September 2019, Eileen Appelbaum and Rosemary Batt

Eileen Appelbaum and Rosemary BattThe American Prospect, September 9, 2016

Based on the decline in the unemployment rate and other recent trends, it is likely that the official poverty rate will fall from 12.3 percent in 2017 to around 12 percent in 2018. The Census Bureau will release those poverty estimates tomorrow, Tuesday,

Dean Baker
Truthout, September 9, 2019

Dean Baker
The Ambassador's Brief, September 8, 2019

September 6, 2019

September 6, 2019 (Jobs Byte)

In the United States, proposals for a Green New Deal have been getting considerable attention in recent months as activists have pressed both members of Congress and Democratic presidential candidates to support aggressive measures to combat global warming. There clearly is much more that we can and must do in the immediate future to prevent enormous damage to the planet.

However, major initiatives in the United States to combat global warming will almost certainly require some increases in taxes. There is likely some slack in the U.S. economy (perhaps we’ll see more slack as a result of Donald Trump’s misfires in his trade war), but a major push involving hundreds of billions of dollars of additional annual spending (2-3 percent of GDP) will almost certainly necessitate tax increases. This doesn’t mean we shouldn’t move quickly to take steps to save the planet, but these steps will have some cost.

In contrast, most of Europe is in a situation where it could easily make large commitments toward increased spending on clean energy, mass transit, and conservation at essentially no economic cost. In fact, a Green New Deal Agenda in Europe is likely to lead to increased employment and output. The big difference is that Europe is much further from facing constraints on its economy. It has plenty of room to expand output and employment without seeing inflation become a problem. 

Before getting into the specifics on Europe’s economy, it is important to add a bit of perspective. The European countries have been far better global citizens in this area than the United States. Their per-person emissions are roughly half as much as the United States. Furthermore, many European countries have already taken aggressive measures to promote clean energy and encourage conservation. 

Solar energy accounts for 7.3 percent of Italy’s electric power, 7.9 percent of Germany’s and 4.3 percent for the European Union as a whole. By comparison, the United States gets just 2.3 percent of its electric power from solar energy. There is a similar story with wind energy where the European Union’s installed capacity is more than 70 percent higher than the United States. 

But in the battle to slow global warming, simply doing better than the United States is not good enough. The European Union can and must do more to reduce its greenhouse gas (GHG) emissions.

Keeping people out of work by failing to take more aggressive steps to address global warming is far more clownish than anything that Boris Johnson is doing with Brexit.

Kevin Cashman and Cavan KharrazianJacobin, September 1, 2019

Dean Baker
New York Daily News, September 1, 2019

It is widely known that for Washington Post columnists writing on economics, ignorance is an asset. Megan McArdle helps make the case in a piece on Chicago’s pensions that tells readers in its headline:

“Chicago kept saying it would pay for pensions later. Well, it’s later.”

The gist of the piece is that Chicago has seriously underfunded public pensions. This is true. Where McArdle combats reality is in implying that this sort of underfunding is typical for public pensions and also that the same logic applies to the federal budget.

McArdle absolves the current mayor, Lori Lightfoot, of blame (she just took office four months ago), as well as her immediate predecessor, Rahm Emanuel, who served two full terms. Instead she tells us:

“Rather, it’s the fault of generations of politicians before them who promised an ever-richer array of benefits to government workers. Particularly, they liked to raise the retirement benefits. …

“Oh, ho, ho, ho. Pay for the pensions? No, we have to stop; some politician might be reading this, and they could really hurt themselves laughing too hard. The whole point of giving workers pension benefits instead of cash was that you didn’t have to pay for them; you could promise the benefits now and gather up the votes that the grateful workers tossed at your feet, all without costing current taxpayers a single dime.”

There are two big problems with McArdle’s story here. First the story of grossly underfunded pensions is not generally true. Most are reasonably well funded because politicians were not hurting themselves laughing, but rather were responsibly setting aside money for the liabilities facing state and local governments. (This briefing paper from Brookings gives a good assessment of the financial state of public pensions.) The real story is that Chicago, along with some other state and local governments with seriously underfunded pensions, are outliers.

But even in the case of Chicago, McArdle did not get the story right. Its shortfall was not the work of “generations of politicians.” Rather it was the result of a specific event – the stock bubble of the late 1990s.

Dean Baker
Austin American-Statesmen, August 30, 2019

These days the business press is full of predictions of recessions. This could get people worried, except that the track record of economists in predicting recessions is basically awful. As much fun as a bunch of scary warnings from economists is, it is best to look at the data.

At the most basic level it is important to recognize that some sectors are very cyclical, meaning they grow rapidly in upturns and fall sharply in recessions, and others tend not to fluctuate very much over the course of a business cycle. The cyclical group is led by housing construction, durable goods consumption (cars and big household appliances), non-residential construction, equipment investment, and inventories. These components of demand tend to plunge in a recession.

On the other hand, we have several components of demand that are mostly unresponsive to the business cycle. Spending on consumer services (largely medical spending and rent) varies little over the course of the business cycle. Spending on consumer services fell just 0.3 percent in 2009 and actually rose through all prior post-war recessions.

The story is similar for investment in intellectual products like software and pharmaceutical research. This component of GDP fell by just 0.5 percent in 2009. While this category of spending did fall slightly in the recession following the late 1990s tech boom, the decline from 2000 to 2001 (the sharpest annual falloff) was just 0.8 percent.

This point about the varying cyclicality of different sectors matters for recession predictions, because the highly cyclical components have shrunk sharply as a share of the economy in the last four decades, as the less cyclical components have grown. 

This is seen most clearly with residential construction, the most cyclical component of GDP. Residential construction peaked at 6.7 percent of GDP during the housing boom before the Great Recession, it was just 3.7 percent of GDP in the most recent quarter. It was 5.7 percent of GDP before the 1980-82 recessions and 4.8 percent of GDP before Fed interest rate hikes began slowing construction in advance of the 1990 recession.

A recent report on Venezuela by the United Nations Office of the High Commissioner for Human Rights (OHCHR) is a grim portrayal of a country in a severe crisis. Yet, given the extensive media coverage given to this report, it is important to contextualize what is going on in Venezuela in light of the situation in other countries in the region.

Comparing the rates of violent abuses of state security agents in Venezuela with those of state actors like Brazil, Colombia, El Salvador, Honduras, or Mexico, it becomes clear that Venezuela is far from being an outlier, but rather part of a disturbing pattern of abusive, tough-on-crime, “mano dura” (“iron fist”) security policies in Latin America. What is an outlier, however, is the disproportionate media attention directed at Venezuela’s human rights situation, in comparison to other Latin American nations.

Another outlier is the US approach to Venezuela, which is clearly driven by the political aims of President Donald Trump — not by any particular concern for human rights. To get a sense of Trump’s double standard when it comes to human rights, one need look no further than how his administration treats Venezuela’s neighbor, Brazil.

In the coming weeks, the IMF will almost certainly choose a new, affluent white European to head the institution. Progressive members of Congress, who care about what US foreign policy does to the rest of the world, should weigh in with some demands for r

Dean Baker
Truthout, August 26, 2019