Dean Baker

Recent Articles

Three Bernie Sanders Bills to Arrest the Highway Robbery in the Prescription Drug Market

Allowing foreign imports, authorizing Medicare bargaining, or setting prices at what other nations pay—all good options 

The prescription drug market in the United States is an incredible mess. From an economic standpoint, everything is wrong. Drugs that would sell for a few hundred dollars in a free market often sell for tens or even hundreds of thousands of dollars because we give their manufacturers patent monopolies. This leads to the sort of distortions and inefficiency that would be expected from tariffs as high as many thousands percent. From a heath perspective the situation is no better. The huge markups give drug companies enormous incentive to misrepresent the safety and effectiveness of their drugs and to push them for uses where they may not be appropriate. This is a big part of the story of the opioid epidemic. Cumulatively, it is a huge deal in both economics and health. We spent more than $430 billion (2.2 percent of GDP) on prescription drugs last year. These drugs likely would have cost less than $80 billion in a free market. The difference of $350 billion is almost five times the...

Low Unemployment: The Bad News in the Good News

The unemployment rate fell to the lowest rate in decades, but there is still a long way to go to make up for the damage of the Great Recession and the decades of wage stagnation that preceded it.

(AP Photo/Lynne Sladky)
The employment report again provided some good news this month. The unemployment rate fell to 3.7 percent, the lowest rate since Nixon was in the White House. The unemployment rate for white women and black teens both hit their lowest levels on record, 2.8 percent and 19.3 percent, respectively. (That 19.3 percent rate is not a typo—it actually is the lowest black teen rate since we started compiling the data in 1972.) As always, we have to recognize that the good news comes against a backdrop of really bad news. The economy is moving in the right direction at a respectable pace, we added a hurricane-depressed 134,000 jobs in September, bringing the average over the last three months to 190,000. But even with this sustained growth, we have a long way to go to make up for the damage from the Great Recession, and even longer to offset the three decades of wage stagnation that preceded it. The percentage of prime-age workers (ages 25 to 54) who have jobs is still down by a full...

Why the Tax Act Will Not Boost Investment

Will lower corporate taxes generate an investment boom? The evidence suggests not.

This article appears in the Summer 2018 issue of The American Prospect magazine. Subscribe here . The centerpiece of the Republican Tax Act signed into law at the end of last year was the cut in the corporate income tax rate. The reduction in the tax rate from 35 percent to 21 percent, along with other reductions in business taxes, accounts for almost 40 percent of the $1.6 trillion projected gross cost of the tax cuts. Since the law passed, most of the discussion has focused on the division of the benefits of the corporate tax cuts between shareholders and workers. On this score, the shareholders look to be the big winners. According to an analysis by Americans for Tax Fairness that focused on the public announcements from the country’s 500 largest corporations, share buybacks announced since the law’s passage have totaled more than $400 billion compared with $6.1 billion in announced bonuses or pay increases, with the vast majority of this money falling in the category...

New York State’s Federal Tax Dodge Is a Big Middle Finger to Republicans

Two provisions designed to offset the federal cap on SALT deductions is a big step toward fighting back against the GOP tax plan.

(AP Photo/Seth Wenig)
On the last day of March, New York’s legislature approved a budget package that included two provisions designed to get around a punitive clause in the congressional Republicans’ new Tax Cuts and Jobs Act (TCJA). The TCJA included a limit of $10,000 on deductions for state and local taxes (SALT). While this could be justified as an effort at fairness, since higher-income taxpayers are more likely to take the SALT deduction and are much more likely to pay SALT taxes in excess of $10,000, this was first and foremost an effort to penalize relatively liberal states like New York. These states have higher taxes for the simple reason that they provide better public services than low-tax states like Arkansas and Mississippi. This shows up both in the form of collective consumption in areas like education and infrastructure, but even more importantly in social safety net spending. According to the Center for Budget and Policy Priorities , the monthly grant for a family of three...

Rubbing SALT in the Wounds of Republicans

Democratic states can nullify the GOP’s war on them by altering their employer-side payroll taxes.

Albin Lohr-Jones/Sipa via AP Images
There is little question that the Republicans in Congress were quite explicitly targeting high-tax blue states with their decision to severely limit the deductions for state and local taxes (SALT). Putting a cap of $10,000 on these deductions can add thousands of dollars to the tax bills of many upper middle class people living in relatively high-tax states like California or New York. As a result, these states will feel considerable pressure from a politically powerful bloc to lower taxes, which will then necessitate cutbacks in areas like education and health care. Fortunately, there are ways to undermine the Republican effort. An obvious one is to partially replace the state income tax with an employer side payroll tax. This can lead to a situation in which the state tax on wage income ends up being fully deductible against federal income taxes even for people who do not itemize on their tax forms. To take a simple example, suppose a state imposes a flat 5 percent income tax. A...