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

[hardblue.livejournal.com]

Financiers and capitalists are stimulated enough, over-stimulated, and some of that wealth needs to go to workers and cities.

[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.

[xforge.livejournal.com]

The only things about the stimulus that were a failure, were that it wasn't anywhere near big enough, it wasn't administered very well, and it contained too many tax cuts for rich people and corporations.

[ddstory.livejournal.com]

It contained no strings attached, and no proper guideline for being enforced. It's like pouring milk into a bucket without having sealed all the holes at the bottom of said bucket. And then wondering why it's going empty.

[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]

:nod: Yeah this is true. I sometimes wonder of Obama, Reid and Pelosi aren't Republican shadow agents.

[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.

[ddstory.livejournal.com]

Obama got bought by Wallstreet the moment it became clear that he would be the Democratic candidate.

[johnny9fingers.livejournal.com]

The spending should have been, according to Keynes, on infrastructure and capital projects which generated employment: not tax cuts.

[xforge.livejournal.com]

Yup. I still think it's such a laugh when people call him anti-business, anti-bank, anti-corporations or anti-Wall Street when he's got half of Wall Street on his payroll.

[xforge.livejournal.com]

^^ This

[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]

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.

[johnny9fingers.livejournal.com]

Sorry, not merely tax cuts.

As it happens, there's a certain motor manufacturer which appears to be have been sold off a bit too cheaply and rather too early, given that it got turned around thanks to a public bailout.

[telemann.livejournal.com]

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

[paedraggaidin.livejournal.com]

Nah, they're just all of them utterly clueless about economics, the budget, and money in general. Funny, for people who are almost universally wealthy.

[malakh-abaddon.livejournal.com]

Yeah the bailout was a flop, in terms of the goals it was intended to achieve. If another bailout is handed down, is should be x amount of dollars paid to every legal citizen who filed their taxes, and made under $150,000 last year. That x amount of dollars will need to be more than $500, which is taxed at the end of the year, it would need to be in the tens of thousands of dollars, with the stipulation that the bail out funds be used for paying debts, starting with mortgages, vehicle loans, college loans, credit cards, liens and judgements, etc, with the rest of the money (if bail out recipient has little or no debt) to be used at their discretion for whatever they need or want. If you currently owe taxes to either the state or federal government, the money owed will be taken from this bailout.

[telemann.livejournal.com]

I think you're confusing the TARP funds with the stimulus package. There was a congressional oversight mandated in the stimulus package.

[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.

[xforge.livejournal.com]

^^ Not this = )

[the-rukh.livejournal.com]

Most real regulation had to get stripped before Republicans would ever let it pass. Of course they're screeching and howling now about how it hasn't helped.

[xforge.livejournal.com]

As they always do. Even if they let a Democratic program or reform get through, they make sure it's had its balls chopped off cleanly before it passes so that they can then say "See? Government does not work. Now elect me to another term so I can continue to make sure government does not work."