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Dean Baker

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Another Front Page Editorial from the Washington Post

Dean BakerApr 09, 2010
The Washington Post (a.k.a. Fox on 15th) feels so strongly that we should reduce the budget deficit that they ran yet another front page editorial on the topic. The piece told readers in the second paragraph: "This mounting government debt poses a painful choice for developed countries such as Britain, Japan and the United States: either a deep reordering of public expectations about everything from the retirement age to tax rates, or slower growth as record levels of borrowing crimp economic activity." Well, that's pretty clear. The Washington Post told us in no uncertain terms that things will have to be pretty bad, no two ways about it. Only those who bothered to read to page two would find out that there is actually considerable uncertainty about the point at which debt really poses a serious burden on the economy. On page two they would discover the United States actually had a debt to GDP ratio that was nearly twice as high as it is presently. This did not prevent it from having...

Social Security, Like Peter Peterson, Is Draining Resources From the Federal Budget

Dean BakerApr 08, 2010
The Washington Post (a.k.a. Fox on 15th Street) told readers that: "Social Security is already draining resources from the broader federal budget, as spending on benefits has risen above this year's Social Security tax collections." Yes, Social Security benefit payments exceed the money currently being collected in Social Security taxes. The gap is being made up by the interest it earns on the $2.5 trillion in government bonds held in the Social Security trust fund. It is peculiar to describe spending money from its interest earning (or for that matter the bonds themselves) as "draining resources from the broader federal budget." However, if that is the standard the Post wants to use, then we should say that any individual or entity that draws interest from the federal government on bonds it holds is also "draining resources from the federal budget." This means that billionaire Wall Street investment banker and long-time foe of Social Security Peter Peterson is also draining resources...

10 Percent at the WSJ Isn't the Same as 10 Percent for the Rest of Us

Dean BakerApr 08, 2010
That is the only thing that readers can conclude from a statement in an article on Federal Reserve Board Chairman Ben Bernanke's urgings to reduce the deficit. The WSJ told readers that: "The government is running a budget deficit in excess of about $1.3 trillion, more than 10% of the nation's total economic output." Of course, the Commerce Department is telling us that GDP for the fourth quarter of 2009 was $14.5 trillion, which would mean that the deficit is less than 9.0 percent of GDP. This trouble with numbers carries over to the substance of the piece which is supposed to be that the country faces an imminent crisis in being able to sell its debt. It warns readers that: "yields on 10-year Treasury notes have risen from around 3.25% in late November to just under 3.9% today, in part because of concerns in credit markets about the mountains of government debt investors are being asked to buy to fund U.S deficits." Hmmm, we are paying 3.9 interest because there are concerns in...

Globalization and the Green Economy: China Provides Expertise to the U.S.

Dean BakerApr 08, 2010
The NYT reports that China's government signed a deal with the state of California and General Electric to provide engineering expertise and high tech parts for the construction of high-speed rail. This is a fascinating and totally predictable story which cause great pain to many purveyors of the economic conventional wisdom (CW). China has been building high-speed trains, the United States hasn't. This means that the country has substantially more expertise in this area than the United States. As a result the transfer of this green technology will go from China to the United States, the opposite direction assumed by purveyors of the CW. More generally, this story shows the absurdity of the assumption of the purveyors of the CW that somehow the U.S. will transfer all its grunt work (i.e. manufacturing) to the developing world and leave the high tech stuff for our smart workers. The reality is that the developing world has hundreds of millions of smart workers who are able to do...

Did the Media Miss the Bubble? Did Saddam Lose His Last War?

Dean BakerApr 07, 2010
Steven Pearlstein often has insightful columns, not today. He discusses a conference he attended in which a repeated theme was how the media contributed to the crisis with its poor reporting. He then comments: "although it's a bit overdone, I'll admit there is a dollop of truth in it." A "dollop?" How about an enormous ocean full of truth to it and Pearlstein continues to contribute to the crisis today by covering up the earlier failure. He tells readers that: "Three years after the onset of what was then thought of as the "subprime crisis," there remarkably is still no consensus on why it happened, who is to blame, how necessary the government bailouts were and what needs to be done to prevent such a cataclysm from happening again. Over time, the issues have been overwhelmed by populist anger, infused with political ideology, distorted by partisan maneuvering and special-interest pleading, and ultimately eclipsed by economic recovery." Yeah, it's all really really complicated. Except...

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