Agree. So, that old Obama is doing a good job after all, is he?
Real production is also a dependent variable of capacity, with changes in real production even more so. If there is spare capacity, both in terms of machines and the ability of workers to work longer hours, there is unlikely to be an increase for need for capacity and thus more hiring or the need for more investment without a substantial increase in demand.
A single successful product says nothing. There are winners and losers in all economic conditions. The increase in spending during this holiday season seems to indicate that American companies are making what people want to buy - once confidence is back.
Yes there is an oversupply of housing right now, thanks to Republican mismanagement and artificial demand pumped up by the investment banks push for higher yielding mortgage products. However there are also a large number of people pushed out of the housing market right now. If they have jobs again, the housing will recover in many (but not all) markets. I think Florida and Nevada are screwed for a while yet. Interestingly, Nevada, with no income tax, has always been held as a shining beacon of how to run a state economy. Perhaps a few too many people rushed in?
Exactly who is calling for stimulus to last forever?
Gee, we had all those things from 2000 - 2008. Sometimes it is hard to distinguish between a good business environment and letting business play with dynamite.
I don’t think interest rates should be raised immediately, no. The economy is too fragile. But that’s one of the problems with stimulus and expansionary monetary policy - it’s very hard to unwind the problems they create. Thus you wind up driving your economy off a cliff because you can never find a good time to tighten up and accept lower growth and allow necessary corrections to happen. That big deficit requires high growth rates to pay off, so when exactly are you supposed to put the brakes on?
It’s entirely possible that the real correction should have happened after the tech bubble burst in 1991, but instead of allowing a sharp recession and a recovery, the Bush Administration basically tried Keynesian solutions - tax cuts, spending increases, and a loose monetary policy. The result is a seven years of anemic growth and anemic job creation, the formation of a new bubble due to these policies, followed by an even bigger correction as reality once again tries to assert itself. And then governments respond with even looser monetary policy and bigger stimulus in an attempt to keep the whole rickety infrastructure moving ahead.
The problem is much worse now, because the U.S. has racked up so much debt that it’s losing the ability to raise interest rates without blowing up debt servicing costs, and because it’s run out of monetary bullets AND fiscal stimulus bullets. If the economy takes another downturn into a double-dip recession for whatever reason, it could get very bad.
Here’s the crux of the disconnect - you talk about ‘capacity’ as if it’s one thing - an economy has a ‘capacity’, and it has ‘demand’, and you need to shore up demand if you have excess capacity, or shrink your capacity. And indeed, that’s what Keynesianism is all about - manipulating aggregate measures, primarily by boosting demand during a recession when there is an oversupply of goods.
But thinking in aggregates like this misses the point to a certain degree. There isn’t one ‘capacity’. There are MANY capacities. There isn’t just one ‘demand’. There’s demand for many different things.
If you live in a town that makes only screwdrivers and you need a hammer, would you say that you have a demand problem or a supply problem? The answer is that it’s a nonsensical way to frame the issue. If you give me $1000 so I can buy 500 screwdrivers, I’m still not buying them. I need a damned hammer. If you give the screwdriver manufacturers tax breaks or bailouts to keep them going, it won’t matter. They’re still making useless items.
When an economy gets out of whack to the point where producers are making things no one wants, demand goes down and savings go up. The proper answer to that problem is to allow the producers to go out of business. Yes, I understand the problem that this puts more people out of work which can depress demand even further. But ultimately, your economy is not going to be healthy until you allow capital to move where it wants to go and stop bailing out failed ventures or over-supplied industries.
That might be true in terms of small consumer goods. I don’t think it’s necessarily true in terms of durable goods and real estate, or that business investment is being directed at what people want as opposed to where the government is trying to get it to go.
Oh, you just had to get a partisan shot in there. Just how did ‘Republican mismanagement’ cause the housing bubble? The Fed is independent, and Greenspan was chair of the fed during the Clinton administration as well. Fannie and Freddie were championed more by Democrats than by Republicans. Paul Krugman was totally in favor of Greenspan’s loose monetary policy, and in fact didn’t think Greenspan went far enough. So how is this the Republican’s fault?
Perhaps it would be recovering faster if the government had not propped up prices through stimulus, home buyer’s tax credits, and other manipulations.
Could be. There was a nationwide real-estate bubble, and Nevada was an attractive place to build. Low taxes and low regulations do not guarantee a perfect economy.
Paul Krugman is certainly very angry that the government isn’t engaging in another round of large stimulus, despite the fact that the recession ended several quarters ago. The White House budgets are assuming growth levels that suggest there will be no significant belt tightening any time soon.
But I’m not talking about another stimulus. I’m talking about the ANTI stimulus - you know, the one the government is supposed to apply during the good times, to pay of the stimulus that was needed during the recession? I’m talking about Bernanke’s plan to unwind all the extra capital he’s injected into the economy over two rounds of ‘quantitative easing’. I’m talking about raising interest rates for the specific purpose of shrinking the money supply and preventing inflation once the economy really does start roaring.
Getting the 70’s stagflation under control required double-digit interest rates and a forced recession. Do you think leaders today will have the stomach for that? Do you think the public will have an appetite for high interest and low growth for five years to correct for all the monetary expansion that’s gone on?
Sometimes it’s hard to distinguish between a good business environment and a sick economy being propped up by constant government interventions.
Perhaps you’d rather be like China which has seen a lot of growth? The downside is you’ll have to go back to a billion people (or whatever that translates to in proportion to the US population) being horribly poor.
The fact is we’re a mature economy, slow growth for the working class is inescapable. Tax cuts will save what growth is possible in this economy.
The second follows from the first how?
I thought that this went without saying. All the big economic concepts we talk about are made up of small decisions. Unemployment isn’t one thing either. No matter what we do to improve it, some segments will lag.
Shrinking capacity can be expensive. Certainly you don’t want to write off physical plant, when you may need it again. After the tech bubble companies wrote off billions of dollars of product in inventory and in the pipeline. This time inventory was much better controlled. The only way of reducing capacity now is to get rid of people, which is what happened.
Lack of demand has been pretty broad based. Can you think of a change in the economy’s product mix that suddenly made people stop buying? Or could it be a mixture of confidence and cash? Clothing did much better this year, and I haven’t read anything to indicate that this is the result of some major fashion trend. Do you have any real data to indicate retailers forgot and relearned what the public wants? It is somewhat fair to say this of car companies.
I only know of two industries bailed out - auto companies, which worked pretty well, and the financial sector, which hardly fits your model. Getting money to people isn’t supporting a specific industry. In any case, are you seriously saying that a person who lost his job or who has a job but has a mortgage that is eating up his income is not buying things because of product selection?
I’ve totally missed the government directing business investment. There have been calls for banks to free up credit, but I haven’t heard them want the banks to invest in any specific industries.
He was not in favor of Greenspan keeping it loose long after the need had gone away. Greenspan was clearly closer ideologically aligned to Bush than Clinton. Fannie and Freddie were not the root cause of the problem either. (At least you are not claiming it is making opportunity available to some poor people that was to blame, thanks for that.)
Home buyer tax credits got rid of a lot of inventory. Around here, average prices are rising again, not from an actual increase in prices but from the fact that the low priced foreclosed homes are getting harder to find, which raises the average selling price. In my neighborhood things have firmed up, and Krugman today says it looks like we’ve finally hit the bottom.
Yes - lots of land, low taxes, little regulation may lead to speculative building.
He is calling for more stimulus because the package that was passed wasn’t big enough to really do the job - which is what he said at the time. He isn’t saying stimulus forever. And while the recession is officially over, the growth of the economy is not big enough to replace the lost jobs anytime soon.
All absolutely necessary when the time comes. Tax increases also to help pay off the debt incurred.
We’ve got so much room that we won’t need to go to double digit interest rates to tame inflation.
Or a sick economy propped up not by government intervention but by government ignoring unsustainable financial practices.
Easy. If you have a country with a billion poor people and a rapidly growing middle class (that’s China, mind you), you have a rapidly growing market for consumer electronics, homes and cars. America’s middle class is not growing as fast as China’s. Demand for stuff is not exploding like it is in China. Slower growth in the U.S. is the only outcome from this.
No, they don’t.
But they do have sharks with laser beams mounted on them.
Actually, he might be right on this.
CNN
BBC
Both from 1998
Snopes(about carjacking in general in SA.)
I’ve searched around and haven’t found anything that says different.
It’s mentioned on several security/alarm sites.
Even checked The Onion.
Nonsense, this was a result of the Bush Tax Cuts…
COUGH
COUGH
GURGLE
Woah, the b.s. nearly came up and out that time…
I agree with this. Part of this has to do with the expansion in the 90s. I recall back then, work was everywhere. I worked at a hotel as an overnight manager. We were paying $14/hr in 1996. I STILL coudn’t get anyone to work for me. People didn’t want the job. They didn’t want to work overnights.
In 2003 our admins in sales offices were starting at 16/hr.
Now these same jobs are paying minimum wage of $8.25 in Illinois. AND you’re not getting 40 hours a week and you’re not getting benefits.
This was the problem. You had to pay a lot more, at least in the hotel industry, to get people. You also got a lot of deadwood.
This recession has cut out a lot of the deadwood. In the last hotel I worked in 9-11 cut a huge amount of the deadwood and the rest was cut by this recession.
So businesses are now operating with minimal staff working part time hours because workers are everywhere.
In the 90s the American workplace had to hire people at wages that were probably too high for the job. In my examples admins should’ve been making $10 or $11/hr, but they had to pay a lot more to get anyone.
So when the hard times hit, you had people in $16/hr jobs that were being overpaid suddenly and they got cut.
Even when they find work it’s not going to be at the same rate.
To compare unemployment you have to look at exact rates and hours. A $10/hr job at 40 hours is not the same as a newly created $9/hr job at 36 hours, though a lot of statistics show it as being so.
Even an salaried manager working 50 hr/week for $50,000 is not the same as a newly hired manager working 60 hr/week for $50,000.
Finally you have to understand, 15% of all high wage earners purchase about 40% of all high priced ticket items. (Over $1,000)
This means you can’t even rely on sales figures as the people who are buying large ticket items, which drive the economy, were never really hit by the recession. Indeed most people I know that kept their job and salary were only “inconvenienced” by this recession. It’s the ones that lost their jobs that got hit very hard.
It does not follow that, “The fact is we’re a mature economy, slow growth for the working class is inescapable.” What is a “mature economy”? There is an objective scientific definition for a mature forest, but not for a national economy. Economies are driven by, among other things, technological change, which is unpredictable and changes the game in unpredictable ways. One might have called America a “mature economy” at any time in our past when growth seemed to have slowed for the moment.
In any case, “growth for the working class” would be, “the working class getting nearer to a middle-class standard of living.” There’s still quite a ways to go there! Look around you. Which means there is demand. Which demand would explode into consumer spending if the means of the working class were increased – just as it has many times in the past, regardless of why their means were increased.
The real differences between now and more fortunate times past are: (1) Demand for exported American goods has declined, because now we have competition from so many more manufacturing countries. (2) Exporting “American goods,” even when you can do it, no longer benefits Americans the way it once did, because so many of the actual manufacturing jobs have been outsourced to the Third World.
Can we buy those here?! 
You mean 2001, right? Can’t blame Bush the Elder for this one.
I doubt Bush was operating from a Keynseian perspective, since his financial policy was clearly not chosen to be most effective from that point of view. It is a bit unfair to claim all deficit spending is Keynesian - that would make Reagan the biggest Keynseian ever. Based on the claims at the time, the tax cuts were supposed to generate additional revenue, not additional deficits. The unfunded wars and the unfunded Medicare mandate had effects also.
And I quite agree that part of our problem now is that increasing deficits during times of relative prosperity limits our freedom of movement today.
Unemployment extensions are funded by the US Treasury, not by unemployment insurance premiums.
Considering that state unemployment insurance coffers are extremely low right now, cutting premiums is about the worst imaginable idea.
Honestly, almost everything you propose is guaranteed to produce the opposite effects from the ones you suggest. I mean, really… cutting taxes to reduce the deficit? A third grader can see the problem with that line of thinking.
Paraphrasing Groucho in his stint as a politician. around 2001-2002.
“A third grade child can see the problem with that. Run out and get me a third grade child, the guy in the White House now can’t.”
The US median wage fell over the course of the 2000s, the first time in history that it has done that. And it hasn’t moved much since 1980. Meanwhile the top 1% have more than doubled their share of the national income since 1980. And why did Bush have the worst job creation record of any modern President after cutting taxes to their lowest level? Where are all the jobs these tax cuts are supposed to create?
Yes of course. Adding on deficits until you get the number you want to make your case and then claiming that there’s nothing wrong with doing that is exactly the sort of thing we’ve come to expect from you.
And with your history of endless dissembling and parroting of right wing think tank nonsense and presenting it as fact then yes, I’m going to go with what actual credentialled economists say about the Canadian economy versus your claims.