My goal with this article is to help shed some light on the answers to central questions. How can progressives set smart priorities? How can progressives do the smart thing? How can progressives win? How can progressives save the world before it’s too late?
Dean Baker knows what he’s talking about, and I take him very seriously. He’s a first-rate economist.
Every progressive should read Baker’s blog—it’s called “Beat the Press” (BTP). Every progressive should also read Baker’s free book Rigged. In my opinion, BTP and Rigged are must-reads for progressives. All of Baker’s books that Baker has control over are free, which is great.
Chomsky reads every BTP post. Chomsky constantly cites/praises Baker. Why is Chomsky so impressed with Baker’s work? It’s just like Chomsky said: “Dean Baker knows what he’s talking about”. Baker has a fantastic grip on Econ 101, logic, math, and data.
Baker has a powerful combination of simple commentary and deep understanding. He talks at a level that a high-school kid can easily understand, and yet if you interact with him you’ll see that he’s an intellectual heavyweight who can get down in the weeds with Nobel-laureate economists.
How would I describe BTP in a word? The answer: “Fresh.” You will see on there, every day, arguments that have two properties. First, they are really good arguments. Second, they are arguments that you simply don’t ever hear—even in progressive media.
Baker is the ultimate watchdog. Nothing gets by him. He is to domestic policy what Chomsky is to foreign policy. It’s odd to me that Baker isn’t way more prominent in progressive media. For example, Baker hasn’t been on Democracy Now! since 2015, which is more than a little bit depressing to contemplate.
(As an aside, Democracy Now! has disappointed a lot of progressives lately in its coverage. Aaron Maté points out that Democracy Now! has totally botched one of the most important foreign-policy stories of our time. A striking comment online observes that Democracy Now!’s “coverage of Russiagate went from reasonable moderation to MSNBC-lite around mid-2017”.)
BTP has many themes. One BTP theme is needless suffering. In this piece about Europe, Baker writes about “tens of millions of lives being ruined” and “the equivalent of $25,000 being thrown in the garbage for every man, woman, and child in the United States”. It’s shocking to think about that many lives being ruined and about that much money being thrown in the garbage. And all for absolutely no reason.
In that piece, Baker writes that “many restaurants and grocery stores [were] putting locks on their dumpsters to keep people from eating from them”. We should reflect on what it was like to actually be the victims of austerity in Europe. I can’t even imagine eating out of a dumpster. These people not only imagined it, but they actually did it.
Or consider the horrors of the US housing bubble, followed by the further horrors of Obama’s post-bubble austerity. The first hammer-blow was the housing bubble itself. Housing prices went up for no good reason, and then when the bubble burst it tanked the economy and plunged the US into the Great Recession. It’s a simple story:
The basic story of the Great Recession is about as simple as they come. The economy was being driven by a housing bubble and the bubble burst. The combination of the loss of housing construction, due to the enormous overbuilding of the bubble years, and the loss of the consumption that had been driven by bubble generated housing wealth, created a gap in annual demand of more than $1 trillion. That’s all simple and easy.
If people in high places had paid attention, the Great Recession and the horrors that came with it could have been avoided. Baker makes clear that there were ways to avoid the Great Recession:
The Fed has a wide variety of tools that it can use to rein in bubbles, starting with talk. The Federal Reserve Chair regularly testifies before Congress and frequently speaks in other public forums. The chair can use these occasions to lay out evidence that a bubble exists in a financial asset and to explicitly describe the potential risks to the actors involved.
The second hammer-blow was Obama’s post-bubble austerity. Baker writes about the suffering that this austerity caused to Americans:
The basic story of the twelve years since the collapse of the housing bubble is that the U.S. economy has suffered from a lack of demand. We need actors in the economy to spend more money. The lack of spending over this period has cost us trillions of dollars in lost output.
This should not just be an abstraction. Millions of people who wanted jobs in the decade from 2008 to 2018 did not have them because the Washington Post and its clique of “responsible” budget types joined in calls for austerity. This meant millions of families took a whack to their income, throwing some into poverty, leading many to lose houses, and some to become homeless.…
How much output has the austerity pushed by the Post’s regular contingent of commentators and reporters cost the country? More importantly how many lives have been ruined by needless unemployment and the resulting loss of income and poverty?
People in high places have a lot to answer for, whether in Europe or in America. These are major crimes against humanity.
This takes us to another BTP theme: elite incompetence. Why didn’t anybody in the US see the housing bubble (and sound the alarm) before it was too late? The answer is that people in high places are not always the most competent. For example, Baker writes that Alan Greenspan’s explanation for why Greenspan didn’t see the bubble “is sufficiently incredible that it is difficult to say whether it would be worse if Greenspan was lying or telling the truth”. Baker wrote this about Ben Bernanke:
Bernanke chose to ignore an $8 trillion housing bubble that was easy for any competent economist to recognize. It was inevitable that the collapse of this huge bubble would lead to a severe downturn. The bubble was driving the economy, creating more than a $1 trillion in annual demand through its impact on residential construction and consumption. There is no easy way to replace this amount of demand, which evaporated when the bubble collapsed. All of this should have been evident to Bernanke years ago. He and his colleagues at the Fed should have taken steps to prick the bubble before it grew to such dangerous levels. The failure of the Fed to act has had disastrous consequences for the country. It would be difficult to imagine how someone could fail more completely in their job than Bernanke did. Yet, NPR thinks it is ridiculous to question whether Bernanke should be reappointed. This is an excellent display of the different standards of accountability in Washington and the world where most people live and work.
Baker wrote in 2008 that economists gave us the Great Recession:
On the other side, there were all sorts of accomplices in promoting the bubble. Virtually the entire economics profession joined Alan Greenspan in his insistence that there was no housing bubble. Having so much high-powered expertise on the side of the no bubble view undoubtedly made investors more comfortable in gobbling up mortgage debt that they should have recognized as junk.…
In short, there is a long list of culprits in the housing bubble disaster. Alan Greenspan sits in the center of the circle, but he is surrounded by a vast group of clowns and criminals. It is not clear that many will suffer any consequences for their actions or even that they will be prevented from doing it all over again.
Baker wrote in 2009 that the “entire economics profession” was too incompetent to prevent the Great Recession:
There was no remotely plausible explanation for this sudden surge in house prices. What did the regulators think had caused this extraordinary departure from a 100-year long trend in the largest market in the world if not a bubble? There was absolutely no excuse for the failure by the Fed and other regulators to see the housing bubble. What were they doing, playing video games the whole time?
If they saw the bubble, then there is also no excuse for failing to understand that its collapse would devastate the economy. Did they think that some force would magically grow up to replace the $1 trillion in bubble-driven demand?
The argument that they somehow lacked the tools to combat the bubble is absurd. If Greenspan-Bernanke had fully used the resources and the podium of the Fed to document and publicize the existence of the bubble, it probably would have been sufficient to prick it before the bubble grew to such dangerous levels. They also could have curtailed the reckless lending that everyone seemed capable of seeing except them. Finally, they could have threatened to raise interest rates as much as necessary to burst the bubble, and then carried through on the threat if necessary.
Instead, the Fed did nothing to combat the bubble—and it was applauded for doing nothing by the entire economics profession. This point is absolutely fundamental in understanding regulatory reform. Economists might be very smart and they may have prestigious degrees from top universities, but this crisis shows that most are incapable of independent thought. If they were, then they could not have possibly missed an $8 trillion housing bubble.
Baker writes that the failure to see the bubble is so embarrassing that it can’t be honestly admitted to:
The idea that economists and other analysts could not see the evidence of a bubble-driven housing market looks like a convenient after-the-fact rationalization for their failure to do anything to check the rise of the bubble before it grew too dangerous. The signs were everywhere.
Looking at the growth of residential construction and the fall in the savings rate in the GDP data is pretty damn simple. Rather than own up to being too lazy to look at the data that was right in front of their faces, economists and their followers in policy circles whipped up a cock and bull story to conceal their incredible incompetence and/or negligence.
In a piece called “Intro Econ and Why the Recovery Is Weak”, Baker writes that the fact that the housing bubble caused the Great Recession is “far too simple for Robert Samuelson” and “is far too simple for most economists who couldn’t see the $8 trillion housing bubble that crashed the economy because it was far too simple”.
Robert Samuelson’s Monday-morning columns in WaPo were BTP’s punchline for years before Samuelson retired. Baker described these Monday-morning columns as “deliciously orthogonal to reality”. Countless BTP pieces feature Samuelson, but here are some:
Baker is used to incompetent people being in high places. Baker has been documenting elite incompetence for many years on BTP. Baker writes that the Washington Post editorial board doesn’t know “really basic stuff” that is “taught in every intro economics class”. And Baker writes that fancy people make errors in the domain of “third grade arithmetic” and that these “arithmetic failures have real and demonstrable consequences”. Baker even writes about an “Excel spreadsheet error” that had real consequences. The emperor has no clothes, and Baker (just like Chomsky) is not going to pretend otherwise.
Baker has a solution to elite incompetence: fire people. Firing people is not rocket science. It’s basic incentives, which economists are supposed to understand. Baker explains (“They thought” refers to the IMF’s reaction):
I said, “Well, suppose you fired people.” And everybody laughed. They thought I was joking. “No, I mean fire people. This is your job. You messed up. People have lost their life savings. They’re out of work. We have huge budget deficits. You messed up. They don’t have a job. You’re the one who messed up. Why not fire people?” And when they realized that I was serious they thought I was crazy.…
If you’re a dishwasher who doesn’t wash the dishes, if you’re a cab-driver who gets lost, most people in their jobs are held accountable. We have to do that with Washington, otherwise we get real bad policy.
I’m with Baker. Until people in Washington get fired for their incompetence, we can expect bad policy and needless suffering.
Another BTP theme: journalistic incompetence. If anyone reading this article knows a journalist, ask the journalist why budget numbers aren’t reported as a percentage of the federal budget in order to give meaningful context to the numbers. Percentages are important. Medicare spent 0.0003% of its budget on dead people and Social Security spent 0.006% of its budget on dead people, but these percentages weren’t given in the media. Journalists engage in “frat boy budget reporting” that’s meaningful “for the fraternity of budget reporting” but “provides virtually no information to readers”.
Context-free budget-reporting contributes to the public being “grossly misinformed about where their budget dollars go”. We shouldn’t mock people for being misinformed. We should direct our laughter “at the NYT, Washington Post and NPR who have reporters who are too dumb to figure out to how to convey their subject matter in a way that is understandable to their audience”. Baker writes that he has “never found a reporter who could tell me with a straight face that when they write that we are spending $210 billion on transportation over the next six years that this number has any meaning to their readers”. In this piece (a must-read for journalists), Baker discusses the issue of context-free budget-reporting:
The most absurd part of this story is that there is no other side. Everyone in the news business knows that no one has any idea how much money $70 billion for food stamps is or $867 billion over ten years. And, it only takes a few seconds to add context, like the share of the federal budget or the spending per person or family.
I thought I scored a big victory on this issue when Margaret Sullivan, then the Public Editor of the New York Times, completely endorsed this point in a column. She got the wholehearted agreement of David Leonhardt, who was the paper’s Washington editor at the time. I assumed this meant a change in policy, which given the NYT’s role in the media hierarchy, would soon be followed by other news outlets.
But, nothing changed. We still get really big numbers which are absolutely meaningless to almost everyone who sees or hears them. This can and must change.
After you ask about budget reporting, ask the journalist why so many mind-readers go into journalism. What am I talking about? There’s mind-reading everywhere in journalism. WaPo knows what Donald Trump “believes”. The NYT knows that the GOP “distrusts” food-stamps. The NYT knows about the “frustration” of Trump-administration officials. The NYT knows how Uber “views” its role. The NYT’s David Leonhardt knows what President Obama and Hillary Clinton “consider”, “want”, “see”, and “think”. WaPo knows how Tea Party activists “view” Obamacare and what Tea Party activists “fear”. The NYT knows what Paul Ryan “believes”. Bloomberg knows what Rick Scott “sees”.
In all of these cases, there clearly aren’t anonymous sources providing the information, so either these journalists are making stuff up or they’re gifted with mind-reading powers. Baker tweeted harshly about a WaPo piece that tells readers how Republicans “see” the For the People Act:
Journalism 100 for WaPo reporter. Dan Balz has no idea how Republicans “see” legislation to protect the right to vote. He knows that they say—this is f**king simple, why can’t reporters learn not to make s**t up?
Seriously, I cannot understand how veteran reports feel the need to make assertions about what politicians think. They do not know what politicians really think, and if the reporters think they know, they should be fired.
I asked Baker what journalists tell him when he brings up mind-reading and out-of-context budget-reporting:
On the mind-reading, they sometimes say things like they don’t want to use a disparaging word like “claims” when referring to a politician’s stated views. I have argued that it should always be possible to just give the facts—what they say or do—without being either pejorative or making assertions about beliefs.
On the context, the most common response is that reporters are rushed. That seems more than a bit far-fetched, since this should only take a few seconds.
The media messes up all the time. The media often claims that big trends exist where there are none. The media pushes falsehoods about unemployment—that it’s due to a lack of skills, and that people stop working because they don’t want to work. I asked Baker what this piece illustrates:
That Thomas Friedman, a highly respected NYT columnist, literally had no clue what he was talking about.
Baker wrote to me that this paper exemplifies how the media—and scholars—can miss the big picture:
There were large numbers of people trying to explain why consumption was weak following the collapse of the housing bubble.
It actually wasn’t weak. It just went back to normal after being extraordinarily high due to the ephemeral wealth created by the bubble.
Another BTP theme is mainstream confusion. The mainstream is confused about automation, stock buybacks, corporate priorities, manufacturing jobs. And about the debt—Baker has sharp criticisms of “debt whiners”:
While deficits are potentially a problem, the debt is not, first and foremost because it doesn’t really measure anything. The debt whiners are fond of telling stories about how the debt is a burden on our children, or how the debt can lead to financial crisis and other bad things, but these claims are inventions, not economic realities.
Interest that we pay on the debt can be a burden, but it is dwarfed by other factors like productivity growth. (The impact of ten years of even modest productivity growth swamps an increment to debt service that we pass onto to our kids from higher deficits today.) Furthermore, debt service burdens at present and the near-term future will almost certainly be much smaller than what we saw in the 1990s.
But there is another aspect to this story that our debt whiners desperately do not want anyone to talk about. Direct spending is only one way in which the government pays for things. We also pay for things, like coronavirus vaccines, by giving out patents or copyright monopolies.
For progressives, BTP’s most important theme is that the progressive movement needs to correct various blindspots/confusions in order to fight inequality.
Consider intellectual property (IP). How many progressives put IP at the center of the inequality solar-system? The Sanders campaign never touched this. The Warren campaign never touched this. Brace yourself, because your eyes will pop when you see how much money is at stake. Baker lays out the eye-popping figures:
Many items that sell at high prices as a result of patent or copyright protection would be free or nearly free in the absence of these government granted monopolies. Perhaps the most notable example is prescription drugs where we will spend over $420 billion in 2018 in the United States for drugs that would almost certainly cost less than $105 billion in a free market. The difference is $315 billion annually or 1.6 percent of GDP. If we add in software, medical equipment, pesticides, fertilizer, and other areas where these protections account for a large percentage of the cost, the gap between protected prices and free market prices likely approaches $1 trillion annually, a sum that is more than 60 percent of after-tax corporate profits.…
Instead of being a sidebar pursued by a small clique of economists and people concerned about access to medicines, rules on intellectual property should play a central role in debates on inequality. There is a huge amount at stake in setting these rules and those concerned about inequality should be paying attention.
This is not chump change. This is trillions of dollars. I asked Baker how he stumbled on the issue of IP:
I didn’t really stumble on IP. The issue had bothered me ever since I was in grad school. I thought I would find some literature explaining why the IP route is better than alternatives. I didn’t.
There are many things that progressives need to change—ASAP. Baker has a great piece on how progressives are very often barking up the wrong tree when it comes to inequality. Baker’s book Rigged lays out an agenda very different from the ones that Sanders and Warren put forward. In 2014, Baker laid out a fascinating “anti-rents agenda”. Baker argues that progressives and shareholders are allies in the fight against inequality.
There’s another crucial point. Baker emphasizes that upward redistribution—or “robbery”, if you’re not at a cocktail party—is about high-end wages. Baker emphasized to me an important point from this paper:
The point is that the upward redistribution was not from wages to profits. It was to high-end wage earners.
Baker knows Stephanie Kelton and other progressive economists, so I asked Baker why he didn’t use his influence to reorient the Sanders and Warren platforms to something more Baker-esque:
The people I knew on the campaigns had their hands full. Everyone had a thousand ideas for them. They didn’t especially want to hear mine.
While I can probably get a phone call or email through to any of them, they all have full plates and are not waiting around for my advice.
I’m very thankful for Baker’s work. Without Baker’s work, I would be ignorant about so many things regarding US domestic policy. There’s a reason why Chomsky praises Baker so much and cites Baker so much.
(I added hyperlinks to the Chomsky-letters below.)
Baker has had instructive interactions with the press. One instructive incident occurred when Baker “went through a couple of rounds of edits” with a WaPo editor who wanted Baker to write propagandistic nonsense. Baker “decided to throw in the towel after round two”. That’s a great example of the corporate-media ideology, the ideology that Manufacturing Consent discusses. Baker has witnessed this corporate-media ideology firsthand. Baker has had a front-row seat to the corporate circus his entire career. I asked Chomsky whether there’s an array of carrots/sticks that keeps the establishment immune to ideas like Baker’s:
It’s not so much a matter of carrots and sticks of the kind you’re looking for. Rather, it’s more like what Hume, Gramsci, Orwell described. Immersion in hegemonic common sense is easy, doesn’t require independent critical thought, can lead to a nice career, doesn’t elicit any criticism or even being kept from polite society. It’s not unique to the social/political arena, though the relevant factors are more extreme there. Even to the sciences. That’s why fads like behaviorism persist even though completely untenable. Even extends to physics in some famous cases—Boltzmann, Bohm, for example.
In a great piece, Baker offers two possible stories to explain the immunity. The first is laziness. The second is motivated reasoning. On the second, Baker points out that it’s uncomfortable for elites to admit that they became rich due to theft:
These people do not want to entertain the idea that they didn’t end up as big winners through a combination of skill, hard work, and perhaps a dose of good luck. Even the progressives in this group, who support redistributive tax and transfer policy, would rather see this as an expression of their generosity than a refusal to take part in theft.…
This is a direction that many, perhaps most, elite types would rather not go. They might be open to coughing up more money in taxes to reduce inequality and provide opportunities for the poor, but they are not open to the idea that they never should have had the money in the first place.
That’s an interesting point. Try bringing up Baker’s arguments about the robbery of the poor the next time you’re at a cocktail party and see how that goes over. Chances are that things will get real awkward real fast, since that’s not the image that well-off people like to have of themselves. But Chomsky thinks that Baker’s first story—laziness—explains the immunity:
Baker is extending the Hume-Gramsci-Orwell observations, but I think he exaggerates the material aspects. It’s simply easier to conform than to question. Economics is actually an unusual case. The arrogance of economists is extraordinary. Just gave a talk at an OECD panel in Paris (by video) a couple of days ago, where this came up in discussion. I had discussed how scientists deal with the problems of geoengineering, urging that at most small-scale experiments should be undertaken so that if there are unexpected negative side effects, it can be quickly called off. I compared that with economists (most of the panel are economists from the IMF, etc.). Based on dubious theories with very slight if any empirical support, they arrogantly propose and impose large-scale changes on highly complex societies that they don’t understand, often with very harmful effects, like the IMF structural adjustment programs, and the neo-liberal assault generally.
I’m not saying that elite types chose the current thinking because it is self-serving, just that they don’t challenge it because it is self-serving. There is little incentive to challenge a view that says they are living comfortably, when many people are not, because that is just the way the market works—and it has rewarded their skills and hard work.
Incompetence has consequences. Incompetence gave us the housing bubble. Dean Baker tried to sound the alarm, but nobody would listen to him. Just look at this disturbing 2002 warning from Baker that’s truly chilling to read.
And the housing bubble gave us the Great Recession. The Great Recession destroyed millions of Americans’ lives. It’s hard to get your head around it.
The Great Recession put Obama in a bad political situation, since people tend to blame whoever’s in power when the economy is bad. But Obama’s post-bubble austerity yielded a weak recovery. And Obama did great political harm when he betrayed the American people in an infuriating manner, since that betrayal left a bad taste in millions of people’s mouths. And you can also ask whether it was wise for him to pour two years of political capital into Obamacare, since that bill is perhaps the very symbol of political blunder and DC sausage-making.
The causes are debatable (the Great Recession? Obama’s post-bubble austerity? Obama’s betrayal of the American people? political stupidity on Obamacare?). But what followed was cataclysmic—the GOP took over every level of government, from the House to the Senate to every single aspect of state government. Obama held the White House, but the Democrats completely collapsed at every other level.
That GOP surge meant DC gridlock, which, as Chomsky points out, is the whole damn point:
The stimulus bill has its flaws, but considering the circumstances, it’s an impressive achievement. The circumstances are a highly disciplined opposition party dedicated to the principle announced years ago by its maximal leader, Mitch McConnell: If we are not in power, we must render the country ungovernable and block government legislative efforts, however beneficial they might be. Then the consequences can be blamed on the party in power, and we can take over. It worked well for Republicans in 2009—with plenty of help from Obama. By 2010, the Democrats lost Congress, and the way was cleared to the 2016 debacle.
You can ask questions. If we’d listened to Baker, and avoided the Great Recession, could the GOP surge have been avoided? If Obama hadn’t engaged in post-bubble austerity, could the GOP surge have been avoided? If Obama hadn’t betrayed everyone, could the GOP surge have been avoided? If Obama hadn’t poured all his political capital in Obamacare, could the GOP surge have been avoided?
Once the surge happened, there was no hope to pass anything useful for the American people. The result was Trump—Hillary Clinton was a terrible candidate, but if people had been happy with things that had happened under Obama then we would not have had Trump for four horrific years.
Most people don’t recognize how bad Trump was. You see harsh condemnations, but not on the issues of global heating and nuclear weapons, which are Trump’s big crimes. On the corruption, Chomsky said it well (I added hyperlinks):
I don’t know if you saw the clips from a couple of days ago, where Bolsonaro gangs were attacking the parliamentary buildings, the Supreme Court, and saying, “Get rid of it.” Bolsonaro fired the heads of the executive divisions, which were looking into his family. His executive statement was that “Nobody’s going to fuck around with my family,” which is pretty similar to what just happened here. Bolsonaro sees himself as a kind of clone of [Donald] Trump. Tragedy and farce.
Trump is very similar. He just fired all of the inspectors general who were put into place to monitor corruption and malfeasance in executive offices. They were beginning to inquire into this fetid swamp that he’s created in Washington, so he fired them all. And like any tin-pot dictator, he went out of his way to humiliate the senior Republican senator, Charles Grassley, who had spent his career setting this system in implementation. Not a peep from the Republican Party. They’ve disappeared as a party. It’s worse than the old Communist Party. The leader gives an order; we [fall] on our knees.
Obama’s betrayal of the American people was a major factor in the GOP surge that shut down DC and ultimately gave us Trump. I asked Chomsky how the people knew that Obama had betrayed them:
Direct evidence in their lives. They could see that Obama had bailed out the perpetrators of the housing crisis but not the victims, though the legislation called for both. They knew that his ridicule of “Cadillac health plans” was an attack on those they had won in union struggles. And plenty more.
Baker gave this comment:
On the betrayal, I’m not sure how many people knew about the “Cadillac health plans” line. I think it’s more that many lost their houses, their jobs were not secure, they still had trouble paying for health care, and the banks and bankers were fine.
There is hope, though, so there’s no reason to despair.
Baker can point to some successes that he has helped to contribute to. For example, Baker writes in a 2019 piece that Federal Reserve chair Jerome Powell had “explicitly made the plight of the poor and working-class part of the Fed’s agenda”. In the piece, Baker is clear about the Fed’s profound importance:
Millions more people have jobs this Labor Day than would have been the case if the inflation hawks had carried the day.
Before Powell, the Fed threw Americans out of work in a way that disproportionately harmed black people and Latino people. As Baker explains in the piece, “even small changes in the overall unemployment rate, which is usually close to the unemployment rate for whites, have a large impact on the employment prospects for more disadvantaged groups”. In other words, the Fed has a hideous record of harming Americans’ lives and particularly disadvantaged Americans’ lives.
Why was Powell different? Hard work. Activist pressure. In the piece, Baker describes “a concerted effort by the Fed Up Coalition, organized by the Center for Popular Democracy, to force the Fed to broaden its focus”. Baker writes in the piece that he is “proud to have been able to work with Fed Up, along with a number of other progressive economists”.
I hope that my piece has made you realize how important Baker’s work is. Let’s all do whatever we can to give Baker the biggest platform that we can. See my recent interviews with Baker on strategy and on progressive priorities under Biden.