Dean Baker
The Sacramento Bee, May 4, 2017

Dean Baker
Fortune, May 3, 2017

I took part in the March for Science a couple of weeks ago. (Okay, economics is not really a science, but I get angry when my government tries to stifle scientists reporting their evidence on global warming.) Anyhow, the rally was filled with speeches about scientific ideals: open, disinterested, reproducible research. Unfortunately, real world science often doesn't live up to this agenda.

It looks like we are going to get a lesson later this month on how politics interferes with science at the annual meeting of the World Health Assembly (WHA), the decision-making body of the World Health Organization (WHO). The Indian government has proposed a motion, which would have the WHO prepare a report on the research into the efficiency of patents as a financing mechanism for prescription drugs and vaccines compared with alternative financing mechanisms. The latter would include government sponsored prize funds and directly funded research.

The reason why this is an important and interesting question is that the current method of financing research by granting patent monopolies leads to situations where drugs often cost several hundred times their free market price. For example, the Hepatitis C drug Sovaldi has a list price in the United States of $84,000. A high-quality generic version is available in India for $300.

The result of these monopolies is that people struggle to cover the cost of drugs which would be cheap if sold in a free market. Even in cases where governments or insurers are supposed to cover drugs, many balk when the price runs into the tens of thousands or even hundreds of thousands of dollars, as is the case with many new cancer drugs. While the monopoly prices are a serious burden even in rich countries, they are altogether unaffordable in the developing world.

The Congressional Progressive Caucus released its annual budget today (full plan here). If past patterns hold, it will likely be ignored by the media. Of course, the budget is not about to be adopted by Congress and signed by the president, but as a path forward it certainly is no less realistic than the various budgets put forward in past years by now Speaker Paul Ryan. These budgets effectively called for the elimination of the whole federal government except the military, Medicare, Medicaid, and Social Security. Nonetheless, the Ryan budgets were taken seriously in Washington policy circles and even earned him a "Fiscy" award from a coalition of Peter Peterson-funded groups.

The budget outlines a progressive agenda for the next decade. Put simply, it cuts what the Republicans want to expand (i.e. military spending) and increases what the Republicans want to cut, such as funding for universal pre-kindergarten, Social Security, and health care spending. There is much there and I encourage people to read the EPI summary to which I linked. I will pick two items that I want to highlight.

First, the budget proposes $2 trillion in additional spending on infrastructure and other public investments over the next decade. While this sounds like a huge amount of money, it is a bit less than one percent of GDP and it just gets spending in these areas roughly in line with long-term averages. It is worth noting that they propose to spend the money the old fashion way, through direct spending, not tax gaming like Donald Trump and the Republicans.

This is the way that we built the interstate highway system and the way we built subway systems in New York and Boston that are moving millions of people daily more than a century later. This is not a knock on the private sector. These and other infrastructure projects almost always rely for private contractors for the bulk of the work. But with upfront funding, we can see clearly where the money is going.

Eileen AppelbaumFortune, May 2, 2017

Earlier this month the Washington Post’s editorial board published a criticism of the Social Security Disability program. Noting the decline in labor force participation amongst prime-age men, the board suggests that the disability program discourages its

Dean Baker
Truthout, May 1, 2017

Dean Baker
The Hankyoreh, April 30, 2017

The Washington Post's article on first quarter GDP growth wrongly told readers that unusually warm weather slowed GDP growth in the first quarter. The rationale was that this lead to a decline in the use of electricity and heating compared with a normal winter, which meant less output. While I noted this fact in my own write-up of the GDP report, the drop in energy usage was more than offset by an increase in construction that was made possible by the mild weather.

Residency and non-residency construction rose at 13.7 percent and 22.1 percent annual rates, respectively. The former increase added 0.5 percentage points to the quarter's growth rate, while the latter added 0.55 percentage points. By contrast, the drop utility usage likely lowered growth by around 0.4 percentage points. (The release lumps it in with housing consumption, so it does not provide a direct measure.) This means that on net, good weather was almost certainly a net positive even before considering its impact on restaurant spending and other forms of consumption.

The major anomaly in the first quarter data was the slow pace of inventory accumulation, which subtracted 0.93 percentage points from growth. Pulling out inventories, the growth in final demand was 1.6 percent in the first quarter which is very much in line with the 2.0 percent average annual growth rate for the last six years.