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Blame the Policies, Not the RobotsDean Baker and / October 23, 2019
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Trump's Trade Deal with South Korea Hasn't Kept the Deficit from RisingCEPR / October 22, 2019
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Celebrating Twenty Years of the Center for Economic and Policy ResearchNext week we will be celebrating the 20th anniversary of the founding of the Center for Economic and Policy Research (October 29th to be precise). I’m going to take this opportunity to point out how much economic debate has shifted over the last two decades, and also do a bit of boasting.
When Mark Weisbrot and I started CEPR at the end of 1999, it was the heyday of neoliberalism. Bill Clinton had won reelection in 1996, assuring us that the era of big government was over. Two big agenda items from his first term were the passage of NAFTA and welfare reform, which, as he put it, “ended welfare as we know it.” In international economics, the Washington Consensus reigned supreme, with privatization and austerity being pushed pretty much everywhere in the developing world.
Mark and I felt that the debate on economic policies had become overly narrow, and we thought that a small dynamic think tank, without major institutional constraints, could make a difference.
One of the first issues that we weighed in on was Social Security. At the time, the conventional wisdom, even among Democrats, was that Social Security was in crisis and that benefits had to be cut. Our book, Social Security: The Phony Crisis, came out just as CEPR was launching. Two decades later, not only have benefits not been cut, but the centrist position in the Democratic Party has shifted to benefits should be raised.
We also had pushed for full employment policies. In two books, Jared Bernstein and I argued that the benefits from low levels of unemployment to workers at the middle and bottom of the pay ladder were enormous. We also argued that economists had underestimated the economy’s ability to maintain low levels of unemployment without spiraling inflation. Today, as the unemployment rate sits at 3.5 percent, Jerome Powell, the chair of the Federal Reserve Board, has largely adopted our position.
CEPR / October 21, 2019
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How Has AP Determined that Ecuador's Debt and Deficits are Unsustainable?CEPR / October 18, 2019
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Trump Declares Victory in China Trade War(This post originally appeared on my Patreon page.)
Back in the late 1960s, when it was clear that the United States was losing in Vietnam, Vermont Senator George Aiken came up with the plan to declare victory and leave. It seems that Donald Trump has stolen the senator’s playbook.
While we don’t know much of the details of Trump’s partial deal with China, it seems almost certain that he has not won most of his demands. According to press accounts, China will commit to buy a large amount of U.S. agricultural products. This is a highly visible, but largely pointless victory for Trump.
All the major agricultural commodities, such as wheat, corn, soybeans, and beef, sell on massive world markets. If China commits to buying some amount from U.S. producers, for the most part, it will come at the expense of producers from other countries. It will not be an increase in world demand. This means that the displaced producers will be dumping their now surplus commodities on world markets, leaving the market price received by U.S. farmers little changed.
Anyhow, it was hardly a surprise to some of us that Trump would go the declare victory and leave route. My colleague at the Center for Economic and Policy Research, Mark Weisbrot, made exactly this prediction a couple of weeks ago, as did I, a few days earlier.
This outcome was easy to see. Trump could not care less about U.S.-China trade policy. He does care about not looking weak and he very much wants to be re-elected. The obvious answer is to say that he won. It doesn’t matter that he may have gotten almost nothing of what he demanded. His followers will believe him and when the media raise questions after seeing the deal, we all know the Trump response: FAKE NEWS.
CEPR / October 18, 2019
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Is the Washington Post Selling Headlines to Mark Zuckerberg?CEPR / October 18, 2019
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Latin America and the Caribbean
La transformación económica de Bolivia: Políticas macroeconómicas, cambios institucionales y resultadosAndrew Bunker, Mark Weisbrot and Jake Johnston / October 17, 2019
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Are Mark Zuckerberg and Facebook Too Incompetent to Do What Publishers of Small Town Papers Do?CEPR / October 17, 2019
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Latin America and the Caribbean
Bolivia’s Economic Transformation: Macroeconomic Policies, Institutional Changes and ResultsAndrew Bunker, Mark Weisbrot, Jake Johnston and Andrés Arauz / October 17, 2019
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Latin America and the Caribbean
Anti-Austerity Protesters in Ecuador Win Some Concessions, But Unlikely to Prevent Further Unrest or RepressionMark Weisbrot / October 17, 2019
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Fact Check: Warren Right, AP Fact Checkers Wrong, Economists Who Know the Data Blame Trade for Loss of Manufacturing JobsCEPR / October 16, 2019
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Trump Has Been Giving Up Ground in His Much-Vaunted "Trade War"Dean Baker / October 14, 2019
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Latin America and the Caribbean
Congressional Briefing: What’s Next for Argentina?The economic crisis in Argentina continues to intensify, with high inflation, rising poverty, and decreasing investor confidence. The implementation of a record $57 billion IMF bailout program, rather than alleviating Argentina’s economic woes, has seen poverty and unemployment rise, and a surge in debt levels.
Argentine political sentiment was tested in August when voters went to the primary polls and delivered a decisive defeat to President Mauricio Macri and his ruling coalition. With a nearly 16-point lead, Alberto Fernández and his running mate, former president Cristina Fernández de Kirchner, are in a strong position to win the general presidential election on October 27. Their broad-based, progressive coalition is also poised to capture the legislature and key governorships, significantly reshaping Argentina’s political terrain.
In light of these developments, and Argentina’s uncertain future, on Tuesday, September 24, three economists, who have been closely following political and economic developments in Argentina, presented their analysis to congressional staffers and civil society representatives at the Longworth House Office Building in Washington, DC.
CEPR and / October 14, 2019
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Ads Try to Hide the Real Cause of those Sky-High Surprise Medical BillsEileen Appelbaum / October 13, 2019
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The Economics and Politics of Financial Transactions Taxes and Wealth Taxes(This piece first appeared on my Patreon page.)
Last month, the Washington Post reported that Joe Biden is considering including a financial transactions tax (FTT) as part of his campaign for the Democratic nomination. For those of us who have long advocated such a tax, this is very good news.
On this issue, Bernie Sanders has taken the lead among presidential candidates, including an FTT as part of his plan for free college tuition free. Several other candidates also support an FTT, but if the Democratic Party’s leading centrist candidate endorses the tax, it would mark a new degree of acceptance within the mainstream of political debate.
It may be somewhat surprising, but Senator Warren is not among those supporting an FTT. This is certainly not due to a reluctance to challenge the interests of the wealthy. Warren has proposed a wide variety of measures that would directly challenge the interests of the rich and powerful.
The most ambitious item on this agenda is a wealth tax. Her tax would tax wealth above $50 million at the rate of 2.0 percent a year and wealth above $1 billion at the rate of 3.0 percent a year. (Sanders has an even larger wealth tax.) While there are good reasons for wanting to tax the very rich, an FTT is almost certainly a better economic policy and would have much better political prospects.
We can see the economics of an FTT are superior when we consider the motivation for taxation by the federal government. As the proponents of Modern Monetary Theory remind us, the federal government doesn’t need revenue to spend, it prints money. The purpose of taxation by the federal government is to reduce consumption, so as to create the economic space for spending. The argument is that if the government spent a large amount of money, and didn’t have any taxes, it is likely to create too much demand in the economy, thereby generating inflation.
To see this point, imagine that the federal government was to spend another $1 trillion next year on Green New Deal policies (a bit more than 20 percent of current federal spending), such as clean energy and mass transit subsidies. If there were no increase in taxes, we would expect to see a huge surge in demand in the economy, likely leading to inflation. (Assume that the Federal Reserve Board simply prints more money so that interest rates are little changed.)
Now suppose we had another big Republican-style tax cut where we handed $1 trillion annually to the very richest people in the country. Also assume that we have no offsetting reduction in spending or increase in other taxes.
In this case, we almost certainly don’t have to worry about inflation. Jeff Bezos, Bill Gates, and other multi-billionaires already have pretty much all the money they can possibly spend. This government handout will fatten their stock portfolios but will have little effect on demand in the economy. And for that reason it is not likely to lead to inflation.
CEPR / October 10, 2019
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Rental Trends Diverge Sharply Across Major US CitiesOctober 10, 2019
CEPR and / October 10, 2019
Prices Byte Artículo
Overall CPI Flat in September, Core Index Up 0.1 PercentOctober 10, 2019 (Prices Byte)
Dean Baker / October 10, 2019
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Latin America and the Caribbean
Para no caer en la trampa de los fondos buitreLara Merling and / October 09, 2019
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Latin America and the Caribbean
Sovereign Debt Restructuring: Not Falling Prey to VulturesLara Merling and / October 09, 2019