The deeper problem, I think, is that the textbook theory doesn't have any politics in it. In macroeconomics textbooks, government is a benevolent central planner beyond politics. It is assumed, for simplicity's sake, that governments can act in perfect compliance with theory. It is also assumed that theory is settled before coming to a policy problem, that motivated disagreement over theory is not an essential element of democratic policymaking. But of course, there is politics, which trashes hope of either consensus on or compliance with theory. And that's how we ended up with the legislative monstrosity actually under consideration in Congress. As Harvard's Robert Barro puts it:
This is probably the worst bill that has been put forward since the 1930s. I don't know what to say. I mean it's wasting a tremendous amount of money. It has some simplistic theory that I don't think will work, so I don't think the expenditure stuff is going to have the intended effect. I don't think it will expand the economy. And the tax cutting isn't really geared toward incentives. It's not really geared to lowering tax rates; it's more along the lines of throwing money at people. On both sides I think it's garbage. So in terms of balance between the two it doesn't really matter that much.
The economists can duke it out over the possibility of successful fiscal stimulus. But is there any reason based in up-to-date economic theory to believe that this trillion dollar deficit-spending bill is not, as Barro says, garbage?
Krugman is plumping for it anyway. Hard. So what can one say about Krugman? That he is a creature of extraordinary double consciousness. Perhaps more than any economist of his caliber, Krugman understands that policy is largely determined by the outcome of the public opinion shoutfest. Yet this recognition seems to have no effect on Krugman's ideas. Rather than bring inside his models disagreement over economic theory and the lack of political incentive to faithfully apply them, which would lead him to radically revise his prescriptions, Krugman leaves his textbook theory untouched and simply tries to win the shoutfest. Krugman's often unbearable stridency seems to reflect an attempt to overcome the problems of democratic disagreement and incentive compatibility through sheer force of will-as if the deep reality of politics is no match for the rhetorical gifts and gold-plated reputation of Paul Freaking Krugman. It is as if his own imagined ability to singehandedly overwhelm the opposition is part of Krugman's implicit model of how a politics-free macoeconomic theory can be made politically relevant in a time of perceived crisis, which is to say, a time of rank political opportunism.
One can see this attitude reflected in Krugman's advice to Obama, who he says "made a big mistake" by failing to mercilessly bully his opponents into submission:
It's time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation's future at risk.
As Krugman sees it, the big problem here is Obama, who lacks Krugman's intransigent will to mercilessly crush any who would dare keep cartoon Keynesianism from coming to life.
As Ross Douthat notes, the stimulus bill we ended up with is the worst of both worlds:
In this world, centrist Senators exist to take politics as usual - whether it's tax cuts in Republican eras, or spending splurges in Democratic ones - and make it ever so slightly more fiscally responsible. So if the GOP wants, say, $500 billion in tax cuts, the country clearly needs $400 billion in tax cuts - but not a penny more! And if the Democrats want $900 billion in stimulus, then the best possible policy outcome must be ... $800 billion in stimulus! To read this Arlen Specter op-ed, justifying both the stimulus package and the cuts the "gang of moderates" have attempted to impose, is to encounter a mind incapable of thinking about policy in any terms save these: Take what the party in power wants, subtract as much money as you can without infuriating them, vote yes, and declare victory.
. . .
There's a case to be made for a stimulus that's radically different than the one we have now; there's a case to be made for a stimulus that's like the one we have now, but a great deal smaller and more targeted; and there's a case to be made for a stimulus that's absolutely gargantuan. But thanks to the centrists, we're getting the cheapskate version of the gargantuan version: They've done absolutely nothing to widen the terms of debate about what should go into the bill, and they've shaved off just enough money to reduce its effectiveness if Paul Krugman is right - but not nearly enough to make it fiscally prudent if the stimulus skeptics are right.
This means that if the damn thing doesn't work, we won't even know whom to blame. But it wouldn't be crazy to start by blaming the centrists.
My liberal friends pay lip service to the fact that bills have to be negotiated through the political process. And they're certainly willing to trim their suggestions to things that are politically possible, rather than, say proposing that we ban the automobile. But this knowledge rarely penetrates as far as acknowledging that the political process sometimes means that we will get a bill that is worse than simply doing nothing, even if there is some theoretical bill out there in the ether that would be simply smokin'.
It reminds me of an apocraphyl story about an ad guy who meets a producer in a bar, and demands that said producer hire him as a writer, on the grounds that even he can write better than that drivel.
"Anyone can write better than that drivel," sighs the producer. "Can you write a script that's better than that drivel after everyone from the extras to the wife of the studio head have all put their two cents in?"
Rather than focusing on crafting policy prescriptions that will best survive the sausage grinder, Democrats and Republicans alike spend a lot of time fantasizing about what life would be like if the other party disagreed, or stopped being a different party. The problem is not that the bill can't win enough support--it's that intransigent [Democrats/Republicans] are refusing to rubberstamp the president's initiatives.
But if the Republican Party disappeared, the Democrats would be no closer to their goals, because the Republican Party represents real interests that would continue to exist, and would elect other people who would also oppose the bill. And at the point when you're fantasizing about the mass disappearance of a large number of voters, I'd suggest that your political philosophy needs a rethink. And if the stimulus package were really as 100% guaranteed to make America better off as its proponents claim, you can bet that sensible Republicans would be falling all over themselves to get on board.
I think Democrats are currently fantasizing about a system where a minority of senators representing an even smaller minority of the population can block legislation, not necessarily that voters would simply "go away."
"Krugman's intransigent will to mercilessly crush any who would dare keep cartoon Keynesianism from coming to life"
What an excellent description - cartoon Keynesianism. Krugman has to rely on double consciousness in order to keep his theoretical understanding of economics carefully segmented from his policy prescriptions. In Krugman's theoretical world, the government is a "benevolent central planner beyond politics". If Krugman ever once allowed himself to see reality with respect to that assumption, it would force him to rethink everything.
"But is there any reason based in up-to-date economic theory to believe that this trillion dollar deficit-spending bill is not, as Barro says, garbage?"
But is there any reason to believe that Robert Barro doesn't have *his* head on backwards, and that *his* theories are garbage?
Please forgive me if I favor Krugman over anything (ANYTHING) that spews from the camp that got us into this mess (the so-called "conservatives" of W's ilk).
I do appreciate President Obama's working to get this package through, and the attempts to make it a political agreement. We had enough BS over most of the past 8 year of "WE WON, AND WE'RE IN CHARGE - AND YOU SUCK". We don't need more. But that does not mean a much heavier weight won't be given to the policies/theories of those who were voted in to run things.
Megan
Didn't the president give a 40 percent tax-cut in the spending bill as an mea cupla to Republicans? I mean it's like you're saying that its the Democrats fault for not putting forth a better bill.
Have you not watched reality?
The Republicans have no idea. Cut capital gains cut anything for the wealthy and hope for the best.
It doesnt work
"And if the stimulus package were really as 100% guaranteed to make America better off as its proponents claim, you can bet that sensible Republicans would be falling all over themselves to get on board."
Actually, no, this seems to violate the conclusion you endorse (and I agree with) that the political process distorts policy proposals to make them worse than they otherwise could be.
It's in the Republicans' interest to undermine the effectiveness (even if they privately acknowledged it) of a Democratic initiative since the Democrats (and Obama) will be faced with the consequences of failure as well as the benefits of success.
You mean the NY Times is a merciless shill for extreme left-wing, partisan beliefs with no basis in reality.
In other news, Biden a moron, Obama an inexperienced socialist.
Obama is not my president.
I am embarassed to be an American because of him,
Krugman behaves much of the time like a middlebrow political pundit. Robert Barro said in that interview that Krugman "doesn't behave like an economist," and that's exactly right. Nobody really believes that Congress is going to pass a stimulus bill that does what any serious theory requires.
"Please forgive me if I favor Krugman over anything (ANYTHING) that spews from the camp that got us into this mess (the so-called "conservatives" of W's ilk)."
What exactly did they do to get us into this mess? Cut taxes? Well then I guess we should raise taxes to make up for it right? The stimulus bill doesn't seem to do that. Spend money? Yes they spent a lot of money on things like SHIP, the proscription drug benefit and no child left behind. So I guess we should cut spending and start living within means right? I guess that would preclude borrowing a few trillion.
That is nothing but schoolyard bullshit. First, it forgets the fact that the Dems controled Congress and the pocketbook from 06 onward and did nothing to stop spending and borrowing. Second, it assumes that spending and borrowing are bad things. Otherwise why else are the Republicans so bad that they have no right to say anything? If that is true, then doesn't that make the Dems just as bad or worse for doing the same thing and pretty much give away the point that spending and borrowing are a bad idea?
The worst forms of argument are appealing to authority and attacking the messanger. Those seem to be the only arguments that can be put forth for this bill. First, a few people with PHDs say it is a good idea, although they can't explain why. Second, Republicans are bad and since they are against this it must therefore be good.
Maybe this is a good idea. I doubt it but I am willing to listen to the arguments. Regardless, what you just posted is nothing but complete ignorant crap and further evidence Megan needs to start filtering her comments.
Is this what passes for 'brilliant' around here?
Krugman has not been plumbing hard for the current bill. He has in fact been critical of it, saying among other things it has too much tax cuts and not enough tax cuts. He's even more critical of the centrists because they've proposed removing what he considers some of the best parts of the package -in particular the $40 billion to the states.
Now, Krugman may or may not be right about that, but this criticism just seems wildly off base.
First, it forgets the fact that the Dems controled Congress and the pocketbook from 06 onward and did nothing to stop spending and borrowing.
They didn't control the Senate, the Republicans could filibuster anything they wanted. The president could also veto anything he wanted. That 51/49 edge in the Senate doesn't mean you run things if the other side decides to not let you.
And if the stimulus package were really as 100% guaranteed to make America better off as its proponents claim, you can bet that sensible Republicans would be falling all over themselves to get on board.
Megan: "Sensible" Republicans in the United States Congress -- like sensible elected officials in every democracy -- worry about keeping their jobs more than any thing else. Now, anybody with a lick of knowledge about the dismal science realizes there's an overwhelming likelihood that in November of 2010 the US economy will either still be in recession or will be too early in its recovery stage for voters to have noticed a difference. Hence an electorate in a fowl mood. Hence an electorate likely to be angry at the party in power. Hence why it makes sense to position yourself in advance as someone who opposed the "reckless" and "ineffective" policies of the administration.
If you replace "sensible" with "public-spirited" or "conscience-driven" I think your words above make more sense.
Guess what? Paul Krugman's ideal bill would be really good. Barack Obama's original bill was good. The bill that has emerged from the Senate is instead much worse, because Republicans and a couple of centrist Democrats inserted a lot of useless or actively harmful tax cuts and credits, and cut some good tax cuts and a lot of good spending.
Whose fault is it that the bill is worse? It is....the fault of the Republicans who made it worse!
Will Wilkinson, however, believes that it is Barack Obama's fault for proposing a bill. And somehow it is also the Keynesian Paul Krugman's fault that the bill that has emerged from the Senate is much less Keynesian than Obama's bill was.
Yes, the democratic system involves compromise. But in any particular case where one set of politicians are performing a bunch of idiotic self-serving or simply illiterate acts of gratuitous stupidity, said stupidity remains their fault, not the fault of the democratic system for existing.
"They didn't control the Senate, the Republicans could filibuster anything they wanted. The president could also veto anything he wanted. That 51/49 edge in the Senate doesn't mean you run things if the other side decides to not let you."
They controlled the House. The fillabuster can stop something from happening, but it can't stop something from being stopped. If spending doesn't get out of the house it doesn't happen.
Perhaps I missed it, but when exactly did the Republicans filabuster the budget in order stop Democratic spending cuts? Did I miss the big government shutdown where Bush insisted that he Democrats be stopped from cutting spending?
You statement is completely disengenious and you know it. The Dems made no effort to cut spending and made only cosmetic changes to the ear mark process. If anything, Bush seems to have stopped the Dem Congress from spending money. Once they got a compliant and weak willed President, we have found out what spending really is.
"But if the Republican Party disappeared, the Democrats would be no closer to their goals, because the Republican Party represents real interests that would continue to exist, and would elect other people who would also oppose the bill."
It's one thing to oppose the bill, it's another to think that handing out $15,000 to flip a house is more stimulative than food stamps. This is something that can be empirically proven.
The republicans are currently led by a man who believes that being a fireman or a construction worker on a bridge is just "work" as opposed to a "job" and that private sector jobs are superior because their "permanent."
If the republicans ceased to exist, no one would have the imagination or audacity to invent them.
Actually, the more I read Wilkinson's post, the more inane it seems. The essence of it is essentially whining about Krugman daring to forcefully argue his views in public. There's really nothing else too it.
"Guess what? Paul Krugman's ideal bill would be really good. Barack Obama's original bill was good. The bill that has emerged from the Senate is instead much worse, because Republicans and a couple of centrist Democrats inserted a lot of useless or actively harmful tax cuts and credits, and cut some good tax cuts and a lot of good spending."
Yes because billions for condoms to grade school students and billions to ACORN are clearly the way to prosperity.
Moreover, there was never an Obama bill. The Whitehouse never presented a bill. They left the drafting and leadership to Pelosi. And she sure does know how to spend. That is where the "Obama Bill" as you call it came from.
Further, just exactly what is Keynesian about this? Keynes soured on "infrastructure spending" after World War II. Further, Keynes would have never endorsed raising baseline spending this high. He might have endorsed short term quick injects of cash, but never this. Moreover, Keynes was writing in a period where most governments were the size of PBS. There already are any number of Keynesian stimulus's in the economy like Social Security and UE benefits and the like as well as 22 million government employees. It is hardly clear that Keynesian models would advocate this kind of spending in this environment.
I agree that this could possibly be worse in the long run than doing nothing right now.
Reminds me of what I was taught in my Navy days about shipboard fires in internal compartments. Be careful not to use too much water to extinguish the fire else the fire will be your second biggest problem...right behind flooding. Right now the Dems are arguing that Niagra Falls couldn't deliver enough water at this moment in time.
And if the stimulus package were really as 100% guaranteed to make America better off as its proponents claim, you can bet that sensible Republicans would be falling all over themselves to get on board.
There is zero gain politically for the GOP to do anything other than aggressively undermine the stimulus in hopes that the failed massive spending will propel them back into power in 2010 or 2012. If the "sensible" Republicans got on board and the recovery process hadn't begun in earnest in time for the campaign season, they would be unseated by their own party. If the stimulus proved to be sufficiently effective in time for campaign season, the downticket benefits of being a member of the party who the majority of the GOP hung the stimulus on and a popular President in the White House would be substantial.
The fact that textbook economics is lacking some key thing that is present in reality shouldn't be considered 'brilliant'. Textbook economics lacks many, many, things that are hugely important in reality, politics being just one of them. The benevolent planner may be just as poor a representation of actual governments as homo economicus is of actual human beings.
These shortcomings have never stopped economists from making bold and confident claims before. This isn't an indictment of Paul Freaking Krugman, it's an indictment of many, many economists on BOTH sides that are confidently bellowing their respective positions.
"The republicans are currently led by a man who believes that being a fireman or a construction worker on a bridge is just "work" as opposed to a "job" and that private sector jobs are superior because their "permanent."
That is a pretty stupid statement. Certainly building a bridge can be a real job. But only if there is a bonifide need for the bridge and some value that the bridge provides. If you build a bridge that is not needed or takes more resources to build than value that it provides, then the people who built it really don't have jobs because they are not producing value equal to their wages.
We have been through this kind of stupidity once. Back in the 1970s, liberals would go on tours to the Eastern Block and rave about how everyone had a job and how much better it was than the West were people were unemployed sometimes. Of course what we found out after the cold war was that those people really didn't have jobs. Yeah, they showed up to work every day and got a paycheck. But they were not adding any value or producing anything that anyone wanted. Those "jobs" were just welfare programs in disguise. Since they were producing less value than they were contributing, the society was getting worse off every year despite what appeared to be full employment.
I guess the current generation has forgotten those lessons and will have to re-learn them. If Liberals did not exist, we would have to make them up for comedic value if nothing else.
I have no idea what Barack Obama's bill looks like, since he never wrote it. Nancy Pelousy, however, wrote a giant super-lefty spending plan, most of which will not come on stream until '11/'12 - just in time for the next election. It is a bill with a minimum of stimulative tax cuts and infrastructure spending, and a maximal permanent expansion of government. I understand that any bill will have to have some relief stuff (UI benefits, food stamps, etc) as well as stimulus, but that's not what the House bill does - those things are addendum to a massive, permanent, expansion of the Federal government - the new baseline if you will. None of that stuff will be going away, ever.
I don't know if that is what BHO wants - maybe he wanted a nice clean stimulus and relief bill - but what he got was Democrat mega-pork. Now the Senate has garnished it with a little GOP pork, but that does not make me like it any better.
What sensible Republicans?
Sigh. I wish everyone who voted knew what net present value meant. Then we would at least have a useful, common vocabulary about the distinction between "spending" and "investment," or between "worth it" and "wasteful."
Instead, we have a President who says, "Of course stimulus is spending. What else could it be?" and the ignorami in the press laughing it off.
John, you make a lot of sense here.
There isn't any chance that spending to create jobs via physical or social projects would fail to create jobs--so to the extent that Prof. Barro believes that, he is not a serious observer despite his nominal credentials. Nowhere in his interview does he explain why he holds this belief; he has an ideological, or perhaps aesthetic, preference for changes in tax rates, but he doesn't give us any basis for preferring that over spending, he only asserts its superiority over one-off tax holidays. Fine with me--you supply-siders can argue amongst yourselves. But there's no basis for believing that will create demand.
The suppoerters of this bill, when they are not engaged in invective or appeals to authority, are playing a shell game. The infrustructure programs, if done properly, could be real stimuluses and a good investment. But those programs are spread out over years and are unlikely to affect the economy until it would have recovered on its own. The immediate spending that does effect the economy, is not particularly Keynsian and does nothing but throw money at Democratic interest groups like ACORN and the teachers' unions. Even from a Keynsian perspective, the bill is the wrong kind of spending at the wrong time.
"there never was an Obama bill" - John
You are correct that the bill was not fully drafted by the White House, but the framework was laid out in Obama's "American Recovery and Reinvestment Plan". The particulars were worked out in concert with the House. From "The Gavel", the blog of the Speaker of the House:
"American Recovery and Reinvestment Plan
January 15th, 2009 by Karina
In the next two weeks, the House will consider the American Recovery and Reinvestment Plan, which makes long-term investments that are worthy, needed, fully-screened, and based on merit, not politics. Developed with priorities shared by President-elect Obama, the plan will create or save 3 to 4 million American jobs, with an estimated 90 percent of the jobs created in the private sector—getting the American economy moving in the short term and making investments for a stronger economy in the long term..."
http://speaker.house.gov/blog/?p=1646
For the rest, if you disagree with Milton Friedman and the rest of the economics profession, and feel that a stimulus is not critically necessary at the moment, there is not much point in discussing anything with you.
"Certainly building a bridge can be a real job. But only if there is a bonifide need for the bridge" - John
A significant percentage of the US's housing stock is standing empty because of overbuilding. Apparently the construction workers who built all those houses did not have "real" jobs, because there was no "bonifide" [sic] need for the houses.
Alice hires Jane to make lemonade and sell it at $1 a glass. Alice pays Jane a salary of $1. But only Tom and Phil pass by, and they aren't thirsty. So Jane doesn't have a "real" job! Guess that salary in her pocket must be fake. Oh, wait! Tom and Phil got thirsty, changed their minds and bought the lemonade. Now Jane's job is "real"! Yet for some reason she still only has that same $1 in her pocket. Either way, Jane is happy -- she buys herself a Snickers bar, and doesn't worry about whether or not her job was "real". And neither does the guy who sold her the Snickers bar!
This has been an episode of Economic Metaphysics, brought to you by St. Augustine and Plato.
And at the point when you're fantasizing about the mass disappearance of a large number of voters, I'd suggest that your political philosophy needs a rethink.
Isn't that really a criticism true of both parties?
"A significant percentage of the US's housing stock is standing empty because of overbuilding. Apparently the construction workers who built all those houses did not have "real" jobs, because there was no "bonifide" [sic] need for the houses."
No they weren't real jobs. Those jobs lost their employers money and thus went away. The only difference between those jobs and a welfare program is that they were subsidized by investors instead of tax payers and unlike government make work jobs those jobs went away before they ate up too much value.
All you are doing is pointing to a lag between unproductivity and unemployment. In the real world it takes a while before an employer realizes that his employees are not productive anymore. In the meantime, the workers make stuff that really don't need and waste wealth and efforts. Fortuneately, the market corrects for that and the workers move on to more productive and needed work. In the world of government make work, that correction never happens and the workers go on building houses even though no one wants them. That is what happened in the old Eastern Block. The central planners decided that X number of this product would be made this year and people made X number regardless of the demand. That is why many of the jobs weren't real.
You example shows nothing and just proves my point. You can thank me later for this short bit of economics 101.
And at the point when you're fantasizing about the mass disappearance of a large number of voters, I'd suggest that your political philosophy needs a rethink.
No! Theirs does!
But seriously, I don't have an obligation to accept that the other large group of voters is not wrong or stupid. As a practical matter, I will have to figure out how to work with them diplomatically in order to survive and accomplish anything. But I would have had to work with the Red Guards in Mao's China too; it wouldn't have meant that I should have accepted the validity of anything they were saying, as an intellectual matter.
I don't want to sound stupid, but there really isn't a need for bipartisanship if the Democrats really honest-and-true cross-my-heart believe that their bill would work. Did I not hear that this is the most heavily one-sided government we've had in decades? If the Democrats are right, they should be eager to take the credit.
As it is, they are looking for cover in bipartisanship. They want everyone in the same boat so that there will be fewer consequences if this doesn't happen to work.
You really are joking Matt Steinglass right? Educated people really are not that ignorant of basic economics are they? I really fear for the country if what you posted counts as thinking. In your example, if they had never sold any lemonaide and had to throw it out, they would have produced no value for the economy. That dollar that was paid to the person to sell it would have been wasted. Now, if they had been able to sell the lemonaide, then they would have produced something that fulfilled a need and the dollar would not have been wasted. It is a simple concept, if you produce something that no one wants or needs, the wages you get for producing it amount to welfare and are a zero sum game with the people who paid your wages. If you produce something that is needed, in long term your wages should equal your productivity and you have increased the wealth of society. Wages can only equal producitivity and productivity can only be measured by how much the rest of society values what you produce. There is no magic trick around that fact.
You know, as I recall, the last time we listened to a bunch of creeps with beautiful theories about how they could make the world work, we ended up hip deep in Iraq. Maybe we should get some actual data before we commit ourselves to bold action.
John, demand for autos last year was 50% higher than demand for autos this year. So let's say 30% of auto workers' jobs this year are "not real". Three years from now demand will recover, and then those jobs will be "real" again. Will the workers notice anything as their jobs go from being "real" to "not real" to "real" again?
In some years, farmers lose money on their crops. They grew the wheat, the wheat was eaten, but they lost money, because they were unable to predict the price of wheat in advance and fertilizer and other fixed costs were too high. Did they not have a "real" job?
The House version of the stimulus bill contains millions of dollars to keep Maine roadworkers on the job. If that money is in there, they will have jobs, and will fix the roads. If that money is not there, they will not have jobs, and will not fix the roads. Under which circumstance will their jobs be "real"?
The House version of the stimulus bill contains tens of billions of dollars for shovel-ready school repair jobs. Those funds were cut from the Senate version. There is a decade-long backlog of school repairs in the US; in New York City alone there are 1 billion dollars worth of school repairs standing ready for a contractor. If the money is in the bill, those contractors will have jobs. If it's not, they won't. Under which circumstances will their jobs be "real"?
Is there a demand for our soldiers to fight in Afghanistan? Are their jobs "real"? Is there a demand for park rangers to staff and maintain our national parks? Are their jobs "real"? Is there a demand for teachers, firefighters, policemen? Who decides whether there is such a demand? Who decides to buy these things? How can we tell whether there is such a demand? Think about it real hard.
Who are the bright people saying the Repubs have nothing to lose by going against the most popular President in most of the younger generations lifetimes? The President who has had more media support than any in memory?
Republicans have a lot to lose by being against this bill.
If they pass the stimuls, and the economy starts to come out of the recession the day the bill is signed, and has absolutely nothing to do with the stimulus bill, then the Democrats and whoever voted will get credit. No one will think to look at the facts that the economy was going to recover anyway (hopefully, I'm presenting a hypothetical).
I think there is just as much possibility that the Democrats are trying to cram this down our throat precisely because the CBO says the US will come out of the recession soon with or without the "stimulus" bill. So they better pass it soon, because then they get to take credit. And if the stimulus makes things worse? Well we'll never know.
"The House version of the stimulus bill contains millions of dollars to keep Maine roadworkers on the job. If that money is in there, they will have jobs, and will fix the roads. If that money is not there, they will not have jobs, and will not fix the roads. Under which circumstance will their jobs be "real"?"
If the value of the roads they are producing is less than the wealth it takes to build them. Lets say we spend a billion dollars to build a road to a village in a remote corner of Maine. Because the road is a more direct route, the existence of that road saves say $100,000 a year in transportation costs for the people of the village and businesses who sell to them. Now if in this environment the present value of money is say 2%, that means that that billion dollar investment has to produce at least two percent of its value every year to be justified. Remember, you have an opportunity cost. You could spend the money elsewhere but chose not to do that and spend it on the road. That means that the road has to produce at least $20 million in transportation value every year to pay for itself. If it doesn't, then you have wasted resources. It is literally a road to nowhere and it would have been cheaper to just give the workers who built welfare and saved on the concrete.
"The House version of the stimulus bill contains tens of billions of dollars for shovel-ready school repair jobs. Those funds were cut from the Senate version. There is a decade-long backlog of school repairs in the US; in New York City alone there are 1 billion dollars worth of school repairs standing ready for a contractor. If the money is in the bill, those contractors will have jobs. If it's not, they won't. Under which circumstances will their jobs be "real"?
The devil here is in the facts. Do we really need those repairs? How many of them are needed or just gold plating schools? There is no evidence whatsoever that infrastructure spending on schools produces better education. For example, Kansas City, Missouri spent billions on infrastructure for schools and had no education improvement to show for it. If those "shovel ready projects" whatever that is, don't produce better education or something of more value than what it took to do them, then no they are not real jobs. I mean hell, why not build paramids or gothic cathedrals? Aren't those projects shovel ready to? Yet, unless the old church or the Egpytian religous system comes back, it is difficult to see how we would be better off after we built them. That is the point. You have to build something of value or you are just wasting your time and resources.
"... is instead much worse, because Democrats ..."
Fixed it for ya!
Democrats control the White House, the House of Representatives (by 255-178) and the Senate (by 58-1-1).
The days when you can blame Republicans for bad legislation coming out of Washington are over. Yes, this has become an addiction among Democrats and the left since 2000 or so, but get over it. Everything is on the Democrats now.
When bad legislation comes out of our capital today it is because either the Democrats want bad legislation, or because they are incompetent. Take your choice.
There is no other option. (Though, of course, one can choose both. They are not mutually exclusive.)
Democrats control the White House, the House of Representatives (by 255-178) and the Senate (by 58-1-1)....
OK, by not quite 58-1-1, more like 58-41-1. But one can see the point.
On a semi-related note (things not working right in these comments), is that check box for "remember personal info?" there just to taunt people? I've checked it a hundred gazillion times and it's never worked once.
Furhter Matt you are kidding yourself if you think there is anything such thing as a shovel ready infrastructure project. Unless Congress is willing to waive NEPA, nothing the feds do is ever shovel ready. While Democrats in Congress is saying that they are going build all of these roads and schools, the Sierra Club and every old lady in tennis shoe organization is readying to sue to stop them. Even if the infrastructure construction is needed and worth doing, it won't get built in time to do any good in this recession.
John, you don't get the point about the lemonade business because you don't understand the difference between a job and a business. A business owner accepts risk. There is no way to know in advance whether or not there is a market for the lemonade; it depends on who passes by and on the whims of the customers. The worker, in contrast, had a job. Her job was to produce lemonade, and she did it and was paid for it. There is no difference between the job of a worker at a business that turns out to be profitable and the job of a worker at a business that turns out not to be profitable. The bankers who have lost their jobs on Wall St. over the past year all really did have jobs before they were laid off. They weren't fake jobs. They were real. You're creating a metaphysics of job "reality" that doesn't have any meaning. If you want to say that the jobs being created do not produce as much in value as they cost, go ahead and say that.
But in any case you then run up against the main point, which is that the spending that's in the stimulus has two different aims. The first and most immediate aim is to prevent unemployment from falling too far and to keep the velocity of money in the economy up, because we're in a liquidity trap and risking a deflationary spiral. From that point of view there is absolutely no point worrying about whether or not the work you're creating has a greater value than its cost -- the point is to keep the money circulating. It's like plasma; it doesn't have to have nutritional content, you're using it for emergency purposes to keep the arteries from collapsing.
Seconly, the vast majority of the spending that was in the original House bill was in fact productive spending. That included aid to states to keep their day to day normal functions from collapsing (I can't understand how you can claim this is an "expansion of government" when all it's doing is preventing the collapse of normal services), school repairs, transportation spending etc.
Thirdly, you don't seem to be making the distinction, normal in economics, between the "private" value of a good -- the amount a private consumer will pay for it at the moment -- and the "social" value of that good. For many kinds of goods -- universal primary education, highways, national parks, et al -- the social value is higher than the private value. And these are precisely the kinds of goods on which the stimulus will be spent.
And finally, one thing you ought to know about Russia, since you seem to have paid so much attention to it, is that when the Communist system collapsed, it wasn't just the thoroughly unproductive jobs that disappeared. All the jobs disappeared. Not only could you no longer make a buck at a redundant steel plant, you could also no longer make a buck selling sandwiches out of a kiosk -- a perfectly profitable activity the week before -- because none of the steelworkers could afford to buy a sandwich anymore. That is the kind of crash we are contemplating here in the US, where productive jobs are annihilated along with unproductive ones because of a self-reinforcing contraction of the entire economic system.
"OK, by not quite 58-1-1, more like 58-41-1. But one can see the point."
Which means they don't control it at all. Because as you well know Republicans are willing and able to vote in lockstep to prevent anything at all from happening. Thus the only bills that get passed, at all, are ones that are appealing for Specter and Snowe. This means everything gets watered down to that point regardless of where it started at.
I'd be perfectly willing to get rid of the filibuster though, in exchange for recognition that Democrats now have carte blanche to do what they think is best for the country and get judged on it in future elections. Deal?
Matt,
You don't get it and I am not sure you have the capacity to get it. It is your kind of simplistic thinking that gives us things like publicly funded sports stadiums. That "stimulus" money has to come from somewhere. We can't just print it up. Every dollar that is spent on "stimulus" is a dollar that isn't spent somewhere else. That is why it is so important that money be spent in the most productive manner. Generally, governments are very bad at determining that. Further, once you get passed the basic functions of law enforcement, national defense, and a properly functioning legal system, the marginally value of government spending starts declining.
Essentially, you are argueing that the government prints its own money and that any money spent by the government is a bonus to the economy no matter where it is spent. Sadly, that is not true. Every dollar the government spends is one less dollar the private sector spends. It only makes sense for the government to spend it, if doing so produces more value than what the private sector spending it would produce. By your logic, the sollution to our economic problems is to just build paramids or dig ditches and fill them back up again. In both schemes millions of people would have jobs and by your definition they would be real jobs. Why not just take the money and pay people large salaries to dig ditches or build walls that are not needed? Wouldn't that work by your logic?
Krugman has long since left behind pure economics, his best work being done in the late 70's early 80's and moved on to a partisan political hack who uses "economics" to support his political views. His stridency depends on who is President. What is certain is there is no government to large for his tastes. The welfare state his highest ideal.
As usual, his chief complaint with this welfare stimulus is that it is not large enough. If this bill were doubled he would shut up. It's almost worth it!
"Every dollar the government spends is one less dollar the private sector spends."
Then why did the private sector buy the treasury bond to fund the project? Maybe I'm slow, but thats the part I don't get.
"Thirdly, you don't seem to be making the distinction, normal in economics, between the "private" value of a good -- the amount a private consumer will pay for it at the moment -- and the "social" value of that good. For many kinds of goods -- universal primary education, highways, national parks, et al -- the social value is higher than the private value. And these are precisely the kinds of goods on which the stimulus will be spent."
Why because you say so? That is fucking comical. You have to be kidding. Well, I think the social value of building a series of gothic cathedrals all over America is greater than the cost to build them. People would inspired by these buildings to pursue a religous life and renounce their evil ways. So, lets build cathedrals. It makes about as much sense as what you are advocating.
Matt,
I am quite sure we are not on the verge of a collapse where all the productive jobs are annihilated along with the unproductive ones. It would seem you are suggesting and promoting INefficiencies as a positive thing because at least those inefficient jobs have workers who can buy things.
What you are clearly forgetting is the money just doesn't grow on the tries. In order to pay those workers to "do anything" in order to get a job so they can buy a sandwich, you are taxing everyone else more and reducing the investment that PRODUCTIVE people can make to create jobs that add value and are lasting.
Now, the benefit of the stimulus, as I see it, is that supposedly we will be able to borrow a lot of money now, and pay it back over a small amount in the long run. So that money gets injected and spent now. Money now is better than money later. And the US can borrow money cheaply.
This seems to ignore the fact that the US has for quite sometime now been doing nothing but borrowing money and "stimulusing" the economy. And here we still are.
So once this stimulus wears off, and these unproductive jobs are gone, where will the workers go?
Will we need another stimulus?
At what point will we pay off the stimulus we are going to take now? Actually, forget that question, at what point are we going to pay of the stimulus we had last year? And the year before and the year before, and so on for the last 15 years?
You seem to argue that we haven't been following your prescription all along. We have been stimulusing. We aren't doing a thing to pay back the last couple decades worth of borrowing.
What person seeks out loans to pay of the interest on their loans? What kind of person suggests its not only good policy, but the BEST policy to get a loan to pay off the interest on the interest on the interest of a loan?
"Every dollar the government spends is one less dollar the private sector spends."
Then why did the private sector buy the treasury bond to fund the project? Maybe I'm slow, but thats the part I don't get."
Because the government gaurenteed them a return on the investment with future tax dollars. That says nothing about the value of the project, it only says the government has the coercive ability to tax and use that ability for its credit rating. The federal government at least could sell bonds to build nearly anything. The fact that the bonds sell doesn't mean that the project isn't a waste of money. In addition, every dollar spent on those bonds is a dollar less that could have been invested in the private sector. There are no free lunches.
John,
To be quite honest, building huge towering gothic cathedrals or other massive projects of the like would be preferable to what is proposed. If the democrats had some vision they would be suggesting this. Instead they are suggesting we fill in some pot holes.
I am pretty sure the Bavarians are glad their crazy King Ludwig spent a fortune on extravagant palaces a 150 years ago. Or the massive imperial buildings of the Habsburgs.
These tourist attractions will bring in hundreds of millions of dollars to the economies of their respective nations for as long as civilization continues. No one will ever grow tired of looking at stunning cathedrals or massive castles, fortresses, and palaces.
So if we're going to waste all this money, let's have something really big and impressive to show for it!
"In addition, every dollar spent on those bonds is a dollar less that could have been invested in the private sector."
The private sector had that choice, they chose government bonds. What does that tell you about the quality of the projects in the private sector?
That is a good point Sam. For the kind of money they are talking about, we could build cathedrals and go to Mars. Why not bring back the big boldly go where no man has gone before space program? It would stimulate the economy by these people's logic and it would be pretty cool to. Sounds a lot better than billions for ACORN. -
"The private sector had that choice, they chose government bonds. What does that tell you about the quality of the projects in the private sector? "
It doesnt' say anything. Because the government has the ability to tax, it can gaurentee a return on the bonds and gaurentee that its bills are paid. The fact that people are willing to buy bonds only speaks to the coercive ability of the government to get money. It says nothing of the value of what it does with the money. If Bank of America could force people buy law to give them money (insert TARP joke here), their credity rating would be pretty damn good even if they were wasting all the money they got. Since the private sector can't force people to give them money via taxes, their projects have an element of risk government bonds don't.
I am pretty sure the Bavarians are glad their crazy King Ludwig spent a fortune on extravagant palaces a 150 years ago.
Several of them are unfinished because he couldn't get parliament to vote him the funds. If only the Democrats had been in charge...
"The fact that people are willing to buy bonds only speaks to the coercive ability of the government to get money." I think it speaks to the levels of fear and risk-aversion out there. Private investors are handing their money to the government for a minimal return because the other potential investments simply aren't worth the additional risk. As long as this continues, the economy will contract and job losses will continue to pile up. For those of you against the stimulus, what is your threshold?
Adam,
I assume you blame the Democrats for NCLB, Medicare part-D, Iraq and Afghanistan as well as all of the spending from 2001 - 2006?
If that's the case, why'd we bother to switch the majorities in both chambers and why was that seen as important?
John (1:15): "The worst forms of argument are appealing to authority and attacking the messenger."
You mean, like W's administration and their shills screaming "UNPATRIOTIC SCUM!!!" at anybody who dared to question their very questionable acts and policies?
Unlike the screamers above, I am basing my judgment on eight years of recent history:
- "Businesses will regulate themselves" - we saw that is exactly what did NOT happen. By the way, anybody who believes businesses will regulate themselves absolutely, feel free to buy an eat as many peanut related products as you can. But please do not feed them to your kids - they have enough trouble having to grow up under your "wisdom" and "guidance".
- "Would we lie to you?" - Yes, and frequently... Such as "we don't spy on citizens", "anybody in this administration who had anything to do with outing a spy will be dismissed", and the big one - "there are WMD in Iraq".
I'll stop at 2 sets of examples, but hopefully you get the idea...
So, if I discount the theories put forth by supporters of W's administration, I have a darn good reason.
So if we're going to waste all this money, let's have something really big and impressive to show for it!
THE. SPACE. ELEVATOR.
TW: And if I discount the theories put forth by anyone left of me, I have a darn good reason too -- having lived in the late Soviet Union and all.
We do not share the same objective reality.
Tom Woolf,
I am sorry but you are an idiot. Think about what you are saying. You don't like Republicans. Okay. So that means you will support anything the Democrats support no matter how dumb it is? Again, that is just schoolyard juvinille logic. "They did it to" is not an argument.
"Businesses will regulate themselves" - we saw that is exactly what did NOT happen."
Who is saying that? Further, the mortgage industry is one the most regulated industries in the economy. Despite all of that regulation, it still went in the tank. Why is more regulation going to help? Moreover, we know that people like Chris Dodd and Barney Frank let Freddie and Fannie make irresponsible loans costing the tax payer hundreds of billions in order to make themselves and their buddies rich, where is assurance they won't do the same thing again after you give them even more power?
I thought that maybe winning an eleciton would sober the left up. But apparently I was naive in thinking that. Politics by temper tantrum rather than thought and argument seems to be too deeply engrained after the last 8 years.
I just want to thank Megan for "apocraphyl," the most useful misspelling I've seen in a long time. ("Hypocracy" is as nothing to it.)
I'm sorry - did the patron saint of glibertarians just suggest that its the Democrats who have to rethink their political philosophy?
Keep on partying like its 1994 guys....
"I think it speaks to the levels of fear and risk-aversion out there. Private investors are handing their money to the government for a minimal return because the other potential investments simply aren't worth the additional risk. As long as this continues, the economy will contract and job losses will continue to pile up. For those of you against the stimulus, what is your threshold?"
The only reason the government is credit worthy is because people pay taxes and there is an economy to produce such taxes. The fact that people are still willing to buy government bonds says that they have faith in the future of the economy. By your logic, in the best of times the government would not be able to borrow money. In fact the opposite is true, the government can always borrow money unless things get REALLY BAD.
"I'm sorry - did the patron saint of glibertarians just suggest that its the Democrats who have to rethink their political philosophy?
Keep on partying like its 1994 guys...."
Mike why don't you just save time and write "Na Na Na". It would be easier to type and be just as mature and be just as persuasive as what you actually did write.
John, I'll say it for Mike:
Na Na Na.
(BTW, Will and MMc have arguments that are no more valid and no less shrill than those of Krugman and Keynes. The difference is that the latter two have textbooks and Nobels.)
"By your logic, in the best of times the government would not be able to borrow money." Not necessarily, just questioning your logic that every dollar of government spending is one less dollar of private spending. If private investment is funding government spending, the government is not crowding private investment. It has chosen to go to the government, not the private sector. Now, if you are talking future tax dollars, thats a different story.
Tony,
I take issue with anyone who says that Keynes would have supported this monstrosity. Further, while Krugman may have a Nobel (which sadly means less that it should) even he in his more honest moments will admit the limits of macroeconomic theory. In one of his books he compared the state of macro-economic theory to that of medicine in the early 1800s. Doctors by then had figured out not to do things like blood let that killed the patient faster but had no idea how to cure anyone. Krugman said economists were the same way. They knew to avoid things like hyper inflation, protectionism and national appropriation of large amounts of private property but really had no idea how to cure a sick economy.
Now a mere 20 years later, Krugman is so sure of the macro-economic models, he is screaming for the government to spend trillions of ours and our children's money on them. I don't beleive for a moment that Krugman thinks this piece of garbage will do anything for the economy. He is too smart for that. What I do believe is that he has an idea of what a just society should be and he thinks that this bill will get us there. He is just lending his nobel and speaking a bunch of economic mumbo jumbo in hopes of getting us boobs to buy into the society he wants. What he is saying or advocating has nothing to do with fixing the economy and everything to do with Krugman wanting to fix the society.
RG,
Unless the government can magically create its own money without debasing its currency, all the money it spends has to come from somewhere. That somewhere is in forgone private consumption. Every tank and school we build is one less car or airplane or regigerator. There is no way around that. Goverments don't create wealth, they only redistribute it or, through roads or LE or education, create the conditions for other people to create wealth.
"That somewhere is in forgone private consumption. Every tank and school we build is one less car or airplane or regigerator." It takes two to tango, the private sector agrees to forego current consumption to invest in government spending. The point is, no one is building cars or airplanes, so put those people to work fixing roads and bridges. Puts money in their pocket, it adds some social and maybe even economic value. Also allows them to spend on private sector goods, so demand does not collapse. The magic trick is doing it right.
"The point is, no one is building cars or airplanes, so put those people to work fixing roads and bridges"
By that logic why not a space elevator or gothic cathedral or a trip to Mars? If the whole point is to just put money in people's pockets, wouldn't virtually anything work? Sadly, it is not that simple.
No, it isn't that simple. By most reports I've seen, our infrastructure is sadly outdated. So it stands to reason that by upgrading the roads, bridges, water and sewer lines, etc. we can squeeze some value out of this spending, while creating jobs and priming demand. Since you can't spend $800 bil quickly, it makes sense to throw in tax cuts and extending unemployment benefits.
RG,
If this were actually a long term infrastructure investment program, you would have a point. But there is a whole lot in there that doesn't fit that description.
W. Wilkinson:
The economists can duke it out over the possibility of successful fiscal stimulus. But is there any reason based in up-to-date economic theory to believe that this trillion dollar deficit-spending bill is not, as Barro says, garbage?"
What a laugh! Take a look at the collapse of the banks, jackass. There is NO up-to date economic theory that hasn't been shredded by recent reality.
R. Douhat:
"This means that if the damn thing doesn't work, we won't even know whom to blame. But it wouldn't be crazy to start by blaming the centrists."
Apply that line of reasoning to the recent bank bailouts - or better yet, the invasion of Iraq.
Finally, Ms. McArdle:
"And if the stimulus package were really as 100% guaranteed to make America better off as its proponents claim, you can bet that sensible Republicans would be falling all over themselves to get on board."
In life there are NO guarantees. It's kitchen sink time princess. Next up: human sacrifices.
Republicans aren't going to 'fall over themselves' for Obama. This is politics. You throw poop at the party in power and hope some of it sticks and you NEVER appear to compromise. It doesn't make them devils but it doesn't mean you should take their arguments against the stimulus package with more than a grain of salt.
The "infrastructure" argument is the chicken littles meshing with the graft-givers. A bridge goes out in MN, and all of a sudden Amtrak, the crappy railroad that can't run on tiem and never turns a profit, needs $100 million for managment training and "improved rail service"?
I call b.s. When a detailed report comes out showing my exactly which roads and bridges are fall apart---and I am on them a lot, and haven't seen one inkling of this----then we can talk.
But The Messiah has none of those things. He only states ridiculously untrue thing, such as that if his magical stimulous bill isn't passed, the economy may never recover. Patently false. Scaremongring.
Obama is not my president.
I am embarassed to be an American because of him.
"It doesn't make them devils but it doesn't mean you should take their arguments against the stimulus package with more than a grain of salt."
But of course we should take the Democrats' argument for the stiumulus as the Gospel truth. The fact that no one knows what to do certainly means we can't make anything worse right? I mean there couldn't be a downside to borrowing trillions of dollars could there? Anything has to be better than nothing, because no economy ever recovered on its own.
Who is this "JOHN," and why doesn't he have a "JOB"???
Megan - your ideas are attracting the likes of "Basic Fact", whom one can only assume was burning some sort of cross while writing this post.
You must be so proud. Clearly the best and the brightest are hearing your clarion call for a new political philosophy.
Let's see if we can't get him that "detailed report showing my exactly which roads and bridges are fall apart". He's on those roads (all of them one can only assume) every day and his trained engineering eye can't see any need for repair.
Yes Mike how dare some peasent like Basic Fact ask where his tax money is to be spent. Obama, Pelosi and our betters have said this spending is needed. That should be enough. Maybe we should ship some of these people off to camps or something.
Mike M:
"whom one can only assume was burning some sort of cross while writing this post."
--don't you just love liberal logic? Disagreeing with a liberal=Klan member. Meanwhile, they elect the black supremacist. Mind-boggling hypocrisy.
"He's on those roads (all of them one can only assume) every day and his trained engineering eye can't see any need for repair."
---Since there is no anecdotal evidence, you need statistics. In fact, even with anecdotal evidence, little man, you need statistics. Facts, not your opinion, support action.
"Maybe we should ship some of these people off to camps or something."
--Obama is already thinking of this. We need to be re-educated, anyway, according to all left-wingers.
Obama the liar: http://www.cato.org/special/stimulus09/cato_stimulus.pdf
But don't tell a liberal that; they love the kool-aid.
Obama is not my president.
I am embarassed to be an American because of him.
No - let's let the ill informed run things, that's an even better idea. I mean what's the worst that could happen?
Oh yeah right, we already tried that. I was raised to be ashamed of my ignorance and to constantly strive to do something about it. Clearly others were not.
If anybody has a rational argument to make as to why this stimulus is a bad idea, they should made it. Whining because a nobel prize winner in economics doesn't support your zombie like chant of "tax cuts" in the face of any and all problems doesn't cut it. At some point you're going to have to come to grips with the facts that
1. We tried your ideas and they've been disproven. REPEATEDLY
2. We had an election where we quite loudly proclaimed we wanted to try SOMETHING ELSE.
So yeah if you have a viable alternative to a spending bill that doesn't involve shoving tax cuts for the rich down our throats let us have it. Otherwise, STFU and let the grownups try and clean up your mess.
"Meanwhile, they elect the black supremacist"
Hey Lord Dorwin - you want to get behind this? Be my guest guy...LOL
I positively enjoy seeing 20-something puppies call themselves "grownups". Been there, done that...
The rational argument against the "stimulus" is rather simple -- I am against letting a bunch of politicians borrow and spend over 10 grand on behalf of my family without any benefit to the said family whatsoever. This sentiment appears to be shared by over 50% of this country's population.
Keep on partying like its 1994 guys...."
Go ahead and cram this abomination down the throat of every taxpayer. It will be 1994 again.
"This sentiment appears to be shared by over 50% of this country's population."
http://washingtonindependent.com/29467/barack-obama-still-popular
Don't you guys ever get tired of being wrong? Does the shame of it ever sting to the point where you say to yourself "you know NEXT time I'm going to know what I'm talking about before I express an opinion". I mean EVER?
IIRC something like about 5.28% of the original bill that came out of the House actually went for infrastructure construction and maintenance. Even if we assumed that all of it really was going for roads and bridges that were ready to fall apart, that’s still more than 94% of the bill that has nothing to do with infrastructure.
BTW: the 35W bridge fell because of a design flaw not from lack of maintenance. Considering how my own State has had plenty of money to waste on vanity projects like sports stadiums and LRT (and Minnesota is supposed to be one of those States with a reputation for good government), I’m not impressed with arguments that try to use the 35W bridge collapse as (yet) another justification for another explosion in federal spending. I would prefer it if instead the federal government quit subsidizing this mismanagement of our federal tax dollars instead of adding to the problem by bailing out the States in the lean years that wasted taxpayer dollars in the fat years.
Oh and Obama is the President but I don’t support him or his agenda because it’s harmful to the country that I love. I’m never embarrassed to call myself an American if only because the alternatives are so much worse. ;)
Mike M,
Just because BO still has favorable ratings doesn't mean the stimulus bill is popular. Read the polls
http://www.rasmussenreports.com/public_content/business/economic_stimulus_package/support_for_stimulus_package_falls_to_37
Don't you people ever get tired of being stupid? I mean like ever? I guess the question answers itself since if you were smart enough to know how dumb you are, you wouldn't be stupid anymore.
IIRC something like about 5.28% of the original bill that came out of the House actually went for infrastructure construction and maintenance.
Yeah, the Democrats have been talking out of both sides of their mouths on infrastructure. The problem is if you're really trying to do "stimulus" large transportation projects are a terrible option because it's years and years before the bulk of the money gets spent.
But it sounds good when you say "new money for infrastructure".
News flash liberals:
We do not live in a parlimentary democracy. Approval ratings mean jack until November 2012.
try arguing the facts....oh wait you're liberals. reminds me of that old saw:
If the law is against you, argue the facts.
If the facts are against you....become a liberal, then the facts don't matter.
Obama is not my president.
I am embarassed to be an American because of him.
http://www.gallup.com/poll/114202/Obama-Upper-Hand-Stimulus-Fight.aspx
Yes read the polls. Please. In fact, feel free to even read more of the link I attached earlier other than the title. May I be so bold as to suggest you do whole lot of reading in general prior to calling anybody else "stupid" in the future? It'll keep you from looking like the prize fool again.
The country backs this stimulus plan. They back Obama and his handling of the stimulus plan. They think your ideas (if you can call complaining and chanting tax cuts an "idea) have no merit. You've lost the trust of the American people.
"You've lost the trust of the American people."
You mean dissent isn't the highest form of patriotism anymore? We can go poll for poll all you want. But ultimately, it is just another appeal to authority. Do you honestly believe that even if it were popular, which it is not, that that would automatically mean it is a good idea? Again, don't you people ever get tired of being stupid?
What are you dissenting against? Helping the country get back on its feet? Good luck selling that.
Or are you just complaining because your "team" isn't in power anymore? We have real world problems to solve. And the Gallup poll was taken this morning. People want this stimulus package and thankfully they're going to get it. You lost the American people the minute people started hearing from somebody besides Republicans 24/7 on the cable news.
Obama's mistake was assuming you guys would act like adults and try to come up with good ideas to get us out of this mess. I didn't think it would work either, but hey he tried.
What I perceive in the politics of the stimulus bill has less to do with partisanship than with a stare down between the U.S. Senate and the 50 state legislatures. The states are proposing to cut social safety net programs, for which the House bill provided additional funding. The Senate doesn't wish to make it easy for the states to hand over their programs for the poor to Congress. Watch to see if the aid to the states is passed later, after many state legislatures have adjourned. There may also be some sentiment to pass merely hoped for items now, knowing that essential items will be funded later.
I also want a unicorn.
I also want a unicorn.
You'll get one. Delivered horn-first.
I prefer it surprise me from behind, if you know what I mean. I am a liberal. Punishment/pain is good. Success is bad. Obama, bring me the kool-aid.
Mike M:
"Obama's mistake was assuming you guys would act like adults"
---was that before or after he stamped his foot and said, "but I won! You HAVE to do what I say?"
seriously, liberal, lol.
What I perceive in the politics of the stimulus bill has less to do with partisanship than with a stare down between the U.S. Senate and the 50 state legislatures.
I agree with this. When Californians voted for the famous "prop 13" cities weren't able to raise enough money to pay for all the unfunded mandates emanating from Sacramento. So the state legislature had to either relax some of those mandates or raise state taxes to make up for the shortfall.
Of course they raised taxes at the state level, just like the federal government will raise taxes to pay for all this eventually.
I am a liberal
So far you've demonstrated that you're a partisan Democrat. Your views on liberty remain unexamined.
Why is everybody knocking on Gothic cathedrals today?
why all the fuss over an old, old wooden ship?
There appears to be good news and bad news. The good news is that this is not a military situation. The bad news is that we are in the equivalent, politically, of being overrun.
What are you dissenting against? Helping the country get back on its feet?
Not exactly.
Many of us doubt that draping an extra $3-400 Billion a year in extra debt + interest on the taxpayers, in perpetuity, will actually HELP get the country get back on its feet. We worry it will weigh the country down and leave it on its back, especially when spending on Social Security and Medicare is about to explode.
The only country recently to try dealing with a financial sector meltdown using this method is Japan. And it didn't work there. Why expect it to work here? Nobody has any coherent explanation. So skepticism abounds.
Mike M: "1. We tried your ideas and they've been disproven. REPEATEDLY"
Agreed, 'borrow and wastefully spend' is a bad idea. After 8 years of big government waste, we don't need any more.
"2. We had an election where we quite loudly proclaimed we wanted to try SOMETHING ELSE."
You mean something like paying off our debts and not spending money we don't have?
2. We had an election where we quite loudly proclaimed we wanted to try SOMETHING ELSE.
Perhaps you consider adding another zero to the end of the yearly deficit "SOMETHING ELSE"; I don't don't.
Maybe people would take your hand wringing about deficit spending had any of you asshats ben at the forefront of complaining about the deficits your Republican president was running up for the last eight years. You know BEFORE the depression he caused.
Now that we are where we are, you want to pretend you have principled objections to spending your precious tax dollars. What a pathetic charade. Especially in light of the fact that government spending is the only thing that will get us out of this right now. That's not an opinion, that's widely accepted economic theory.
So to recap - you took a budget surplus, turned it into a massive budget deficit while waging a disastrous war, bungling another war, shredding the constitution and bringing the world to its knees with economic chicanery and gimmicks produced by your precious unregulated market.
Yes, by all means. Let's continue to listen to YOUR principled objections. Clearly you know what you're talking about and are to be trusted.
That's not an opinion, that's widely accepted economic theory.
Talk about a distinction without a difference.
"You know BEFORE the depression he caused."
---you can always tell a liberal by the lies he tells and the panic he tries to cause with them.
"Especially in light of the fact that government spending is the only thing that will get us out of this right now. "
"That's not an opinion, that's widely accepted economic theory."
--Translation: Paul Krugman said so.
---100% wrong. But a liberal, know anything about economics?
the rest of your post is just the typcial liberal lies about Bush and the country. Ignore button now turned on.
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud of my country.
I think the soviet union was right.
also, where's my damn unicorn? Daily kos promised me one!
Basic Fact: I know the feeling. I'm embarrassed to be in the same country as you! Since it's just been demonstrated that there are more in my camp than in yours, you may wish to ponder your options.
I have Rich, trust me, I have. Don't worry, sugar, scum like you make me sure of my feelings.
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud of my country.
By that logic why not a space elevator or gothic cathedral or a trip to Mars? If the whole point is to just put money in people's pockets, wouldn't virtually anything work? - John
Yes. But the country doesn't really need a space elevator, a gothic cathedral or a trip to Mars, and those programs would take too long to get going. In contrast, the country really needs school repairs, bridge repairs, and a myriad of normal state services (buses, etc.) that will be cut unless the Fed Gov provides tens of billions in immediate aid to states.
"In contrast, the country really needs school repairs, bridge repairs, and a myriad of normal state services (buses, etc.) that will be cut unless the Fed Gov provides tens of billions in immediate aid to states."
-----lmao. More chicken little b.s. without ANY PROOF. It's mind bogglingly hilarious how you panicked nutcases can say this crap with a straight face. The sky is falling!
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud of my country.
Finally, John, two points: under your reasoning, what government spending is NEVER justified? Unemployment insurance. It never "produces" anything worth more than the money that was put into it because it never produces anything. And yet we will be spending more and more on unemployment insurance as we spend less on public works.
Second, you absolutely refuse to address the concept of a liquidity trap. There are two reasons why you have to spend in order to avoid a liquidity trap. The first is that if you don't you will end up at an equilibrium of wealth and employment that is permanently lower than where you would otherwise have been. Russia ended up permanently poorer than it would otherwise have been because it went through economic chaos in the early '90s rather than a gradual transition to capitalism like China's. It has grown since, but it will never entirely make up for those lost years. We are spending now because if we don't spend, the abrupt drop in velocity threatens to destroy too much of our productive capacity. What you have to address is the argument made by essentially every respected economist in the world that the circulation of money right now will create productivity in and of itself by keeping the economy from needless destruction. In other words the spending creates value in and of itself at this moment. That's true not always true; it wasn't true three years ago that massive government stimulus would automatically create value even if it was just building a space elevator. But AT THE MOMENT, in these conditions, it is true.
Matt Steinglass:
"What you have to address is the argument made by essentially every respected economist in the world that the circulation of money right now will create productivity in and of itself by keeping the economy from needless destruction. In other words the spending creates value in and of itself at this moment."
----100% not true.
http://www.cato.org/special/stimulus09/cato_stimulus.pdf
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud of my country.
Matt, when you try to appeal to authority, try at least to find a consensus that actually exists, not one you hope is right.
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud of my country.
I know Megan is desperate to get reputable people to help her against Professor Krugman, but who cares what Robert Barro thinks anymore? This last administration followed his ilk and look how great that turned out.
Unless the government can magically create its own money without debasing its currency, all the money it spends has to come from somewhere. That somewhere is in forgone private consumption. - John
False. If the government borrows money by issuing debt at a moment when the rate of investment is extremely low, and the government spends that money and then rapidly returns it to the person who lent it, then the resulting net private consumption will be higher than it would have been if the government did not borrow and spend the money.
Similarly, if private sector investment has a high tendency for whatever momentary structural reasons to go towards non-productive speculative assets (precious metals, Ponzi schemes), whereas government investment is generally being spent on goods with higher multipliers (schoolteacher salaries, mass transit), then there will be greater private consumption even in the short term. And if the government-purchased goods are wiser investments than the private ones, because they are of the kind which tend to have higher social value than private value (public education, mass transit), then private consumption will be higher in the long term as well.
It is of course possible for the government to suck money out of the private sector and spend it in ways that reduce private consumption. But it would be hard to do that at the moment, when private consumption is falling incredibly fast and savings investment in T-bills is rising; almost anything the government borrows private savings to spend on will raise private consumption under current conditions.
Obama is not my president.
Legally, that's false. Socially, it's just an incredibly annoying and obnoxious thing to say.
Who cares what Krugman thinks anymore? I don't need to bother reading Krugman to know what he thinks: I can always go to the DNC web page.
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud of my country.
I am NOT a racist - I have tasted the rainbow nation of penises - but he is NOT my President.
I am NOT a racist - I have tasted the rainbow nation of penises
Um, nobody actually mentioned anything about racism, but sudden out-of-nowhere bragging about how many people of color you've had sex with tends to make people think you've got a problem in that area, rather than the reverse.
Matt Steinglass:
Legally, that's false. Socially, it's just an incredibly annoying and obnoxious thing to say."
--Since for the last 8 years liberals have built their entire party and majority around it, turnabout is fair play, bitch boy. Don't like it? Should have kicked these crap heads out of your party and acted like civilized people.
Too late for that now. It's war now, boy. You guys stated all of the above for 8 years and never stopped it.
I repeat, hypocrite:
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud of my country.
Matt,
What, because I'm not a liberal pretending to love every race, doesn't mean I can't fuck every race.
Now who is prejudiced. Cum tastes the same, whatever the color cock it shoots from.
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud of my country.
I don't know many liberals who are proud of Krugman's tone these days, but honestly, Megan the man has distorted your ability to see things clearly. You may not like his tone but you CANNOT deny that 75% of mainstream economists say a stimulus is needed yesterday. Smart, honest conservatives such as Glenn Hubbard, Martin Feldstein, even Mankiw say that the circumstances warrant a stimulus. Yes, for traditionally politial economy reasons, fiscal policy sucks BUT the question is relative to what? Right now, the alternative of doing nothing is even worse. Yet libertarians like you and Will hide behind the pathetic group of ideological ignoramuses that are politicians, rather than urge Republicans to come up with smart counter proposals to the stimulus as Feldstein and Mankiw tried to do. I don't like Krugman's tone, but I understand why he goes crazy when you have supposedly first-rate economists and finance academics making incredibly bogus theoretical claims to cover for their own ideological beliefs. Robert Barro being the perfect example. He is just as ideological as Krugman is about government, but you quote him as if he is some independent middle of the road source of wisdom.
Megan, take a break and start afresh.
Chris:
"You may not like his tone but you CANNOT deny that 75% of mainstream economists say a stimulus is needed yesterday. "
---Wrong: http://www.cato.org/special/stimulus09/cato_stimulus.pdf
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud of my country.
I just love the feeling of a large cock slowly pushing up my rectum.
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud of my country.
It appears Megan may have to revisit her carefree attitude re: posting about Starbucks. Talking about oral pleasures seems to have unleashed an unexpected flood of personal disclosures. OTOH, 'Obama is not my president' metaphoricaly suggests what a lot of people are probably feeling, that 'the partisan divide has hardly been bridged.'
Matt: "Um, nobody actually mentioned anything about racism, but sudden out-of-nowhere bragging about how many people of color you've had sex with tends to make people think you've got a problem in that area, rather than the reverse."
Matt, I think he was actually using criticism of Obama as an excuse to bring up all the multicultural gay sex he's had. Like most guys, he is proud of his conquests.
While we are on the topic, I banged a hot indian girl and fencer girl (lunges are great for the thighs) this month.
Megan and the folks she's quoting get at some insightful truths about Paul Krugman of the New York Times and why I tend to find him almost universally annoying (even when I'm agreeing with him).
Then at the end there's this:
"And if the stimulus package were really as 100% guaranteed to make America better off as its proponents claim, you can bet that sensible Republicans would be falling all over themselves to get on board."
But where did that standard come from? No one that I've read is claiming that this is 100% guaranteed to work. This crisis is so big and messy that we're definitely in the land of "more likely than not to work." What are the odds it will work? Even many supporters will admit that it could be 80/20, 70/30 or even 60/40 in favor. Megan's essential argument over the last couple of weeks seems to be that if we're in the range of 60/40 (and maybe even 70/30), it's just not worth it, given the potential long-term harm to the economy. (She probably also thinks the odds are more like 40/60 or 30/70.) These are principled policy positions based on her view of the facts.
I suspect a lot of Republican politicians are taking just this same principled stance. I also suspect that at least some are looking at this as a political calculation. Given the middling odds, they're thinking that there's the potential to win big in Congress in two years if it doesn't look like this thing is working. They also know that there's a higher chance that the situation will be sufficiently murky in two years that Republicans will be able to argue that the stimulus (that they heroically opposed) has failed. Perception is king, and the key question will be whether the American people think the stimulus is working when the next elections roll around.
These are the policy and political calculations people are making, but let's not pretend that anyone is working from 100% probabilities here.
http://eclecticdialectics.blogspot.com/2009/02/100-guaranteed-to-make-america-better.html
And if the stimulus package were really as 100% guaranteed to make America better off as its proponents claim, you can bet that sensible Republicans would be falling all over themselves to get on board.
a. No one -- NO ONE -- has suggested anything like a 100% expected success rate. This is all predicated on the background likelihood of a bad outcome. How bad is the question. If you want to make the case for doing nothing or doing something radically different than what is proposed, great -- and totally democratically necessary. But it negates your good-faith presumption to make the case by advancing false claims about the position of those you a critiquing.
b. Megan proposes a wager about Republican motivation. If she's willing to take the side she suggests we take -- that Republicans would support Obama's bill if it were a certainty that it would work, then I would love to take the opposite. Unfortunately it is not determinable since the predicate -- certainty about stimulus efficacy -- does not exist (see a. above). Based on a previous post I thought Megan understood the Republican's tactics here, but I guess not. If the stimulus was a sure bet for bringing us out of the recession, Republicans would be doing exactly what they are doing now: raising doubts about that proposition and attempting to hobble its effectiveness in order to inflict short-term damage and deny a long-term victory to the new president, regardless of the real consequences for the country. None of which is inconsistent with the party's recently re-discovered fiscal principles, mind you. Apparently Megan is as dubious about their true fealty to those as I am, since she charges that if only a $900B stimulus package pushed by a Democratic White House to lift the country out of a serious recession could be counted on to work, then Republicans would be all about it. Never mind that it would be the president's plan that worked, and Republicans would be deemed irrelevant at best. No, if only the stimulus as proposed by Obama was a sure thing, take it from Megan, the Republicans would be there with him in patriotic unity.
For the record, I am a stimulus supporter, and I have always thought that the best possible stimulus had about a 40% chance of working. What Obama proposed, 30%, and what passed the Senate, 25%.
If you believe that the opposition must be actively working in bad faith to harm the country, shouldn't you support more direct methods against them?
"Matt: "Um, nobody actually mentioned anything about racism, but sudden out-of-nowhere bragging about how many people of color you've had sex with tends to make people think you've got a problem in that area, rather than the reverse."
Matt, I think he was actually using criticism of Obama as an excuse to bring up all the multicultural gay sex he's had. Like most guys, he is proud of his conquests.
While we are on the topic, I banged a hot indian girl and fencer girl (lunges are great for the thighs) this month.
Posted by Ninja Zombie | February 9, 2009 10:12 PM "
Apparently you all haven't been following the discussion since MikeM wrote "Megan - your ideas are attracting the likes of "Basic Fact", whom one can only assume was burning some sort of cross while writing this post."
At least partly in response to Basic Fact's pointing out that Obama is a black racist. If you don't believe that maybe you should read what Obama himself wrote in "Dreams from My Father: A Story of Race and Inheritance". Also he attended an extremely anti-white church for decades, donating them loads of money.
Odd choice of post name...were you trying to see if anyone would catch the reference to "Triumph of the Will", Leni Riefenstahl's Nazi propaganda film? Or were just unaware?
-e
AT,
I'd like to respond, but I don't think I understand your point. Can you restate the question?
Matt, I think he was actually using criticism of Obama as an excuse to bring up all the multicultural gay sex he's had. Like most guys, he is proud of his conquests.
If only Basic Fact was so subtle. No, the purported posts about gay sex were almost certainly made by an imposter pretending to be Basic Fact. Said posts, I suspect, were almost certainly made in response to Basic Fact's impersonation of Mike M. What goes around, comes around.
Late to this, so someone may have already referred to Clive Crook's FT column ("Politics is damaging the credibility of economics"), but if not, here are the relevant excerpts:
"John, you don't get the point about the lemonade business because you don't understand the difference between a job and a business. A business owner accepts risk."
Any worker with half a brain realizes that there is no such thing as a 100% secure job - you accept a certain degree of risk. A lot of people are finding this out right now the hard way.
I'm going to ignore most of these threads, because I'm blushing. But Matt Steinglass, I think your argument about jobs is technically right, but substantively wrong.
John is getting at a real problem in calculating unemployment figures: the problem of countries that create make-work to lower that number. They stick people in training programs that go nowhere, or put them in temporary jobs programs. This does not in fact reduce real unemployment, which we might define as the number of surplus workers in the economy. Those workers are still surplus--no one in the economy wants to employ them to do what they are doing for the wage they are drawing. They've just been artfully recategorized. Some argue that if you take these kinds of programs out of Sweden's figures, for example, the real unemployment rate is more like 20%.
A "real" job is not one that creates a profit; it is a job that someone would voluntarily pay you to do--i.e., a job that was not primarily created for the purpose of giving you a job. "People need jobs" is not a good reason to build a bridge; "People need bridges" is a good reason to build a bridge. Most advocates of the stimulus probably want to build bridges because they think that people need bridges, but the public justification for the bridge--and particularly, the speed and size of the spending--is "people need jobs". That is worrying.
Megan, maybe make-work programs don't add value or truly reduce unemployment, but is anyone looking at the social value of having these people employed? Also, remember that the stimulus is farming this work out to the private sector, so the government won't be the employer.
What are the impacts on crimate rates, divorces, abandoned children, etc. if unemployment reaches a certain level? Especially in light of the fact that lots of cities and municipalities are cutting back on their budgets, which could effect police and fire staffing, prison levels.
As for the need for bridges, the ASCE just gave another poor grade to the nation's infrastructure. Maybe they are a biased source, but I haven't seen any counterarguments.
http://www.cnn.com/2009/US/01/28/infrastructure.report.card/index.html
Basic Factoid: "No, the purported posts about gay sex were almost certainly made by an imposter pretending to be Basic Fact."
This does, of course, assume that the original Basic Fact is not the sock puppet of some liberal trying to make conservatives look stupid.
Mike:
Why would the Republicans support anything at all Obama does? Even the freakin' Chamber of Commerce supports the stimulus, yet the Republicans fight the dyin' of the light. What does that tell you? It tells you that the Republicans hate the US and that you can't reason with them. Hell, Obama broke Negotiating 101 and threw them bones before having any guaranteed Republican votes.
Deleted by Krugman's blog moderator:
your comment is awaiting moderation.
Paul –
The problem with posts like this — as opposed to your (increasingly pertinent) wonkish posts and the occasional more or less neutral factual posts — is that it erodes your audience. Pointlessly. And at moments like this, the only relevant audience is the Congress on both sides of the aisle.
Your role in all this is to provide the best possible economic analysis. To clarify confusions. To interpose inconvenient facts. Etc. (If you want a different role, you should ask Obama for a job.)
Every time you post on this blog, you ought to ask yourself: If Keynes found himself in my position today (or Samuelson or Solow, etc.), what would they feel compelled to say. And what would he or they resist saying.
To put it some entirely different way: Posts like this cheapen the brand. Why play club basketball with Galbraith when you can play in some other better league?
Affectionately,
Old friend
The slander of "the past 8 years" of bad economic performance must be resisted. The Bush economy generated millions of good jobs and economic growth until the 2006 elections brought Comrades Pelosi and Reid to power. (Due to the war, not a bad economy) This change in Congress (and the promise to raise taxes) created economic uncertainty and led to the slide that we are now on. Also, the credit crunch was caused by bad mortgages. Which political party has as one of its basic tenants to issue bad mortgages to poor people who cannot afford them? Republicans need to stop agologizing for Bush and defend his actions, including trying to regulate Fannie and Freddie to avoid the mortgage melt down. The problem is that liberals have been successful in creating a false reality through media dominance. Just like the Soviets were able to do for 80 years. I hope it does not take us 80 years to get through this current mess.
Joe Klein's conscience et al.:
Look, You remember that 'ownership society.' A lot of Republican voters have money in the American economy. They will be better off if the economy does well. So, they'd like a proposal that looks helpful. In re: the Chamber of Commerce, I have only heard their most publicized comment which is they are opposed to it's 'buy American' clauses seeing it as leading to a 'beggar thy neighbor' situation. That doesn't seem to bother Pelosi et al. who would beggar Republicans and trading partners.
Posted by Megan McArdle | February 10, 2009 7:38 AM
Normally I would agree that make work for make work can be wasteful, but the US happens to be in a situation where it has a massive infrastructure backlog. A lot of roads bridges power plants and sewers need to be refurbished or replaced as they are at or past their natural lifespan. As for the welfare and state aid provisions well that is just keeping aggregate demand from collapsing too much all at once. So I don't see how the passionate opposition to this is at all justified.
The only caveat is the overall debt/deficit level of the federal government, but frankly this is most likely not going to hit the wall during the recession and tackling it now would prolong the downturn as this requires removing massive amounts of spending or raising taxes to close the gap.
So the best approach still seems to be counter cyclical spending now, balanced budget efforts starting after 2010.
The problem is that liberals have been successful in creating a false reality through media dominance. Just like the Soviets were able to do for 80 years. I hope it does not take us 80 years to get through this current mess.
Posted by Basil | February 10, 2009 11:49 AM
Basil (Basil Fawlty?)
Your post is pretty funny because the economy under Bush performed exceptionally badly from a jobs creation standpoint for the entire mandate, relative to other 8 year periods (and Presidents). The amazing Bush tax cuts really didn't deliver what was theorised (an investment boom and jobs). The cuts benefitted the top 33% of the Americna income distribution the most, bt the 'investor class' didn't follow the script. The money did not flow into direct investment, it went into consumption, real estate and portfolio investment, three of the elements that fed the asset bubble we are coming out of now. The Bush tax cuts was one of the worst policy moves of the last few years (maintaining the Clinton tax regime/ balanced budget would have been a superior choice). Proof positive that the laffer curve produces negative returns are some point on the curve.
Economists are in fantasy land if they think that they can control or eliminate the business cycle in a capitalist economy. Moreover, why would they want to? If a company is weak or inefective, it needs to be destroyed by its competitors, its resource base, in customers and employees, freed up for more productive use. The government should facilitate the reemployment of a displaced labor base through training and job search assistance, not create government jobs to employ people. If the US were as prescient as France, deciding winners and losers in the marketplace, we would now be enjoying the Minitel instead of the Web. The new administration hasn't a clue whether its technological initiatives will succeed. The marketplace will pass judgement, not some Washington functionaire. No amount of throwing money around will guarantee a particular technological outcome.
Economists read about recessions in the newspaper like the rest of us. They can't accurately predict them. There is no magic lever or switch they can use to control them. They may, however, sustain the banking system. The mechanism is well known to the experienced and is called the RTC.
Northern Observer, and I guess it is just a coincidence that a prosperous economy just happens to turn bad when a new, anti-business, left wing socialist or quasi-socialist political party takes power. Just like Russia, East Gremany, Cuba, Poland, Venezuela, Bolivia, ad nauseum.... When will the left learn that it is only capitalist wealth that allows leftist idiocy to thrive. When the rich are gone, there will be no more trusts, foundations and think tanks. Have you ever been hired for a job by a poor person?
By the way, where is the call for a 9/11 type commission to investigate the beginnings of this crisis? Who started teh runs onteh banks? Who pulled out first? Does anyone care if a foriegn government, for example did this to us????
Let's have a September 18, 2008 Truth Commission.
Why would the Republicans support anything at all Obama does? Even the freakin' Chamber of Commerce supports the stimulus, yet the Republicans fight the dyin' of the light. What does that tell you?
That just tells you the Chamber of Commerce knows which way the political wind is blowing. Plus, who do you think is going to get all the contracts in this bill?
Big businesses doesn't mind big government. In fact, they rather like big government, because for a few million dollars spent in Washington they can get billions worth of contracts or favorable legislation. Only the consumer loses.
ed by Basil | February 10, 2009 3:01 PM
Stop comparing apples to asteroids. I'll take you seriously when you want to talk about economic outcomes in OECD countries instead of trying to lump the American Democratic Party with the likes of Mugabe, Chavez and PolPot.
A little more wonk and a little less hack would be in order. Or not. It's a free market, exercise your choice.
Re: And if the stimulus package were really as 100% guaranteed to make America better off as its proponents claim, you can bet that sensible Republicans would be falling all over themselves to get on board.
Apparently the population of sensible Republicans consists of Charlie Crist, Mitch Daniels and a small handful of others.
Haven't been watching for a couple of days, but just to respond to Megan: yes, it's possible for the government to waste a lot of money on unproductive jobs. (See: Iraq.) Everything depends on context. Under normal conditions, or even anything vaguely close to normal conditions, vanishingly few Democrats would support a sudden extra $800 billion in federal deficit spending. I know I certainly wouldn't. These are not normal conditions. The news about the $550 billion in sudden withdrawals last Sept 18 which threatened to crash the international financial system makes it clear that there is, hovering over us, a constant threat of a loss of confidence so complete -- a loss of confidence not in the long-term balance sheet of the government but in the short-term functioning of the financial system through which our paychecks flow -- that we have got to reduce people's anxiety about whether money is flowing. The risk that some small portion of the spending in this bill will not generate as much value as it costs pales in comparison to the risk of a systemic crash. At the beginning of this month, it took an extra couple of days for my salary to arrive from my German employer to my American bank, and I actually wondered: is this it? Did the system just break? Did something blow up in the chain of transactions that gets my salary from Hamburg to New York, and did my cash flow just disappear? At some point, that risk will start to feel high enough that I immediately take all my money out of the bank and hold it in physical cash. The more ordinary people have to think thoughts like this, the more risk we run of a run on the banks.
There is another longer-term issue here, which is that I think people of a libertarian/laissez-faire/classical bent are too averse to thinking about economic transactions which happen between groups rather than individuals -- which comprise a huge portion of the economic world. For example, Merrill Lynch apparently spent $1.2 million redecorating John Thain's office. At the same time, ML obviously spent billions of dollars on various equities and things which it does as part of its core business. Now, did John Thain value that office redecoration at $1.2 million? Would he have paid it out of his pocket? Almost surely not -- notably, he overpaid vastly for the decorator. So who did value that redesign so highly? Where did the demand come from? From an entity called "Merrill Lynch". Because of the way a large corporation like ML makes spending decisions, somehow the demand for a $1.2 million office renovation for the boss materialized. Does that mean the demand was not "real"? Well, all those other billions of dollars in business decisions happened the same way -- delegated decisionmaking with collective resources. So were they not "real" demand either? Agree to that, and all the corporate spending in the economy becomes "fake" demand.
Yet this is substantively the same way governments make purchasing decisions. A government makes a collective decision to buy things and it's responsible to its constituents -- voters, rather than shareholders -- for the decisions it makes. The laissez-faire/libertarian way of thinking about whether these decisions were justified is often expressed as: if an individual were paying for it, would they make the same decision? But as with a corporation's purchases of various kinds of assets and services, that's not a meaningful way to phrase the question. Obviously corporations make decisions differently than the individuals in them would -- that's the very reason for having corporations, they can do productive things that don't happen in societies which lack corporations. And governments, too, make purchasing decisions which individuals would not and cannot. That's the very reason for having governments. One such decision is the decision to heavily increase spending in order to escape a liquidity trap -- a decision which no individual or corporation could possibly make on its own. That is not to say that every single decision made by a government is always by definition smart. Government officers do often spend money in ways that don't make any sense -- just as corporate officers do. And companies with lots of bad corporate officers end up going bankrupt, and governments that spend money too stupidly end up losing power. The main point is that I think this idea that government spending is "fake" demand is really kind of a metaphysical idea that mainly serves to confuse. Spending may be unwise, or unproductive, but describing it as "fake" is rarely a useful way to think about it.
Because of the way a large corporation like ML makes spending decisions, somehow the demand for a $1.2 million office renovation for the boss materialized. Does that mean the demand was not "real"? Well, all those other billions of dollars in business decisions happened the same way -- delegated decisionmaking with collective resources. So were they not "real" demand either? Agree to that, and all the corporate spending in the economy becomes "fake" demand.
You and John both make fair points on this issue that are also somewhat in error.
John's point is that "bad" demand (if I may call it that) is bad because it isn't unsustainable without what amounts to be a perpetual subsidy. He views it as wasted capital, because it was more poorly deployed than it otherwise could have been.
He's right, under many normal circumstances. The problem during a crisis period like this is that the parties who would ordinarily feed the money multiplier and generate "good" demand most efficiently are not participating, because of the economic climate and accompanying lack of liquidity and credit. The deadlock can't be broken without government picking up some of the slack, if but for an interim period until the rest of the participants return to the market.
The current situation demands drastic actions. Unlike the Japan of the early 90's, the US has a deteriorating infrastructure that needs to be fixed, regardless, so we can restore these if we choose without building bridges to nowhere. But infrastructure projects take a long time to complete and generate relatively few jobs, so betting the farm on trains, highways and bridges is probably not going to do much good.