talkpolitics | Stimulus? Still a failure.

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?

Flat | Top-Level Comments Only

OK, General Ripper.

Here is the thing; you just spent 40+ posts talking about semantics when you could have stated that you don't see a difference between them. Then you'd have spent the time arguing about the effective differences as it relates to macro-economics. An argument I'm sure Jeff would have rathered.

I'm fairly sure he wouldn't as he's yet to answer any direct questions I ask him. You and Gunslnger will, and I give you credit for that.

That there's really only been one substantive reply to this in nearly 200 comments is both telling and predictable.

(deleted comment)

'Here's the thing; you guys constantly bring up the difference between marginal and effective tax rates when it is politically advantageous'

Because people keep bringing up marginal rates as if raising them won't have a negative effect with them citing the past higher marginal rates. It's beneficial to cite the effective rates because that's what they want to affect.

I'm just going to create some numbers to ilustrate the point. If in the top bracket was 72% and the effective was 35% back in the day, while today it is 36% and the effective is 25%. Saying we ought to double it because it used to be double and everything was okay back then is specious. If you were to double that effective rate you have a much higher tax burden than you did back then. So yea, it's important to bring up how effective rates were different back then.

For policy, effective is much more important than a marginal rate.

And Reagan wasn't a socialist because of his ideology.. not his tax rates.

'The fact of the matter is that the stimulus lowered the effective tax burden on a lot of people/business and you refuse to accept that. '

Tax credits are different than marginal tax rates in that they change every year and are so myriad that a business can't predict its tax burden effectively year to year. Tax rates are just easier to chart. So tax credits are a weak attempt at lowering taxes for positive effect.

Deductions way more than tax credits were the name back in Reagan's day.

'Interestingly enough, we could do a lot to helping solve bond market instability by raising revenues.'

And not bailing out GM.

Stimulus? Still a failure.

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