The NYT reports that opponents of a measure that would save money by putting private lenders out of the government guaranteed student loan business warn that it could cost jobs. This is of course true. Suppose there is an efficient computer company that sells computers for $500 each and an inefficient computer company that sell comparable computers for $1,000 each. It is likely that the inefficient computer company employs more workers for each computer produced than the efficient manufacturer. Therefore switching orders from the less efficient company to the more efficient company would cost jobs. This is effectively what is happening with the student loan program, except the more efficient provider happens to be the government. There is no more argument to obstruct this switch because of possible job loss than there would be to try to prevent people from buying goods from more efficient producers. This is economic growth. The people who lose their jobs should be reemployed where...

The NYT reports that the Fed is debating whether much of current unemployment is due to a skills mismatch between workers and the available jobs as opposed to simply a cyclical shortfall in demand. It is worth noting that the assertion of skills mismatch is a predictable behavior of economists in policy positions in every recession. There were many papers arguing exactly this story after the last downturn as the economy continued to shed jobs for almost two years after the recession ended. --Dean Baker

The NYT reported that China and India both signed an agreement to limit their greenhouse gas emissions. The article cites unnamed analysts who complained that the new commitment by China and India falls short of the terms of the agreement. The article neglected to mention that on a per person basis China emits about one quarter as much greenhouse gases as the United States, while India emits around one-eighth as much. It is impossible to understand these countries' positions on this issue without recognizing how much less they contribute to global warming than people in the United States. They will not agree to permanently hold their emissions below U.S. levels without compensation and the U.S. lacks the ability to force them. In other words, people who care about global warming should want the U.S. to pay China and India to limit their greenhouse gas emissions. Those who don't want to see such transfers are just wasting everyone's time. --Dean Baker

Those who favor affirmative action for people with no discernible skills undoubtedly appreciate Dana Milbank's page 2 column in the Washington Post. Today Mr. Milbank used his column to tell the world that he knows absolutely nothing about economics. The theme of the piece was that in ten years the United States will be like Greece. He discusses the trip to the United States of Greek Prime Minister George Papandreou seeking support for his country during its current fiscal crisis and tells readers: "if current trends persist, an American president will be doing the same thing in about 10 years." The article goes on: "He or she will probably be in Beijing, asking for more favorable interest rates or pleading with the Chinese government to keep speculators from betting on an American default." Okay, now let's imagine that Milbank had taken an econ class at some point. Suppose speculators were betting heavily against the dollar. The value of the dollar would be plummeting. If China still...

There is a line being pushed by some on the right (e.g. David Brooks today ) that small businesses are putting off hiring because of uncertainty over the costs they may face from health care reform, global warming restrictions, or other tax and regulatory changes. It is understandable that small businesses would be reluctant to commit themselves to having another employee on the payroll if we were in a country like Italy or Spain where permanent employees have a substantial degree of employment protection. Employers in these countries (and most other wealthy countries) cannot simply lay off workers any time they choose. However, if we live in the United States, we know that employers here can lay off anyone they want, any time they want, with no restrictions whatsoever. This assumes that there is not a union contract, which is the case for 93 percent of private sector employees and close to 100 percent of employees of small businesses. Suppose that we have a conscientious small...

Robert Samuelson argues that they will . Samuelson apparently believes that people's standard of living is determined only by their tax bill. According to Samuelson's world view, Bill Gates is much worse off than the typical middle class family because he pays so much more in taxes. Of course in real world land, well-being is determined by after-tax income. The greater sum that Bill Gates pays in taxes is trivial compared to his enormous income. The same story applies for the millennials. The projections from the Congressional Budget Office, the Fed and all other standard sources show that before-tax compensation will rise on average at the rate of about 1.4 percent a year. This means that after 20 years their compensation will be more than 30 percent higher than what workers get today. This means that even if they pay substantially higher taxes than workers today, they will still have substantially higher living standards. The retirement of the baby boomers is likely to help...

The NYT's piece on Iceland's referendum on using public money to pay debts to foreign bank depositors failed to explain the real issues involved. During the boom, several Icelandic banks courted deposits outside the country, mostly in the UK and the Netherlands, by offering higher interest rates. The banks then used these deposits to finance a range of highly speculative investments. As long the bubbles kept expanding, this model was hugely successful. However, when the bubbles burst, the value of the banks' assets collapsed and they had no ability to repay their depositors. This would have all been a private matter, except that the government insures bank deposits up to a certain level (like the FDIC in the United States). Iceland, as a matter of its treaty obligations with the European Union, is obligated to maintain a system of public deposit insurance which applies to both domestic and foreign depositors. The issue here is whether private banks can effectively create enormous...