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Dean Baker

Dean Baker

Dean Baker is a macroeconomist and codirector of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout's Board of Advisers.

Articles by Dean Baker

Socialism ain’t what it used to be

2 days ago

From Dean Baker
I was very disappointed with Ezra Klein’s NYT interview with Bhaskar Sunkara, in large part because I have a high opinion of Sunkara, the founder of Jacobin and now the president of The Nation. My main disappointment stems from his non-answer to one of the main questions raised by Klein.
Klein asked why the Democrats, and other liberal/left parties around the world, rely largely on more educated people for their support, while more working-class types have turned to the right. Socialists had historically envisioned socialism as the agenda of the working class, not college-educated professionals.
Sunkara gave an answer that put the blame on the decline in unions, which is undoubtedly a big part of the story. But the answer clearly goes beyond this.
Liberal/left parties

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Getting rents down, converting vacant office space to residential

25 days ago

From Dean Baker
There is good reason for believing that the prices of many items that drove inflation higher in the last year have stopped rising and are may even be going in the opposite direction. Used cars are the best example. The CPI index for used vehicles rose 40.5 percent from January 2021 to January 2022. In the three months from January to April, the CPI index has fallen by 4.5 percent.
More generally, the supply shortages that drove prices higher in 2021 seem to be replaced by gluts, with major retailers like Amazon and Target complaining about stockpiles of unsold goods. With the stimulus measures from the pandemic fading into the past, and people no longer fearing to travel or go to restaurants, it is likely that we will be seeing serious downward pressure on the prices of

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The impediment to productivity growth: Waste that makes some people rich

May 25, 2022

From Dean Baker
The New York Times ran a piece discussing why innovations in cloud computing and artificial technology have not led to more rapid increases in productivity. It raises a number of possibilities, but leaves out an obvious one, increasing waste associated with rent-seeking. We clearly see an increase in waste associated with rent-seeking, the only question is whether it is large enough to have a notable effect on productivity growth.
The piece actually touches on, without commenting on it, one of the major sources of waste. It discusses the practices of a major health insurer.
Health insurance does not directly contribute to GDP. Health care (actually health) is what we care about. Health insurers determines who has access to health care. In principle we want as few people

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There is no political constituency for free trade, it’s just a term used to justify screwing workers

April 29, 2022

From Dean Baker
It is amazing how frequently policy types talk about “free trade” as though it is actually a policy anyone is interested in promoting. The reality is that what passes for free trade is a policy of removing barriers to allow low cost manufactured goods to enter the United States without restrictions. This puts downward pressure on the pay of manufacturing workers. Since manufacturing had historically been a source of high paying jobs for workers without college degrees (it is no longer), the loss of these jobs out downward pressure on the pay of non-college educated workers more generally.
A policy of genuine free trade would mean eliminating barriers that limit trade in physicians’ services as well as the services of highly paid professionals more generally. It would

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Two routes to lower inflation

April 27, 2022

From Dean Baker  

Inflation has stayed higher longer than I expected. I got that one wrong. I am happy to acknowledge my mistake, but I also want to know the reason why. This is not a question of finding excuses, I want to know why the economy is acting differently than I thought it would.
The most obvious reason is the supply chain disruptions that led to the original jump in prices have lasted longer and been more far-reaching than I expected. Part of this is due to the persistence of the pandemic, with the delta and omicron strains disrupting economies around the world.
The other major source of disruption is Russia’s invasion of Ukraine. This has blocked the supply of many items manufactured in Ukraine, but more importantly, the war reduces its ability to grow and sell wheat

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Corruption in drug patents: take away the money

April 18, 2022

From Dean Baker
The New York Times had an editorial about the corruption of the patent system in recent decades. It noted that the patent office is clearly not following the legal standards for issuing a patent, including that the item being patented is a genuine innovation and that it works. Among other things, it pointed out that Theranos had been issued dozens of patents for a technique that clearly did not work.
As the editorial notes, the worst patent abuses occur with prescription drugs. Drug companies routinely garner dozens of dubious patents for their leading sellers, making it extremely expensive for potential generic competitors to enter the market.  The piece points out that the twelve drugs that get the most money from Medicare have an average of more than fifty patents

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Paul Krugman, China, mRNA vaccines, and right-wing populism

April 11, 2022

From Dean Baker  

It is our policy on technology that drives inequality, it is not the technology.
I rarely disagree with Paul Krugman’s columns, but every now and then he does say something that I have to issue with. In a column last month, Krugman complained about the enormous costs associated with China’s zero COVID-19 policy. He tied it to its reliance on old-fashioned Chinese vaccines that used dead virus material, instead of using the mRNA vaccines developed by researchers in the United States and Europe.
There are good grounds for criticizing China’s zero COVID-19 policy. It may have been reasonable in the early days of the pandemic when we had neither vaccines nor effective treatment. However, the massive lockdowns required, which also literally threaten lives (people can’t

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Recession fears: real and imagined

April 3, 2022

From Dean Baker
There is a story of a football coach who ran running plays near the end of a game, when he clearly should have been passing. Apparently, he had seen data showing that teams that win, on average, run on a certain number of plays. His team was below this number, so he decided that he had to have more runs if his team was going to win.
This is a classic case of confusing correlation with causation. (For those not familiar with football, when a team is ahead, it generally uses running plays to take lots of time off the clock. They run because they are winning, they don’t win because they run.) This distinction is important when considering various predictions for a recession in the current environment.
There are many features of an economy that we commonly see before a

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We don’t need a Cold War with China

March 21, 2022

From Dean Baker
There has been much press around President Biden’s demands that China not support Russia in its invasion of Ukraine. The implication of these demands is that the United States has the ability to punish China economically in a way that imposes more pain on China than on us. That may be true for now, but it’s not clear it will be true much longer, and it may not even prove to be true at present.
It is common to refer to China as the world’s second largest economy, after the United States. However, using a purchasing power parity measure, China’s GDP actually passed US GDP in 2016. The IMF projects that it will be more than one third larger by 2026, the last year of its projection period.

Source: IMF
The purchasing power parity measure, in contrast to the more commonly

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As the Fed prepares to raise rates, the inflation hawks are running wild

March 16, 2022

From Dean Baker
With bad news on oil prices, and a new wave of COVID-19 shutdowns in China, the inflation hawks are getting really excited. After all, higher oil prices and further supply disruptions are sure to add to the inflation the economy is already seeing. I guess they were right with their warnings.
Okay, let’s get back to Planet Earth. The large stimulus package that President Biden pushed through last year undoubtedly added to inflation in the economy, but it also quickly got the economy back to something close to full employment. If we had not had a big package, maybe the inflation rate would be a couple points lower, but the unemployment rate might be closer to 5.8 percent, rather than the 3.8 percent reported for February.
The point that many of us keep making is that most

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Reducing oil prices without ruining the environment: pay people not to drive

March 2, 2022

From Dean Baker
From my Twitter feed it seems that Sarah Palin has been resurrected. All sorts of centrist-liberal types are yelling “drill baby, drill!” as a response to Russia’s invasion of Ukraine. They have been pushing for ignoring environmental regulations and even directly subsidizing fracking.
While that is no doubt music to the ears of the fossil fuel industry, this is going backwards about as quickly as we can in our effort to reduce greenhouse gas emissions. There is an alternative route, we can pay people not to drive. That one might seem a little silly, but it beats paying people to wreck the environment.
The way this could work is that ask people to submit a form to the IRS indicating how many miles they drove last year. We also have them submit a picture of their

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Reducing oil prices without ruining the environment: pay people not to drive

February 24, 2022

From Dean Baker
From my Twitter feed it seems that Sarah Palin has been resurrected. All sorts of centrist-liberal types are yelling “drill baby, drill!” as a response to Russia’s invasion of Ukraine. They have been pushing for ignoring environmental regulations and even directly subsidizing fracking.
While that is no doubt music to the ears of the fossil fuel industry, this is going backwards about as quickly as we can in our effort to reduce greenhouse gas emissions. There is an alternative route, we can pay people not to drive. That one might seem a little silly, but it beats paying people to wreck the environment.
The way this could work is that ask people to submit a form to the IRS indicating how many miles they drove last year. We also have them submit a picture of their

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Ross Douthat and the Great Resignation

February 21, 2022

From Dean Baker
The General Picture: Policy Was Structured to Redistribute Upward
I don’t agree with much about Ross Douthat’s politics, but he often makes some interesting points. He did so in his latest column on the Canadian “truckers” protest against vaccine mandates. Douthat argues that support for the protest stems from resentment by people who do various types of manual labor against the professional class. His point is that the latter have largely been setting the rules in ways that disadvantage the group of people who rely on manual labor for their living.
Unfortunately, it seems that no one other than Douthat is given the opportunity by major news outlets to argue that policy, rather than inevitable processes like globalization or technology, is responsible for the relative

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The big lie of the elites

February 11, 2022

From Dean Baker
We all know about the Trumpers’ big lie: somehow millions of votes were stolen from their hero, but the liberals were so smart in their steal that Trump’s team can’t produce any evidence. That one rightly draws contempt from anyone not in the cult, but what about the big lie that the vast majority of intellectuals seem to accept?
Regular readers know what I am talking about. The big lie is that the massive rise in inequality over the last four decades was somehow the result of the natural workings of the market. The standard position among policy types is that the rise in inequality was simply the result of the development of technology and the process of globalization.
We saw this view on full display in a generally interesting column in today’s NYT by Thomas Edsall.

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More thoughts on the Great Inflation Debate

February 1, 2022

From Dean Baker

With inflation remaining stubbornly high for longer than I, and many others, expected, I want to take another stab at the argument of the inflation hawks. As a jumping off point, I will use the argument put forward by Larry Summers and Jason Furman, probably the two most prominent and coherent economists arguing that we have underestimated the risks of persistently high inflation.[1]
There are three main components to the Summers-Furman (SF) argument. (Their arguments are not identical, so I’m being a bit unfair to both in trying to mash them together.)  The first is that the Biden administration provided excessive stimulus to the economy with the American Recovery Act (ARA) passed by Congress last February. They argue that demand for goods and services far exceeded

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Are used car prices bankrupting workers?

January 25, 2022

From Dean Baker
The news media have been constantly hyping inflation in recent months. While everyone has been seeing the huge rise in gas prices over the last year (that’s what happens when the world reopens after a pandemic), used car prices have risen almost as rapidly. From December 2020 to December 2021 they rose 37.3 percent. This accounted for 1.03 percentage points of the 7.0 percent overall inflation in the last year.
We know the story of these price increases. A fire in a semiconductor plant in Japan has created a worldwide shortage of semiconductors, which has slowed car production. With people unable to get new cars, they are bidding up the price of used cars.
But beyond the specifics, there is an interesting accounting issue (oxymoron?) here. The Consumer Price Index

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The continuing phony debate on “free trade”

January 13, 2022

From Dean Baker
The national debate on free trade is one where honesty has no place. The purpose of our trade agreements, which were not free trade, was to reduce the pay of manufacturing workers, and non-college educated workers more generally, to the benefit of more highly educated workers and corporations. This was the predicted (by standard economics) and actual result.
We made our manufacturing workers compete with low-paid workers in China and elsewhere in the developing world. This led to a massive loss of manufacturing jobs as the trade deficit exploded. The hit to workers in manufacturing was so large that the historic wage premium in the industry has largely disappeared.
While the massive upward redistribution of income from our trade deals was sold on the principle of “free

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A Better World

January 10, 2022

From Dean Baker
Okay, I’m a bit slow for a New Year’s piece, but what the hell, we can always use a bit of optimism. Anyhow, I thought I would spout a few things about what the world might look like if we didn’t rig the market to give all the money to rich people. Not much new here for regular readers, I just thought I would spell it on paper, since it is a nice backdrop for many of our battles.
Before I go through my favorite unriggings, let me start by making a general point, which some people may miss. I focus much of my writing on ways that we rig the market to give money to the Bill Gates and Moderna billionaires of the world.
The idea of restructuring the market, so that these people do not get so rich, is not just a question of punishing the wealthy. When we give these people

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Repealing Section 230: Giving Mark Zuckerberg what he wants?

January 5, 2022

From Dean Baker
I have been engaging on Twitter recently on my ideas on repealing Section 230. Not surprisingly, I provoked a considerable response. While much of it was angry ad hominems, some of it involved thoughtful comments, especially those from Jeff Koseff and Mike Masnick, the latter of whom took the time to write a full column responding to my proposals on repeal.
I will directly respond to Mike’s column, but first I should probably outline again what I am proposing. I somewhat foolishly assumed that people had read my earlier pieces, and probably even more foolishly assumed anyone remembered them. So, I will first give the highlights of how I would like to see the law restructured and then respond to some of the points made by Mike and others.
Narrowing the Scope of 230
To my

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Getting ready for the next pandemic: Can we get patent monopolies on the table?

December 21, 2021

From Dean Baker

From the way our policy types talk about patents, or refuse to talk about them, they must think that the constitution guarantees life, liberty, and people getting incredibly rich from patents. Even as this pandemic has been needlessly prolonged by patent restrictions on the spread of technology for vaccines, tests, and treatments, resulting in millions of preventable deaths, we are still seeing no real debate as to whether we want to rely on these monopolies as a primary mechanism for financing medical innovation in the future.
At the most basic level, we need an explicit recognition that patent monopolies are just one possible mechanism for financing research. This should have always been obvious, but the pandemic should have hit us over the head with this simple but

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Will we see deflation in the next 12 months in the USA?

December 13, 2021

From Dean Baker
I’m not worried at this point about a deflationary spiral, but I see what, to my view, is a plausible scenario where the CPI actually goes negative in the next twelve months. I go through the categories and my predictions component by component below, but there are four main items driving the story that I’ll mention here.
First, I assume a sharp reversal in new and used car prices. The 11.1 percent increase in the former and 31.4 percent increase in the latter, have added 1.5 percentage points to the inflation rate over the last year. This run-up is due to the well-known shortage of semi-conductors. It seems that manufacturers are overcoming this shortage and getting up to normal production levels. This may lead to a situation where they are not only meeting normal

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Yes folks, Omicron can be blamed on patent monopolies

December 4, 2021

From Dean Baker
The development of the new variant, which was first discovered in South Africa, can be attributed to our failure to open-source our vaccines and freely transfer technology, contrary to claims from the pharmaceutical industry and its political allies. Their big talking point is that South Africa currently has more vaccines than it can effectively use at the moment.
This claim ignores two important points. The first is that we really don’t know where this strain originated. It was first identified in South Africa in part because its screening system happened to catch it. South Africa then did the responsible thing and reported to the world that it had uncovered a new variant.
This doesn’t mean that the Omicron variant originated in South Africa. It has been identified in

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In fighting COVID-19, intellectual property, not antitrust, is the real problem

November 30, 2021

From Dean Baker
Former New York Times reporter Donald McNeil had an interesting Medium piece on how antitrust law could be impeding the development of effective treatments for COVID-19. McNeil argued that COVID-19 treatments that were developed by Pfizer and Merck, and are now in the final stages of testing, may work best when taken together.
He argues that this may be the case because the drugs use two fundamentally different mechanisms for attacking the virus. By using the two in combination, we would be maximizing the likelihood that at least one would be effective. This has been the approach followed with effective H.I.V. drugs, as well as Hepatitis C treatments.
McNeil argues that the reason combinations are not pursued is because of antitrust laws. If, instead of competing with

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Weekend Read – Imagine if stopping climate change was more important than making climate change billionaires

November 20, 2021

From Dean Baker
We are still getting through a worldwide pandemic that has taken tens of millions of lives. While we did develop effective vaccines, they were not produced and distributed quickly enough to prevent enormous loss of life. This is a tragedy that should force us to ask how we could have done better.
On the other side, some people did manage to get enormously rich from the pandemic. Specifically, those who had patent monopolies on the mRNA vaccines did very well, as the stock prices of both Pfizer and Moderna soared during the pandemic. Back in April, Forbes identified 40 people who became billionaires as a direct result of their ownership of stock in companies that were profiting off the pandemic. Three of these were from Moderna alone. The number has surely grown, as the

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The media discover real wages

November 12, 2021

From Dean Baker
Those of us who have spent decades trying to call attention to the situation of ordinary workers, and their stagnant wages over the last four decades, are glad to see the media’s newfound interest in real wages (the difference between wage growth and price growth). They have been anxious to highlight the fact that inflation has exceeded the rate of wage growth over the last year.
While that is unfortunate, it is also the case that this is not unusual. Here’s the picture over the last four decades.
Source: Bureau of Labor Statistics.
As can be seen, there are many periods in which wage growth has not kept with inflation. Starting in the 1980s, wages lagged inflation through most of the decade. This is the period that was known in the media as the “Reagan Boom,” or

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Weekend read – Combatting Global Warming: The Solution to China’s Demographic “Crisis”

November 5, 2021

From Dean Baker
There have been numerous news articles in recent years telling us that China faces a demographic crisis. The basic story is that the market reforms put in place in the late 1970s, together with the country’s one-child policy, led to many fewer children being born in the last four decades. As a result, the number of current workers entering retirement exceeds the size of the cohorts entering the workforce, leading to a stagnant or declining workforce. This is supposed to be a crisis.
I used the word “supposed” because it is not in any way obvious that a declining workforce is any sort of crisis. We see shifts of population all the time, which can lead many cities or regions to have a decline in their population or workforce, even if the country as a whole does not. That

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In the U.S. between 1989 and 2020, spending on prescription drugs rose from 0.6 percent of GDP to 2.4 percent of GDP

October 23, 2021

From Dean Baker
That simple point might have been worth mentioning in an article reporting on efforts by Democrats to rein in prescription drug costs since 1989. The current level of spending of roughly $500 billion a year comes to more than $1,500 for every person in the country. Annual spending on prescription drugs is roughly one and a half times as much as the proposed spending in President Biden’s Build Back Better proposal.
It’s also worth noting that this piece repeatedly refers to Democrats’ efforts to “control” drug prices. This is inaccurate. The government already controls drug prices by granting companies patent monopolies and related protections. As a result, drug companies can charge prices that are often several thousand percent above the free market price. In the

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Rich jerks in space

October 21, 2021

From Dean Baker
As a big fan of the original Star Trek, I have to confess that it was kind of neat to see Captain Kirk actually go into space. But there is a real issue here about the silly games of the super-rich that is worth some thought.
There have been numerous stories and papers about the huge increase in the wealth of the super-rich since the pandemic began. Virtually all of this is due to the run-up in the stock market during this period. Part of that is bounce back, the S&P 500 lost almost one-third of its value between its pre-pandemic peak in February of 2020 and its pandemic trough a month later. If we want to tell a really dramatic story we can start at the pandemic trough and take the rise in the stock market from March 20th.
But even if we are being serious, there has

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If this is a wage-price spiral, why are profits soaring?

October 17, 2021

From Dean Baker
That’s the question millions are asking, even if economic reporters are not. The classic story of a wage price spiral is that workers demand higher pay, employers are then forced to pass on higher wages in higher prices, which then leads workers to demand higher pay, repeat.
We are seeing many stories telling us that this is the world we now face. A big problem with that story is the profit share of GDP has actually risen sharply in the last two quarters from already high levels.

The 12.4 percent profit share we saw in the second quarter is above the 12.2 percent peak share we saw in the 00s, and far above the 10.4 percent peak share in the 1990s. In other words, it hardly seems as though businesses are being forced by costs to push up prices. It instead looks like

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The preventable horrors of the pandemic and the short case for open research

October 12, 2021

From Dean Baker and Arjun Jayadev
 The Covid 19 pandemic is once again at an inflection point– with cases now falling sharply in most of the world. The current pandemic may be coming under control, but after millions of preventable deaths,  this is very far from a success story and it is as good  a time as any to take a hard look at our failings, especially with regard to our management of knowledge
Across the world, the number of Covid infections are declining: the United States numbers are finally falling after the Delta variant sent it soaring in the late summer; India-perhaps the hardest hit country in the world where cases peaked at more than 400,000 a day in early May, is now reporting just over 20,000 cases daily, the equivalent of 5,000 a day in the United States. Similar

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