Bathwater and Bad Pot?

Dean Baker lives in a state where marijuana is not legal, so he may be getting some of the illegal bad quality stuff which is doing weird things to his brain. Either that or he’s using way too much of the good stuff.

On the 19th, critical of the stand taken by the Washington Post against tax cuts, he said that, “we have already paid an enormous price for having deficits that are too small. We have needlessly kept the unemployment rate higher than necessary, with a cost to our children of a permanently smaller economy, to the tune of $1 trillion to $2 trillion annually.”

So spending at a rate which has led our debt to grow from $5.7 trillion in 2000 to $18.2 trillion in 2015, a 219% increase, is “deficits that are too small.”

He then goes on to argue for higher deficit spending and makes the claim that our debt level of more than 100% of GDP is not problematic by saying that, “Japan has a debt-to-GDP ratio of more than 200 percent, over twice the US ratio. Until recently, investors were paying the Japanese government to lend it money, as its long-term interest rate was negative in nominal terms.” Etc.

He notes that Japan has maintained low inflation while accumulating that debt, but he doesn’t address Japan’s economic growth during that time, and it is economic growth that he claims has been harmed by insufficient deficit spending in this nation. In fact, Japan's economic growth has been so paltry during those years during those years of deficit spending that the population refers to those years as “The Lost Decades.”

So deficit spending didn’t grow Japan’s economy, but apparently he thinks it would grow ours. He does not explain why.

Then on the 20th he goes on another of his rants about the evils of patents and copyrights. It’s not that he doesn’t make some valid points regarding pharmaceutical companies, but he throws the baby out with the bathwater. Since Big Pharma is abusing the copyright/patent process, the entire process is evil and a person who writes a book should not be allowed to profit from having done so.

And, as usual, the ability to engage in logical thought completely escapes him.

“Suppose the government were to spend $400 billion this year on biomedical and other research and creative work,” he says. “This means that the deficit and debt would be $400 billion larger because it paid out money to corporations and individuals for this work.”

Then the train leaves the tracks. “Now suppose it grants patents and copyrights this year that will add an average of $50 billion a year over the next decade to the price of prescription drugs, software, and other protected items. Ignoring interest and discounting, how is that different from adding $500 billion to the debt?”

Actually, it adds nothing to the debt and $500 billion to the GDP, thereby reducing the debt to GDP ratio that, while utterly meaningless, is something that economists other than Dean Baker constantly worry about. Baker used to care, until doing otherwise suited his narrative better.

Baker does not see it that way, however, he sees that “we are requiring taxpayers to pay more money to drug companies and software makers,” which he says is, “in effect a privately collected tax.” Well, since it goes to corporations and not to the government, no, it is not a tax. Look up the definition of “tax” in the dictionary.

He then strays farther and farther into Paul Krugman territory. “Perhaps people feel better about being taxed by Pfizer and Microsoft than by the government,” he says, but given complaints about drug prices, clearly such is not the case.

He then discusses having an excise tax on drugs as opposed to the higher price and says that with respect to the difference, “No one would say that changes the debt story at all.” That borders on delusional, since the excise tax would reduce the deficit and the higher price does not.

He finishes with, “Anyhow, any deficit/debt monger who doesn't talk about the cost of patent and copyright monopolies is just being a political hack. They are not making serious economic arguments.” Well, we know who isn’t making serious economic arguments.