Today "Robin Hood" the movie -- starring Russell Crowe and directed by Ridley Scott -- opens in theaters nationwide. With Wall Street turning profits and paying big bonuses again, less than 2 years after getting bailed out by Main Street taxpayers, this is a good time to remember what Robin Hood was all about -- taking from the rich and giving to the poor, in the interest of economic and social justice.
Who's against it? You guessed it: big banks and Wall Street. The Robin Hood Tax campaign even put together a fun video (directed by Richard Curtis, director of "Four Weddings and a Funeral") with the pirate actor Bill Nighy playing a big banker -- and showing how their arguments don't hold water.
Markets can be irrational, as Keynes famously pointed out, and the Eurozone/Greek crisis is a classic example. “The markets” for months have been demanding more blood from Greece, as the financial press has continuously and often unquestioningly reported. More commitment to spending cuts, tax increases, and “procyclical” policies that the bondholders, EU authorities and IMF have also demanded. As I noted yesterday, this just pushes Greece deeper into recession, and doesn’t even make it more likely that they will pay off their debt in full. The same is true, to varying degrees, for the other weaker Eurozone economies: Portugal, Ireland, Italy and Spain.
So why do they do it? I have been asked that question many times recently, and of course I can’t speak for the EU authorities or the IMF, which in this case is subordinate to the former. The most likely explanation is one proposed by George Soros nearly a decade ago to explain such attitudes during the Argentine crisis: punishment. The Greeks (and others) must pay for their governments’ “profligacy,” lest others be tempted to run up unsustainable debt. “The markets” and the authorities who follow their dictates don’t particularly care about the injustice of punishing the general population for decisions made by a few. But do they care if they are making the economy worse and possibly reducing the chance that the bondholders get paid in full? Or weakening the whole Eurozone economy? Or possibly worse, exacerbating “systemic risk,” as we saw in the wild ride of worldwide stock markets last week?
Upton Sinclair famously used to say that it was "difficult to get a man to understand something if his salary depends on not understanding it." It's also the case that it is difficult to get someone to change a mistaken belief when their deeply held preconceptions and world view depends on it. Facts, as various studies have shown, have a tendency to bounce off ineffectively when they don't fit the preconceptions (or mental "frame") people bring to an issue.
In a recent piece in The Forum, political scientist Brendan Nyhan compares how this process worked in both the Obama and Clinton health care reform proposals. Various misconceptions about the proposals, such as the "death panel" myth, were held most strongly by ideological opponents who believed they were particularly well informed:
... beliefs about the Clinton and Obama reform plans represented misperceptions rather than simple ignorance—a distinction that is emphasized by Kuklinski et al. (2000: 792). The difference between the two concepts is that members of the public who are uninformed typically know that they lack information about a given issue, while those who hold misperceptions are paradoxically more likely to believe that they are well-informed. For instance, Kuklinski et al. (2000) found that Illinois residents who held misperceptions about welfare benefit levels and the beneficiary population were the most confident in the accuracy of their beliefs. Using survey data from 1993 and 2009, we observe a similar dynamic in misperceptions about the Clinton and Obama health care plans among opposing partisans (i.e., Republicans). As noted above, the confidence with which these beliefs are held is one reason they are so difficult to correct.
The Heritage Foundation recently expressed concern that “unless entitlement spending is reined in, it will consume all federal revenue in just 42 years, with nothing left over for defense.”
Interestingly, Heritage made no mention of why entitlement spending is projected to rise so quickly. The fact is that the federal government is projected to spend a tremendous amount of money because the health-care system in this country is severely broken. According to the Congressional Budget Office, the cost of health care is rising so fast that per-capita consumption of all other goods and services is projected to rise only 6 percent between 2007 and 2035—less than 0.2 percent per year.
If serious efforts aren't made to rein in the cost of health care, in 29 years it will double as a share of GDP—accounting for fully one-third of the entire economic output of the country. In 70 years, health care will be nearly one-half the economy.
And yes, it is the cost of health care, not the quantity that accounts for the spending increase. If federal spending on health care rose only on account of economic growth and aging of the population, it would total 7.3 percent of GDP by 2083. Because of projected cost growth, federal spending is projected to reach 17.8 percent of GDP.
MIT economist Esther Duflo is the most recent recipient of the John Bates Clark Medal, arguably the economics profession's most selective award (harder to get than the Economics Nobel). She received the award for her work at MIT's Abdul Latif Jameel Poverty Action Lab, which has pioneered the use of randomized field experiments to test specific social policies, such as distributing bednets to prevent the spread of malaria or providing small financial incentives to parents to encourage them to vaccinate their children.
What is particularly appealing about Duflo's work is that it uses the strongly empirical approach that has made "Freakonomics" so popular. But she does not just wonder whether sumo wrestlers cheat or prostitutes are patriotic. She manages to ask questions that can vastly improve, even save, millions of lives in poor countries around the world.
If you have 16 minutes and 47 seconds, Duflo does a superb job summarizing some of her work in this recent video in the TED series.
Randomized field trials aren't the answer to every important question in economics. They have almost nothing to say about how we got into or how we can get out of the current world recession, for example. But, it sure is nice to see an economist ask and convincingly answer questions that really matter.
The National Institutes of Health (NIH) spend more than $30 billion on medical research every year. Some research is done in-house, but most is contracted out to universities and research organizations. But the NIH is not always getting its money’s worth when it contracts out.The selection process for awarding grants is inconsistent, and rigorous review of study design and statistical methods is missing. As a result the quality of NIH-supported research is shockingly poor, at least for some diseases.
After becoming sick with Lyme disease in 2003, I read up on the medical literature on treatment of Lyme disease. Lyme disease is a bacterial infection caused by a tick bite. It is treated with antibiotics, but unfortunately many patients fail the recommended treatment of 2-4 weeks of antibiotics. Currently, there is a fierce debate among medical professionals about the optimal treatment. The debate is fuel by the lack of good research. The NIH has in the past funded four medical trials that looked at additional antibiotic therapy in Lyme patients who failed previous treatment. All four trials had serious design flaws that biased them against finding a treatment effect.
Further confirmation of the grave deterioration of the human rights situation in Honduras can be found in a detailed report on freedom of speech released on May 3rd by the Tegucigalpa-based organization Committee for Free Speech, or C-Libre. Though it has received scant attention in the media, the report (which can be accessed here in Spanish) offers an alarming and scathing account of the attacks endured by Honduran media outlets and journalists critical of the June 28 coup.
Update (February 15, 2011): Work-sharing is becoming more common across the OECD. The general pattern still appears to hold, those countries have pushed it most aggressively have seen the smallest increases in unemployment. The graph below has been updated.
The April jobs numbers showed the unemployment rate rising back to 9.9 percent. While the main reason was that more people were looking for jobs (rather than more people losing jobs), on the current path, the unemployment rate will not fall to normal levels any time soon.
There are two ways to fix this situation. The first one is to expand the size of the economy. This could be done by running larger budget deficits, through more expansionary monetary policy at the Fed, or by pushing the dollar down to increase our net exports. In principle, all three of these can be effective routes to boosting the economy and expanding employment, however as practical matter, none of these paths look very plausible politically any time soon.
If we can't reduce unemployment by increasing demand, then we can try the second route to full employment: share the work. The basic concept is simple, if we can't get generate more jobs, then we can share the jobs we have by everyone working fewer hours. This is "workshare" system is already in place in several other wealthy countries, most notably the Netherlands and Germany.
In Germany, the standard practice is that employers reduce work time by 20 percent. The government then makes up 60 percent of the lost wage or 12 percent of the total age. It requires the employer to make up another 20 percent of the lost wages or 4 percent of the total wage. The worker then absorbs a paycut of 4 percent in exchange for working 20 percent fewer hours. This might mean a 4-day week instead of a 5-day week. In these circumstances, the reduction in transportation costs and other work-related expenses can easily exceed the lost pay.
Even though its loss in GDP has been larger than the decline in the United States, the Netherlands has seen almost no rise in unemployment in this downturn. Germany has actually seen its unemployment rate go down. On average, the rise in the unemployment rate has been less than 1 percentage point for the 8 countries that the International Labor Organization reports as having some form of worksharing program in place. By contrast, for the other wealthy countries, the average increase has been close to 3 percentage points.
The Geneva-based South Centre has recently published a bulletin with updates about the status of the World Trade Organization (WTO) expansion negotiations, known as the “Doha Round.” You can click here for the entire – extremely useful – collection. At this point, the poorest developing countries are asking for an “early harvest” on the promised development benefits of the Round, and middle-income developing countries are demanding more balance within the negotiations on agriculture and industrial tariffs, as well as between the two issues.
Launched in 2001, governments worldwide have repeatedly rejected various iterations of the proposed expansion, which would further slash tariffs and other employment and industrial protections. What sane government is going to agree to job-killing tariff cuts during a global recession? Countries of the global South are also being asked to slash agricultural tariffs (to let in more subsidized agribusiness imports) while the minimal protections they’re demanding for farmers’ livelihoods and food security are being opposed – mostly by the United States. (This contradicts Obama’s commitment to global food security, by the way.) See here for more background on agriculture and food security issues.
Welfare reform in Wisconsin includes a mix of conservative and progressive elements that date to the date to the early 1990s. The progressive elements include a state Earned Income Tax Credit and broad expansions of child care assistance and health insurance for low-income families. The conservative element, which got the most attention nationally, was a radical redesign of its Aid to Families with Dependent Children (AFDC) program. The Wisconsin redesign, known as Wisconsin Works or W-2, was fully implemented when the federal government replaced AFDC with the Temporary Assistance program in 1996.
The conservative changes to Temporary Assistance effectively resulted in the near-elimination of means-tested income supplements for unemployed parents. As a result, the number of unemployed, low-income parents receiving income supplements in Wisconsin declined by an extraordinary 87 percent in Wisconsin between 1993 and 1998. It remains depressed even in the current economic downturn. In a recent analysis, Tim Casey of Legal Momentum, found that the number of families receiving Temporary Assistance income supplements in the state increased by only 2.4 percent between December 2007 and March 2009; by comparison, the number of people receiving Food Stamps nationally increased by 20 percent over the same period. Similarly, a recent study by the state agency that administers W-2 found thousands of families without any income aren't participating in it.
Conservative welfare reformers have generally lauded the changes that led to these reductions in the number of Wisconsin families receiving help. For example, political scientist Lawrence Mead, a proponent of a "New Paternalist" approach to social policy, pointing almost exclusively to the reduction in the number of families helped (or as he put it, reductions in "dependency"), has argued that Wisconsin's redesign was the "most radical and, arguably, the most successful in the nation."
The problems with using this sort of low bar to determine success became apparent in 2002 when the NAACP, Legal Action of Wisconsin and other organization filed a complaint with the federal HHS Office of Civil Rights alleging that the state systematically discriminated on the basis of race and disability in administering the program. In 2004, the state's own report found racial disparities in the program's treatment of Latino and African-American parents. Other research has found that many parents who applied for help from the program and could have benefitted from it, were "diverted", that is, effectively denied assistance.
Some progress was made on this front last week when the U.S. Department of Health and Human Services (HHS) announced they had reached a compliance agreement with the state on modest improvements to the program that should reduce discrimination. The improvements are mostly common-sense ones, like conducting assessments of the potential mental or physical health limitations of parents, and other needs they may have related to employment and training, at the "front-end" of the program when parents are applying for benefits, but they're important nonetheless. As a recent research on poverty and disability by Peiyun She and Gina Livermore has shown, nearly two-thirds of working-age adults who experience consistent income poverty (36 months in a 48-month period) have a disability. (For a synthesis of this and related research, see my paper Half in Ten). Wisconsin still has a long way to go when it comes to providing effective social insurance for low-wage workers who experience unemployment, but the HHS agreement is at least a step forward.
CEPR co-Director Mark Weisbrot responds to questions from a Greek journalist about the agreement reached Sunday for a 100 billion euro loan package, between the Greek government and the European Commission, the European Central Bank, and the IMF:
1. Are these measures [the Sunday loan agreement] good to resolve the problem?
I would say no. Note that the finance ministry just lowered their projections for Greece's GDP growth: from negative 2 to negative 4 percent for 2010. They may well be lowered again soon, if the policies are implemented. In Latvia, the IMF projected negative five percent growth for 2009 and it came in at negative 18 percent.Also, they are projecting a debt of 149 percent of GDP by 2013 under this program. Unless most of this debt can be rolled over at extremely low interest rates, which nobody is talking about, this is not sustainable, and simply pushes the inevitable restructuring a few years into the future, after the debt burden becomes larger as the economy shrinks further.
2. If they are not, is there any other option now?
Well there are a lot of options but they all involve taking a harder line with the EC/IMF/ECB and refusing to accept the proposed conditions. If they were willing to make the loan at near-zero-interest rates and drop the pro-cyclical conditions, then a sustainable deal might be possible. Other options include a forced restructuring of the debt and/or leaving the Euro. These would also involve costs to the Greek economy, but they may well be smaller, and shorter-lived, than those of the open-ended recession and potential long-term stagnation that the current arrangement commits the government to.
Today the MIT Press is publishing CEPR co-director Dean Baker's latest book, Taking Economics Seriously. It's a cloth/hardcover compact (4 1/2" by 7" and 136 pages) book that offers an alternative Econ 101. A great little graduation gift, especially for econ geeks, but it's accessible enough for anyone.
But don't believe me. Here's what Simon Johnson (former IMF chief economist and co-founder of The Baseline Scenario) and Elizabeth Warren (Harvard Law Professor and Chair of the Congressional Oversight Panel) say about it:
Baker's analysis is always insightful and his proposals entirely reasonable. Read this book only if you are worried about where the United States is heading. - Simon Johnson
A terrific book. Dean Baker deconstructs the myth that big corporations have any interest in free markets and deregulation. And he is right: industry interests support government intervention all the time -- when it helps them. They have thrown the free market under the bus to maximize profits, and Taking Economics Seriously explains how. - Elizabeth Warren.
And while you're at it, pick one up for yourself! Unless, of course, you're not worried about where the U.S. is heading.
In March, MDRC released its initial evaluation of New York City's Family Reward's demonstration program. Family Rewards provides cash payments to very low-income parents (below 130 percent of the current poverty line) who meet various conditions related to their children's education (including children's school attendance and scoring above a certain level on standardized tests), family health (maintaining health insurance coverage and preventive care), and their own employment and training (full-time work and participating in certain education and training activities). Family Rewards is based on "conditional cash transfer" programs that currently operate in Latin America, particularly Mexico's Oportunidades program.
The headlines from press accounts of the evaluation (NYT: "New York to End Program to Give Cash to the Poor"; AP: "Money for Good Habits Doesn't Change Lives") frame the demonstration as having little impact, but the actual results are more nuanced. Most notably, families enrolled in the program experienced average monthly income gains of $366 compared to families in a control group. Family Rewards payments amounted to about 80 percent of the difference. Families in the demonstration also experienced substantial reductions in various economic hardships and financial strain. They were less likely to have their phone and utilities disconnected or be food insecure, and more likely to report an improved financial situation compared to the previous year.
The results related to children's education, however, were quite limited. There was generally no improvement in the test scores or school attendance of children in the program (although attendance was already quite high). One exception was for a subgroup of high school students: those students who scored at or above proficiency level in the previous year (before entering the program) saw some gains in attendance and likelihood of moving forward to the next grade. One caveat to these results is that they are based on only one year of data. It may be that additional time is needed for the program to have an impact on educational outcomes; we'll know in 2013 when the final longer-term evaluation is released.
What I take away from the evaluation is that providing income supplements to low-income families increases their income and reduces their levels of economic hardship. This may seem like an insignificant point, but remember that conservatives and even many mainstream anti-poverty researchers believe that public income supplements are counter-productive because they have a large "work disincentive" effect unless conditioned explicitly on employment. That wasn't the case here. (Although Family Rewards isn't a clear-cut test since one of the 22 incentives was for maintaining full-time employment.)
The big question with Family Rewards is whether it's a better way to deliver income supplements to low-income families than other alternatives. The Bloomberg administration describes Family Rewards as the "first major conditional cash transfer initiative" implemented in the United States. This is true in a narrow programmatic sense—the program is the first U.S. demonstration directly modeled on the Latin American CCT programs—but it's not really the case in the broader conceptual sense implied by the term conditional cash transfer. Federal and state governments provide all sorts of transfers that are conditioned on meeting various requirements. Federal tax law, for example, provides subsidies conditioned on homeownership (the mortgage interest deduction), on earnings (the Earned Income Tax Credit), and education (the Hope Tax Credit, Lifetime Learning Credit and others).
While Family Rewards shares these programs' conditionality, it's different in other ways: 1) the transfers are not explicitly linked to costs associated with meeting the conditions; 2) the program is limited to very-low income families; 3) it provides a long list of micro-incentives under a single programmatic umbrella administered by a non-profit agency. This approach might make sense in Mexico and other middle- and lower-income countries where existing means-tested social insurance programs are limited or non-existent, but I'm skeptical that it makes much sense in the United States where we already have established structures for delivering means-tested social insurance and conditional transfers.
So, instead of 22 incentives bundled in a single program, I'd opt for focusing on a handful of benefits that could be made progressively universal and are designed to offset specific costs. To a large extent, this would simply mean extending existing benefits to low-income families. For example, the Lifetime Learning Tax Credit offsets the costs of post-secondary education and training for adults, but it's only available if you have federal income tax liability. The Earned Income Tax Credit provides benefits conditioned on earnings, but the benefits are teensy for low-wage workers without children and youth are completely excluded. Both credits should be made more inclusive and progressive. In terms of new benefits, I'd focus on something for youth in the 16-24 age range, a group who are largely ignored by current social policy (and left mainly to the criminal justice and educational systems). One possibility would be a credit for completing high school (in part to explicitly reduce economic pressures to leave school for work) and, after doing so, moving into work or post-secondary educational and training.
CEPR has just posted our second graphic describing the uninsured in the United States. The first graphic emphasized that in the most recent available data (2008), the large majority (38.3 million) of the 46.3 million uninsured are adults age 18 to 64. Of these, more than half (23.1 million) are working, most (14.7 million) full-time, all year long.
Today's graphic looks at how many of the uninsured are immigrants. According to the most recent data, almost three-fourths (34.0 million) of the uninsured were born in the United States. Of the 12.3 million immigrants without health insurance, more than half (6.3 million) are employed, and about 900,000 are children.
Dean Baker's Prescriptions for Moving the Economy Forward: Work Share, Right to Rent, and the Financial Speculation Tax Dean Baker's work share concept, which would which would provide an employer tax credit for paid time off as a way to quickly boost demand in the economy, continues to gain attention as well as bi-partisan support. The Los Angles Times recently printed this op-ed, co-written by Dean and the American Enterprise Institute's Kevin Hassett, and the Miami Herald also ran the piece. On April 27, 2010, Baker and Hassett are slated to discuss work share with the House Democratic Caucus.
Congressman Raúl Grijalva (D-AZ) and Congresswoman Marcy Kaptur (D-OH) introduced legislation on April 15, 2010 to create a "Right to Rent" for homeowners facing foreclosure. The bill allows a family to petition a judge to stay in their home as renters under a 5-year lease. Dean Baker conceived of the right to rent concept several years ago, and has been promoting the plan as a viable solution to the foreclosure crisis ever since. He recently discussed the right to rent option in his testimony before the House Subcommittee on Housing and Community Opportunity on the Obama administration's Homeowner Affordability Modification Program (HAMP).
Dean Baker was part of a panel that included Wall Street and economic experts, labor leaders, and consumer, development and global health advocates who called on President Obama and Treasury Secretary Timothy Geithner to embrace this tax and on Congress to move swiftly to enact it. The groups held a press conference on April 15, 2010 to push for a Financial Speculation Tax. Baker has been vocal in calling for support of the FST, recently pointing out that it "would go a long way towards addressing future budget shortfalls and it would raise money from people who can afford it: the Wall Street crew whose financial shenanigans led to the meltdown."
Haiti CEPR continues to monitor the situation in Haiti through the Haiti: Relief and Reconstruction Watchblog. CEPR also released a paper that proposes that international donors seeking to support Haiti's agricultural sector and provide food to those in need could help Haiti become more self-sufficient by purchasing the entire Haitian rice crop over the next two years. The paper finds that buying up all of Haiti's rice should be close to the amount of food aid for rice that the international community is likely to provide this year, and would provide a tremendous boost to Haitian farmers, who currently are unable to compete with low-cost rice imports from the U.S.
CEPR VS the Wall Street Deficit Hawks
CEPR has been fighting the scare tactics of the Wall St deficit hawks for ten years now. It wasn't enough that the people who missed the housing bubble are still in power - now they want to come after Social Security. At a time when we should be focusing on job creation and stimulus to get the wrecked economy moving, the deficit hawks are trying to scare the public with untruths. As Dean Baker says here "the scary budget stories being hyped in the media and by the Wall Street crew are driven almost entirely by projections of exploding health care costs. But instead of proposing ways to fix the health care system, these deficit hawks want to attack Social Security." Dean also takes on the deficit hawks here and here.
CEPR joined forces with the Campaign for America's Future to oppose Wall St mogul Pete Peterson's program, "I.O.USA: America's Money Crisis" that aired on CNN over the weekend of April 10th. The call went out for progressives to pressure CNN to cancel this program or make it more balanced by including progressive solutions for addressing the budget deficit. Watch Dean and CAF's Roger Hickey discuss the program here.
New Releases: Capital Controls
CEPR's latest paper, "Capital Controls and Monetary Policy in Developing Countries", looks at both the theoretical and empirical literature on capital controls and finds that capital controls can play an important role in developing countries by helping to insulate them from some of the harmful effects of volatile and short-term capital flows. CEPR Co-Director Mark Weisbrot will debate the IMF on the topic of Capital Controls on April 23 - see below for more information.
Catch CEPR Co-Directors Live and In-Person On April 22, 2010, Mark Weisbrot will participate in a panel discussion on Special Drawing Rights for Climate Finance. The event, sponsored by Action Aid and the Nature Conservancy, will be held at the World Bank as part of the Spring Meetings Civil Society Forum. Click here for more information.
On April 23, 2010, Mark will join Reza Baqir, deputy chief in the International Monetary Fund's Strategy, Policy, and Review Department in a discussion of capital controls. The event will be held at the World Bank as part of the Spring Meetings Civil Society Forum. Click here for more details.
Later that same day, Mark will take part in a discussion with Luis Arce, the Republic of Bolivia's Minister of Finance, on the country's economic growth over the last four years. The event, titled "Bolivia's Economic Success Story: Making the Economy Work for the Bolivian People", will be held at 2:30PM at George Washington University's Elliott School of International Affairs in Washington, DC. Click here for more information.
On April 24, 2010, Dean Baker will discuss themes from his book False Profits: Recovering from the Bubble Economy at the Chazen Art Museum Auditorium on the University of Wisconsin campus in Madison, WI. The event, titled "The Origins of the Economic Crisis and the Way Out", is free and open to the public, and is sponsored by The Madison Institute. Details can be found here.
On April 26th, Dean will travel to Ottowa, Canada to participate in a parliamentary roundtable discussion on the G8/G20 agendas regarding the financial crisis, organized by Canadian civil society.
And on April 29th at 5:15PM, Dean will present a talk titled "The Second Great Depression: How Dumb Can We Be?" At Sarah Lawrence College in Bronxville, NY. The event is open to the public - click here for more details.
New Features on CEPR's Website!
Beat the Press After a successful run on the American Prospect's website, Dean Baker's blog on economic reporting can now be found here, on CEPR's website. You can also become a fan of Beat the Press on Facebook.
A Revived CEPR Blog CEPR economists will soon take turns blogging about the important economic issues of the day. Check out what they have to say here starting April 26th.
For Dean Baker's newest book: Taking Economic Seriously. The book, which is scheduled to be released by the MIT Press on April 30, 2010, provides an "an alternative Econ 101."
The most recent available data (2008) show that 46.3 million people in the United States had no health insurance. Adults between 18 and 64 are by far the largest group of uninsured (38.3 million in 2008). Children are the next largest group of the uninsured (7.3 million). Thanks primarily to Medicare, only a small share of the uninsured are 65 or older (0.6 million). Most uninsured adults are workers. Over 23 million workers 18 to 64 have no health insurance from any source, compared to about 15 million non-working adults in the same age range. A large majority of the working adults (14.7 million) are “full-time, full-year” (that is, worked at least 50 weeks in the year, for at least 35 hours per week).
CEPR contributed a key graph to the report. As the PSN writes:
"Public Employee Unions are Not Driving Underfunding of Retiree Benefits: Part of the rhetoric around high-paid retirees and the supposed public pension crisis is blaming public employee unions for pushing states into fiscal crisis. Yet as the graph below indicates, courtesy of the Center for Economic and Policy Research, there is zero correlation between the degree of state employee unionization and how well funded state plans are. In fact, New York state has the highest unionization rate in the country and the highest funding level compared to its liability of any state, while other high unionization states like Connecticut and Rhode Island share honors with low-unionization states like Kansas and Louisiana for falling somewhat below the 80% goal for pre-funding retiree obligations. What's clear is that budgetary factors quite unrelated to the level of public employee unionization are the main factors in how well states pre-fund their pension obligations."
Well, why not? We've been trying to think of some new and creative ways to support all the good work that CEPR's been doing over the past few months, and since Sarah Palin's been in the news lately, we thought that maybe she'd lend a hand…
OK, not really. But CEPR has been working hard to address the many serious issues facing all of us - from the continuing foreclosure crisis to the unacceptable unemployment rate to the devastating situation in Haiti - and we do need the support of all of our friends so that we will be able to continue that good work.
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Dean Baker Writes the Washington Post’s Obituary Dean Baker was the first to notice that a Washington Post article on the budget deficit came from the Fiscal Times, a newly-formed “news service” funded by billionaire Peter G. Peterson, who has been using his vast fortune to try to cut back and/or privatize Social Security and Medicare for the last two decades. As Baker noted in his blog “Beat the Press,” the Post’s New Year’s Eve article conveyed Peterson's budget fear-mongering view, but did not mention Peterson’s funding of the Fiscal Times and the main sources cited in the article. Baker’s discovery was picked up by other blogs, and the issue was highlighted in a New York Times piece that was published on January 5th. Baker co-signed a letter sent to the Post’s Ombudsman protesting the article, and another letter to the Chairman of the Post. After the Ombudsman printed this disappointing reply, Baker fired off another critique.
As the Senate is set to vote on a fast-track commission on the budget deficit next week, this scrutiny of Pete Peterson’s agenda and his ties to the Fiscal Times could not come at a better time. Dean Baker’s New Book is now Available! Dean Baker’s new book, False Profits: Recovering From the Bubble Economy is officially released today! In this sequel to Plunder and Blunder: The Rise and Fall of the Bubble Economy, Baker recounts the causes of the economic meltdown, outlines how policymakers failed to recognize the warning signs, and offers a thoughtful progressive program for rebuilding the economy and reforming the financial system. The book is available here.
And if you’re in Washington DC on January 28th, please join Dean Baker at 6:30pm for a book talk at Busboys and Poets, 2021 14th St. NW, Washington, DC 20009 (202) 387-POET (7638). For more details about this free event, click here.
CEPR’s Response to the Earthquake in Haiti In the wake of the devastating earthquake that hit Haiti, CEPR has responded by working with other organizations - such as Jubilee USA and the Institute for Justice and Democracy in Haiti - to promote the use of grants, rather than loans, from international financial institutions’ assistance to Haiti. This was prompted by news that the International Monetary Fund would require Haiti to pay back its $100 million in assistance money. CEPR staff also raised the question of why the Obama administration has not yet provided Temporary Protective Status to Haitians in the U.S., as currently there are 30,000 Haitians awaiting deportation; and CEPR has worked to put experts, independent journalists, and relief workers in contact with major media outlets. CEPR staff will lead a workshop on Haiti at a conference on January 25, 2009 organized by TransAfrica Forum. Participants will include Congressional staff and other policy makers.
Support for a Financial Speculation Tax Grows Support continues to build for a financial speculation tax (FST). Dean Baker was one of 200 economists, including Nobel Laureate Daniel McFadden, James K. Galbraith, who signed a letter in support of the FST. Representative Peter DeFazio (D-OR) and Senator Tom Harkin (D-IA) have introduced bills calling for the adoption of an FST. Dean Baker continues to point out the benefits of the FST, responding to criticism here and offering it as a viable solution to address the deficit in an interview on NPR’s Morning Edition. And just today, Steven Pearlstein of the Washington Postendorsed the FST.
Mark Weisbrot in Latvia CEPR Co-Director Mark Weisbrot just returned from Latvia, where he presented on the serious challenges facing Latvia's economy due to its overvalued currency, which is pegged to the Euro. Swedish, Austrian, and other European banks have put enormous pressure on Latvia to maintain the peg through the European Union, even though this is contributing to Latvia's worst-ever recession, and the IMF is also supporting this policy. Weisbrot's presentation immediately followed remarks by the Latvian Prime Minister, who attended the event along with most of the cabinet. While he was there, Weisbrot also had several meetings with other top policy makers and economists, and his visit was a top news story on all the major Latvian media and was covered by international media outlets as well. Weisbrot’s new column for The Guardian examines Latvia's economic problems in detail.
In Case You Missed It… CEPR’s 10th Anniversary webcast is now available in seven (briefly annotated) parts. Originally broadcast in September of 2009 and moderated by Jane Hamsher of firedoglake, the webcast features CEPR CO-Directors Dean Baker and Mark Weisbrot in a wide-ranging discussion of CEPR’s past, present and future.
Once again, we’d like to extend our sincere appreciation to everyone who made this possible. To all of our friends, many thanks for your financial and moral support over the past ten years – we couldn’t have done it without you. We look forward to another ten years of setting the record straight…stay tuned!
Dear Friends of CEPR, I have a new book out this month: False Profits: Recovering from the Bubble Economy. I felt the need to write this book because, remarkably, the people who somehow could not see an $8 trillion housing bubble still could not understand the bubble even after it wrecked the economy. It was as though their house had burnt down in a fire and they were checking on the burglar alarm.
There is not a lot of mystery as to the source of the current problems. First and foremost, the country's top regulators, Alan Greenspan and Ben Bernanke, were incredibly incompetent in allowing the bubble to grow unchecked. This bubble drove the economy ever since the last recession. Predictably, high house prices led to an enormous construction boom. Soaring home equity also led to a massive consumption boom as people spent based on the newly created wealth in their homes.
In its later years, the bubble was further inflated through complex financial engineering and, in some cases, outright fraud by the financial industry. While it would be desirable to have a better regulatory structure and it is important to fully prosecute the high level bankers who violated the law, this should not obscure the fact that the basic problem was very simple: the Fed committed one of the biggest policy blunders of all-time by allowing the bubble to expand unchecked.
At this point, we have to push for the measures that will best help us recover from the disaster that Greenspan/Bernanke created. At the top of the list is getting people back to work. Second, we have to help the homeowners who got caught up in the bubble. Finally, we have to rein in our bloated financial sector. There are other simple policy solutions to what, in many cases, are actually simple problems. But there is a whole industry of professional lobbyists, many of them economists, whose job is to make simple problems appear complicated.
False Profits, like my other writing, is an effort to assure people that the problems and solutions really are simple. That may put me at odds with many of the leading names in the economics profession. But, when it came to the bubble, most of them were wrong. I hope False Profits will help them better understand what caused, and how to cure, the current crisis. And I hope you'll find it a worthwhile read also.