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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

The problem with electric vehicles

12 days ago

From Dean Baker
For the last quarter century, those of us hoping we could slow global warming were anxious to see a quick conversion to electric vehicles (EVs). If we could get most people using electric vehicles, and have the energy coming from clean sources, we could radically reduce greenhouse gas emissions.
The problem was that EVs were considerably more expensive than their conventional counterparts. There were savings in operation due to lower maintenance, and the electricity generally costing less than gas, but that usually was not enough to offset the higher purchase price.
This was the motivation for the tax credit that the Biden administration included in the 2022 Inflation Reduction Act. The idea was to bring the price of EVs closer to the price of conventional cars.

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With a modest financial transactions tax, Jim Simons would not have been superrich

13 days ago

From Dean Baker
The New York Times reported that Jim Simons, the founder of Medallion hedge fund, died this week. As a result of his fund, according to the article, he accumulated more than $20 billion over his lifetime.
Simons was a math genius who had made many important breakthroughs in various areas of math. Back in the 1980s, he decided that he could make far more money on Wall Street than in doing math at a university. He thought that with sophisticated algorithms and cutting-edge computers, he could beat the market by finding patterns in trading.
This meant literally making trades seconds or even fractions of a second before other traders became aware of a price shift. If a trade could make a margin on even a few fractions of a percentage point on trades, hundreds of times, that

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There ain’t no libertarians, just politicians who want to give all the money to the rich

April 3, 2024

From Dean Baker
David Wallace-Wells had a column discussing the trip by Javier Milei, Argentina’s new president, to the World Economic Forum (WEF) in Davos, Switzerland. The WEF is an annual gathering of many of the world’s richest people, where they also invite politicians, academics, and others who they think may amuse them. According to Wallace-Wells, Mr. Milei definitely fits into that category.
The piece talked about how Milei calls himself as an anarchist, with the government just doing basic functions, like defending the country and running the criminal justice system. Otherwise, Milei would eliminate any role for government, if he had his choice.
It is humorous to hear politicians make declarations like this. As a practical matter, almost all of these self-described anarchists

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In a free market, drugs are cheap, government-granted patent monopolies make them expensive

March 14, 2024

From Dean Baker
This simple point was left out of a Washington Post article on the legal battle surrounding the Biden Administration’s efforts to negotiate lower prices for drugs purchased by Medicare. This point is important because the drug companies are definitely not trying to get the government out of the market, as the industry claims.
The industry is effectively insisting that the government is obligated to give it an unrestricted monopoly for the period of its patent duration. Also, since patent monopolies provide enormous incentives for corruption (they are equivalent to tariffs of many thousand percent, or even tens of thousands percent), drug companies often find ways to game the system and extend effective protection beyond the original patent life.
Anyhow, portraying this

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Is “greedflation” over?

March 11, 2024

From Dean Baker
Peter Coy used his column yesterday to beg President Biden not to use the term “greedflation” to explain the runup in inflation since the pandemic. I am sympathetic to much of his argument, most importantly, the idea that corporations suddenly turned greedy is a bit far out.
As Coy notes, corporations are always greedy. The real question is whether something unusual was going on with corporate profits in the pandemic. There clearly was an increase in profit margins in the pandemic. This was largely due to real shortages created by supply chain problems worldwide.
We can say this with a high degree of certainty because inflation was a worldwide story. This means that the idea that it was due to Biden’s “excessive” stimulus is silly.
While the U.S. is a huge part of the

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Do you want to subsidize rich people’s political contributions?

February 9, 2024

From Dean Baker
In prior decades we in the US used to try to restrict the ability of the rich and very rich to buy elections. We have limits on campaign contributions to candidates and political parties. Until the Supreme Court’s 2009 decision in Citizens United case, corporations were prohibited altogether from contributing to politicians and political campaigns.
This is no longer the case. The rich have found ways to largely circumvent campaign funding restrictions with independent campaign committees. And corporations can support whatever candidates or causes they want.
But the problem of money is even worse than it seems. Not only do the rich get to spend as much as they want to advance their interests, they can actually get taxpayer subsidies for pushing their political agenda.

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The great economy Trump left Biden

January 16, 2024

From Dean Baker
We have been seeing numerous stories in the media about how people support Donald Trump because he did such a great job with the economy. Obviously, people can believe whatever they want about the world, but it is worth reminding people what the world actually looked like when Trump left office (kicking and screaming) and Biden stepped into the White House.
Trump’s Legacy: Mass Unemployment
The economy had largely shut down in the spring of 2020 because of the pandemic. It was still very far from fully reopening at the point of the transition.
In January of 2021, the unemployment rate was 6.4 percent, up from 3.5 percent before the pandemic hit at the start of the year. A more striking figure than the unemployment rate was the employment rate, the percentage of the

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When it comes to prescription drugs, the Washington Post can’t even conceive of free trade

November 28, 2023

From Dean Baker
Like many self-imagined “free-traders,” the Washington Post editorial board cannot even conceive of free trade when it comes to prescription drugs. They demonstrated this fact yet again in discussing ways to deal with the high price of effective weight-loss drugs like Wegovy. These drugs carry price tags of more than $1,000 a month, making them costly for insurers, governments, or individuals who have to pick up the tab themselves.
The Post throws out a couple of ideas that could allow for a lower price, but never considers the fact that these drugs would be cheap without the government-granted patent monopolies that prevent generic manufacturers from entering the market. The monopolies are of course to provide an incentive to undertake the research, but there are other

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Will China’s demographic crisis look like Japan and Korea’s?

November 7, 2023

From Dean Baker
The New York Times seems to really love telling readers that China is facing a demographic crisis because its population is falling. It is not clear why the NYT thinks this amounts to a crisis for China, since many other countries have declining populations without experiencing any obvious crisis.
The most obvious examples are two of China’s neighbors, Japan and Korea, both of which are seeing modest drops in population. In both countries, per capita income is continuing to rise, in spite of a shrinking workforce. In fact, in South Korea, per capita income has risen at a 2.0 percent annual rate in the last four years, a faster pace than in the United States.
This growth figure actually understates improvements in living standards, since a smaller population also means

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Fighting billionaires’ control of the media, individual news vouchers

October 26, 2023

From Dean Baker

Mark Twain famously quipped that everyone always talks about the weather, but no one ever does anything about it. (This was before global warming.) In the same vein, it is common for people to rant about billionaires, like Rupert Murdoch and Elon Musk, controlling major media outlets and using them to advance their political whims. But, no one seems to do anything about it.

There is a reason for inaction. For the foreseeable future, it is hard to envision a political scenario in which the ability of the rich and very rich to own and control major news outlets will be restricted. That means that if the goal is to prevent Elon Musk from owning Twitter (or “X,” as he now calls it), then we will likely be able to do little more than rant. (That is not entirely true.)

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The big three’s CEOs are ripping off their companies

October 3, 2023

From Dean Baker
Robert Reich posted a table that tells us a huge amount about the U.S. economy.
CEO pay of the largest carmakers in the world
Honda: $2.3M
Nissan $4.5M
Toyota: $6.7M
BMW: $5.6M
Mercedes: $7.5M
Porsche: $7.9M
Ford: $21M
Stellantis: $25M
GM: $29M
The reason this table is so informative is that the performance of these foreign automakers would certainly stand up well in comparison to the U.S. Big Three. (In fairness, Stellantis is largely a European company, headquartered in Amsterdam. But, its CEO gets U.S.-style pay.) So, the question is, why do U.S. companies have to pay so much more to get good help at the top?
The disparity in CEO pay does not reflect pay patterns in the economy more generally. The Bureau of Labor Statistics stopped publishing data showing hourly

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A high national debt can be bad news, sort of like a high stock market

September 28, 2023

From Dean Baker
The media have been giving considerable attention to the national debt in the last year or so. They have some cause, it has been rising rapidly, and more importantly, the interest burden of the debt has increased sharply since the Fed began raising rates last year. But, if we want to be serious, rather than just write scary headlines, we have to ask why the debt is a problem.
The first concern to dispel is the idea that the country somehow has to pay off its debt. Our national debt is in dollars, which the government prints. Unless something truly bizarre happens, we will always be able to print the dollars needed to pay interest and principal on government bonds.
We could have some story that if our economy collapses people could lose confidence in our debt. That is

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Crypto and finance are waste and a drag on the economy

September 6, 2023

From Dean Baker
As everyone learns in Econ 101, and immediately forgets, the purpose of the financial sector is to facilitate transactions and allocate capital. This seems like a simple and obvious point, but you would never know it in most discussions of the financial sector.
The point here is that we need finance for these purposes. We don’t need finance to develop elaborate betting games and complex financial instruments. Financial instruments are only useful when they serve the purpose of better facilitating transactions or improving the allocation of capital.
In this context, an efficient financial sector is a small financial sector. We want to use as few resources as possible to serve its function, just as we want to use as few resources as possible in the trucking industry.

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Job loss from going green is nothing like the loss of manufacturing jobs due to trade

August 19, 2023

From Dean Baker
The United States suffered from a massive loss of manufacturing jobs in the 00s. This has come to be known as the “China Shock,” since it was associated with a flood of imports, especially from China, and a rapid rise in the U.S. trade deficit.
In the decade from December of 1999 to December of 2009, the economy lost more than 5.8 million manufacturing jobs, or more than one in three of the manufacturing jobs at the start of the decade. The vast majority of this job loss took place before the start of the Great Recession in December of 2007.
This sort of job loss was not typical for the manufacturing sector. While it lost jobs in the 1990s also, the drop was just 601,000, a bit more than one tenth as much as in the next decade. Since 2009, the manufacturing sector has

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U.S. manufacturing jobs and trade: A tale of two graphs

August 7, 2023

From Dean Baker
The first decade of this century was pretty awful for U.S. manufacturing workers. In December of 1999 we had 17.3 million manufacturing jobs. This number had fallen to 11.5 million by December of 2009. This amounted to a loss of 5.8 million jobs, or one-third of all the manufacturing jobs that had existed at the start of the decade. That looks like a pretty big deal.
It’s also worth pointing out that most of these jobs were lost before the onset of the Great Recession. We had lost almost 4 million jobs by December of 2007, the official start date of the Great Recession. The obvious culprit here is the explosion in U.S. trade deficit that we saw in this decade. If we’re buying more goods from other countries, in general, that means we are producing fewer goods here.

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The Chinese need to stay poor because the United States has done so much to destroy the planet

July 31, 2023

From Dean Baker
That line is effectively the conventional wisdom among people in policy circles. If that seems absurd, then you need to think more about how many politicians and intellectual types are approaching climate change.
Just this week, John Kerry, President Biden’s climate envoy, was in China. He was asking the Chinese government to move more quickly in reducing its greenhouse gas emissions. President Xi told Kerry that China was not going to move forward its current target, which is to start reducing emissions by 2030.
I know from Twitter that many people think that Kerry’s request was reasonable and that Xi is jeopardizing the planet with his refusal to move forward China’s schedule for emission reductions. This is in spite of the fact that China is by far the world leader

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US Government to consider alternatives to patent monopoly financing of drug development

July 22, 2023

From Dean Baker

In some really big news that is likely to get almost no media attention, Senator Bernie Sanders, the chair of the Senate HELP Committee, negotiated a deal with Bill Cassidy, the ranking Republican, on a package of amendments to the reauthorization of the nation’s pandemic preparedness law. While there are a number of items in the deal, a really big one is funding for a study to be done by the National Academies of Sciences, Engineering, and Medicine (NASEM) to consider alternatives to patent monopoly financing of the development of prescription drugs.

This is potentially huge, since our current system is a disaster. No one ever said it was a great idea to finance research by charging tens of thousands of dollars for life-saving drugs, when these drugs would sell for

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Weekend read – Mixed progress in the fight against inequality and for democracy

July 15, 2023

From Dean Baker
I have a birthday coming up, so it seems a good time to assess progress, or lack thereof, on the various issues that I have worked on over the decades. There is some big progress in at least a couple of areas, but not much to boast about in the others.
I’ll start with the success stories.
The Benefits of a Tight Labor Market
The big one, where I feel we really have made huge progress, is the battle for full employment. It might seem like ancient history, but a quarter century ago the absolute standard wisdom in the economics profession was that we could not get unemployment rates below 6.0 percent without ever accelerating inflation. To argue otherwise was to invite ridicule.
The reality repeatedly contradicted the theory. We sustained an unemployment rate of 4.0

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The myth of the “Free Market”

July 7, 2023

From Dean Baker
The media are really going overboard in telling us the days of the free market are over with Biden’s new economic policies. President Biden has quite explicitly implemented policies intended to reshape the direction of the economy, pushing clean energy and more domestic production of advanced semiconductors and other products. He also has reinvigorated anti-trust policy, which was largely shelved by his predecessors.
But the idea that the policies of the last four decades were somehow a matter of just leaving things to the market is a grotesque lie that no person remotely familiar with economic policy should be repeating.
The Finance Industry Cesspool
I will reverse the usual course of my diatribe here and start with the financial sector. Suppose back in 2008-09 we let

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New York Times headlines article “Public Tired of ‘Neo-Liberal’ Policies Designed to Make Rich Richer”

June 28, 2023

From Dean Baker
Of course, the New York Times did not headline a piece this way, but that would have been a more accurate headline of an article it ran last weekend discussing a turn away from “neo-liberal” policies. As I pointed out in a quick Twitter thread, that piece misrepresented a set of policies that have the effect of redistributing income upward as “free market” policies.
This is wrong in a way that is very convenient for the proponents of these policies. The massive upward redistribution of income in the last four decades is not really a debatable point. However, as a political matter, it is far more salable to say that this upward redistribution was the result of the forces of technology and globalization than of policies designed to make the rich richer.
While it should be

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Will Biden’s industrial policy create a lot more Moderna billionaires?

June 23, 2023

From Dean Baker
People routinely tout Biden’s efforts to bring back manufacturing jobs as a way to rebuild the middle class and reduce inequality. Whatever the motives, there is not much reason to believe that it will have this effect.
When the United States opened up its market to freer trade in manufactured goods, through trade deals like NAFTA and admitting China to the WTO, manufacturing workers had a substantial pay premium over workers in the rest of the private sector. This was largely because manufacturing was much more highly unionized than other parts of the private sector.
However, this is no longer true. In 2022, 7.8 percent of manufacturing workers were unionized, compared to 6.0 percent for the private sector as a whole. As a result, the pay premium for workers in

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AI, job loss, and productivity growth

June 19, 2023

From Dean Baker
Fear the rich, not AI
It is really painful to see the regular flow of pieces debating whether AI will lead to mass unemployment. Invariably, these pieces are written as though the author has taken an oath that they have no knowledge of economics whatsoever.
The NYT gave us the latest example on Sunday, in a piece debating how many jobs will be affected by AI. As the piece itself indicates, it is not clear what “affected by AI” even means.
What percent of jobs were affected by computers? The answer would probably be pretty close to 100 percent, if by “affected” we mean in some way changed. If by affected, we mean eliminated, then we clearly are talking about a much smaller number.
Thinking of AI like we did about computers is likely a good place to start. First of all,

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Recreational vehicles and magazines: what’s up since the pandemic

June 13, 2023

From Dean Baker
Now that we have inflation beat, it seems like a good time to look at what has changed since the pandemic. A full catalog of how the USA is different would be a serious undertaking, but we can learn a lot just by examining how consumption patterns have changed over the last three years. These data are readily available from the Commerce Department’s website.
Losers in the Post-Pandemic Period
Some of the changes in consumption patterns are obvious. The increase in working from home (as many as 30 percent of workdays are now remote) has led to a sharp drop in the amount we spend on commuting. While real consumption expenditures were 10.8 percent higher in the first quarter of 2023 than in the fourth quarter of 2019, real spending on mass transit was down 17.8 percent.

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Owning up to mistakes and pandemic deaths

June 8, 2023

From Dean Baker
We should be able to work together for the benefit of humanity.
John Kerry got the start to his political career when he testified to Congress about the Vietnam War as an anti-war veteran, and asked, “How do you ask a man to be the last man to die for a mistake?” The point, of course, was that we were still sending soldiers to Vietnam to fight and risk dying in a war that was widely recognized to be pointless. Rather than just owning up to the mistake, we continued the killing.
We might ask the same question about the U.S. trade embargo against Cuba and our government’s efforts to prevent Cuba from playing a positive role in stemming the pandemic. As my friend Achal Prabhala pointed out in a Washington Post column (co-authored with Vitor Ido), Cuba had developed two

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We can do better with a thousand years

May 26, 2023

Review of Power and Progress, by Daron Acemoglu and Simon Johnson
from Dean Baker
When I saw that two of the country’s most prominent economists wrote a book on “our 1000-year struggle over technology and prosperity,” I expected a lot. I was disappointed. To be clear, there is much here to like and I’m sure that most readers will get much from it, as I did. But, the book fails to follow through adequately on the key point in its analysis, which is that the gains from technology are a matter of struggle, not an outcome given by the technology itself.
I’ll start with the positives. The book gives a cursory, but useful, account of the major developments in technology going back more than a thousand years. Some of their discussion deals with the origins of agriculture, an innovation that

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The “Which way is up?” problem in economics

May 15, 2023

From Dean Baker
Economics famously suffers from a “which way is up?” problem. The issue is whether an economy is suffering from too much demand or too little demand. On its face, that seems like it should be a very simple question, but in fact it can be complicated and people often get it wrong, with very serious consequences.
The Great Depression was the classic too little demand story. We had millions of people out of work through the decade of the 1930s because there was not enough demand in the economy. With the benefit of hindsight, or a good Keynesian understanding of the economy, this demand problem is very clear, but it did not seem that way to many people living at the time.
Most immediately, people saw families who didn’t have food, adequate clothing, or housing. That looks a

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Google AI expert warns of massive uptick in productivity growth: No problems with Social Security

May 4, 2023

From Dean Baker
We have long known that people in policy debates have difficulty with arithmetic and basic logic. We got yet another example today in the New York Times.
The NYT profiled Geoffrey Hinton, who recently resigned as head of AI technology at Google. The piece identified him as “the godfather of AI.” The piece reports on Hinton’s concerns about the risks of AI, one of which is its implications for the job market.
“He is also worried that A.I. technologies will in time upend the job market. Today, chatbots like ChatGPT tend to complement human workers, but they could replace paralegals, personal assistants, translators and others who handle rote tasks. ‘It takes away the drudge work,’ he said. ‘It might take away more than that.’”
The implication of this paragraph is that AI

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David Brooks’ celebration of American capitalism

April 27, 2023

From Dean Baker
Last week, David Brooks had a column that was quite literally a celebration of American capitalism. He makes a number of points showing the U.S. doing better than other wealthy countries over the last three decades. While his numbers are not exactly wrong, they are somewhat misleading. (I see Paul Krugman beat me to the punch, so I’ll try not to be completely redundant.)
Brooks points to the faster GDP growth in the United States than in other wealthy countries. As Krugman notes, much of this gap is due to the fact that they have older populations; the differences are much smaller if we look at GDP per working-age person.
However, a big part of the story is also that they have opted to take much of the benefit of productivity growth in the form of more leisure time. In

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China is bigger, get over it

April 21, 2023

From Dean Baker 
It is standard for politicians, reporters, and columnists to refer to the United States as the world’s largest economy and China as the second largest. I suppose this assertion is good for these people’s egos, but it happens not to be true. Measuring by purchasing power parity, China’s economy passed the U.S. in 2014, and it is now roughly 25 percent larger.[1] The I.M.F. projects that China’s economy will be nearly 40 percent larger by 2028, the last year in its projections.

Source: International Monetary Fund.
The measure that the America boosters use is an exchange rate measure, which takes each country’s GDP in its own currency and then converts the currency into dollars at the current exchange rate. By this measure, the U.S. economy is still more than one-third

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Quick thoughts on AI and intellectual property

April 17, 2023

From Dean Baker
There has been a lot of concern in recent days about the impact of AI on people’s intellectual property. The latest AI programs screen millions of documents, songs, pictures, and videos posted to the web and freely grab any portion that seems to fit the commands given the program. As it stands, the creators of the material are not compensated, even if a large portion of their work appears in the AI product.
This raises serious questions about how AI will affect the future of intellectual property. To my mind, we should keep the focus on three distinct points:
Creative workers need to be compensated for their work;
Copyright monopolies may not be the best route, especially in a world with AI;
There are alternative mechanisms that we already use and which could be

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