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

[badlydrawnjeff.livejournal.com]

So we need to keep doing what hasn't worked?

[hardblue.livejournal.com]

No, we need to stop what isn't working, namely, supply-side economics.

[telemann.livejournal.com]

Funny to me that half of the package was tax cuts, incentives, whatever you want to call them: but no Republicans are jumping up and down talking about the failure of that to create jobs.

[hardblue.livejournal.com]

LOL Love the Krugman icon.

No, I'm sure you will never hear Republicans speaking against the joys of tax cuts and as the cure for all that ails you. But keeping those Bush tax cuts, for instance, while a boon for the upper classes, has been a deadweight for the budget and the welfare of the working classes.

[telemann.livejournal.com]

David Brooks wrote a few days ago, the current GOP is not normal. (http://www.nytimes.com/2011/07/05/opinion/05brooks.html)

A normal Republican Party would seize the opportunity to put a long-term limit on the growth of government. It would seize the opportunity to put the country on a sound fiscal footing. It would seize the opportunity to do these things without putting any real crimp in economic growth.

The party is not being asked to raise marginal tax rates in a way that might pervert incentives. On the contrary, Republicans are merely being asked to close loopholes and eliminate tax expenditures that are themselves distortionary.

This, as I say, is the mother of all no-brainers.

But we can have no confidence that the Republicans will seize this opportunity. That’s because the Republican Party may no longer be a normal party. Over the past few years, it has been infected by a faction that is more of a psychological protest than a practical, governing alternative.

The members of this movement do not accept the logic of compromise, no matter how sweet the terms. If you ask them to raise taxes by an inch in order to cut government by a foot, they will say no. If you ask them to raise taxes by an inch to cut government by a yard, they will still say no.

The members of this movement do not accept the legitimacy of scholars and intellectual authorities. A thousand impartial experts may tell them that a default on the debt would have calamitous effects, far worse than raising tax revenues a bit. But the members of this movement refuse to believe it.

The members of this movement have no sense of moral decency. A nation makes a sacred pledge to pay the money back when it borrows money. But the members of this movement talk blandly of default and are willing to stain their nation’s honor.

The members of this movement have no economic theory worthy of the name. Economists have identified many factors that contribute to economic growth, ranging from the productivity of the work force to the share of private savings that is available for private investment. Tax levels matter, but they are far from the only or even the most important factor.

But to members of this movement, tax levels are everything. Members of this tendency have taken a small piece of economic policy and turned it into a sacred fixation. They are willing to cut education and research to preserve tax expenditures. Manufacturing employment is cratering even as output rises, but members of this movement somehow believe such problems can be addressed so long as they continue to worship their idol.

Over the past week, Democrats have stopped making concessions. They are coming to the conclusion that if the Republicans are fanatics then they better be fanatics, too.

If the debt ceiling talks fail, independents voters will see that Democrats were willing to compromise but Republicans were not. If responsible Republicans don’t take control, independents will conclude that Republican fanaticism caused this default. They will conclude that Republicans are not fit to govern.

And they will be right.

[xforge.livejournal.com]

*Hopefully* voters will finally notice Democrats are willing to compromise and Republicans aren't. Democrats have been lying around in the road with Republican tire tracks over their backs for long enough.

[telemann.livejournal.com]

In May, David Frumm was chiding the press and Obama for even *just suggesting* how bad it would be if the Congressional Republicans were going to the brink over the raising the debt ceiling, now Frumm is calling the current situation another "August 1914" and can't believe we're at this point. And oddly enough, Frumm blamed President Obama in way by his willingness to compromise with the worst elements of the GOP, has made things worse.

And he's pointed out Republicans apparently clueless about the effects of what a shut-down will be: and he said there's no doubt they'll be blamed for it because the GOP has branded itself as the anti-government party and will have achieved its goal. "Shut it down" has become a chant for some Tea Party folks. You know, the flag wavers and "God Bless American" types.

[xforge.livejournal.com]

And it doesn't even occur to them what happens when government closes down. People in Minnesota couldn't celebrate Independence Day at a public park, they were all closed. They don't think. At all.

[jlc20thmaine.livejournal.com]

What plan have we seen from the dems? nothing yet. They haven't even presented a budget in over 790 days. At least McConnell has called obama's bluff. I guess obama needed to go on vacation and take a break from golfing. Now that he's back let's see if he will meet with repubs.

[telemann.livejournal.com]

Pssst. It was Congress that was on recess. Ya know, just inserting facts here. Oh and speaking of facts? In his first year and a half as President, George W. Bush vacationed 96 days. Over that same time period, President Obama has taken 36 days.

[xforge.livejournal.com]

::ignores you and your idiotic "Democrats have done nothing" talking point::

Oh and after eight years of The Vacation President, who I personally saw you defending and saying "he's allowed to take some time off if he wants," for Christ's sake STFU about Obama going and having a fucking round of golf, Jesus Christ already.

[badlydrawnjeff.livejournal.com]

That would require the Democrats to, uh, be willing to compromise first.

[hardblue.livejournal.com]

Yeah, I loved that piece, too, but Republicans don't feel very chastened and have harshly rebuked Brooks. Those guys are playing hard and insist on going all the way. It's like they can taste blood and are going for the kill.

[telemann.livejournal.com]

Yeah, the right wing blogosphere and conservative talk radio lost its collective shit over that op-ed piece.

[jlc20thmaine.livejournal.com]

Turn down the volume on the liberal hyperbole, where every Republican in Congress secretly wants to destroy Social Security, and it is not hard to discover the position of the Grand Old Party. Over the last forty years, the federal government has taken in about eighteen percent of GDP in taxes and spent about twenty percent of GDP in outlays, so why not just keep doing that?

The Democratic position is that the federal government should take in more and spend more – just how much more depends on how far to the left any given Democrat is.

Final point. Take a closer look at the federal outlays line in the above graph and consider that, according to the CBO, 116 percent of the increase between 2011 and 2085 comes from “Medicare, Medicaid, CHIP, and Exchange Subsidies.” Spending outside federal health entitlements will effectively be cut (as a share of GDP) over the next seventy years. It’s health spending alone that keeps us rolling on down the road to serfdom. In other words: The Democrats just enacted comprehensive reform of the health care system, and still the federal government is on pace to redistribute better than one out of every three dollars our grandchildren earn.



http://www.weeklystandard.com/blogs/morning-jay-should-gop-agree-raise-taxes_576334.html

[telemann.livejournal.com]

Thanks for making Brook's point.

[underlankers.livejournal.com]

And of those last 40 years, 28 have seen Republican Administrations attempting to revert the USA of the 20th Century to the Gilded Age. If their attempts have indeed failed so much, we must conclude that 1) Republicans are stupid and useless, and cannot make anything of controlling the Presidency whatsoever, or 2) that the Democrats are the only serious political party in the USA. Either conclusion is bad for the viability of conservatism as an ideology. :)

[kylinrouge.livejournal.com]

where every Republican in Congress secretly wants to destroy Social Security

It's no secret.

[xforge.livejournal.com]

"Secretly?" They've said it. In plain English. Multiple times. At political rallies. In front of cameras. Fox News practically has its own half-hour show every night called the Destroy Social Security Progress Report.

[badlydrawnjeff.livejournal.com]

But we didn't try supply side economics to get out of this. We haven't done supply side in over 20 years.

[hardblue.livejournal.com]

If someone tells you that we haven't really tried a real stimulus, your reaction is probably similar to mine when told we haven't been doing supply-side economics. The Republicans' focus on tax relief for the wealthy, with the rationale that the economic good of that will trickle down to the general population, is the heart of supply-side economics.

[badlydrawnjeff.livejournal.com]

Sure, but that doesn't mean we've actually tried supply-side economics in a while. Meanwhile, this stimulus was pure Keynes.

[underlankers.livejournal.com]

And when we did do it, the result was a huge government and a humongous deficit.

[badlydrawnjeff.livejournal.com]

So hopefully we can accomplish it without growing those things.

[underlankers.livejournal.com]

Why did Reagan fail at it? The great champion of conservatism, except when he was selling the USA down the river to Dr. Mabuse-er Gorbachev. And he failed. Bush II created Homeland Security, which was entirely unnecessary and a massive expansion of coercive power. Why did he fail? Are GOP politicians drooling idiots or liars?