoff state and local governments by charging them large management fees. A standard arrangement will give the equity fund managers 2.0 percent of the funds under management and 20 percent of the profit. The article notes several cases where these investments have turned out poorly for pension funds and cites academic studies that show private equity funds, net of fees, provide on average no better return than broad stock indexes. --Dean Baker

Does Anyone Who Writes on Housing for the NYT Know Arithmetic?

When people talk about plans to "help" homeowners they must (yes, I said "must") ask two simple questions: 1) Are the homeowners being "helped" paying less in mortgage and other housing costs than they would to rent a comparable unit: and 2) Are the homeowners likely to end up with equity in their homes? Neither of these questions get asked in this discussion of the merits of the Obama administration's plans to "help" homeowners. This means that the NYT wasted readers time and killed trees for no good reason. The point should be really straightforward. We help homeowners when we actually put money in their pocket. If homeowners are paying more in housing costs than they would to rent the same unit, then we have not put money in their pocket, we have put money in the banks' pockets. This is a policy to help banks, not homeowners. That can be offset if there is reason to believe that the homeowner will eventually end up with equity in their home. Do we have any reason to believe that...

David Brooks Crusade of Denial

To those who pay attention to the economy, it's rather evident that the basic economic problems of the last two decades are the bubble driven growth of this era and the country's broken health care system. But NYT columnist David Brooks apparently never allows the actual state of the economy to affect his pronouncements about the economy and our moral state. Therefore he describes the rise of personal debt from 55 percent of national income in 1960 to 133 percent in 2007 as being the result of the fact that: "life has become secure. This has eroded the fear of debt, private and public." Let's try an alternative hypothesis. Wages have stagnated for tens of millions of workers. I guess no one Brooks hangs out with caught this development. In a context of stagnating wages, many families have been forced to take on debt to maintain living standards. The other reason that borrowing has increased is that people spent money based on their stock and housing bubble wealth. Perhaps Brooks can't...

April Fool's Joke?

I leave the assessment of this USA Today headline to readers' judgment. --Dean Baker

NYT Is Anxious to Tout Bad News About Europe

That is what the headline of an article on new economic data told readers. The headline is: "Unemployment and Inflation Rise in Europe." The data showed that unemployment increased from 9.9 percent in January to 10.0 percent in February. This increase is not statistically significant. It is also the same unemployment rate that had originally been reported for November, but was subsequently revised down to 9.9 percent. In other words, the unemployment rate has been essentially unchanged for the last four months. The rise in the inflation rate was an increase in year over year inflation from 0.9 percent in January to 1.6 percent in February. Since a major concern in most countries, including those in Europe, is deflation, this rise in the inflation rate would likely be viewed by most analysts as a positive development, although the monthly data is highly erratic so the number does not have much consequence. --Dean Baker