Stimulus? Still a failure.

[badlydrawnjeff.livejournal.com]

The failure of the stimulus isn't exactly news, and hasn't been for some time. Thankfully, more and more people are getting on board.

For instance, it looks like we might not have needed it to begin with. Granted, since stimulus of this nature doesn't work, we never need it, but the justification for it isn't so strong anymore:

"We had to hit the ground running and do everything we could to prevent a second Great Depression," Obama told supporters last week.

...

IBD reviewed records of economic forecasts made just before Obama signed the stimulus bill into law, as well as economic data and monthly stimulus spending data from around that time, and reviews of the stimulus bill itself.

The conclusion is that in claiming to have staved off a Depression, the White House and its supporters seem to be engaging in a bit of historical revisionism.

...

The argument is often made that the recession turned out to be far worse than anyone knew at the time. But various indicators show that the economy had pretty much hit bottom at the end of 2008 — a month before President Obama took office.

Stanford's John Taylor showed us that tax credits and directed spending was fairly worthless:

Individuals and families largely saved the transfers and tax rebates. The federal government increased purchases, but by only an immaterial amount. State and local governments used the stimulus grants to reduce their net borrowing (largely by acquiring more financial assets) rather than to increase expenditures, and they shifted expenditures away from purchases toward transfers.

Some argue that the economy would have been worse off without these stimulus packages, but the results do not support that view.

Even Harvard's Robert Barro is on board to an extent. While he has yet to come around on the fact that stimulus has not ever been shown to work, he's at least noting that the merits of spending need to be more important than the stimulating impact:

"In the long run you have got to pay for it. The medium and long-run effect is definitely negative. You can't just keep borrowing forever. Eventually taxes are going to be higher, and that has a negative effect," he said.

"The lesson is you want government spending only if the programmes are really worth it in terms of the usual rate of return calculations. The usual kind of calculation, not some Keynesian thing. The fact that it really is worth it to have highways and education. Classic public finance, that's not macroeconomics."

With murmurings that we may need a second stimulus, the question remains as to why we'd pursue such a thing given the track record of the first. At this point, if you're still a proponent of Keynesian-style stimulus, why? What will it take to convince you that it will not succeed?

Comments

[underlankers.livejournal.com]

No, I'm simply using libertarian rationales that use the Gilded Age to prove that the 20th Century prosperity never happened.

Re: Remember: there were no tax cuts.

[telemann.livejournal.com]

Other Business Tax Cuts:

1. Advanced Energy Investment Credit (Sec. 1302, Page 231). This relates to properties designed to reduce greenhouse gas emissions, such as those that produce
energy from the sun, wind, geothermal deposits, fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric vehicles.

2. Tax Credits for Alternative Refueling Property (Sec. 1123, Page 211). This is a temporary increase for alternative fuel vehicle refueling businesses.

3. Work Opportunity Tax Credits for Hiring Unemployed Veterans and Disconnected Youth (Sec. 1221, Page 223). This is a tax credit to provide incentive to businesses to hire unemployed veterans and "disconnected youth." That latter term is defined, in part, as young adults "not readily employable by reason of lacking a sufficient number of basic skills."

4. Delayed Recognition of Certain Cancellation of Debt Income (Sec. 1231, Page 224).

5. Election to Accelerate Recognition of Historic AMT/R&D Credits (Sec. 1201, Page 220).

Grand total: 25.

In all, tax cuts amounted to about a third of the cost of the $862 billion stimulus over the next decade. The biggest ticket tax cut was the first one on the list, the Making Work Pay tax cut that is expected to cost the government about $116 billion over two years. Interestingly, the White House did not include the Alternative Minimum Tax patch, which has been extended annually for years. But that accounted for another $70 billion for one year. Together, those two items account for the lion's share of the tax cuts in the stimulus.

Which leads us to the question of whether all of these 25 qualify as tax cuts?

"In a way this reminds me of Clinton's 'It depends on what your meaning of is is' comments," said Rosanne Altshuler, director of the nonpartisan Tax Policy Center. "It depends on what you mean by tax cuts."

"These are all provisions that cut your taxes," she said, "but most of them are temporary," designed to stimulate a floundering economy.

Each of the tax provisions in the stimulus could have been broken into separate bills, said Bob Williams, also of the Tax Policy Center, and on their own could have rightly been billed as separate tax cuts.

"They packed an awful lot into that bill," Williams said. "I think it's fair to say that various tax provisions in the stimulus could be considered tax cuts. I don't think that's being deceptive."

We agree.

Re: And screw rocks!

[htpcl.livejournal.com]

Icon win, btw.

[xforge.livejournal.com]

Well of course tax cuts and credits cost less. But giving tax breaks to the megarich and to huge corporations does absolutely nothing to help anyone but the megarich and the shareholders and officers of the huge corporations, whereas sending money to build a new bridge to replace one that's falling down helps tons of people. The same money would help even MORE people if it went into public transportation and health care but don't EVEN get me started on THAT shit.

[xforge.livejournal.com]

If such a thing appeared in the US it wouldn't matter to me because I would drop dead from the shock.

[ddstory.livejournal.com]

How's that working IRL?

[telemann.livejournal.com]

Pretty good.

[badlydrawnjeff.livejournal.com]

So you're not actually willing to admit you're wrong. I'll file that away for later.

For the record, when I'm wrong, I admit it (http://talk-politics.livejournal.com/974227.html?thread=75939475#t75939475).

[badlydrawnjeff.livejournal.com]

What do you mean, "So they say?" The Republicans say that, the Democrats say that, everyone says it. Your selective skepticism is weird.

I'm skeptical period. I don't know how true any of it is.

Stimulus was a compromise with Republicans. Public option was a compromise with conservative Democrats, Lieberman, and an attempt at getting Republicans.

I disagree.

[nevermind6794.livejournal.com]

a.) Actually, the article says, "Monthly GDP, for example, stopped free-falling in December 2008, long before the stimulus kicked in, according to the National Bureau of Economic Research. (See nearby chart.)"

b.) Your article clearly shows that stimulus money was spent starting in April. And even if it hadn't been spent, it had been promised in the form of contracts.

c.) No, it is indicative of the point. The author doesn't know what he's talking about, or he's attempting to mislead with the "no money was spent yet" line. And you fell for it.

d.) Taylor says that the failure of various stimulus to increase purchases and expenditures is a flaw: "The federal government increased purchases, but by only an immaterial amount. State and local governments used the stimulus grants to reduce their net borrowing (largely by acquiring more financial assets) rather than to increase expenditures, and they shifted expenditures away from purchases toward transfers."

e.) You quoted his line that "Some argue that the economy would have been worse off without these stimulus packages, but the results do not support that view." His results are based on a model.

f.) Eh, sort of. I'll concede this one.

g.) He estimated fiscal multipliers using WWII spending, in which people were blown up and resources were actively withheld from the private sector, among other things. (http://online.wsj.com/article/SB123258618204604599.html) He used shoddy estimations to make bold claims about unemployment benefits. (http://www.fool.com/investing/general/2010/08/31/the-popular-lunacy-of-blaming-those-lazy-unemploye.aspx)

h.) No, you have unsubstantiated claims about history. You have no data.

[badlydrawnjeff.livejournal.com]

Tax credits are tax cuts, just as "fees" are taxes by those wary of the t-word.

Oh, so you're changing your tune now. No, tax credits are not tax cuts - they do not actually cut the rate of taxation. They have to be sought after by the person or group getting them. Big difference.

At least now you've stopped with the dishonest statement from earlier.

[nevermind6794.livejournal.com]

Actually, b.) should say "February," not April.

[underlankers.livejournal.com]

For the record, so do I, twice in one set of threads in fact:

http://talk-politics.livejournal.com/1072055.html?thread=85526967#t85526967

http://talk-politics.livejournal.com/1072055.html?thread=85533879#t85533879

So none of this about how I cannot say it either.

[nevermind6794.livejournal.com]

You disagree with what? That Snowe and Collins (and Specter, at the time) are Republicans? That abandoning the public option was an attempt to get more votes?

Re: Remember: there were no tax cuts.

[badlydrawnjeff.livejournal.com]

Credits! Deductions! No cuts! You proved my point last time with this.

[johnny9fingers.livejournal.com]

I'm afraid I'm going to have to ask you for more evidence here.

[underlankers.livejournal.com]

No, tax credits are tax cuts. The idea that seeking something out does not make it a cut is akin to saying that getting honey from a tree as opposed to a bee farmer makes the tree-honey not-honey.

[nevermind6794.livejournal.com]

Yeah, it's kind of an odd paper. Wouldn't be so bad on its own if people weren't using it like they are.

[badlydrawnjeff.livejournal.com]

Excellent. Now do so here.

Re: Remember: there were no tax cuts.

[telemann.livejournal.com]

Yeah, we know your history with words and semantics, Jeff. I mean even the Wall Street Journal described these as tax relief measures. So, go head, have fun way out there in fringe land.

[badlydrawnjeff.livejournal.com]

a) So what's your protest?

c) We disagree, then. You seem to think unspent money has a bigger impact than I do.

d) Okay. And what's the protest here, then?

e) Then I've made an error here.

h) If you say so. The Forgotten Man is still worth a read for you on this.

[badlydrawnjeff.livejournal.com]

That the stimulus or health care issues had anything to do with getting Republicans on board.

[badlydrawnjeff.livejournal.com]

The Post accepts the spin that they're cuts, but they're credits (http://www.washingtonpost.com/wp-dyn/content/graphic/2009/02/01/GR2009020100154.html). Most of the bill was spending.

[badlydrawnjeff.livejournal.com]

So what was the tax rate cut to in the stimulus?

Re: Remember: there were no tax cuts.

[badlydrawnjeff.livejournal.com]

Indeed, we do.