Dean Baker
Truthout, November 30, 2015

Dean Baker
The Hankyoreh, November 30, 2015

I'm serious, here's how he begins his column (titled "Generational warfare, anyone?") this morning:

"An enduring puzzle of our politics is why there isn’t more generational conflict. By all rights, younger Americans should be resentful. Not only have they been tossed into the worst economy since the 1930s, but also there’s an informal consensus that the government, whatever else it does, should protect every cent of Social Security and Medicare benefits for the elderly. These priorities seem lopsided and unfair."

Yeah, think about that one. We have seen an enormous upward redistribution over the last 35 years. Without this upward redistribution the wages of a typical worker would be more than 40 percent higher today. This money has gone to Wall Street types—you know the folks who sunk the economy and then got us to bail out their banks when the market would have sank them. The money has gone to CEOs who put in their friends as corporate directors. The friends then return the favor by paying the CEOs tens of millions of dollars a year.

The money has gone to drug companies who use their political power to get Congress to give them stronger and longer patent protection and folks like President Obama's trade team to extend this protection around the world. It has gone to doctors and dentists who have used their political power to strengthen the protectionist barriers that ensure them ever higher pay. And it goes to folks like Samuelson's employer, Jeff Bezos, who has pocketed around $4 billion as a result of the exemption of Amazon from the requirement to collect state sales taxes.

But Samuelson and his friends are disappointed and puzzled that they can't get young people angry over their parents' and grandparents' $1,200 a month Social Security check. Life is tough.

I am going to submit a piece to the Washington Monthly about how astronomers should support science. After reading Robert Atkinson's Washington Monthly piece on progressives and productivity, I'm convinced its editors would find its thesis compelling.

The Atkinson piece is more than a little annoying since it paints an imaginary image of progressives that exists only in Atkinson's head. Atkinson tells us that progressives should support productivity growth, after first going through some bizarre nonsense on the path of wages and productivity. (Wages have diverged sharply from productivity over the last three decades. This is measured using hourly wages and productivity. Someone would only bring family income into this calculation, as Atkinson does, if they are either confused or dishonest.)

Every progressive I know would very much like to see more productivity growth. The most immediate way to secure more productivity growth would be to have faster economic growth. This is both likely to spur investment and also shift workers from low paying, low productivity jobs to higher paying, higher productivity jobs. This is exactly what happened in the late 1990s when the Fed allowed the unemployment rate to fall to 4.0 percent, ignoring the widely held view in the mainstream of the economics profession that unemployment could not fall below 6.0 percent without leading to spiraling inflation.

Most of the progressives I know are actively leaning on the Fed to not raise interest rates and instead allow the unemployment rate to continue to fall. Where are the centrists and conservatives who supposedly care about productivity on this one? When is Atkinson?

Susan Dynarski had an interesting piece in the NYT on the relative effectiveness of charter schools in inner city and suburban neighborhoods. She reported on the findings from her own work, as well as others, that charter schools tend to result in higher achievement levels for inner city children, but had no effect on outcomes for children in suburban areas.

While this finding is interesting, it is important to note an important limitation to much of the research that has been done. Dynarski describes the nature of the tests:

"In the case of charter schools, researchers have found an innovative way to overcome selection bias: analyzing the admission lotteries that charters are required to run when they have more applicants than seats.

"Each lottery serves as a randomized trial, the gold standard of research methods. Random assignment lets us compare apples to apples: Lottery winners and losers are identical, on average, when they apply. Any differences that emerge after the lottery can safely be attributed to charter attendance."

Actually the claim that differences in outcomes, "can safely be attributed to charter attendance," is not true. There are two differences between the students who win the lottery and attend a charter school. One is the issue being examined, that they are attending a charter school. The other is that they are being placed in a school where the other students all have parents who were sufficiently motivated to enter their children in a lottery to try to get them in a better school.

The election of the conservative candidate to the presidency in Argentina has been cause for celebration in mainstream Washington, as typified by this Washington Post editorial. I won't claim to know which candidate offered the better path for the country going forward, but we should not let the Washington Post types rewrite the past. 

The governments led by the Kirchners have much to show for their twelve years in power. Nestor Kirchner took power in May of 2003, just as Argentina was beginning its recovery from its dramatic default and devaluation at the end of 2001. The I.M.F. was insisting that Argentina return to the austerity path that had led to a horrible recession in the years from 1998 to 2001. Its per capita income had already declined by more than 15 percent at the point of the default making the downturn more than four times as severe as the 2007–2009 recession in the United States. Kirchner said no deal.

Instead he pursued policies to promote growth and employment, with an emphasis on helping those at the bottom end of the income distribution. To the great consternation of the folks at the I.M.F. (where Argentina became known as the "A-word"), his policies largely succeeded. While the I.M.F. kept predicting economic collapse, Argentina's economy grew rapidly. By the middle of 2003 it had already made up all the ground lost following the default and by the end of 2004 its per capita income was above the pre-recession level. And, it was much more evenly distributed.

On November 24, CalPERS, the California public employee pension fund, released the long awaited figures on the amounts it has paid private equity firms in performance fees — so-called carried interest. For years, the pension fund failed to ask for or repo

Mark WeisbrotFortune, November 24, 2015

The usually astute Greg Ip gets derailed in a high production values piece that tries to tell us that our problems stem from not having enough kids. For those left scratching their heads while sitting in traffic jams or standing in over-crowded subway cars, the basic story is that we somehow don't have enough workers to do all the work. (Where are those damn robots when we need them?)

Anyhow, the piece starts out quickly on the wrong foot:

"Ever since the global financial crisis, economists have groped for reasons to explain why growth in the U.S. and abroad has repeatedly disappointed, citing everything from fiscal austerity to the euro meltdown. They are now coming to realize that one of the stiffest headwinds is also one of the hardest to overcome: demographics."

Umm no, those of us who warned of the housing bubble and predicted that the resulting downturn would be hard to reverse saw the weak growth as a 100 percent predictable problem from a shortfall in aggregate demand. There was no source of demand to replace the construction and consumption demand driven by the bubble.

And, I don't recall being at all troubled by slower aggregate growth, the issue was that we were seeing insufficient growth to fully employ the population. The United States and many other wealthy countries have seen a sharp decline in the employment to population ratio. This is true even when we look at the employment to population ratio for prime age (ages 25–54) workers. This is down by three full percentage points from its pre-recession peak and by more than four percentage points from its 2000 peak. It is pretty hard to explain the drop in the percentage of people working by demographics. 

We later get the strange statement:

"Simply put, companies are running out of workers, customers or both. In either case, economic growth suffers."

Dean Baker
Truthout, November 23, 2015

Dean Baker
Al Jazeera America, November 23, 2015

Earlier this week, Representative Keith Ellison (D-MN) and Representative Rosa DeLauro (D-CT) introduced a bill aimed at making diapers affordable. H.R. 4055, or the Hygiene Assistance for Families of Infants and Toddlers Act of 2015, will allow states to

NPR had a piece on the horrible inflation of the 1970s and how the country was rescued by the herioics of Paul Volcker who was Fed chair at the time. The piece raises several points that could use a bit more context and leaves out some important information.

First and most importantly, the piece implies a world that did not exist. It begins with a discussion of a speech by President Gerald Ford in 1974. It told listeners:

"Inflation was the silent thief, and every year it got worse. Inflation got worse. It went from 10 percent to 11 percent to 12 percent. It wasn't clear exactly why and no one could agree on a simple way to fix it."

Neither part of this story is especially true. Inflation was hardly silent. It was widely reported, so people did know about it. Nor was it obviously a thief. Many, perhaps most, wage contracts were indexed to inflation, which meant that wages rose more or less in step with prices. While this was not true for everyone, a substantial segment of the population was able to insulate itself from the effects of inflation. This is one of the factors that made it harder to contain inflation.

It is also not true that no one knew how to fix it. Higher unemployment reduced workers' bargaining power and lowered demand in the economy. This slowed inflation. In fact, the skipping from Gerald Ford to Paul Volcker, mispresents the actual course of inflation over this period. Inflation did in fact come down. After peaking at 10.4 percent in 1974, it fell back to 5.5 percent in 1976 before it started to rise again. The main factor bringing inflation down was a steep recession in 1974–1975, so the method for bringing inflation under control was not quite as difficult to figure out as the piece implies.

Mark Weisbrot
Página/12, 21 de noviembre, 2015