Dean Baker
Boston Review, January 14, 2015

Dean Baker
Fortune, January 14, 2015

Dean Baker
Truthout, January 12, 2015

Robert Samuelson uses his column today to tell readers that he is very unhappy with Paul Krugman. The specific complaint is that Krugman gives Paul Volcker credit for reducing inflation in the early 1980s, rather than Reagan. (Actually, I thought Krugman was giving Volcker credit for the recovery from the recession, which Krugman said was primarily due to lower Fed interest rates rather than Reagan tax cuts.)

Anyhow, Samuelson insists that Volcker has to share credit with Reagan, since Reagan gave him the political cover to carry through policies that pushed the unemployment rate to 10.8 percent and ruined millions of lives. I'm inclined to agree with Samuelson on this one. A different president might have put pressure on the Fed chair to back away before his policies had done so much damage.

Where Samuelson is wrong is in his characterization of the need for the Volcker policies. He tells readers:

"From 1960 to 1980, inflation — the general rise of retail prices — marched relentlessly upward. It went from 1.4?percent in 1960 to 5.9 percent in 1969 to 13.3 percent in 1979. The higher it rose, the more unpopular it became. People feared that their pay and savings wouldn’t keep pace with prices.

"Worse, government seemed powerless to defeat it."

Actually, the inflation picture was not quite as bad as Samuelson describes. He apparently is referring to the measure using the official consumer price index (CPI), which had a well-known measurement error (more in a moment) that led to an exaggerated measure of inflation. In fact the inflation rate using the now popular consumer expenditure deflator peaked at just over 11 percent.

Earlier in the week I took the environmental movement to task for its lack of interest in pay by the mile auto insurance. I consider it a major failing because this one should be a relative freeby in the effort to reduce greenhouse gas emissions.

In contrast to a carbon tax or cap and trade mechanism, it doesn't raise the price on average, it just changes the incentive structure. And in doing so, it can have a large impact in reducing driving. If the average insurance policy costs $1,000 a year, and people drive 10,000 miles on average, then this converts to a fee of 10 cents a mile. If a car gets 20 miles per gallon, shifting to pay by the mile insurance would have the same incentive effect in reducing driving as a $2.00 a gallon gas tax.

Also, unlike a carbon tax, which is really bad news for the oil and coal industries, insurers could still make plenty of money with pay the mile insurance. The only real obstacle for them is inertia. After all, why should they change the way they sell insurance just to save the planet? 

And, pay by the mile also has the great advantage that insurance is regulated at the state level. This means that if the enviros concentrated their forces on a green-friendly state, they should be able to win support for pay by the mile policies. And, with adverse selection going the right way (low-mileage, low accident drivers go into the pay by the mile pool, driving up the cost of conventional policies), it shouldn't be too hard to quickly get most of a state's drivers into pay by the mile policies. If one state could go this route and substantially reduce miles driven, then others could follow.

Anyhow, several people wrote comments and e-mails complaining that the environmentalists have in fact been pushing for pay by the mile insurance. I can't say I'm aware of everything enviros do, but anything they do on pay by the mile certainly is not as visible as something like the effort on the Keystone pipeline. (Which is worth opposing.)

Mark Brucker, one of my correspondents, sent along a list of relevant pieces for those who might be interested:

Earlier this morning, CEPR’s Dean Baker reported on the good news about the Affordable Care Act (ACA) in today’s jobs report:

“Most of the other news in the household survey was positive. The number of people involuntarily working part-time fell by 60,000 and is now almost 1 million below its year-ago level. The number of people who chose to work part-time also fell from the November level, but it is still 1.1 million higher than its year-ago level. This is likely due to the ACA, which has allowed workers to get health care insurance outside of employment.”

This directly contradicts critics’ claims that the ACA would force firms to cut their workers’ hours. As can be seen from the graph below, the number of workers involuntarily working part-time has come down drastically since last April, while the number of workers choosing to work part-time has increased. (I use April as my start date because many of the ACA’s 2014 enrollees only purchased insurancein March, even though the exchanges had been open since October 2013.)

As Paul Krugman likes to point out, conservative leaders have a bad habit of just making things up: global warming isn't happening, tax cuts pay for themselves, quantitative easing will lead to hyper-inflation etc.. David Leonhardt tells readers that at the Upshot section of the NYT, which he edits, they are committed to calling both sides out when the facts don't support their claims.

And he is taking the occasion to beat up on liberals on the relationship between marriage and happiness. He proudly calls attention to a new study that purports to show that married couples are happier on average than people who are not married, and this is even after controlling for states of happiness before they were married.

It's not clear exactly what liberal view Leonhardt thinks he is challenging. There is an obvious survivor bias in a long marriage. We expect that people in unhappy marriages are less likely to stay married, so this study has effectively found that people in happy stable relationships are happier on average than people not in happy stable relationships. Are there liberals who feel it is important to argue that this is not true?

There is a problem that liberals, like any believer in logic, may have with policy prescriptions that could be mistakenly based on this finding. For example, it certainly does not follow, based on this research, that the government should make it more difficult for couples to divorce. The point is that happy couples are happier, if we forced unhappy couples to remain married, it does not follow that they would be happier than if they were separated.

We may also think that the government should foster happy couples by having subsidies for marriage. But this effectively amounts to penalizing the people who are already unhappy because they are single. After all, someone has to pay for these subsidies, which means that on average we would have money flowing from already unhappy single people to our happy couples. Is this good policy?

It's also not clear that there is importance to marriage as opposed to a stable relationship. In the U.K. (where the subjects for the study lived), like the U.S., most people in stable relationships tend to get married. However in other countries this is not a cultural norm. Are we supposed to believe the sheet of paper makes people happy? Did the Wizard of Oz make the straw man smart when he handed him a diploma?

Rural workers face the destruction of their environment and culture, lack access to basic needs, and rarely have a say in the policymaking processes that affect their lives.

January 9, 2015 (Jobs Byte)

January 9, 2015

The unemployment rate edged down from 5.7 percent in November (revised from an earlier reported 5.8 percent) to 5.6 percent in December. However, the main reason was that 273,000 workers reportedly left the labor force. The employment-to-population ratio was unchanged at 59.2 percent, roughly 4.0 percentage points below the pre-recession level.

Most of the other news in the household survey was positive. The number of people involuntarily working part-time fell by 60,000 and is now almost 1 million below its year ago level. The number of people who chose to work part-time also fell from the November level, but it is still 1.1 million higher than its year-ago level. This is likely due to the ACA, which has allowed workers to get health care insurance outside of employment.