Bruce Bartlett has written that the Obama administration underestimated how quickly the stimulus would affect the economy, reducing unemployment almost immediately. Krugman calls this "totally false":
Did Bartlett even look at the Bernstein-Romer paper? Here's the key graph:
The predicted impact from the stimulus is indicated by the difference between these two curves. We're now at the very beginning of 2009Q3; they predicted that the unemployment rate right now would be only a fraction of a percent lower now than it would otherwise be. The impact wasn't supposed to be really noticeable until late this year, and wasn't supposed to peak until late 2010.
The problem, in other words, is not that the stimulus is working more slowly than expected; it was never expected to do very much this soon. The problem, instead, is that the hole the stimulus needs to fill is much bigger than predicted. That -- coupled with the fact that yes, stimulus takes time to work -- is the reason for a second round, ASAP.
But when I look at the graph, it looks to me as if the stimulus was supposed to affect the unemployment rate immediately. Specifically, it was supposed to dramatically lower the rate of increase in unemployment immediately. By now, at the beginning of Q3, unemployment was supposed to start falling. But unemployment has continued to rise apace. It definitely isn't falling.
Also, I don't understand what he's trying to get at when he says that unemployment was only supposed to fall by a fraction of 1% by now. In my experience, "a fraction of one percent" is usually used to refer to a small fraction of one percent, i.e. a trivial number. As "fractions of 1%" approach 1%, it gets increasingly hard to distinguish them from 1%, because of measurement error inherent in collecting economic data.
But this fraction is certainly not trivial. Eyeballing it, it seems to be in the neighborhood of .7%. Since the maximimum reduction promised for the stimulus looks to be about 1.8% by Q3 2010, this means that we already should have seen more than a third of the employment benefit from the Obama plan. By their own estimates, the stimulus seems to have failed badly. I see little sign at this point that it's even moderating; rather, the seasonal adjustments seem to be improving because college graduates, who are being frozen out of the job market it record numbers, don't show up in job losses and unemployment claims.
It seems to me that a better defense against the Newsweek graph I linked is simply that models like this don't work very well, so expecting any sort of precise number from them is silly. The problem is, those are the same models used to justify the stimulus in the first place. There's no question that in theory, ceteris paribus, a stimulus helps the economy return to full employment. But as with tax cuts and other macroeconomic medicine, the size of the effect is an open question, one that has to be modeled against an extremely complicated and unpredictible economy.
Overestimated, surely?
I'm a little confused how Krugman is on the one hand defending the stimulus by saying that it wasn't supposed to have an effect yet, and then saying that even though it hasn't taken effect yet, we need another one. Though I guess that's mostly resolved by saying that the problem was worse than we thought (though from the rhetoric used at the time of the stimulus package, it's a wonder that it could be any worse. Unless that was exaggeration too.)
VP Biden also says that everybody knew that the stimulus package wasn't going to be able to spend funds that quickly. Yet of course somehow it was highly important that the bill be passed immediately, without being read.
To me, this is a clear argument in favor of the Republican alternative as offered by Sen. McCain, which consisted largely of payroll tax cuts with some increased unemployment checks. Or are Krugman and others not conceding that payroll tax cuts would have had an effect faster?
One of *many* arguments. This is the most Random, ill-informed administration I've ever seen. They are throwing money at their pet projects while simultaneously calling it stimulus.
It's like watching the Three Stooges - only not funny.
Wait, wasn't the original stimulus like, half tax cuts?
Also, taxes come out of your paycheck in real time. If we cut taxes for a year it would take a year for that money to get into the economy.
To me this is a clear argument that you don't know what you're talking about just want tax cuts, always, and forever. I'm going to go out on a limb and say that you also wanted tax cuts in 2000 when we were running a stimulus and the economy was doing well.
"I'm going to go out on a limb and say that you also wanted tax cuts in 2000 when we were running a stimulus and the economy was doing well."
I don't understand, do you mean surplus instead of stimulus?
It was? I seem to recall a bubble bursting.
You do of course realize that over 250 billon of Obama's stimulus was tax cuts right?? You do realize, of course, that this amounts to the largest tax cut in US History, right?
Right?
http://michaelscomments.files.wordpress.com/2009/06/stimulus-vs-unemployment-may2.gif
Disregard this, I didn't realize you linked something similar.
Why isn't the graph displaying the actual the main picture?
While I'm no economist, it is increaingly obvious how flawed Krugman's thinking is. And I'd really like to see economists like you, Megan, be more critical of him, and call a spade a spade. His apparent credibility should be diminished by now, and since it isn't he is especially dangerous at this most crucial time in our history.
Wait I thought last time was the most crucial time in our history? Or was it the time before? ;)
The Now is always the most crucial time in history
For Obama it is. He's the Poster Child for "Leading through Fear and ADD..."
Rob, I thought Bush had that one down a lot better. Obama has us afraid of the economy which is, in fact, actually bad right now. Bush got everyone worked up over Iraq which was, in fact, no threat to anyone but its own people.
And Bush managed to get Democrats to vote for his project.
Obama didn't.
Derek
"Rob, I thought Bush had that one down a lot better."
Should there be some rule like Godwin's that anyone who sneeringly brings up Bush on some topic of, at best, tangential relation, is first pantsed, then ignored?
"Bush got everyone worked up over Iraq which was, in fact, no threat to anyone but its own people."
Well, there was that whole war with Iran, thing, so a million Iranian casualties would tend to disprove your thiking. Plus, I seem to recall Iraq arguing with Kuwait about some property. Didn't we get involved in that? Oh, and then there were all those UN resolutions, but surely that wasn't because of anything Iraq's thuggish rulers were involved in.
Nope, no threat there.
I'm a little confused on how "It was supposed to work, but it isn't working" seamlessly implies "More of the same, immediately." Maybe Krugman's legendary nuance isn't easily captured in an NYT blog post, but AFAICT, one might just as easily argue from the results that we don't understand the problem as well as we thought and should be trying something different.
If a screw doesn't go in when you smash it with a hammer, the solution is not to look for a different tool, but to get a bigger hammer and hope the screw won't break apart in the process.
Or, you could use a crappy metaphor and be all like "damn, I'm so smart."
By the way, what was the last problem you solved without employing tax cuts and less government intervention?
Why are you projecting your boogey man on to me?
Keep taxes where they are. Trim the layers of government and wasteful spending.
Let every sector of government know they are going to face a 10-25% budget cut (depending on the department) from last years numbers and its up to them to rearrange their department for long term stability as the budget cut will remain in effect for the rest of the 3/4 year term.
Review the actions of the various departments to see what they chose to cut and why and if they are playing games by cutting useful services and refusing to cut positions and their own payroll fire them.
Defense is not exempt, except for I wouldn't reduce payroll for servicemen/women.
I don't know what "less government intervention" has to do with "government bloat". Our government is intervening quite a bit and bloated like a great big elephant. If you want your lousy intervention, keep it for now, we can fight about that later, just spend less doing it ok?
I'm pretty sure there are plenty of tyrannical governments throughout history that intervened more for half the price. We're not even getting our money's worth!
Megan -
First, why disparage yourself compared to him? His Nobel prize appears to be 90% political, 2% inspiration and 5% perspiration (I'm not a world class economist, so my numbers don't need to add up to 100%).
His works are mostly political nowadays and tend to not offer any new insight or idea, merely replicating the thoughts of others (as most journalists appear to do).
Second - That graph's worst-case scenario (sans stimulus) was hitting 9% unemployment in Q1 2010....we're barely into Q3 and we're cracking 9.5% and growing steadily.
I think this clearly says that the foundation of the stimulus was poorly planned, and it also clearly states that ANY stimulus must be IMMEDIATE and not delayed by the approval of projects and dispersion of funds.
The only immediate stimulants are tax-code manipulations or handing out checks. In a time when businesses are the ones cutting the jobs (and government adding them), doesn't it make more sense to cut taxes on businesses (and individuals) to allow them to either not lay off as many people and/or have a greater chance to actually start growing?
I never understood how government spending on temporary projects was supposed to be better than cutting taxes (and therefore maximizing the ability for a company to profit off of equal revenue).
Just my .02
Joe
P.s. Cutting individuals taxes probably wouldn't do too much, since so much of the population pays so little federal income tax and those that pay the lion's share tend to be wealthy income to weather the storm.
Krugman is undeniably a brilliant economist, but he is also a partisan. This puts him in the unfortunate and unenviable position of having to give credible and rational academic gloss to the often-irrational policies that are the result of crude politics. His genius is constrained and distorted by his need to cover for preferred politicians, even when they act against the principles and ideas articulated in his academic work.
This means that his columns for the NYTimes (I am unfamiliar with his continuing academic work, so I have no idea if that has been compromised as well) are often exercises in obfuscation rather than clarification. He doesn't present falsehoods, but he labors mightily to misdirect attention so he can ignore and overlook inconvenient facts.
Such is the tragedy of Dr. Robert Stadler -- selling out academic credibility for invitations to the DC-NYC cocktail party circuit.
Wow, this prediction really sucked.
It seems to me that the first thing anybody notices about the graph is how the current unemployment numbers are actually worse than the "Without Recovery Plan" line. The impact of the crisis was pretty underestimated. And kind of makes you lose faith on the science of Economics in general. Don't these people know what they're doing?
A couple of thoughts:
I don't believe looking at the maximum difference between the curves is a good measure for the overall predicted impact of the stimulus. I honestly can't believe that economists measure it like this. Instead, the impact of the stimulus on the economy up until 2014 is best measured by the area between the two curves.
This corresponds to - how fresh is that calculus? - the integral of the difference between the 2 curves. So, if t is time, f(t) is the unemployment function without the stimulus, and g(t) is the same function with the stimulus, the impact of the recovery plan is
∫[g(t)-f(t)]dt - with the integration boundaries roughly between 2009 and 2014.
By this measure, we would have seen not a third, but more like a twentieth of the benefits of the stimulus.
Of course, this is really kind of pointless. We will never know what the unemployment numbers would be without the stimulus. And it seems the models used by the World's Finest Economical Minds (or something like that) have a very low predictive value. Man, does Economics suck or what?
So I guess we're kind of fated to discuss this whole matter with positions divided neatly along politic lines.
Or perhaps not. Maybe, in a few months, we can compare the progression of unemployment rates between countries with and without a stimulus.
Nimed,
This is a strong analysis. It also seems to me that you largely agree with Megan: the best criticism of the graph and our ability to make strong conclusions based on it is that, as you put it, "economics sucks" -- at least in its predictive ability on huge macro levels.
And that, of course, was precisely the criticism that Krugman did NOT choose; instead, he ignored a whole host of pertinent facts and doubled down on his cowbell.
I don't think comparing countries with stimulus programs vs. ones without will yield any useful information, not that it would stop both sides from showing their own comparisons.
The countries in question are not isolated. Its easy for ones country stimulus to trickle to another that had not enacted one. If a country does all it takes to keep its stimulus from flowing to others, it is restricting its own trade, and skewing the outcome as a result.
There is just too many secondary effects to pick some information out of the resulting mess.
Wouldn't the better comparison be the entire EU or Soviet Block countries vs. US, or perhaps China?
What would that comparison show you? All the countries you listed are busy interfering in their economies with massive loans and nationalization plans (except for china that is nationalized already)
Nimed,
My calculus is somewhat fresh . . . you can't do that. The area under the curve is unemployed quarters. The only data presented are unemployment rates at specific times. Megan is absolutely correct that we should have seen 1/3rd the amazingness of the stimulus, at least on the current unemployment rate.
Grundles,
You are right: I should have said Macroeconomics sucks.
Regarding Krugman, he clearly has liberal tendencies, but my opinion differs from yours: I'm convinced he is not compromising his economic analysis due to rampant partisanship. While he can be pretty aggressive in his columns and blog, I don't think he is some sort of extremist in his politics. From what I can tell, he has been defending UHC and some measures to fight rising inequality, but he keeps talking about returning to the economic 50s, which he sees as a kind of Golden Age of the American economy - strong middle class, low unemployment, and what he calls "boring banking". For instance, he had some serious disagreements with Robert Reich regarding trade in the 90s, and he was on the "right-wing" side of the discussion, so to speak (although later he said "while people like you and me were having our disputes over trade policy, Sauron was gathering his forces in Mordor").
But of course, evaluating good faith and partisanship is quite tricky, and I kind of lean liberal myself. One is always worst at judging our own biases.
I like to think that I'm persuadable by evidence to change my mind on the relative effectiveness of the stimulus compared to tax cuts. As you, I'm an agnostic on the size of the multipliers. The problem is, I haven't exactly seen other economists (of any political color) predicting the current astronomical unemployment numbers. It looks like it caught everybody by surprise. I remember seeing Krugman and Stiglitz interviews in which they stated that the stimulus should have been higher at the time, and I remember that Republicans were mainly concerned with debt and budget issues.
Ken Magalnik,
Yes, countries aren't isolated, and particularly countries with a strong exporting should benefit more from stimulus of other countries. But, while there's definitely leakage (and restricting trade would be counterproductive indeed), hopefully the leakage isn't complete, and one shouldn't expect to see policy differences between countries. Also, supposedly leakage is at least partially dependent on the way stimulus money is spent - for instance, construction and road repair should leak less than unemployment benefits.
Anyway, I agree the comparisons are far from perfect. I just don't see any better way of evaluating the current economic policies.
John Randoe,
Regarding the 1/3 thing, I have to say that is not right. Taking the maximum amplitude as the indicator ignores the period in which the stimulus (or any other measure) takes effect. I wish we were discussing this in front of a blackboard. But imagine 2 alternative economic interventions, one that drops unemployment rates for 3% for 6 months and then wears out, and another that lowers unemployment by 1% for 5 years. Clearly the second is preferable, although its maximum amplitude is smaller.
About the integration, are you saying that you can't do it because the unemployment data is not continuous in time? Well, sure you have to make some kind of approximation. There is no such thing as continuous data, right? For instance
∑[g(t)-f(t)]·∆t
Should provide a reasonable approximation to the integral above.
Nimed,
I can say everything you said about integrating in two sentences:
The total number of unemployed days is a better measure of unemployment than the rate. In that regard, we're only about 1/20th below the graph's expectation.
But you can't do that because it's an apples and oranges comparison. Megan's post was specifically about Krugman's assertion that the graph doesn't predict lower unemployment today. To that extent she is right. In order for the stimulus to work (for there to be a real difference of the area under the curves), the unemployment numbers must begin to diverge. The graph predicts that about 40% of that divergence should have already happened. It hasn't.
BTW, there's no continuous data, but there is data that closely matches a theoretical formula. These integrations can be done analytically. I can't fathom a reason or method to analytically integrate unemployment data.
Nicely put. I was trying to highlight the fact that, in the graph in question, this is represented by the area between the curves.
My point was that, in the better measure of "total number of unemployed days", we can't really say that much about the stimulus yet. Megan "more than a 1/3" expression and your "1/3rd the amazingness of the stimulus" is not wrong, but it's in my opinion misleading. But it's true that this wasn't what Krugman was saying.
This is kind of a question of semantics. There's the stuff about the meaning of a fraction of 1%. I tend to agree with Megan's expectation in the use of the expression (it should be a small fraction), but this isn't very important, and rather pointless to discuss.
Then Krugman says "The impact wasn't supposed to be really noticeable until late this year, and wasn't supposed to peak until late 2010." I interpret this as a statement about the accepted margin of error on the predictions of the unemployment rate. Is 0.7% four months later noticeable? I agree with Krugman that it's too soon to tell.
He also says "The problem, instead, is that the hole the stimulus needs to fill is much bigger than predicted". This is almost surely right. The monthly rise in unemployment has been much higher than expected every month since February/March. It's kind of hard to attribute this to a failure in the stimulus, since the stimulus hadn't been passed yet. I blame it on the predictive power of the model used. Macroeconomics sucks.
The lion's share of the stimulus gains are in the curve difference area corresponding to the period between the end of 2009 and the middle of 2011. Screaming, "OMG, nothing happened yet. This thing is a failure." seems kind of silly, since most of the benefit from the stimulus, if there is indeed one, is yet to come. It seems even more silly because, again, the unemployment numbers are much higher than expected since before the stimulus was supposed to have any effect.
But divergence isn't going to "happen". Either you do the stimulus or you don't, and you'll never know what would happen under the alternative. What actually happened was that the rise of the unemployment rate since January has been much steeper than even under the no-stimulus curve. What do you conclude about the stimulus from here?
Allow me to nitpick: that's not true. Most of the time data closes matches a theoretical formula that can't be integrated analytically - it has to be done numerically in a formula similar to the above. One famous example is the kernel of the Gaussian distribution, exp(-x^2). No analytic formula for the integral.
Huh... But the graph doesn't depict actual data. It displays predictions. Based on a model of employment. Those 2 curves are quite integrable functions.
And you compare the relative effectiveness of, say, different methods to reduce unemployment, by computing the integral above (or others equivalent). I should say, that that's what you would do if you could trust the predictions generated by the macroeconomic models you're using. Which doesn't seem to be the case, because - have I mentioned this already? - Macroeconomics sucks.
And my point was that you could do that without using 1000 words to prove you're a high school graduate.
It's actually true that this is what Krugman was saying. That's the problem and the reason for Megan's post.
I agree with anyone but Krugman and yourself saying this. Krugman is trotting out Romer's graph to prove his point, but it quite obviously does the opposite. The general point that unemployment data after four months of stimulus means nothing is important and needs to be made more often; however, the blog post that pimps a graph showing how amazing it will be is the wrong venue.
Well of course it isn't going to happen as long as unemployment is rising. If unemployment were dropping, Krugman &Co. would have all kinds of amazing numbers showing how much better the economy is post-stimulus.
Megan's post was a refutation of Krugman claiming the graph doesn't predict what it clearly predicts. None of this handwaiving changes that fact. That the unemployment numbers have risen seems to be a pretty clear indication that the stimulus is having the opposite of it's intended effect. I hope that isnt' the case, but that data point certainly suggests something more depressing than "OMG, nothing happened yet."
Allowing me to nitpick, you don't know what you're talking about. I regularly do 20 or so tests that fit nicely with a back-of-the-envelope integration, mostly logarithmic and sigmoidal.
Really . . . if you want to compare actual data to the graph, how do propose going about it? Also, I'd really like to see your formula for the "With Recovery Plan" line.
Man, take a chill pill. I was trying to explain that you can't pick one point in time to evaluate the projected impact of an economic measure based on a rate metric. Instead, you should integrate the rate in question over the relevant period of time - the area between the curves is what matters. Then I wrote the formula for this. That's it. I'm sorry that you have some sort of complex about this issue, but your inadequacies are not my problem.
Now, as to integration
You're just throwing things out there, aren't you?
There are various methods of analytical and numerical integration. In your previous post, you said that data that "closely matches a theoretical formula" can be integrated analytically. Let me repeat: this simply isn't true in general. The integral of many analytic expressions can't be solved by analytic integration. For instance, you can't integrate analytically ∫exp(-x^2). This is a pretty basic fact. You're not required to know this, but if don't know it, you should refrain from making assertions on it. Of course, this is a technical point completely marginal to the Krugman discussion, and that's why I called it nitpicking. But you seem determinate in displaying your ignorance, so knock yourself out.
I particularly like the sentence
I regularly do 20 or so tests that fit nicely with a back-of-the-envelope integration, mostly logarithmic and sigmoidal.
First of all, this is a quite crass attempt to... I don't know. Impress someone, I guess. You "regularly do 20 or so tests"? That's just sad.
And the sentence itself is completely meaningless. My argument referred to integration, but you're now somehow talking about fitting techniques. And back of the envelope statistical tests!
I'll point out the obvious: doing 20 tests on any given problem is not something to brag about. It kind of shows that you're blindly trying to fit anything to a data set. Trying to fit logarithmic and sigmoidal functions to a given data set strikes me as particularly stupid, since logarithmic and sigmoidal functions are used to fit completely different data sets. You should be able to exclude one of these just by plotting the data.
Finally, the notion that people of back of the envelope goodness of fit tests is absurd to anybody that knows even a little bit about statistics. Do you calculate Chi-square values on the back of the envelope? Laughable.
You missed the point again. Both the curves in the graph are projections. if you want to compare the projected impact of a stimulus, you don't have data. It's, you know... projected. So what you have are time functions derived from a model. Those two lines are projections. Hence, they are functions, not data. Get it?
If, on the other hand, you want to compare real data to a particular projection (not what was being discussed), what you do depends on what you want to achieve with the comparison. But of course, in all methods you are going to evaluate the sum of distances (or some analog of this. You can use other norms, squared distances, etc) between the data and the corresponding function value at every time point, and compare this sum to some posited acceptable error.
My formula? Sigh. Of course I don't know the particular function they used. Go look it up if you're interested. Of course, me not knowing the analytic expression for this particular function doesn't have anything to do with the discussion. It's prety pathetic that you think it does.
Concerning Krugman's post
I don't know who you mean by the &Co, but for Krugman that isn't true. Krugman has been writing for ages that:
1- the amount of stimulus is not sufficient;
2- the composition of the stimulus package was less than ideal.
I see. Well, since the unemployment numbers have been higher than predicted since at least February, the stimulus had the opposite of it's effect even before it passed in Congress. Maybe they sent some stimulus money back in time?
It could be that thinking of the whole US economy as a big firm or a big household might yield useful insights, but thinking of it in some other way, like a macroeconomist does, might be pointless, or, more succinctly, that macroeconomics is mostly bullsh*t. Gee, who wrote a textbook on macroeconomics?
As stated: unemployment is already 9.5% and climbing. It's obvious that the "stimulus" should always be written with those quotes around it, since it was never a stimulus.
It was, and is, a mash up of pet projects. It's plunder, basically. An orgasm of patronage and pillage.
We already see Barney Frank reverting back to his old habits with Fannie and Freddie - who is surprised?
What's going on here? Well, a few things are pretty well known:
Chauncey has either intentionally or incompetently fostered a level of fear that is clearly growing. We now have a classic fear/velocity loop, and it ain't good.
The 50% of people who actually pay taxes are afraid that they are going to be fiscally attacked. The debt is chilling, and Obama is still talking about Health Care. Perhaps the ignorant masses who don't pay taxes think that Cap and Tax is a good thing, but the majority of taxpayers only see yet more taxes.
And thus velocity is way down. And thus GDP continues to fall. And unemployment continues to rise.
But that's not all - what about interest rates? Can Chauncey continue to borrow without driving them up?
Bush's share of the blame is receding faster than even I thought possible. Bush didn't buy GM. Bush didn't push the deficit anywhere near where it is now. Bush didn't scare the living daylights out of the tax-payers. Perhaps he irritated some hippies (who, amazingly, are no longer protesting the war, or anything else), but he didn't promise everyone increasing energy prices like Chauncey is.
Chauncey's sheer ignorance is staggering. And Joe "I wouldn't ride the subway" Biden's protestations that this is Bush's fault ring hollow.
We have 3.5 more years of train wreck ahead. Perhaps a Republican majority in either house of Congress could quell at least some fear, but that's the best case.
You don't need a Nobel Prize to see that the "stimulus" has only exacerbated the problem.
Far being for me to defend Obama, but I think you are glossing over a few points.
Bush did deliver much higher energy rates (whether he can be held responsible for that or not is somewhat irrelevant). More than anything else, those high gas prices delivered the psychological shock that caused consumers to curtail their spending and double down on paying their debts, which slowed down the economy. I'm not saying that obama is helping matters (I believe he is injecting mass quantities of uncertainty, which makes recovery nearly impossible), yet the role of the gas price spike should not be underestimated
Bush was bad, no questions. I'm no apologist for him, for sure.
I'm not only agreeing with you, but see my post below re: Ambiguity.
There's no question that in theory, ceteris paribus, a stimulus helps the economy return to full employment.
I disagree that "there's no question". It *might*. Depending on the circumstances and how it is done, but probably it won't. Milton Friedman certainly argued that government stimulus *extended* recessions.
As Gingrich predicted last October, the distribution of the stimulus was done by humans who had to pick who will and who will not receive stimulus money. The economy is on hold as everyone waits to see if they or a competitor will get a big pile of cash borrowed from China.
If the government should have done anything at all, it should have cut corporate and capital gains taxes for 6 months. If not that, they should have done nothing...NOTHING. Not even extending unemployment.
I'm a consultant technical writer in the IT industry. Available work for me is seriously affected by economic constrictions. I am so distraught about the destructive, reactive policies of my government over the last 9 months that I just want to scream...policies that were doomed to make things worse.
(At least the Bush admin had the excuse of an impending election. The Obama admin could have treated the money spent in October as an excuse not to spend more.)
Spot on. People are paralyzed for any of a number of reasons:
Ambiguity re: who will get "stimulus" dollars,
Ambiguity re: who will pay for them
Ambiguity re: how much they will cost
Ambiguity re: how this will affect our children
Ambiguity re: impending inflation
Ambiguity re: impending rising interest rates
Ambiguity re: how much are my taxes will rise
Ambiguity re: how much my energy bills will rise
Ambiguity re: what other companies will Chauncey buy or bailout?
Ambiguity re: most of the same players that caused this mess are alive, well, and still serving. What do Barney, Nancy, Harry, etc. have in store next?
NONE of this ambiguity can be laid at Bush's feet. The complete lack of leadership that the Community Organizer is showing is almost incomprehensible.
And notice that we didn't even mention Iran, N. Korea, Israel, Illegal Immigration, California, or any of the other issues that he's handling so well.
The complete lack of leadership that the Community Organizer is showing is almost incomprehensible.
Incomprehesible to a moron, maybe.
To those that aren't morons, it is very comprehensible: being President is hard...Obama is not very experienced...the problems we face are vast in scope and tenacity...Obama's policies, while popular with voters, are not always the best possible solution...and a President does not have onmnipotent control over the entirety of American civilization.
Of course, if only Bush was still in office none of this would have happened - Jesus would have saved us. But Obama's poor performance thus far is not only comprehensible, it's entirely unsurprising.
The economy is on hold as everyone waits to see if they or a competitor will get a big pile of cash borrowed from China.
It really is gratifying to see one's predictions come true.
As I recall, when Megan asked for "a prediction", it was this graph that was trotted out (by Beutler?).
Do any of you have any notion how this money actually gets spent, sending it back into the economy?
Shovel-ready projects still take a lot of time; they must be finalized, bid, etc.
I continue to be amazed how quick folks are to criticize government when they have almost no concept of how government actually functions.
Here's a challenge for the new era of citizen journalism: attend a town, county, or state hearings and get a feel for what you pay for. You'll see ample evidence of the influence from special-interest groups and the glacial pace of projects accomplished by committee meetings held only every-other week or month.
Sounds like a fine argument for privatization!
But seriously, the reason projects take time is to make sure that money is spent wisely. So how come writing and approving the stimulus bill took so little?
I suspect the 'speed' served a number of factors, first among them reminding Congress what its job is; second to preserve jobs on the prospects of stimulus that would otherwise have been lost by now.
And no, I don't like how government functions, but I'm not convinced the private sector is always a better solution, either. And there are a lot of good reasons for the slow pace; one being it helps prevent some of the shady, pocket-lining behavior simply because there's more time to flush it out.
But wasn't the wisdom of the day to get money into the economy as quickly as possible? And having government do anything with speed is impossible. So I see a paradox. Perhaps there was more stimulus in TARP than Recovery.
>wisdom of the day
No. The wisdom of the day actually read the bill and saw the majority of the 'stimulus' would happen 2011-2012.
The talking points were how this was absolutely necessary right now before anyone could read the thing otherwise all these jobs would be lost.
This is a political response to a political event, and the response to it's perceived success or failure will be political.
The challenge now for Obama is to somehow use these numbers to cement his indispensability. To somehow come up with a program where desperate people see him as a savior. To somehow demonize anyone who would challenge his program.
The job numbers are meaningless unless they represent some political advantage to someone.
Derek
If throwing money into the economy as quickly as possible was what was needed, it could've been done with "tax refund" checks like the ones Bush sent out. I can't say if it would have helped or not, but it would've gotten the money out there fast, and at a much lower administrative cost
Well no kidding it takes a long time. We all knew this before the stimulus was passed -- it's joke that there were thousands of shovel reading projects just waiting to get started. This is yet another argument for payroll and other tax cuts which are much more immediate. Tax cuts, however, meaning giving up control of how the money is spent, which is anathema to most politicians.
I'll tell you how it gets spent.
They shovel it into a HOLE!
Thats what they mean by shovel ready. Ready to be shoveled.
Anyone that bothered to ask a civil engineer about the concept of "shovel ready" projects would have had to wait several minutes for the engineer to straighten up from the gut busting laughter. It takes years to get most major infrastructure projects planned and approved, let alone to the point of
don't know why it cut off the post but...
...being ready for construction start. Anyone who thinks otherwise (like apparently, the POTUS) has never seen the process work. Even a small town mayor from Alaska would've known that.
I continue to be amazed how quick folks are to criticize government when they have almost no concept of how government actually functions.
Many of us were critics of the stimulus precisely because we have a concept of how government functions.
We ride the same boat, here. We just want different oceans to ride on.
Eight years of GOP control left the impression of truly massive incompetence, like leaving a stew overnight in a cast iron pot. Takes a while to scrub it out.
But then I worked for government for a long time. Those constant shifts in policy, the fall out of elections, waste a lot of time, investment in resources, and leaves governments lurching about from right to left like a drunken sailor.
#$%^ elections getting in the way of government planning...
Yeah. Democracy is a beautiful thing, isn't it? Gives everyone something to complain about.
I'm agnostic as to the extent of the multiplier effect on goverment stimulus. Small, undeveloped countries can benefit mightily from just a little stim, like a paved road into a resource-rich area. But in a massive and advanced economy like the US, I imagine, you just don't get the same return/dollar of stimulus except in extremely targeted and well-strategized places. (Unfortunately, ideologically polarized and pork-crazy Congress is the last place I would go for a good-faith and well-thought-out stimulus plan. Instead, it's just a wish list of partisan handouts. I really, really hope that Nancy Pelosi didn't believe herself when she argued that free condoms were economic stimulus.)
One thing is clear, however. The marginal benefit of stimulus projects are HUGELY hampered by regulations that didn't exist in the 1930s, which is Krugman's Golden Age of Keynesianism. Don't expect anybody in the NYT to inquire, but I imagine that "shovel-ready" projects that would provide immediate jobs to our growing legions of unemployed young men are, in reality, pretty tough to get off the ground when you consider the layers of bureaucracy and lawyering and litigation that new projects have to go through. The mountain trails that I like to hike on the weekends -- built in the 30s by the CCC -- would be DOA nowadays once the environmental lobby got involved.
Totally true. Shovel ready may still mean environmental impact studies, community hearings, drawing up bid documents, bidding cycles, and more. Not to mention the litigating, inevitable with NIMBYism running rampant.
For much of the stimulus, I imagine state and local governments also have to develop the infrastructure to take in stimulus money, award it, and track it. Not an easy task when you're cutting staff and services because of lowered tax revenue.
I was (and still am) hopeful that, once the shovel-ready projects ran into the NIMBYs, BANANAs and EIS, Obama would use some of his political capital to break through and get some infrastructure stimulus. No dice, I guess.
Krugman *was* a very smart economist. Today, he's just a partisan hack.
Does that make his recent writings more intelligible?
Just as the NY Times *was* a fine newspaper, but now it's just an organ of the State Media.
I think your difficulty here is reconciling Krugman's case for a second stimulus with the Bernstein-Romer report. Those are separate issues. Krugman has always argued the stimulus as-passed was too small to have the required effect and we would end up with the administration scrambling for a second one. So, it makes sense that the fact that unemployment is worse than the administration predicted would only confirm his intuition on the subject.
On the other hand, you're arguing that we should be seeing an effect, but that's asking to prove a counterfactual, we have no idea what the employment rate would be without that bill being passed. You're saying we should show a decline in unempoyment, but even this model shows unemployment continuing to rise until sometime around Q4 2009 with the stimulus. So the idea that the stimulus didn't "work" because unemployment has continued to rise isn't much of a counterargument (yet).
My takeaway from Bartlett's column was that the stimulus hasn't had much time to work yet, so give it some time and it probably will. Krugman's point is, it was never enough, the unemployment is worse than the administration charted, so we need to get another one going.
I tend to agree with Bartlett right now, but I don't think he and Krugman are as far apart as many here seem to want to think.
Krugman's a hack and yet another example of how Nobel Prizes (meant to award excellence in given fields) have been degraded to the level of political statement. See, Gore, Arafat, etc. The Nobel is going to be just a glorified Oscar Award before long.
As for the stimulus, here's why it's total garbage and political patronage--if the idea was that money had to be pumped into the economy quickly--so quick of course that no Congressman could have time to read the whole thing before voting on it, which is always a great idea, see the PATRIOT Act--then there's a simple solution. Take the money that would be spent on the stimulus and mail it directly to every American as a cash payment in an equal amount. The recipients would spend it, save it, pay off debt, invest it--any number of things depending on their individual situation--but in all cases helping improve their own financial situation and helping the economy in one way or another. It would be direct, and quick, and eliminate much of the bureaucratic waste now involved in the current stiumulus pillage of the Treasury. And it might have eased deflation fears.
But why can't Congress do something so simple, which would probably have been more broadly popular? It's obvious--Congress exists to pay off their pet groups with taxpayer money. Being surprised by this is like the frog being surprised that the scorpion that it gave a ride across the stream would sting it halfway through the journey. It's just what Congress does. And save your outrage--they're gerrymandered into lifetime jobs, getting well paid by all of us to keep this up.
The first 'stimulus' was never meant to stimulate anything; it was legalized theft for the left's special interest groups. And since it was borrowed money, it's had a largely negative impact by raising the cost of capital. And with all the social engineering raising the uncertainty about taxes and health care costs (etc.), small businesses (remember them? those are the things that actually lead us out of recessions) have not been willing to take the chance to start hiring. So, it's not that the situation was worse than they thought, it's more like this administration has made a tough situation far worse.
Now they're going to come around and tell us to bend over and give them a second, bigger 'stimulus'. As the leftists say, 'Never let a crisis go to waste.'
This administration is so corrupt it makes Nixon's look like an innocent schoolgirl.
Krugman is another run of the mill partisan hack political "commentator" who used to be an economist. Baaa. Baaaa.
Megan is a unique economist blogger who occasionally comments on politics. Hmm. Sounds interesting.
As I recall, Krugman was calling for a $600 billion stimulus before Obama took office. Coming as it did on the heels of TARP I was shocked
by the huge number. In the event, Krugman got more than his own suggested figure.
If it didn't work, and it appears to have failed, lets not do more of what didn't work only in greater quantity. Krugman should admit his idea didn't work and be quiet or come up with a new idea.
You're forgetting though, money was worth a lot more before TARP.
"It seems to me that a better defense against the Newsweek graph I linked is simply that models like this don't work very well, so expecting any sort of precise number from them is silly. The problem is, those are the same models used to justify the stimulus in the first place."
Where else have I seen these types of models? Global warming, er, climate change? You're right-- these models don't work very well, but are used for all kinds of justifications. Proponents create supporting evidence that purports to show objective results, but it's just guesswork.
How accurate do you think the 80-year projections of global climate temperatures are?
Look, just because there is modeling involved in several scientific fields, it doesn't mean that there's the same degree of uncertainty in predicting outcomes. Modeling works fine in predicting the trajectory of celestial bodies. Several centuries in advance.
That's a cheap shot if I've ever seen one.
Models become less predictive as the number of variable included increases. Newtonian mechanics, like you mentioned do well, when they predict the interactions of two bodies. They cannot hold the same accuracy with 4 bodies. Luckily for astronomers, we can just isolate system most of the time. Until someone asks you to predict an object orbit around a binary star, and then things are not so simple anymore.
Climate models pretend to predict an outcome with a virtually endless list of variables, ones that interact with each other in unknown ways. Do cows fart more or less when its warmer? That sort of thing is important. Most of these models are made to predict a certain warm future, which is why very few of them can extrapolate the past.
Economic models have slightly fewer variables than climate ones (but still far more than astronomical) and try to predict much shorter periods of time. The outcome, however, is an educated guess, at best. Will the 2010 elections mean that congress if controlled by democrats, republicans, or divided? No economic model can tell you, yet, i will guarantee that the state of congress will affect the economy to some degree.
Just because an idea comes packaged in a bunch of numbers does not make it anymore, or less, valid.
Corollary for zic:
One needs not be pure in order to have ideas worth while. That is the flaw of identity politics. Pythagorean theorem would have been just as true if Pythagoras himself was a neo-nazi, racist, child molester.
What's really amusing is that climate models are meaningless until they're plugged into economic models.
Wait a minute. I was merely saying that modeling isn't what's wrong with the economics or climate science. And it isn't. Modeling in Astronomy is quite successful.
Also, it's that there are a lot more relevant interactions in economics and climate Science. But that's just part of the problem in Economics. Another big part is that you are very limited in the sort of controlled experiments you can perform to validate the models. In climate science this is also a problem, but you know with much more certainty the basic physical properties of some elements.
Models become less predictive as the number of variable included increases. Newtonian mechanics, like you mentioned do well, when they predict the interactions of two bodies. They cannot hold the same accuracy with 4 bodies.
Actually 3 bodies are enough. But it depends on what you're trying to predict. You mentioned the orbits of bodies around binary stars. Well, positions and trajectories are tough to predict, but boundaries on trajectories aren't.
Climate models have a lot of variables, but you are not interesting in predicting particular trajectories. You're interested in predicting future average temperatures. A helpful analogy is that it's impossible in practice to predict the date of the warmer day of the year, but you are quite confident in predicting that, in spite of the high number of variables and the chaotic dynamics, in a given year Summer is going to warmer than Spring or Autumn, which are going to be warmer than Winter.
You all don't understand. The stimulus is working. The unemployment rate would be 12.5% right now.
I am just waiting for them to tell us that.
Isn't that what Obama is trying to imply with all the bazillions of jobs he's "saved"?
Here is what you do not understand, and I will try to be as diplomatic about this as is possible:
Krugman is an idiot.
They give away the Nobel prizes for ideological reasons now.
Sigh. You'd think the fact that even the supposedly 'historical' part of this graph was wrong might give a few people pause to think. In fact, everyone was lead to believe that the employment stats were much better than was reality. According to the BLS, the true unemployment rate for February was actually 8.1%, vs something like the seven and a half percent figure that was bandied about at the time. The same goes for March, April, and May, where we see that the real unemployment rates were 8.5, 8.9, and 9.4 percent respectively.
Note that these figures predate any possible effect the stimulus could have had, even theoretically. So to crow that the stimulus didn't work - and yes, it is crowing, and by the Usual Suspects - is to completely miss the point. That is, that this chart was out of date practically before it was posted, for both the with and without parts. Note also that as far as the unemployment situation is concerned, it seems that everyone of note got it wrong, and in the wrong direction. To single out Obama's team in this respect is ludicrous, even for those people who are nothing but partisan flacks.
You got it exactly right. So does Megan in the last paragraph:
The "open question" expression is quite an understatement. I don't understand how economists are not freaking out more about this. After all, if Macro is dead (or never really lived), everything is permitted.
It is simply wrong to assert everyone got it wrong.
It isn't crowing to point out that some people are wildly unreliable.
If the report -was- wrong from the moment it was published then you should be very sceptical about the source of the report from this point forward. That is a rational response.
Since we are all chained together by this democratic system, those of us who are unhappy with the self destructive behavior feel obligated to point out that the Obama administration is a tremendous fraud. A fact which should have been evident to a middle school student.
"Hope and Change" - I mean really. Who runs on that? My high school class president ran a more substantive campaign.
So I take it the "usual suspects" you indict would include Paul Krugman? He seems quite prepared to read a result from the data as it stands now, and even recommend a future course of action from it.
I assume that I must be missing something.
Along with all of the caveats in the paper concerning a presumed large margin of error, what you're really missing here is that the intent of the projection is to derive a figure for Q4 2010.
The interim points aren't the focus of the report. The point of the stimulus proposal is to target a 7% unemployment rate by the end of next year, so you'll know then whether or not this projection had any value.
Really? Who got the unemployment statistics right then? If I recall correctly, unemployment statistics have been more or less consistently revised upwards weeks or months after the initial estimates for more than a year now. If the BLS itself gets the figures wrong, why are you singling out Obama? Anything besides partisanship?
So, who got this particular statistic right - according to you - and why?
The obvious "solution" for the administration is to put out a second graph that projects that unemployment would be higher today and going forward than the original non-stimulus curve indicated. They have already been doing this rhetorically, so it is only a matter of time before someone puts together the curve. At that point, the original graph can be safely dumped in the virtual wastebasket.
If the report -was- wrong from the moment it was published then you should be very sceptical about the source of the report from this point forward. That is a rational response.
A more rational response would be to understand how models and pro formas work, and to assess accordingly.
The document says throughout that its intent is to model an EOY 2010 figure. Once that objective is established, the forecast should be evaluated based upon whether it came reasonably close to that stated objective.
The interim period data is meant to be part of whatever regression was used to get to that EOY 2010 amount. The graph has to be used appropriately and within that context.
Models are typically built with a focus on forecasting a few major outputs that are considered to be most important. The rest of the model is a sort of mathematical filler that is meant to help with the calculation with that ultimate figure.
Even the best models are generally flawed in terms of the details. That doesn't mean that we avoid using them, it just requires that we use them with the understanding that they are not to be judged based upon whether every single line item is accurate during every period. That isn't their purpose, and to use them in such a flawed way is a reflection of the abuse of the reader, not the model itself.
This forecast may be good or it may be rotten, but the judgments being offered here are premature, in any case. In my view, one of the interim tests is whether they come close to identifying the timing of the peak of unemployment, which they peg at Q3 2009. (Not the amount, but the timing.) If they miss that by a wide margin, then we may have then earned the right to be a bit more cynical.
Not sure if this has been mentioned before but I think Megan has missed her calculus a bit:
But this fraction is certainly not trivial. Eyeballing it, it seems to be in the neighborhood of .7%. Since the maximimum reduction promised for the stimulus looks to be about 1.8% by Q3 2010, this means that we already should have seen more than a third of the employment benefit from the Obama plan.
Leave aside the fact that only 10% of the stimulus has been spent...meaning for it to generate a third of the benefit would require a pretty high multiplier.
The 'total benefit' of the plan is not 1.8% but is the total area between the two curves. Of this area, only a tiny portion sits in the time period running up to the end of Q2 beginning of Q3.