Economic Craziness from the Democrats

[erez]

@Left_Hand_of_Dorkness

I’m sick and goddamn tired of this idiotic Republican idea that, because there are abuses in New York City by the union, teachers everywhere are selfish fat cats.

I’m earning about $33,000 a year. A 5% tax cut will knock that down by about $1,700. That’s huge for me. I’ve had two years of complete pay freezes: not only no cost-of-living raises, but also they’ve canceled the raises we were supposed to get for experience, the ones I counted on when starting a family.

There is no reason to talk about the NYC, we can talk about the averages.

You did what the teachers always love do when they complain about how underpaid they are: talk about their yearly base wages only. That’s fine, let’s start here. On average, teachers in every single state in the U.S. make more than $33,000 (http://www.aft.org/pdfs/teachers/salarysurvey07.pdf). Do you live in a state with a low cost of living or are you new to the profession? Do you have a master’s degree? Is your degree in a high-need subject, such as math, or is it a liberal arts degree? Teacher unions hate pay-for-performance and love pay-for-seniority, so if you are a good new teacher, I hope you are fighting against them.

How many days per year do you work? According to the BLS, the average teacher worked 1,405 scheduled hours per year (http://www.bls.gov/ncs/ocs/sp/nctb1350.pdf) vs. 2,047 hours in the private industry (http://www.bls.gov/ncs/ocs/sp/nctb1347.pdf), a 45% difference. Another BLS survey shows that teachers report 10% more time spent working at home than others (http://www.bls.gov/opub/mlr/2008/03/art4full.pdf), which lowers the gap to 32% (they report the same amount of time as others engaging in household, leisure and sports activities activities and were able to hold multiple jobs more often than others, though). In addition, note that the working time for college-educated professionals in the private sector is higher than for low-income workers, which increases the gap.

What will be your pension? “Employers contribute 40 percent less to the retirement package at comparable private-sector jobs, according to Labor Department data.” (http://www.chicagotribune.com/news/opinion/editorials/ct-edit-teacherpay-20100722,0,150775.story). “…employer contribution rates for public school teachers are a larger percentage of earnings than for private-sector professionals and managers, whether or not we take account of teacher coverage under Social Security. In addition, the BLS data show that the contribution rate for teachers is clearly trending upward.” (http://educationnext.org/teacher-retirement-benefits/)

What is your expected retirement age as compared to workers in the private sector? “U.S. Department of Education data show a median retirement age for public school teachers of 58 years, compared to about 62 for the labor force as a whole.” (http://educationnext.org/teacher-retirement-benefits/)

What are your health benefits and how do they compare to the health benefits in the private sector? Even the NEA admits that they are better for the teachers. Some teachers even get health insurance when they retire.

How many days of sick leave do you get? Are they cumulative? “According to a recent U.S. Department of Education survey, during the 1999-2000 school year, 5.2 percent of teachers were absent on any given day on average.” “The Bureau of Labor Statistics reports that the absentee rate for managerial and professional employees is just 1.7 percent of annual hours.” (http://educationnext.org/fringebenefits/)

Do you need to travel out of town? Many private-sector jobs do require travel.

Are you on-call during your time out of school? As you might be aware, a growing number of private-sector workers are.

Teachers have much higher job security than others. It is very difficult to fire poor teachers. The notion of tenure should only apply to the post-secondary level of education. “Studies of the frequency of public school dismissals have consistently found that significantly less than 1 percent of teachers are dismissed each year.” (New Initiatives - National Center for Education Statistics (NCES) Symposium on Data Issues in Teacher Supply and Demand - March 26, 2007). "According to Public Agenda, 78 percent of teachers nationwide report that there are at least a few teachers in their school who “fail to do a good job and are simply going through the motions.” The same Public Agenda study quoted one New Jersey union representative: “I’ve gone in and defended teachers who shouldn’t even be pumping gas.” " (http://educationnext.org/strikephobia/)

Once you add up these factors, you’ll start getting closer to the total compensation, and only then you’ll be able to compare yourself to other professions and complain about how underpaid you are.

[SteveG1]

@Sam_Stone

Of course, the moral message to you is that you’re a sucker for having been cautious and careful with your money. You should go out and speculate, comfortable in the knowledge that if the market takes off, you’ll do better than your neighbors. If the market tanks, well, your neighbors have a responsibility to bail you out. It’s only fair.

Gee. Just like, in one form or another, over the years,

airlines
car manufacturers
pharmaceuticals
Wall Street
AIG
Goldman Sachs

Any others?

We protected and/or bailed THEM out over the years, so why not a few more? Or does it only apply to the big shots who lobbied or paid off the right politicians?

So yes, why not? We bail out the crooks all the time, don’t we? It’s only fair.

[Lantern]

Sam Stone,
You seem to be cherry-picking papers which you think support your view without even bothering to understand exactly what they are saying or their limitations. Let me take two of them: the Romer/Romer paper and the Rheinhart/Rogoff paper:

Here is a good discussionof the former:

The Romers did this by compiling an exhaustive narrative of tax changes over the past six decades, and separating them into two main categories: endogenous (that is, motivated by a desire to stimulate a faltering economy or pay for planned increases in spending) and exogenous (“any tax change not motivated by a desire to return output growth to normal”). The effects of endogenous tax changes are especially hard to disentangle from other economic factors, their reasoning went, so they focused on exogenous tax changes and found a pretty substantial—as much as 3-to-1—negative impact on GDP from tax hikes and positive impact from tax cuts. The one exception: Tax increases explicitly intended to reduce a budget deficit didn’t have much of a negative effect. The Romers also found a 2.1-to-1 impact for tax changes intended to counter a slowdown, but expressed very little confidence in that number—for the reasons expressed above and also because there just haven’t been many such tax cuts in recent decades.

So basically the paper doesn’t find a significant impact for tax increases to reduce deficits and their methodology is focussed on “exogenous” changes and doesn’t have much to say about tax cuts in response to a recession. Also at the end of the paper they state that the issue of “omitted variables” which leads to tax changes having a big impact on output could easily apply to changes in government spending as well so the paper really doesn’t address the relative merits of tax cuts versus spending in a fiscal stimulus. Let me also note that in the internal debate within the Obama administration Romer was very much on the side of a bigger stimulus.

Next the Rheinhart/Rogoff paper. Here the problemis simple. The data points from the US economy with more than 90% debt and low growth are all based on the immediate years after WW2. Not only is it a very small set of data points but it is a complete unique situation with very little relevance to the present: you had a huge debt because of the world war and also a massive demobilization of the war economy which naturally led to a decline in GDP growth for a few years. Extrapolating from this very limited and unique sample to a general rule that 90%+ debt/gdp reduces growth is extremely far-fetched.

The paper has data on other countries but really when it comes to borrowing capacity the US is sui generis. No other country has remotely the same capacity to borrow especially in its own currency as the US. The very fact that the US is able to borrow enormous amounts at very low rates of interest is a testament to that. So at best RR provide some evidence that the 90% threshold is a serious problem for smaller, more vulnerable economies. Even that is debatable since the paper doesn’t address the issue of causality which possibly goes from low growth to high debt rather than the reverse.

[Sam_Stone]

Lantern: I both read the papers and understand them. In another thread last week I discussed the Romer/Romer paper, including the difference between endogenous and exogenous tax changes and the different result when taxes are applied to deficits instead of just being spent.

The thing is, that’s not what’s happening here, is it? The 400 billion in tax increases from the expiration of the Bush tax cuts on the rich are not being applied to the deficit - they’re going to pay for programs like this 26 billion dollar ‘stimulus’.

As for not having much to say about tax changes in response to a recession - I think you miss their point there. They’re not saying there’s something special about ‘exogenous’ tax changes - they just broke them out for methodological purposes, because as you say, endogenous tax changes are entangled with all kinds of other effects which makes it hard to sort out the effect of the tax itself.

Another fact about the paper is that the result was very robust, surviving all kinds of robustness tests.

And I’m afraid the Romer paper further validates the anti-Keynesian point of view in that it shows that deficit reduction is apparently important enough that you can increase taxes for deficit reduction and not see the growth-limiting effects of the tax. The paper doesn’t really address this in detail, but I thought it was a striking finding that perhaps suggests that raising deficits to pay for fiscal stimulus might have negative effects that outweigh in whole or in part the benefit of the stimulus. It suggests that deficits are a significant drag on the economy, which again is a similar result to the other papers I listed.

As for the other paper, you’re saying that data from the WWII era is too old to be useful? That’s funny, because the Keynesians constantly use the depression as their major example of how fiscal stimulus can work to end recessions. Are you saying that the Great Depression should not be used at all as data for fiscal policy today, or does that squeamishness to use old data only apply to data which runs counter to the policies you want to implement today?

And one of the risks of the extensive borrowing the U.S. is doing is that it may cause the U.S. to lose its sui generis debt-carrying capability. There is already lots of talk of dropping the dollar as the world reserve currency. If the U.S. debt load gets too high, or the Fed does a little too much QE, or the government tries to inflate its way out of debt, the U.S. could find itself losing its special status that gives it so much advantage.

And if you think I’m cherry-picking, perhaps you can link to some similarly peer-reviewed papers which find strong effects from the fiscal stimulus? The only one I know of that showed a positive result from the overall countercyclical financial policies attributed most of the effect to TARP, the tax cuts, and QE, and found the spending component to be largely ineffective or even negative in effect.

[gonzomax]

@Sam_Stone

@Lantern

Your source says: “The Senate broke a Republican filibuster Wednesday to clear passage for a $26 billion state aid bill to help avert the layoffs of 140,000 teachers.”
So it’s about preventing layoffs and not propping up the salaries of teachers. Helping state governments prevent crippling spending cuts during a recession is in general an excellent policy and one of the best types of fiscal stimulus.

That site says that, but other sites say it’s to maintain teacher salaries.

I think it comes down to how you want to define it. If there’s a shortfall of X billion dollars, you can pay for it either by cutting salaries or laying off people. Of course, the political class and the unions have a vested interest in saying that the result will be layoffs, because those affect the public whereas cuts in salaries don’t.

What I find outrageous is that, in a time when most private sector workers have been taking pay cuts and furloughs, and the unemployment rate is near 10%, teachers in some states are still getting significant pay raises. I work for one of the largest companies around, and we’ve been under a pay freeze for two years now, and American employees had to take four weeks of mandatory unpaid furlough last year. That’s the norm for the private sector. But in the government sector, pay raises are still being rolled out and the rate of layoffs has been a fraction of what it is in the private sector.

This is the typical way that governments defy the will of the people. In response to demands to cut the budget, several states have started furloughing police officers and firefighters - not coincidentally, the two types of service that the public says they want the most. They’re not cutting the salaries in the bureaucracy or stopping programs to buy expensive art for public buildings or anything like that. Oh no, if you want us to cut the budget, we’re going to fire your teachers and furlough your cops and firemen. So there.

And frankly, perhaps some teachers should be laid off. If they’re being paid with borrowed money, it’s certainly not clear to me that teachers should go to the head of the queue while other people will have their taxes raised in January to pay for it. The government would probably have a more effective stimulus plan if it simply took the 26 billion and used it to extend the Bush tax cuts further.

More Government Workers Face Pay Cuts, Not Furloughs The government sector is taking pay cuts. Starting teachers are getting practically nothing , they are lucky if they find a teaching job at all.
Every election cycle politicians talk about how teachers are so under paid. Right after the election they try to fire as many as they can while cutting wages.

[Robot_Arm]

@Sam_Stone

The thing is, that’s not what’s happening here, is it? The 400 billion in tax increases from the expiration of the Bush tax cuts on the rich are not being applied to the deficit - they’re going to pay for programs like this 26 billion dollar ‘stimulus’.

And the other 374 billion?

As for the other paper, you’re saying that data from the WWII era is too old to be useful?

Lantern didn’t say a single word about it being too old. His objection (one of them, anyway) was “not only is it a very small set of data points but it is a complete unique situation with very little relevance to the present:…”

[Sam_Stone]

“very little relevence to the present” == “too old”, does it not? In any event, you’re picking nits. Whether it’s age or something else, he’s saying that the economic situation was too different then to give us valuable lessons today. It seems to me that by that logic, the Great Depression cannot be used as an example for fiscal stimulus today.

And the other 374 billion?

The 400 billion figure was over 10 years. The 26 billion stimulus is just this year, and is just one of a number of smaller ‘stimulus’ programs that have been enacted in the last year. The home tax credit and ‘Cash for Clunkers’, for example. And Congress is talking about more stimulus.

[Robot_Arm]

@Sam_Stone

“very little relevence to the present” == “too old”, does it not?

No.

[Bosstone]

@Sam_Stone

“very little relevence to the present” == “too old”, does it not?

If England today announced an alliance with Iran in declaring war on the US, our policies regarding England that were in place yesterday would have very little relevance to the present.

[Lantern]

@Sam_Stone

The thing is, that’s not what’s happening here, is it? The 400 billion in tax increases from the expiration of the Bush tax cuts on the rich are not being applied to the deficit - they’re going to pay for programs like this 26 billion dollar ‘stimulus’.

Do I really have to comment on the ridiculousness of this? What’s the 400 billion going to do once you subtract the 26 billion. Isn’t it obvious it’s going to reduce the deficit especially since it is going to increase revenue in future years as well. This tax increase is exactly of the kind which the Romer paper says doesn’t have a significant negative impact and may even have a positive impact because of lowering long-term interest rates.

Another fact about the paper is that the result was very robust, surviving all kinds of robustness tests.

Yes but robust results which don’t say what want aren’t of much use, are they?

And I’m afraid the Romer paper further validates the anti-Keynesian point of view in that it shows that deficit reduction is apparently important enough that you can increase taxes for deficit reduction and not see the growth-limiting effects of the tax. The paper doesn’t really address this in detail, but I thought it was a striking finding that perhaps suggests that raising deficits to pay for fiscal stimulus might have negative effects that outweigh in whole or in part the benefit of the stimulus.

I am honestly confused about what you are trying to say here since it doesn’t make any sense. The second sentence doesn’t follow from the first. The Romer paper emphatically doesn’t say that defict-financed stimulus during a recession is a bad policy. It doesn’t even say that tax cuts are better than government spending in a fiscal stimulus. Let’s leave aside the issue that the Bush tax cuts have had a far bigger impact on the deficit than Obama’s discretionary fiscal stimulus.

As for the other paper, you’re saying that data from the WWII era is too old to be useful?

No, I explained exactly why the handful of 90%+ US data points in RR are of little use. It’s not got anything to do with being old, it’s that they coincide with massive demobilization of a war economy which was always going to lead to a decline of GDP growth during the transition. The causal link isn’t from high debt to declining growth. The debt was created by the war and the declining growth was created by the demobilization from war. Not remotely relevant to the current economic situation in the US.

And one of the risks of the extensive borrowing the U.S. is doing is that it may cause the U.S. to lose its sui generis debt-carrying capability.

And there will be sharp increase in long-term interest rates if that happens. In fact since markets are forward-looking there will be sharp-increase in long-term rates merely in anticipation of this but nothing of the kind has happened. So let’s worry about this when long-term interest rates rise, shall we, and in the meantime focus on

[gonzomax]

@Evil_Captor

@gonzomax

When Clinton ,a Democrat, was president, we had a balanced budget and high employment. We did not have wars. We had reasonable taxation.
What did Bush do different? All of it . How did that work out?
Obama has been forced to implement programs to save the financial system and banks . He has attempted to create jobs. Why did he have to do that? See above, Bush. fucked it all up and we will pay for a long time.

Well it was during Clintons’ Administration that Glass-Steagal was repealed. It was his one major economic mistake, and frankly, it wasn’t exactly Clintons’ initiative, it was his “triangulation” strategy to work with the Republicans, who were hot for the repeal to appease their moneyed masters. Plus, of course, they don’t like regulation.

It’s an important lesson, really … just because a measure appeals to the center, that doesn’t make it a good idea. In this instance, it was a horrifically bad idea. Which we have not yet corrected. :smack:

Glass /Steagal was killed by Phil Gramm ,Republican, economic advisor to McCain’s campaign, who pushed it through in the middle of the night during a lame duck session. Clinton did sign it though.

[Lantern]

That should be “focus on the present economy” at the end of my last post.

@Sam_Stone

The 400 billion figure was over 10 years. The 26 billion stimulus is just this year, and is just one of a number of smaller ‘stimulus’ programs that have been enacted in the last year. The home tax credit and ‘Cash for Clunkers’, for example. And Congress is talking about more stimulus.

In the context of the Romer paper those other programs are clearly spending proposals that have already been enacted and would exist regardless of the Bush tax repeal. They would be part of the “inherited budget deficit”. IOW repealing some the Bush tax cuts is exactly the kind of tax increase which their paper clearly says doesn’t have a negative impact on the economy.

[Sam_Stone]

Only if those tax cuts truly result in a deficit reduction. If the revenue just gives Democrats more leverage for enacting new spending, then that’s not the case.

But the larger point is that the paper seems to implicitly state that big deficits are a major drag on the economy, and that this is a new finding. If so, should it not have an effect on Keynesian models that use borrowed money to stimulate demand? The paper indicates that reducing the deficit will have a big enough positive effect to offset the negative effect of the tax increase. If that’s the case, then increasing the deficit to pay for fiscal stimulus will also assert a drag on the economy.

As for not using the data after WWII, clearly we’re not talking about just the age of the data, but the fact that the economy then was very different. That should equally apply to the case for fiscal stimulus. Some of us pointed out during the stimulus debate that the economy of the depression-era US was very different. For one thing, labor was more fungible. For another, there weren’t a bunch of extant social programs already looking after the worst-hit people. For yet another, there wasn’t already a gigantic structural debt and a budget forecast of ever-increasing deficits as entitlement programs explode. But all of those objections were hand-waved away, and the New Deal was held up as a perfectly valid example of how stimulus works. But now when the data from the same general era suggests that stimulus spending doesn’t work as well as you’d think, suddenly you’ve got all kinds of objections using the same logic the anti-stimulus people used.

[Snowboarder_Bo]

@Sam_Stone

Great. Because if you’d chosen that career, you’d probably be completely unemployed. Marketing is one of the industries that’s been hit hard.

You have an attitude of real entitlement. You scrimped and saved to go through college, so damn it, you DESERVE your job and pay raise. I’ve got news for you: the same can be said for everyone who lost their jobs in this recession. What makes you special?

I chose this quote because it’s a stellar example of complete disconnect. This is <something something> at it’s finest, in that statement right there.

Entitlement doesn’t occur because people worked for something. That’s “earning” something.

This is a pathetic attempt to smear or deride an opponent, and it’s not even using the term correctly.

[MrK]

Once you add up these factors, you’ll start getting closer to the total compensation, and only then you’ll be able to compare yourself to other professions and complain about how underpaid you are.

So erez, why aren’t all those under-compensated professionals from the private sector rushing in to become teachers? How much would it take for you to leave your job to make a difference in a child’s life?

[magellan01]

@Left_Hand_of_Dorkness

What’s your cite for teachers making above-average incomes? And are you comparing apples to apples–that is, comparing teacher incomes to folks with equivalent seniority in their professions and with equivalent educational backgrounds? Because from where I stand, I’d freakin’ love to be making an income equal to what I got in my first job out of college twelve years ago, when I was writing material for an Internet marketing company.

Your problem with the mortgage bill seems to be that it rewards bad behavior. While I’m not close to being underwater with my mortgage (we bought a house far less than what the credit union said we could afford, and we bought a nasty-looking filthy house that we had to clean up largely because its filthiness was depressing the price into our range), I’m pretty okay with my tax dollars going to forgive mortgages, if that’s what it’s going to take to get other people back on their feet so they can get back to paying more taxes so I can, y’know, finally get a freakin’ raise.

How about instead of rewarding bad behavior, they reward good behavior. I don’t know, maybe give You that money so you can spend it wisely like you did previously. Rewarding bad behavior will just beget more bad behavior.

[Evil_Captor]

@gonzomax

@Evil_Captor

Well it was during Clintons’ Administration that Glass-Steagal was repealed. It was his one major economic mistake, and frankly, it wasn’t exactly Clintons’ initiative, it was his “triangulation” strategy to work with the Republicans, who were hot for the repeal to appease their moneyed masters. Plus, of course, they don’t like regulation.

It’s an important lesson, really … just because a measure appeals to the center, that doesn’t make it a good idea. In this instance, it was a horrifically bad idea. Which we have not yet corrected. :smack:

Glass /Steagal was killed by Phil Gramm ,Republican, economic advisor to McCain’s campaign, who pushed it through in the middle of the night during a lame duck session. Clinton did sign it though.

Thanks for the additional info, but it pretty much supports my statement that Republicans, led by Phil Gramm, supported the repeal of Glass-Steagal, and Clinton went along with it. He did not go along with it because he was a lame duck, lame ducks can still veto, he signed it presumably as part of his “triangulation” strategy to stay in the center, though I confess I’m not absolutely certain that was his motive in this instance, it was just his general approach during his administration.

[gonzomax]

He signed it because of the tremendous pressure that the financial lobbyists, bankers and goofy republicans/libertarians were exerting at that time. The idea was that regulation was unneeded because markets are self regulating and will always do the right thing. I argued with many on this board over that retarded mantra. Greenspan was a god who could do no wrong. He was totally fucking everything up. But his disciples are still near the power reins . They should have been unceremoniously purged. It would have been difficult for any one to stand up to the power of money at that time. I believe Clinton actually bought much of it. If it were true, it would simplify governance.

[Robot_Arm]

@Lantern

Next the Rheinhart/Rogoff paper. Here the problemis simple. The data points from the US economy with more than 90% debt and low growth are all based on the immediate years after WW2. Not only is it a very small set of data points but it is a complete unique situation with very little relevance to the present: you had a huge debt because of the world war and also a massive demobilization of the war economy which naturally led to a decline in GDP growth for a few years. Extrapolating from this very limited and unique sample to a general rule that 90%+ debt/gdp reduces growth is extremely far-fetched.

@Sam_Stone

As for the other paper, you’re saying that data from the WWII era is too old to be useful?

@Robot_Arm

Lantern didn’t say a single word about it being too old.

@Sam_Stone

“very little relevence to the present” == “too old”, does it not?

@Lantern

No, I explained exactly why the handful of 90%+ US data points in RR are of little use. It’s not got anything to do with being old,…

@Sam_Stone

As for not using the data after WWII, clearly we’re not talking about just the age of the data,…

The only one talking about the age of the data is you. I know it would make things easier on you to discredit what you think people are saying, but that’s just not the way it works.

(Yeah, I know I’m probably beating a dead horse, here, but I just wonder if those quotes, in order, illustrate a larger trend.)

[Lantern]

@Sam_Stone

But the larger point is that the paper seems to implicitly state that big deficits are a major drag on the economy, and that this is a new finding. If so, should it not have an effect on Keynesian models that use borrowed money to stimulate demand? The paper indicates that reducing the deficit will have a big enough positive effect to offset the negative effect of the tax increase. If that’s the case, then increasing the deficit to pay for fiscal stimulus will also assert a drag on the economy.

Huh ?? You think the finding that deficits can have a negative impact on the economy is some kind of brilliant discovery by Romer and Romer in 2010? It is one of the oldest ideas in economics and there have been empirical papers on this issue for decades. Their paper isn’t even about deficits which aren’t their main concern. Anyway the Keynesian argument about this is perfectly simple. They are perfectly happy to conceded that deficits can be harmful under normal economic conditons. However when you have massive unemployment and excess capacity, the crowding-out effect is much less relevant and benefit of a deficit-financed stimulus outweight the harm. Nothing in the Romer paper contradicts this and as I mentioned Christina Romer was arguing for a bigger stimulus inside the Obama administration. And for the nth time, Obama’s stimulus is not a major contributor to the long-term deficit which is what matters. Even without the stimulus the long-run deficit and debt would be enormous.

As for not using the data after WWII, clearly we’re not talking about just the age of the data, but the fact that the economy then was very different. That should equally apply to the case for fiscal stimulus. Some of us pointed out during the stimulus debate that the economy of the depression-era US was very different. For one thing, labor was more fungible. For another, there weren’t a bunch of extant social programs already looking after the worst-hit people. For yet another, there wasn’t already a gigantic structural debt and a budget forecast of ever-increasing deficits as entitlement programs explode. But all of those objections were hand-waved away, and the New Deal was held up as a perfectly valid example of how stimulus works. But now when the data from the same general era suggests that stimulus spending doesn’t work as well as you’d think, suddenly you’ve got all kinds of objections using the same logic the anti-stimulus people used.

So I take it you are not trying to defend the relevance of the Reinhart Rogoff paper just bringing up some alleged inconsistency with some argument that someone else has made. Good to clear that up and I hope you will stop quoting this paper in future threads.

In any case let’s examine this alleged inconsistency. While the 1930’s were indeed different from today’s economy there are some important similarities as well. You had a financial crisis which led to a very severe recession which led to a massive spike in unemployment and deflation. Today’s recession is basically a less severe version of the same events. So while there are big differences it’s not crazy to believe we can learn something by looking at the Depression.

However the 46-49 period in RR has very little relevance to what’s going on today. You have a high debt/GDP number but for completely different reasons and other than the basic economic situation was completely different. So there is no inconsistency in believing that we can learn something from the Depression but very little from the immediate post-war demobilization period.

In general there is a serious problem with statistical studies which lump together fiscal stimulus in a whole bunch of countries without controlling for things like whether the economy is at the zero-interest bound. It’s quite possible that a fiscal stimulus is unnecessary for a mild recession when coventional monetary policy works but that doesn’t offer much guidance for US policy today. This is a problemwith the Alesina/Ardagna paper which you also mentioned.

It’s useful to list the central features of the current recession which when combined make it very different from the vast majority of post-war recessions.

1. This is an unusually severe recession, probably the worst in the US since the Depression
2. The economy is at the zero-interest bound and conventional monetary policy is of little use.
3. Inflation is very low and deflation is much the bigger threat
4. The US has a massive capacity to borrow and despite high deficits and rising debt interest rates remain very low. Markets clearly don’t believe that a fiscal crisis or hyperinflation are serious possibilities.
5. Because of their funding constraints, fiscal policy at the state level is severely contractionary. In fact the Obama stimulus doesn’t even represent an overal fiscal stimulus for the US as a whole; all it does is balance out the fiscal contraction at the state level. Those who are arguing against the stimulus, are saying that overall fiscal policy should be contractionary during a recession which is absurd.

In general these points greatly strengthen the case for a fiscal stimulus compared to the average recession for the average country.