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

From Dean Baker
In recent weeks there have been several articles noting the enormous wealth that a small number of people have made off of the vaccines and treatments developed to control the pandemic. Many see this as an unfortunate outcome of our efforts to contain the pandemic. In that view, containing the pandemic is an immensely important goal, if some people get incredibly rich as result, it’s a price well worth paying. After all, maybe we can even tax back some of their wealth after the fact.
The infuriating part of this story is that it is so obviously not true. But, just as followers of Donald Trump are prepared to believe any crazy story he tells about the stolen election, our intellectual types are willing to accept the idea that the only way we could have gotten vaccines as

From Dean Baker
Yes, it is spring. The flowers are blooming, the birds are singing, and the deficit hawks are whining. The proximate cause is President Biden’s new budget, which will push the ratio of government debt to GDP to its highest level ever.
The question is whether this should bother anyone who has a life? The projections show that the debt to GDP ratio will rise to 117 percent of GDP in 2031. If that sounds scary, consider that Greece’s debt to GDP ratio is over 180 percent. And, the bond vigilantes don’t seem to be too bothered by this. The interest rate on long-term Greek debt is 0.8 percent, compared to the 1.6 percent on U.S. Treasury bonds.
Of course if we really want to go big we can look at Japan, where the debt to GDP ratio is approaching 250 percent of GDP. It is

From Dean Baker
People in policy debates are not supposed to question the desirability of patent monopolies as a mechanism for financing the development of new drugs and vaccines. After all, why ask a question that could jeopardize the profits of some of the world’s largest corporations? But, since I live out in Southern Utah, far away from the great centers of policy debate, I thought I would ask the question in reference to vaccines against Covid.
To be specific, suppose that instead of funneling money into drug companies to subsidize the patent monopoly financed system, we instead use this money, and added more to it, for the purpose of fully prefunding the development of vaccines. The condition of accepting funding is that all the work would be fully open-source.
This means

From Dean Baker
Paul Krugman’s column today commented on the recent data showing continuing low fertility rates, which is likely to mean a stagnant or declining working age population in future years. Krugman points out that this is no big deal; Japan and Europe have been living with declining working age populations and have managed just fine.
But he does point out that a declining working age population is likely to lead to lower rates of investment and therefore creates a risk of “secular stagnation,” a sustained period of inadequate demand in the economy. To counter this problem, Krugman recommends large-scale public investment programs along the lines proposed by President Biden but considerably larger.
All this seems very much on the mark, but it is worth contrasting this with

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