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Haiti

Latin America and the Caribbean

World

Vice on HBO Follows the Money in Haiti

Vikram Gandhi, VICE on HBO correspondent travelled to Haiti to see just what happened with the $10 billion in aid pledged after the earthquake that occurred more than five years ago. The episode aired at 11 PM EST 4/24/15.

In a sneak peek, Gandhi goes to the site of a housing expo held in 2011. Organized by the Interim Haiti Reconstruction Commission led by Bill Clinton, the expo was meant to showcase model homes that could be built across the country. With more than a million made homeless, and hundreds of thousands of homes damaged or destroyed, providing new housing was seen as key to “building back better.”

Jake Johnston / April 25, 2015

Article Artículo

Globalization and Trade

Correction to Mankiw: Economists Actually Agree, Just Because You Call Something "Free Trade" Doesn't Make It Free Trade (see correction)

Greg Mankiw joined the parade of prominent people saying silly things to help push fast-track trade authority through Congress. He headlined a column:

"Economists actually agree on this point: The Wisdom of Free Trade." 

The piece then goes on to argue for fast-track trade authority to allow for the passage of the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Pact (TTIP).

It's nice that Mankiw has apparently gotten out his bag of economist's holy water and blessed them both as free trade agreements, but that doesn't make it true. (Hey, I want to have the Congress Gives $1 Trillion to Dean Baker Free Trade Act. As an economist in good standing, Mankiw will have to support this free trade measure.)

The basic story here is a very simple one. There are merits to reducing trade barriers, but traditional trade deals will have winners and losers. If this is hard to understand, imagine that we had a free trade deal in physicians' services so that a flood of foreign doctors cut the pay of doctors by 50 percent (@$125,000 a year on average). This would make most of us winners, since we will pay less for health care, but doctors would be big losers. Most traditional trade deals have this character. So people, including economist people, may reasonably oppose them if they think the losers will be hurt so much that it offsets the gains from the deal. (Yes, we can do redistribution, but that is a children's story. We don't.)

But the key point here is that neither the TPP or TTIP is a traditional trade deal. The formal trade barriers between the parties to these deals are already low, which means there is not much room to lower them further. These deals are mostly about putting in place a business friendly structure of regulation. Some of this business friendly regulation involves increasing barriers in the form of stronger and longer patent and copyright protection. (Yes, that is "protection," as in protectionism.)

Dean Baker / April 24, 2015

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Pinocchio Wars: Senator Sherrod Brown Versus the Washington Post Fact Checker

Glenn Kessler, the Washington Post fact checker, gave four Pinocchios this morning to Ohio Senator Sherrod Brown for for mis-attributing a claim on lost jobs from the trade deficit to George W. Bush. Since I may have played a role in the Pinocchio warranting comments, let me try to clear up some possible confusion on the issue.

At the most basic level there are two different ways to view trade based on two different views of the overall economy. The conventional view is that trade affects the allocation of output (i.e. we produce more of some goods and services and less of others) but has little impact on the overall level of output. This is because the economy is assumed to be at or near full employment. The other view is that trade can have a large impact on employment and output because the economy is often not near full employment. In this case, the size of the trade deficit can make a big difference.

Dean Baker / April 23, 2015

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Robert Samuelson Says a 12 Percentage Point Increase In Income Taxes Would Impose No Hardship

That's not exactly what Samuelson said, after all a 12 percentage point increase in the income tax would take a lot of money from rich people. Samuelson told readers that increasing the normal retirement age for Social Security by an additional two years between now and 2027 (it is already scheduled to rise to 67) "wouldn’t impose major hardship." Raising the normal retirement age by two years is effectively a 12 percent cut in benefits. (For orientation, the average Social Security benefit is less than $1,300 a month.)

Since Social Security is more than 90 percent of the income for one third of retirees this would be equivalent to almost a 12 percentage increase in the income tax for this group. It's more than half of the income for two-thirds of retirees, which means that Samuelson's proposal would be equivalent to a tax increase more than 6 percentage points for this larger group of seniors. By comparison, the Republicans claimed that President Obama's proposal to raise the marginal tax rate by 4.6 percentage points on the rich would be devastating.

The context is Samuelson's praise for New Jersey Governor Chris Christie's proposal to phase in an increase in the normal retirement age for Social Security to 69, which he proposes to phase in by 2034. Samuelson wants it done immediately. Samuelson also applauds Chrstie's proposal to phase out benefits for seniors with incomes between $80,000 and $200,000. This would have the same incentive effect on these seniors as an increase in the income tax rate of 25 percentage points.

Since it affects relatively few people, and would provide a substantial incentive for evasion and avoidance, this proposal would have little impact on the finances of the program, although it would likely help to undermine political support since it would no longer be a universal program. The cutoff for benefit cuts could also be gradually lowered as the promised savings are not realized. It is also worth noting that the $80,000 cutoff for being wealthy in the context of Social Security cuts, and also Christie's proposal to cut Medicare, is one-fifth of the $400,000 cutoff set for the higher income tax rates put in place in 2013.

But the most striking part of Samuelson's piece is that these cuts to Social Security are supposed to be part of a drive for "generational justice." Samuelson complains that:

"Boomers’ children and grandchildren would pay for these more generous benefits [Social Security and Medicare] while their own future benefits would drop."

Dean Baker / April 23, 2015

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Washington Post Tells Readers the Elite Will Lie, Cheat, and Steal to Pass Their Trade Deals

The Washington Post has established itself over many decades as a major mouthpiece of elite opinion. Its editorial pages argue strongly for the interests of the wealthy, with scarcely concealed contempt for people who have to work for a living. (They do support alms for the poor, hence they are okay with programs like food stamps and TANF.) 

This attitude has been shown many times over the years, but perhaps never more clearly than in its editorial on the bailout of General Motors and Chrysler, where it fumed about auto workers who earned $56,650 a year. By contrast, it was an ardent supporter of the Wall Street bailout, which was largely about helping people who make this much money in a day.

In fact, the Post helped to conceal one of the major scams that was used to pass the bailout, the claim that the commercial paper market was shutting down. When people were saying that the economy was at the edge of collapse following the Lehman bankruptcy, the commercial paper market was the most immediate issue.

Many large profitable companies (e.g. Verizon or Boeing) were dependent on issuing commercial paper to meet their monthly bills such as payroll, utility bills, and payments to suppliers. If these companies could not get the credit needed to make these payments, the economy really would collapse. What most of the country, and almost certainly most members of Congress, did not know at the time the bailout was approved was that Ben Bernanke and the Fed single-handedly had the ability to support the commercial paper market. The weekend after Congress approved the TARP, Ben Bernanke announced the creation of the Commercial Paper Funding Facility. Congress would have had a much more informed debate about whether it wanted to save Wall Street if it knew the Fed had this power before it voted, but folks like the Washington Post editorial board didn't want any delays before the Wall Street folks got the money.

Dean Baker / April 20, 2015