Can we admit that the "stimulus" is a failure?

[SpaceCadet]

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Can we admit it yet?

http://www.washingtontimes.com/news/2010/aug/3/evidence-and-denial/

"President Obama likes to say that he inherited the "worst" economy since the Great Depression, but the fact is that the economic "Misery Index" (inflation plus unemployment) - which the Democrats used as a weapon against Republicans - was twice as high when President Reagan took office."

Do I necessarily take everything in this article to be true?  Hell, no, and I don't really think that supply-side is the correct approach for these times.  But the fact is that the growth of the economy appears to be faltering, in spite of the "stimulus".  To whatever extent the so-called stimulus had anything to do with the growth over the past couple of quarters, at best it seems to have provided only a temporary boost, as was widely predicted.
 
It's not that I don't think it is possible that some sort of economic stimulus could work.  I do.  I think it's very possible, under certain circumstances, that the right kinds of investment could yield more than what is input and put the economy on a self-sustaining growth track.  I never thought that this was that stimulus, and I believe we are now seeing that in these numbers.

Now, we have generated trillions in additional debt, and what do we have to show for it?  An economy that is still faltering.

[Velleity]

SpaceCadet, it's only supposed to be a temporary boost to cut off the lower end of a severe low in the business cycle.

How do you come to proclaim something to be a failure when you don't understand what it's about?

[Velleity]

Time For President to Lead on Jobs

http://www.huffingtonpost.com/heidi-shierholz/time-for-president-to-lea_b_601188.html

The monthly employment report, released this morning by the Labor Department, contained enough bad news to prompt some people to ask if the economy might be tipping into a new recession. But whether we have a "double-dip" or not, this morning's report makes it clear that it will be years before American workers see a healthy job market again.

Here's what the report showed: In May, U.S. employers added 431,000 jobs to their payrolls. But one single employer accounted for nearly all of that: The U.S. Census Bureau, which hired 411,000 workers in May. Those are temporary jobs that will vanish by the end of the summer.

State and local governments, meanwhile, axed 22,000 jobs - and faced with budget gaps, they will be cutting jobs for months to come. That leaves the private sector: It created just 41,000 jobs in May, three-quarters of which were temp jobs. That's better than nothing, but it's not nearly enough to end the jobs crisis.

To get back to the pre-recession level of 5 percent unemployment, we need to create 11 million jobs. If the U.S. economy started adding jobs fast - say, as fast as it did during the late-90's boom - it would still take until 2015 to get back to 5 percent unemployment.

It's almost certain that we won't see such rapid job growth in coming years. What today's report demonstrated, more than anything else, is that the private sector isn't anywhere close to being in a position to create sufficient numbers of jobs on its own. It needs a boost.

That's why we are going to have very high unemployment for a very long time, regardless of whether we enter a recession anew, unless Democrats in Congress and the Obama administration undertake new efforts to create jobs. They are reluctant to do so, in part because Republicans have been so cynical and relentless in labeling past job creation efforts a failure. Congressman Dave Camp (R-MI) was at it again today, saying "the so-called jobs agenda of Democrats in Washington has failed to stimulate anything other than more debt."

This is ludicrous. Were it not for last year's Recovery Act, 2.5 million more jobs would have been lost. It may be true that this isn't a potent political talking point - when people are struggling to find work and make ends meet, saying 'it could have been worse' doesn't provide much comfort. But it's the truth.

The President should show some strong leadership and push ahead with aggressive efforts to put people back to work. There are plenty of good policy options for doing this, like the Local Jobs for America Act. There are also crucial steps that we must take both to aid unemployed workers and strengthen a recovery, like extending unemployment insurance.

These actions will increase deficits in the short term. At a time of high and rising deficits, that's a hard thing to swallow. But it's an enormous mistake to confuse short-term deficits, which are necessary to fighting the recession, with the long-term budget challenges we'll face long after the economy and job market have fully recovered.

Nearly half of all jobless workers have been unemployed for more than six months, the highest rate of long-term unemployment on record. There are more than five unemployed workers for every available job. These are measures of a crisis that will do enormous harm to unemployed workers and their families for years to come, driving up poverty, increasing family stress, harming children's educational achievement, and exacting other untold costs well into the future.

There is no good reason to let this crisis linger when we have the ability to act to do something about it. Republicans will recycle their dishonest arguments and do their best to make the President pay a political price, but today's jobs report should convince the administration that the human costs of inaction are simply too great to let political concerns stand in the way.

[Pepsi]

Can we admit it yet?

http://www.washingtontimes.com/news/2010/aug/3/evidence-and-denial/

"President Obama likes to say that he inherited the "worst" economy since the Great Depression, but the fact is that the economic "Misery Index" (inflation plus unemployment) - which the Democrats used as a weapon against Republicans - was twice as high when President Reagan took office."

Do I necessarily take everything in this article to be true?  Hell, no, and I don't really think that supply-side is the correct approach for these times.  But the fact is that the growth of the economy appears to be faltering, in spite of the "stimulus".  To whatever extent the so-called stimulus had anything to do with the growth over the past couple of quarters, at best it seems to have provided only a temporary boost, as was widely predicted.
 
It's not that I don't think it is possible that some sort of economic stimulus could work.  I do.  I think it's very possible, under certain circumstances, that the right kinds of investment could yield more than what is input and put the economy on a self-sustaining growth track.  I never thought that this was that stimulus, and I believe we are now seeing that in these numbers.

Now, we have generated trillions in additional debt, and what do we have to show for it?  An economy that is still faltering.

Well, what would you're solution be as the economy nose dived from 2007 into 2008 and 9?

If not government stimulus spending, you'd prefer what have happened?

[ivanm]

It is not a question of government spending but one of how it should be spent.  From my pov it is a mixed bag.  An example of spending that accomplished little was some of the ridiculous things we did while working the census.  Yes, it put money into people's hands but what do we have to show for.  An example of what I think is good policy is the upgrade of a road running to the east of Fort Riley and a new bridge over the Kansas River.  This is an ongoing project is creating real value and is supplying jobs to a lot of people over perhaps two years or more.  The motorists needed the upgrades as the traffic has increased a lot and the old road was tearing up.  We will be able to use this improvement for decades.

I have been reading Shirer's "The Rise and Fall of The Third Reich" and he discusses the impact of the Great Depression on Germany in late 29 and in the early 30s.  German industry had been booming and American investors were supplying them with plenty of money to operate with.  Exports were strong and things looked good for the new republic, and then the depression set in. Exports fell off as foreign customers cut down on their buying of German goods and then the decrease in earnings from thise exports caused a shortage of capital to buy imported materials to keep the factories running. The whole thing seemed to boomerang and millions of people were out of work.

I see parallels to the export failures of the Weimar Republic in our present day situation right here in America.  We constantly have a negative trade balance, which further robs us of money we could use here at home to put people back to work.  We have sent to much of our factories overseas, probably never to return, so what are the unemployed supposed to do for a living?  I guess they could participate in nonsensical stimulus projects that are being financed by incessant borrowing from foreign lenders.

In closing, stimulus money just masks the underlying problem of a decrepit industrial system that cannot compete with Chinese labor, but what do we do, we keep on subsidizing those sweat shops by importing boat loads of their wares. Even the great Chinese economy can be hurt by the recession and is being hurt by it.  I guess the last of the great spenders just cannot stuff anymore cheap junk under his mattress because he is full up with trinkets and other electronic status symbols and out of room.

[Velleity]

It is not a question of government spending but one of how it should be spent. 

Not really. You're looking at the wrong part of the picture here. It would be nice to get the most bang for the buck but the real concern is avoiding the depths of a liquidity trap. What you're doing with stimulus is replacing consumption lost by the drop in consumer spending. In other words you're replacing things like the demand for Big Macs, so how much of an issue is "how it should be spent?"

The only thing that is real is the production of goods and services. The rest of it is all just the interplay of the markets and it plays out in things like inflation, deflation, higher interest rates, lower interest rates, and so on. In other words it's just money and money can be created or destroyed at will. If you're not at full employment the lost production is gone forever. So why would you not do what you need to do to be at full employment?

Even the monetarists' own theories point to this proposition, which is half of the reason why there was rapprochement between monetarists and Keynesians in the '80s. It's true that monetary policy is more salutary than fiscal policy but when interest rates are below zero there is no real monetary policy options. Stimulus is the only game in town.

People don't seem to understand any more how serious and how severe the problem was. It's a tough sell to convince people that it would have been a lot worse but for the government action, but the facts are out there if you are to be objective.

To get to a sustainable recovery we have to get the employment numbers up. You're not going to get the employment numbers up until you get people consuming again. You're not going to get people consuming again until they are confident in their future ability to consume, meaning their prospects for income, home value, retirement account value, . . .

I hear a lot of talk about how people had no right to run up their debt based on their expectations. Like so much other "common wisdom" this doesn't cut it. People do have a right to expect that they will be employed and that they will be paid better as they become more productive. That, Ivan, is the natural course of things. "How it should be spent" is just hollow rhetoric.

[Observer]

This kind of out of control government spending has never worked in the past. It isn't working now. It will never work in the future.

"We have tried spending money. We are spending more than we have ever spent before and it does not work ... After eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!"
Henry Morgenthau
Treasury Secretary under FDR, after 2 terms of FDR's "New Deal".

Some people just never learn.

[Velleity]

This kind of out of control government spending has never worked in the past. It isn't working now. It will never work in the future.

"We have tried spending money. We are spending more than we have ever spent before and it does not work ... After eight years of this Administration we have just as much unemployment as when we started ... And an enormous debt to boot!"
Henry Morgenthau
Treasury Secretary under FDR, after 2 terms of FDR's "New Deal".

Some people just never learn.

 

So sayeth The Great Cockalorum.

Too bad your worthless and baseless opinion is just that.

[Observer]

Oh, that's right... I forgot.

Vel knows more about economics than Morgenthau did and most of the world's most learned economists know today.   

[ivanm]

Oh, that's right... I forgot.

Vel knows more about economics than Morgenthau did and most of the world's most learned economists know today.   

Have you noticed that when people do not agree with Vel's opinions then he responds by insulting their intelligence or attacking their character?   Why does he do such things?

[Observer]

He is what he is.

[ivanm]

He is what he is.

I contend that it does make a difference, relatively speaking, on what stimulus money is being used for.
Let's assume that it is merely enough to place more money into circulation in hopes that it creates more jobs.
That is easy to say if you have unlimited credit and cheap money with no obligation to ever repay it.

Party A takes its money and spends it on fluff and stuff such as Big Macs, the latest DVDs, and cheapo electronic gadgetry.  Party B does somewhat the same thing and lives it up.  

All is well, or is it?  Party A discovers that the roof is leaking and has no money to fix the roof and has no credit to get it done now and pay later.  So he and his family have to move out into other housing that he certainly cannot afford.  Those hamburger wrappers and the DVD players won't put a roof over their heads.

Party B has an old flivver that gulps gas and  finally breathes its last, so now he can't drive to his burger flipping job and has to quit.  But wow, that 300 dollar rock show ticket was well worth it?

Had party A the good sense to keep his home in good repair instead of blowing it in on burgers, and had party B taken care of his credit rating he could be still driving to work in a decent automobile.
But  wait, if the feds can simply borrow some more from the Chinese and hand it to them then there is no cause to worry. Why work or improve your skills when you have a nanny tit to suck on?

I think the same reasoning can be applied to the national economy and to government policy.  Once a country neglects the basics for too long then it can have one heck of a time getting back on its feet.
A lot of the pain is at state and local level where roads and bridges wear out, money for the bankrupt and ineffective public school system (K thru 12) grows short, and homeowners, who pay the lion's share of the school tax via real estate tax, go belly up and are forced out of their homes.  Does the school district give a hoot?  Apparently not as long as the numb nutted teachers get their raises and they can keep the yellow buses running.  The priority of government really sucks in my opinion.

This idea that we can continue to borrow indiscriminately from other countries doesn't ring true for me.
China, one of our biggest creditors, has its own needs and without our purchases it cannot continue to reap profits that can be lent back to us.   So here we are, over the credit barrel as well as over the oil barrel because our elected officials are too myopic to see the fallacy of their policies.

I just find it hard to believe that we can spend our way out of debt or back to prosperity, particularly when billions upon billions of dollars are being sent abroad to pay for imported oil and imported manufactured items. Where is the payback?  Some believe that the federal government is not subject to the same laws of economics that the private citizen is and yet history shows a number of countries that have gone belly up due to reckless spending and poor economic policy.  The Wiemar Republic comes to mind as does Greece in more recent time. Once a regime becomes financially broke it is vulnerable politically speaking and can be come politically bankrupt.

[ivanm]

So sayeth The Great Cockalorum.

Too bad your worthless and baseless opinion is just that.

Why the insults?  I don't think it was government stimulus spending that pulled us out of the Great Depression. The advent of WW II done a lot to save our broken economy as we spent a number of years making war materiel for our allied friends before we formally entered the war ourselves.
 
Sure we may have given the stuff away but did the American factory workers work for nothing? I think not. In many cases the defense jobs were the best paying jobs people had ever had.

[IM2]

The stimulus is not failing.  Unemployment has fallen from over 10 percent to 9 percent. Jobs have actually been created. And the only reason why it has not produced as you guys claim it should is because we did not inject enough money into the economy. IN fact if republicans had been more than the party of no, and had produced ideas that were not the same things that took used to this mess, maybe things would be better also. Instead republicans have tried sabotaging everything, and now they claim its only Obamas fault that things have not gone as they were predicted. Obama swore in with the hopes of working together with republicans and democrats to get things done. Instead that has not happened. And now we have a bunch of republican idiots on the internet talking about a failure.

One things is for certain, if we get republicans control of everything again, we will see economic failure.

Chicken Little said the sky was falling when it was not. And people believed that. The emperor was told that his clothes fit him well and looked great and he believed that. Yet he was naked. The little boy cried wolf and they believed that.

Many provisions of this stimulus package were phased in over a number of years. This was a long term plan, not some short term dyke fix. Perhaps you conservatives and fiscal conservative liberals need to understand this.

[Velleity]

Oh, that's right... I forgot.

Vel knows more about economics than Morgenthau did and most of the world's most learned economists know today.   

I know you're an idiot and that your think tank wanker bullshit is just that.

That's a lot more than you know.