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How Does the Post Know that the Ryan-Wyden Plan Will "Preserve" Medicare?Dean Baker / December 15, 2011
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SOPA Will Cost Jobs! The NYT Should Talk to an Economist, not the Chamber of CommerceDean Baker / December 15, 2011
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NYT Forgot to Mention That Ryan's Medicare Plan Raises CostsDean Baker / December 15, 2011
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The Impact of a Financial Speculation Tax on GDP: Problems with the European Commission ModelWhile interest in a financial speculation tax, also known as a financial transaction tax (FTT), is picking up in the United States, the European Union is getting close to actually approving a tax. As part of this process, the European Commission (EC) had its staff put together a model that would project its impact on investment and growth.
This model, which the staff admits is very much a work in progress, projected that in the long-run the tax would lead to a 1.76 percent decline in output. Opponents of the tax were quick to seize on this projection as a basis for opposing the tax.
As I noted earlier, there are good reasons for questioning this projection from the model. It implies that the cost of financial transactions (a tax would have no different effect than brokerage fees and other trading costs) have an extraordinarily large impact on growth and productivity growth. This is completely at odds with nearly all of the economic literature on growth, which does not mention financial transactions costs at all.
Extrapolating from the model, the decline in the average cost of financial transactions in the United States over the last three decades would explain close to 15 percent of the productivity growth in over this period. If this is true, then the U.S. should anticipate slower productivity growth in the years ahead, since there is little room for transactions costs to decline further, now that they getting close to zero. (The Congressional Budget Office and the Office of Management and Budget have not incorporated any such slowdown into their growth projections.)
Another implication of the EC model’s projection is that the U.K. could quickly see a jump in its GDP of close to 9 percent if it got rid of its 0.5 percent tax on stock trades. It is unlikely that anyone really believes this. Of course, if the EC model’s projections are accurate then the UK should have seen its GDP increase by close to 9 percentage points above its baseline in the years following 1986. That was the year it lowered its tax from 1.0 percent to 0.5 percent. (There was no increase in growth that was close to this size.)
CEPR / December 14, 2011
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NYT Presents Good Analysis of State Tax Breaks for BusinessDean Baker / December 14, 2011
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Latin America and the Caribbean
La historia del éxito económico argentino y sus implicacionesMark Weisbrot, Rebecca Ray, and / December 13, 2011
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Latin America and the Caribbean
Venezuela: Contributions to Quarterly GrowthCEPR / December 13, 2011
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Emergency and Transitional Shelter Provision Flawed, New Evaluation ShowsAn independent evaluation of shelter provision released last week by Estudios Proyectos y Planificación S.A., under commission of the International Federation of the Red Cross, provides perhaps the first systematic evaluation of the provision of shelter since the earthquake nearly two years ago. The report, while acknowledging the tremendous constraints in post-earthquake Haiti and pointing to some notable successes, is highly critical of the overall effort on the part of the international community despite the fact that “money was not an issue for the shelter response.”
The report focuses on the Shelter Cluster, which took the lead in providing emergency and then interim shelter solutions in Haiti, finding that affected populations and Haitian institutions were excluded from the process and a rigid, singular focus on transitional shelters (T-shelters) hindered the ability to develop a comprehensive housing solution.
Meetings were most often conducted in English and access was restricted inside the UN Log base leading to “a barrier between the international response system and the Haitian institutions.” One government official states that, “[o]ur ideas were not taken too much into consideration. Some said it is because we didn’t have the capacity [to actively participate in the cluster’s decisions] (…) Perhaps we were weak but we were there and tried, but they [shelter agencies] wouldn’t listen to us.”
The evaluation found that “a more participatory strategy would have been desirable to better address the affected population’s needs and plans and to seek collaboration with them, to allow a more self-driven response and to reduce the burden on the humanitarian actors.”
“Affected people were not consulted nor their capacities considered, the response was what those with the [foreign] money decided,” one interviewee told the evaluation team.
Jake Johnston / December 13, 2011
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Latin America and the Caribbean
Venezuela: GDP Rebounds on Strong Construction GrowthRebecca Ray / December 13, 2011
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Bruce Bartlett Uncovers the Most Misleading Poll Question of All TimesDean Baker / December 13, 2011
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Ben Bernanke Did Not Save Us from a Second Great DepressionDean Baker / December 13, 2011
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Mark Zandi and the NYT Hugely Underestimate the Number of Vacant HomesDean Baker / December 13, 2011
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How Does the NYT Know That Prohibiting Millionaires from Getting Food Stamps Is Part of a Desire to Make the Rich Pay More?Dean Baker / December 13, 2011
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Companies that Offer Jobs at Below the Market Wage Can't Find WorkersDean Baker / December 13, 2011
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The NYT Does He Said She Said on the Shape of the Earth and Income InequalityDean Baker / December 13, 2011
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Letter to Sen. Mike Johanns on Social Security Trust FundDean Baker / December 12, 2011
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Economic Conflicts with China and Class War in the United StatesDean Baker / December 12, 2011
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A Tale of Two Deficit ChartsNot long after I first came to Washington 20 years ago I was at a conference dealing with Social Security privatization. One of the panelists used a number for the administrative costs of private accounts that was far lower than the numbers I had seen in the literature. After the panel, I asked one of the other panelists about her best estimate of the administrative costs of private accounts. She said that this depended on whether I was interested in advocacy or policy.
I was somewhat taken aback by her response, but after a moment I told her that I was interested in accuracy. I have always felt that this is the best approach to policy questions.
Accuracy has not featured prominently in Washington budget debates in recent decades. There is an enormous amount of misunderstanding about the deficit, much of it deliberately promoted by politicians. We hear endless tales of out-of-control government spending and chronic deficits. This is nonsense as the data clearly show, but unfortunately both parties have an interest in promoting the deceptions.
Dean Baker / December 12, 2011