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

[peamasii.livejournal.com]

The stock market would have to give back the 50%+ growth it has enjoyed since the stimulus program. We can discuss our feelings about the US constitution and such, but the reality is that capitalism rock-and-rolls.

[kylinrouge.livejournal.com]

That's the problem with these people. Record corporate growths? Massive growth in stock market? Nah, stimulus had nothing to do with that, that was all natural market forces from our ~free market~.

The idea of 'do nothing, the market will correct itself' has zero evidence to back that up.

[kylinrouge.livejournal.com]

Bank profits and corporate growth can help individuals, but they're not the ones that can make the most use out of extra money. Those would be the poor and middle class.

Re: I hope you understand why I specified banks.

[kylinrouge.livejournal.com]

If you think the stimulus didn't have clearly defined benefits for corporations then you are blind.

Re: I hope you understand why I specified banks.

[kylinrouge.livejournal.com]

It was more of addressing the contention that the stimulus 'did nothing'. Whether or not corporate growth and CEO benefits are indicators of a good stimulus or a healthy economy are not topics that I addressed.

Re: I hope you understand why I specified banks.

[kylinrouge.livejournal.com]

Dodge an argument that I never made? Very nice.

Re: I hope you understand why I specified banks.

[kylinrouge.livejournal.com]

No.

Re: I hope you understand why I specified banks.

[kylinrouge.livejournal.com]

My point was a criticism against the people who claim the stimulus did nothing. I think this is the third time I've said that?

Re: I hope you understand why I specified banks.

[kylinrouge.livejournal.com]

They said it failed. As in, it didn't do what it set out to do, which it did. If they think natural market forces are responsible for the things the stimulus claimed to have done, then the stimulus must have done nothing.