Dean Baker Talks Strategy

I ask Dean Baker about strategy.

Dean Baker is an extremely important progressive economist.

Check out Baker’s book Rigged (it’s free to download right here).

Check out Baker’s blog “Beat The Press” (it’s free to read right here).

I found out about Baker’s work through Noam Chomsky. Chomsky reads every single post on “Beat The Press”. Chomsky cites Baker regularly. Chomsky considers Baker to be extremely important, and with good reason.

See below my quick interview with Baker about strategy.

What advice would you give to public intellectuals? What are the key blunders and key successes that you’ve had, regarding all the different activities, ideas, strategies that you’ve tried?

Baker: I guess where I’ve had successes it has been the result of fixing on a key issue, getting entirely inside it and finding incontrovertible logic to make the case. I then looked for every possible venue to push the point.

In the 1990s there was a big effort to reduce the annual Social Security cost-of-living adjustment by 1.0 percentage point, based on the claim that the consumer price index (CPI) overstated the true rate of inflation by at least 1 pp. This was a big deal because it would accumulate over time. After 10 years, it would mean benefits would be 10 percent lower, after 20 years they would be 20 percent lower (ignoring compounding).

An unavoidable implication of the claim that the CPI overstates inflation by 1 pp is that real incomes have been rising 1 pp more rapidly each year than the data now show. It also means that the incomes will be rising 1 pp more rapidly than we now project. This means that people now getting benefits were much poorer when they were growing up and in their working lifetimes than we had thought. It also means that young people will be much richer than we had been projecting. If this is true, what’s the logic of cutting SS benefits, ostensibly to help the young?

I managed to get this to a Washington Post reporter who ran it as a major front page story. I also got Ted Kennedy to take up the cause and beat back Democrats in Congress who would have gone along with it. But the clincher was to get it to Dick Gephardt, who was the leader of the Democrats in the House. He was thinking of challenging Al Gore in the Democratic presidential primaries in 2000. There could be no better issue for Gephardt in the primaries than saying that Al Gore is the guy who cut SS, I’m the guy who tried to stop him. This blocked a deal between Clinton and the Republicans.

Anyhow, I would say the key thing was being on rock-solid ground, and then working very hard to press the case everywhere I could, and being very lucky.

I can tell a similar story on undermining the effort to put Social Security money in the stock market under Bush. There I showed that their assumption on stock returns was impossible. I got Paul Krugman as a very valuable ally on this.

In terms of failures, I tried to warn of the housing bubble before it burst and sank the economy. There was just too much desire to believe that the run up in house prices was good news and people just did not want to hear someone saying it would not continue and would end badly. Needless to say, lots of people were making money on the bubble and especially the bad loans that were fueling it.

I had plenty of economist friends who simply did not want to take this seriously. I suspect that many were very happy to see the price of their own homes soar and didn’t want to see evidence that this was just a bubble.

We’ll see how I do in getting people to think that we don’t need patent monopolies to finance the development of prescription drugs. Not being in DC and not working on this round the clock are disadvantages.