Dean Baker
Truthout, August 5, 2019

August 2, 2019 (Jobs Byte)

It is far too common for progressives to accept the right’s framing of economic issues. In the standard story, the right portrays itself as the champion of free markets. The image is of the rugged individualist who struggles against the current to come out ahead. They want to be able to make their way in business without the help or hindrance of the government.

In this story, liberals mess everything up by bringing in the government. They are so concerned that some people could get hurt that they bury businesses in bureaucracy and red tape, not only hurting profits but slowing growth and job creation, thereby hurting even the people they were trying to help. That is a worldview that is favorable to the right’s story – after all, who wants to stifle the economy?

I have written much to attack this worldview. My main point is that conservatives like the government just as much as liberals and progressives. The difference is that they want the government to act to redistribute income upward – and that they are smart enough to try to hide the role of government. That way they can say that their riches were just the result of talent and hard work. (This is the point of my book Rigged [it’s free].)

We got a great example of this turning of reality on its head in an otherwise excellent New York Times article on how it appears that Education Secretary Betsy DeVos intervened to ensure that a for profit college run by a political ally (Dream Center) could stay in business even after it was clear that it was about to go bankrupt. According to the piece, the Education Department’s actions allowed students enrolled in the school to continue to get government loans, even though there was little likelihood the school would survive long enough for them to graduate.

Dean BakerThe Sacramento Bee, August 1, 2019

Lara MerlingBretton Woods Project, July 30, 2019

Dean Baker
Truthout, July 29, 2019

A Washington Post piece on the issues surrounding a rate cut this week by the Federal Reserve Board missed many important points. First, and most importantly, it never once mentioned that inflation has been persistently below the Fed's 2.0 percent target. This matters both for the Fed's credibility and more importantly as a protection policy in the next downturn.

On the first point, the Fed has repeatedly stated that its 2.0 percent inflation target is an average, not a ceiling. That means that the inflation rate must occasionally rise above 2.0 percent in order for the average to be 2.0 percent. Inflation in the core personal consumption deflator, the rate targeted by the Fed, has not exceeded 2.0 percent since the Fed Chair Ben Bernanke adopted it as an official target in 2012. If Fed policy is not consistent with achieving the 2.0 percent inflation target, then markets will not believe the Fed is committed to this target.

The other side of this is that we know that there will be another recession at some point. Inflation almost always falls in a recession. If we go into a recession with a 1.5 percent inflation rate (the figure for the last twelve months) then we are likely to see inflation fall very close to zero in a downturn. This matters because the Fed would like to have a large negative real interest rate (the nominal rate minus the inflation rate) in a recession. If inflation is near zero, then even with a zero federal funds rate, the real interest rate is only slightly negative.

July 26, 2019 (GDP Byte)

Last week the Washington Post ran a column by Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, one of the many pro-austerity organizations that received generous funding from the late Peter Peterson. The immediate target of the column was the standoff over the debt ceiling, but the usual complaints about debt and deficits were right up front in the first two paragraphs.

“At the same time, the federal debt as a share of the economy is the highest it has ever been other than just after World War II. ….”

“So our plan is to borrow a jaw-dropping roughly $900 billion in each of those years — much of it from foreign countries — without a strategy or even an acknowledgment of the choices being made because no one wants to be held accountable.”

This passes for wisdom at the Washington Post, but it is actually dangerously wrong-headed thinking that rich people (like the owner of the Washington Post) use their power to endlessly barrage the public with.

The basic story of the twelve years since the collapse of the housing bubble is that the U.S. economy has suffered from a lack of demand. We need actors in the economy to spend more money. The lack of spending over this period has cost us trillions of dollars in lost output.

This should not just be an abstraction. Millions of people who wanted jobs in the decade from 2008 to 2018 did not have them because the Washington Post and its clique of “responsible” budget types joined in calls for austerity. This meant millions of families took a whack to their income, throwing some into poverty, leading many to lose houses, and some to become homeless.

At this point, the evidence from the harm from austerity in the United States (it’s worse in Europe) is overwhelming, but just like the Pravda in the days of the Soviet Union, we never see the Washington Post, or most other major news outlets, acknowledge the horrible cost of unnecessary austerity. We just get more of the same, as though the paper is hoping its readers will simply ignore the damage done by austerity.

David RosnickMarketWatch, July 22, 2019

Dean Baker
Truthout, July 22, 2019

(This post was originally published on my Patreon page.) One of the central themes in Donald Trump’s presidential campaign was that U.S. workers were being badly hurt by trade. His story was that the country had signed bad trade deals that were put togeth