From Dean Baker
There has been a lot of silliness around President Biden’s proposed infrastructure packages and the extent to which they are affordable for the country. First and foremost, there has been tremendous confusion about the size of the package. This is because the media have engaged in a feast of really big numbers, where they give us the size of the package with no context whatsoever, leaving their audience almost completely ignorant about the actual cost.
We have been told endlessly about Biden’s “massive” or “huge” proposal to spend $4 trillion. At this point, many people probably think that Biden actually proposed a “huge infrastructure” package, with “huge” or “massive,” being part of proposal’s title.
While it would be helpful if media outlets could leave these

From Dean Baker
President Joe Biden’s recovery and jobs plans have led to considerable alarm over the resulting increases in the deficit and debt. Most of these concerns are misplaced.
The issue of whether a deficit is too large depends entirely on whether it causes us to push the economy too far, leading to inflation. The deficit for last year was $3.1 trillion, which was equal to 15.2% of GDP. This was by far the largest deficit, relative to the size of the economy, since World War II.
Yet, the inflation rate actually slowed in 2020, as the pandemic related shutdowns created an enormous gap in demand in the economy. It would be difficult to find any major sector of the economy that was operating near its capacity last year, and therefore raising prices.
The question going forward is

From Dean Baker
I realize that I may seem obsessed with the topic of patents (and copyrights), but it really is a big deal, and few people seem to appreciate the issue in its larger economic context. I have written about the inefficiency and corruption associated with these monopolies for decades, but if there was ever a time when public attention should be focused on reforming the system, it is now.
With the pandemic costing millions of lives around the world, and costing our economies trillions in lost output, we really should be asking whether the current system serves us well in producing vaccines, tests, and treatments. Incredibly, public debate is so dominated by the pharmaceutical industry and its allies, we are primarily seeing celebration of the system’s dubious claims to

From Dean Baker
Since I came to Washington in 1992, I have been working alongside friends in the policy community, labor movement, and community organizations in fighting against a series of trade pacts. NAFTA was the immediate issue in 1992, but a couple of years later we had the Uruguay Round of the GATT that created the WTO. At the end of the Clinton administration, we had China’s admission to the WTO and then various other smaller pacts.
Those of us who opposed these deals (which were not really about free trade), argued that they would put downward pressure on the wages of manufacturing workers, by putting these workers in direct competition with low-paid workers in the developing world. This mattered in a big way because manufacturing had historically been a source of

From Dean Baker
Okay, it is more money than even Bill Gates, Elon Musk, and Jeff Bezos have, put together. That probably still doesn’t give people too much information, since most people don’t have much familiarity with these folks fortunes. But it might be helpful if the media made some effort to put the proposed spending in President Biden’s infrastructure package in a context that would make it meaningful.
The spending is supposed to take place over eight years, which means that it would be equal to just over 0.8 percent of projected GDP over this period. At $250 billion a year, it comes to about $750 per person each year over this period. It is less than 40 percent of what we are projected to spend on prescription drugs over this period and less than half of the higher prices that

From Dean Baker
It is often said that intellectuals have a hard time dealing with new ideas. Unfortunately, for purposes of public debate, open-source government funding of drug development is a new idea, and people in policy positions seem to be having a very hard time understanding it. So, I will try to write this post in a way that even a policy wonk can figure it out.
The basic idea of government-funded research should not be hard to grasp since the government already funds a large share of biomedical research. The National Institutes of Health gets over $40 billion a year in federal funding, with the Biomedical Advanced Research and Development Agency (BARDA) and other government agencies getting several billion more. This puts the government’s total spending in the $45 to $50

From Dean Baker
That seems to be the implication of a David Sanger piece commenting on the state of U.S. relations with Russia and China. At one point Sanger notes that China is a rising economic power:
“Economists debate when the Chinese will have the world’s largest gross domestic product — perhaps toward the end of this decade”
Actually, China already has the world’s largest economy using purchasing power parity measures of GDP, which is what most economists view as the best basis of comparison.
Here is what that well-known source of Chinese propaganda, the CIA World Factbook, has to say on the topic.
“From 2013 to 2017, China had one of the fastest growing economies in the world, averaging slightly more than 7% real growth per year. Measured on a purchasing power parity (PPP) basis

From Dean Baker
As can be easily shown the bulk of the upward redistribution from the 1970s was not due to a shift from wages to profits, it was due to an upward redistribution among wage earners. Instead of money going to ordinary workers, it was going to those at the top end of the wage distribution, such as doctors and dentists, STEM workers, and especially to Wall Street trader types and top corporate management. If we want to reverse this upward redistribution then we have to take back the money from those who got it.
If top management actually earned their pay, in the sense of increasing profits for the companies they worked for, then there would be at least some sort of trade-off. Reducing their pay would mean a corresponding loss in profit for these companies. It still might be

From Dean Baker
I guess it is hard to get news at the world’s leading newspapers, but this lengthy podcast on Bill Gates and his efforts to make vaccines available to the developing world never once mentioned the vaccines developed by China or Russia. This is more than a bit incredible because at this point, far more of the Russian and Chinese vaccines are going to developing countries than the vaccines supplied by Western countries through COVAX, the international consortium set up the WHO and supported by the Gates Foundation.
Are New York Times reporters prohibited from talking about the Chinese and Russian vaccines?
This piece is also incredible in that it explicitly says that because Gates doesn’t want the government-granted patent monopoly system of financing from being

From Dean Baker
As the vaccination campaign picks up steam, we have many public health experts warning us about a possible resurgence of the pandemic due to the spread of new vaccine-resistant strains. The logic is that, as more people are protected against the predominant strain for which the vaccines were designed, it will allow room for mutations to spread, for which the current vaccines may not be effective. This can leave us in a whack-a-mole situation, where we have to constantly alter our vaccines and do new rounds of inoculations to limit the death and suffering from the pandemic.

This situation would seem to make the urgency for open-sourcing our research on vaccines even greater than in the past. The point is that we would want evidence on new strains to be shared as

From Dean Baker
I saw this piece last week on the soaring price of baseball cards, and naturally started thinking about Bitcoin. The article begins with a story about how a rare LeBron James trading card (it’s all sports cards, not just baseball cards) would now sell for over $3 million, more than ten times its price in 2016. It then reports on how the prices for rare cards of other famous players have also gone through the roof, with even cards of less great players selling for several million dollars.
The reason this got me thinking about Bitcoin is that the price of Bitcoin has also been soaring. In fact, it has risen considerably faster than the price of baseball cards, increasing more than a hundredfold over the last five years.
Bitcoin as a Currency
Bitcoin proponents see this

From Dean Baker
The explosion of inequality over the past four decades is appropriately a major focus of the political agenda for progressives. Unfortunately, policy prescriptions usually turn to various taxes directed at the wealthy and very wealthy. While making our tax structure more progressive is important, most of the increase in inequality comes from greater inequality in before-tax income, not from reductions in taxes paid by the rich. And, if we’re serious about reversing that trend, it is easier, as a practical matter, to keep people from getting ridiculously rich in the first place than to tax the money after they have it.
While the Reagan, George W. Bush, and Trump tax cuts all gave more money to the rich, policy changes in other areas, especially intellectual property have

From Dean Baker
It seems that Larry Summers is worried that the stimulus proposed by President Biden is too large. I will say at the onset that he could be right. However, at the most fundamental level, we have to ask what the relative risks are of too much relative to too little.
If we actually are pushing the economy too hard, the argument would be that we would see serious inflationary pressures, which could result in the sort of wage-price spiral we saw in the 1970s. As someone who lived through the 1970s, it actually wasn’t that horrible.
Okay, the fashions and hair styles might have been horrible, and I was never a fan of disco, but the period as whole wasn’t that bad. We didn’t have mass starvation and homelessness, but yes, the inflation of the decade was definitely a problem

From Dean Baker
I have written repeatedly on how we should have been looking for a collective solution to the pandemic, where countries open-source their research and allow anyone with manufacturing capacity to produce any treatment, test, or vaccine. (We pay upfront, like with Moderna, for those wondering why anyone would do the work.) Anyhow, we obviously did not go that route under Donald Trump.
Along with many others, I have argued that we should still go this route, sharing all our technology freely, as has been proposed in a WTO resolution put forward by India and South Africa. The U.S. and most European countries have vigorously opposed this measure thus far.
A main argument in the case of vaccines, is that the mRNA vaccines (Pfizer and Moderna — the only two approved thus far

From Dean Baker
It’s fair to say that the U.S. performance in dealing with the pandemic has been disastrous. With the effort led by Donald Trump, this is not surprising. His main, if not only, concern was keeping up appearances. Preventing the spread of the pandemic, and needless death, was obviously not part of his agenda.
Unfortunately, many other wealthy countries, like France, Belgium, and Sweden, have not done much better. They don’t have the excuse of having a saboteur in charge who was actively trying to prevent the relevant government agencies from doing their jobs.
Anyhow, I thought it would be worth throwing out a few points about how we should have approached the pandemic. While some of this is 20-20 hindsight, I was making most of these points many months ago. I should add,

From Dean Baker

The Wall Street crew is furious over the masses at Robinhood and Reddit ruining their games with their mass buying of GameStop, which wiped out the short position of a big hedge fund. The Robinhood/Reddit masses are touting this as a victory over Wall Street. The Wall Street insiders are decrying this effort to turn the market into a casino. It’s worth sorting this one out a bit and answering the question everyone is asking (or should be), would a financial transactions tax fix this problem.
First of all, much has been made of the fact that the hedge fund Melvin Capital was shorting GameStop, as though there is something illicit about shorting a company’s stock. This one requires some closing thinking. In principle, a major purpose of the stock market (we will come

From Dean Baker
President Biden’s proposal to raise the minimum wage to $15 an hour by 2025 is prompting a backlash from the usual suspects. As we hear the cries about how this will be the end of the world for small businesses and lead to massive unemployment, especially for young workers, minorities, and the less-educated, there are a few points worth keeping in mind.
While $15 an hour is a large increase from the current $7.25 an hour. This is because we’ve allowed so much time to pass since the last minimum wage hike. The 12 years since the last increase in the minimum wage is the longest period without a hike since the federal minimum wage was first established in 1938. Few workers are now earning the national minimum wage, both because of market conditions and because many states

From Dean Baker
It is more than a bit bizarre that the New York Times can run a major piece about the lack of access of developing countries to Covid vaccines and never once mention the vaccines developed by China, Russia, or India. The piece is very useful in highlighting the fact that the United States and Europe have secured the vast majority of the 2021 production of the vaccines developed by western drug companies, leaving relatively few doses for the developing world. As a result, developing countries may continue to be afflicted by the pandemic well into 2022, with enormous human and economic costs.
That is an important story that needs to be told, but another aspect of this picture is that China, Russia, and India are making vaccines available to many countries in the

From Dean Baker
– the ways in which the economy has been structured to redistribute income upward
It’s hard not to be appalled and scared by the reality denial of Donald Trump’s followers. Their willingness to insist an election was stolen, with no evidence whatsoever, is difficult to understand for those of who like to think that people respond to facts and logic.
I don’t have any easy answers to get these people to start thinking clearly, but I will point out that it is not just ignorant and/or crazed Trumpers who have trouble dealing with reality. Many of our leading intellectuals and our major media outlets have similar difficulty dealing with reality when it doesn’t fit their conceptions of the world.
In particular, I am referring to my standard complaint about the unwillingness

From Dean Baker
I have repeatedly raised the point that media accounts routinely use the term “free trade” when they can more accurately say simply “trade” or trade policy. It is amazing to me that this practice continues.
We saw it yet again in a NYT article on how many Republicans continue to be faithful to Trump even after last week’s coup attempt. The article told readers:
“Anthony Sabatini, a Florida state representative, described Ms. Cheney and other Republicans who voted for impeachment as ‘artifacts,’ saying they were out of step in a party that has embraced a more populist platform opposed to foreign interventions and skeptical of free trade.”
As I have pointed out endlessly, we do not have a policy of “free trade.” We do not allow foreign trained professionals, such as

From Dean Baker
With a Democrat in the White House, the season of the deficit hawk has returned. So, it’s worth going through the old arguments just to remind everyone that the best response to these people is ridicule.
It looks like President Biden will propose a robust stimulus package of well over $1 trillion. According to press accounts, the package is likely to include another check for $2,000. (I believe it is supposed to $1,400 above the $600 in the last package.) It is likely to include a refundable child tax credit that will do much to reduce child poverty.
It will also include money to state and local governments to make up massive pandemic induced shortfalls. There will also be money for mass transit and a down payment on green new deal programs. Biden also plans to increase

From Dean Baker
The approach of the end of the year seems a good time to sum up thoughts. My comments here will not be news to regular readers, but may be to others. Also, this exercise is helpful for me to keep my thoughts clear. (I also expect to take next week off, so you won’t be hearing from me for a while.)
Most of my work for the last several years has been focused on ways to reduce before tax inequality by reducing the amount of before-tax income that goes to those at the top of the income distribution. For better or worse, there don’t seem to be a lot of progressives that share this beat. There are a few points that are worth making.
First, my focus on reducing income at the top doesn’t mean for a second that I don’t see efforts at raising income for those at the bottom (and

From Dean Baker
It is more than a bit annoying to hear reporters endlessly refer to China as the world’s second largest economy. It isn’t. It’s the world’s largest economy and has been since 2017. Here are the data from the International Monetary Fund.

Source: International Monetary Fund.
As the chart shows, China’s economy first passed the U.S. in 2017. It is projected to be more than 16 percent larger this year, and by 2025 is projected to be almost 40 percent larger by 2025.
Purchasing power parity (PPP) measures of GDP are based on applying a common  set of prices for all goods and services produced across countries. While it is difficult to measure accurately, most economists view PPP as being the better way to calculate GDP, since it reflects living standards and does not

From Dean Baker

For several years the opioid crisis has been recognized as a major national catastrophe. Millions of people have become addicted to the new generation of opioid drugs. In many cases, this addiction has led to the destruction of families, job loss, crime, and suicide. At the peak of the crisis in West Virginia, the hardest hit state, the death rate from overdoses alone, was more than 41 people per 100,000. This is more than 70 percent of its fatality rate from the pandemic, as of mid-December. And this doesn’t count deaths due to crime or opioid-related health conditions. Opioids are a big part of the story of the state’s drop in life expectancy over the last quarter century.
The crisis did not just happen by chance. As we now know, drug manufacturers and distributors

From Dean Baker
You don’t have to look far, it’s literally the first sentence in a Bloomberg piece on dollar policy under incoming Treasury Secretary Janet Yellen.
“Janet Yellen once touted the benefits of a weaker greenback for exports, but as the incoming Treasury secretary, she faces pressure to return the U.S. to a “strong-dollar” policy — and may cause trembles on Wall Street if she doesn’t.”
For folks who don’t know, the vast majority of U.S. stock is held by the richest 10 percent of households in the country, with the richest 1 percent holding close to 50 percent of all stock wealth. The run-up in the stock market over the last four decades has been the main factor behind the rise in the inequality of wealth over this period. A drop in the stock market would reduce wealth

From Dean Baker and Arjun Jayadev
On Monday, we, along with Achal Prabhala, had a column in the New York Times arguing in support of a resolution put forward before the WTO by India and South Africa, which would suspend intellectual property rights related to vaccines and treatments during the pandemic. The main point is that these rights are slowing the diffusion of life-saving medicines in a crisis. Furthermore, since much or all the cost of developing these vaccines and treatments were picked up by various governments, the drug companies would still be earning back their investment, plus a healthy profit, even with this suspension.
Not surprisingly, the pharmaceutical industry is not letting this proposal go unchallenged in public debate. Thomas Cueni, the director-general of the

From Dean Baker
When I do one of my diatribes about how our protectionist barriers allow U.S. doctors to earn twice as much as doctors in other wealthy countries, I invariably get complaints from doctors and their friends asking why I don’t go after the really big bucks people on Wall Street. The answer of course is that I do, but the bloated paychecks on Wall Street are not a reason to pay an extra $100 billion a year ($750 per household) to doctors in the United States. But it is true that I haven’t beaten up on the financial sector for a while, and with Biden now putting together his administration, this would be a great time to take a few shots.
First, we need some important background. Finance is an intermediate good, like trucking. It does not directly provide value to people

From Dean Baker
We know that the economy is likely to get worse in the immediate future as the pandemic is spreading out of control in most parts of the country. However, the latest data on average weekly hours indicates we may be facing a longer-term issue that has not generally been anticipated.
In a normal recession, we see both a loss of jobs and a reduction in hours for those who managed to keep their jobs. The shortening of hours is a better way for employers to deal with reduced demand for labor since it keeps workers attached to their jobs. (This is the argument for work-sharing as an alternative to unemployment.) However, in this recession, we are actually seeing some lengthening of the average workweek, not the usual shortening.
The chart below compares the change in the

From Dean Baker
It’s good to see the New York Times making the case for higher wages in an editorial. Unfortunately, they get much of the story confused.
First off, the essence of the case is that higher wages will lead to more consumption, which will spur growth. This is true, but higher pay is not the only way to generate more demand. We also get more demand with larger budget deficits, lower interest rates, and a smaller trade deficit.
But that is the less important problem with the piece. The bigger problem is the assertion that the failure of pay to keep pace with productivity growth over the last four decades is due to higher profits.
“Wages are influenced by a tug of war between employers and workers, and employers have been winning. One clear piece of evidence is the yawning

From Dean Baker
We know that Republican office holders are not allowed to say that Joe Biden won the election. Apparently there is a similar ban in place for news outlets when it comes to the question of the United States collaborating with China, and other countries, in developing vaccines against the pandemic.
In recent days, there have been articles in several major news outlets about how China vaccinated close to 1 million people, under an Emergency Use Authorization, for vaccines that are currently in Phase 3 clinical testing (here, here, here, and here). While large-scale distribution of vaccines, that have not completed testing for safety and effectiveness, is probably not a good public health practice, none of these pieces raised any questions about whether the United States,