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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

From Dean Baker
The Democrats have proposed paying for part of President Biden’s Build Back Better plan with $500 billion in savings on what the government will pay prescription drug companies through Medicare and other public programs over the next decade. The country currently pays the pharmaceutical industry over $500 billion annually for its products. If we look at spending over the next decade, and like the news media, ignore that it’s over ten years, we would say that we will give the pharmaceutical industry $7 trillion, double the projected cost of Biden’s agenda.
Naturally, no one expects to be able to get $50 billion a year out of the hide of a huge industry without a serious fight. The pharmaceutical companies surely have all their lobbyists working overtime courting members

From Dean Baker
Paul Krugman’s column this morning raises the issue of whether China is on the edge of seeing a real estate bubble burst, in the same way that Japan saw its real estate and stock bubble burst in 1990. Krugman points out that this did lead to slower growth for Japan, but it was not an economic catastrophe, as it still saw rises in GDP, relative to its working age population, that were comparable to the U.S. (I would add that one reason why Japan did not see more GDP growth is that, unlike the U.S., it had a sharp reduction in the length of the average work year over the last three decades. This means workers were taking some of the benefits of productivity growth in more leisure time rather than higher income.)
Krugman points out that China is seeing a similar

From Dean Baker  

Now that George W. Bush is back in the news with his attacks on the Trumpist insurrectionists, it might be worth reviving one of the great lines of his presidency. After the September 11th attack, when Bush decided to go after not just the terrorists who planned the hijackings, but all sorts of people around the world he didn’t like, he lumped them together as “evil doers.” That may not be the most eloquent phrase, but it works well as a description of the modern pharmaceutical industry.
Some may find this description of the pharmaceutical industry abhorrent, after all they develop life-saving drugs and vaccines, most recently the vaccines against the coronavirus which have saved millions of lives. But the industry’s story line gives us a very incomplete picture

From Dean Baker
Greg Mankiw warned New York Times readers about the dangers of adopting the Biden agenda and moving more towards a European-style welfare state. In his piece, titled “Can America Afford to be a Major Welfare State,” Mankiw noted:
“Compared with the United States, G.D.P. per person in 2019 was 14 percent lower in Germany, 24 percent lower in France and 26 percent lower in the United Kingdom.
“Economists disagree about why European nations are less prosperous than the United States. But a leading hypothesis, advanced by Edward Prescott, a Nobel laureate, in 2003, is that Europeans work less than Americans because they face higher taxes to finance a more generous social safety net.”
While Prescott and Mankiw attribute the gap in annual work hours between Europe and the

From Dean Baker
That may sound pretty crazy, but that’s roughly what the minimum wage in the United States would be today if it had kept pace with productivity growth since its value peaked in 1968. And, having the minimum wage track productivity growth is not a crazy idea. The national minimum wage did in fact keep pace with productivity growth for the first 30 years after a national minimum wage first came into existence in 1938.

Furthermore, a minimum wage that grew in step with the rapid rises in productivity in these decades did not lead to mass unemployment. The year-round average for the unemployment rate in 1968 was 3.6 percent, a lower average than for any year in the last half century. 

The $26 an Hour World
Think of what the country would look like if the lowest paying

From Dean Baker
With the economy facing substantial bottlenecks, and the continuing spread of the pandemic, it is worth taking a quick look at how lower paid workers have been faring. Nominal wages have been rising rapidly for workers at the bottom of the pay ladder in recent months. This has allowed workers in the lowest paying jobs to see substantial increases in real wages, in spite of the uptick in inflation the last few months.
Here’s the picture in retail for production and non-supervisory workers. Note that real wages were actually somewhat lower in 2018 than they had been in 2002. (These numbers are 1982-1984 dollars, so multiply by about 2.6 to get current dollars.) They did rise in 2018 and 2019, due to a tightening of the labor market, as well as minimum wage hikes at the

From Dean Baker

In recent days, major fear has been evident in financial markets and elsewhere that the delta variant of the coronavirus will spread widely and be a considerable impediment to continued economic growth: On Monday, the Dow tumbled 700 points, for example.

At least based on trends we’ve seen so far, these fears appear to be unfounded.

It is highly unlikely that the delta variant will lead to shutdowns of major sectors of the economy, of the sort we saw last spring and summer. The basic story is that in the states where the variant is causing the most infections and deaths, governors and other public officials are resistant to taking steps to contain the pandemic, especially if they carry an economic cost. So most economic enterprises will continue to do business, if

From Dean Baker
I get to say this about the drug companies, now that President Biden has said that Facebook is killing people because it was allowing people to use its system to spread lies about the vaccines. There is actually a better case against the drug companies.
After all, they are using their government-granted patent monopolies, and their control over technical information about the production of vaccines, to limit the supply of vaccines available to the world. As a result, most of the population in the developing world is not yet vaccinated. And, unlike the followers of Donald Trump, people in developing countries are not vaccinated because they can’t get vaccines.
The TRIPS Waiver Charade
The central item in the story about speeding vaccine distribution in the developing

From Dean Baker

Yes, it is that time of month again. As I always say, this sort of comparison is silly, since there are so many factors determining job growth that have nothing to do with the person in the White House. But, we all know that Trump and the Republicans would be touting this to the sky if the shoe were on the other foot.
So, here’s the latest, the economy has created more than 3 million jobs in the first five months of the Biden administration. It lost almost 2.9 million jobs in the four years of the Trump administration. Biden has now created more jobs than Trump lost.

From Dean Baker
There are lots of silly comments that pass for great wisdom in elite circles. Steve Rattner gave us one of my favorites in his NYT column warning President Biden against putting too much money into reviving our system of train travel.
Rattner tells us:
“America is not Europe, with its dense population centers clustered reasonably close together.”
This is of course true, but in a totally trivial sense. The density of our population per mile of land is much lower than in Europe, especially if we include Alaska. But this is completely beside the point when it comes to trains. The issue is not building passenger lines from New York to Fairbanks, it’s about connecting cities that actually are reasonably close to together.
For example, Chicago is 790 miles from New York. By

From Dean Baker
I know I harp a lot on all the ways we structure the market to redistribute income upward, but that’s because we keep digging in deeper on these policies, and almost no one else talks about it. I get that it’s cool to talk about all sorts of tax and transfer schemes to redistribute some of the money we give to the rich and super-rich. But, I’m one of those old-fashion sorts who thinks it’s simpler just not to give them all the money in the first place. So, now that you have been warned, here again is my short list of ways to not give so much money to rich people.
Patent and Copyright Monopolies
The immediate issue that prompts this tirade was a request by President Biden for another $6.5 billion  (0.15 percent of the budget) in 2022 to support research into diseases

From Dean Baker
Like most economists, I have always been a Bitcoin skeptic. The question has always been what purpose does it serve?
The idea that it would be a useful alternative currency is laughable on its face. How can you have a currency that wildly fluctuates year to year and even hour to hour?  Imagine if you had a wage or rent contract written in Bitcoin. Both your pay and your rent would have more than tripled over the last year, likely leaving you unemployed and unable to pay your unaffordable rent. Economists often exaggerate the problem of inflation, but having currency that has large and unpredictable increases and decreases in value is a real problem.
So, Bitcoin may not be very useful as a currency, but maybe we can just treat as an outlet for harmless speculation, like

From Dean Baker
After Donald Trump’s clown shows, it was nice to have a U.S. president who at least takes world issues seriously while representing the country at the various summits over the last week. But that is a low bar. While we want adults in positions of responsibility, we have to ask where those adults want to take us. It is not clear that we should all eagerly follow the path that President Biden seems to be outlining with regard to China.
Unfortunately, people in the United States (including reporter-type people) tend to have little knowledge of history. Many have no first-hand knowledge of the Cold War with the Soviet Union and have not done much reading to make up for this deficiency. In fact, they also don’t seem to have much knowledge of the Iraq War, which is probably

From Dean Baker
If the waitress works in an upscale restaurant and earns a decent living, there is a good chance that she is paying a higher tax rate than a private equity partner. The reason is that private equity (PE) partners get most of their pay in the form of “carried interest.” This is money that is paid to them as a share of the returns on the money they manage. Since private equity partners are rich and powerful, their carried interest payments are taxed at the capital gains tax rate of 20 percent, instead of the 37 percent top tax rate that people earning millions a year would be paying.
The ostensible rationale for allowing PE partners to pay a lower tax rate on their carried interest is that these payments involve risk. If the funds don’t meet some threshold rate of return,

From Dean Baker
There is plenty of evidence at this point that CEO pay bears little relationship to returns to shareholders. Yet, it is an article of faith in policy circles, especially progressive policy circles, that companies are being run to maximize returns to shareholders.
This is why I loved this story. According to the NYT, Chad Richison, the CEO of Paycom, had a pay package that was worth $211 million. When it came up for vote of shareholders in a say-on-pay ballot, it was voted down. The article tells readers:
“Shareholders opposing the compensation won a say-on-pay vote at the company, and a majority also withheld votes from a director on the board’s compensation committee. Under Paycom’s governance guidelines, the director had to tender his resignation. The board’s