You guys are way off the OP. The answer is, “with the usual mixture of money and lies.”
Lol. I still have no idea how they got so damn organized and motivated so quickly. If liberals had that kind of organization it would be amazing. We barely got Sestak picked over Specter in the PA primary.
Say what you want about conservatives, but they get stuff done. Liberals don’t seem to have the organization or turnout necessary to do to primaries on the left that the tea party is doing to primaries on the right.
The stimulus package, good or bad, is from borrowed money, not something the government saved for. Someone has to pay for it even if it is taxpayers.
Obviously. But Shodan compared it to TARP or the Auto Bailouts. The stimulus money is emergency spending, not a loan, and the recipients aren’t going to have to pay it back, except in the form of future taxes.
Recessions are when you need to incur short term debt to keep the economy from stalling.
Not disagreeing with you at all, in theory.
But that is never how it turns out. The spending is never to ‘keep the economy from stalling’ - it’s always directed for political purposes, is invariably wasted, and usually comes with loads of Unintended Consequences.
Here was a nice chart of the stimulus spending from the Washington Post. The peak chart at the bottom is my favorite.
Very, very little of the spending was done for projects that even have a prayer of a positive ROI (like infrastructure spending) and 2/3 of that infrastructure spending won’t even be started by the end of 2010. Most of the money was used to backstop transfer payment shortfalls. That’s hardly the sort of spending that ‘keeps the economy from stalling’. It’s the kind that buys votes.
And we haven’t even got into the discussion of distortions in the housing market and the hundreds of billions being pissed down the drain at Freddie and Fannie.
Why are you guys even bothering to argue about issues, evidence, logic, etc.? Tea baggers, almost by definition, believe what they want to believe when it’s convenient for them. By stating a position, they automatically know which position to attack.
You know, just a couple of days ago I posted several peer-reviewed papers that used new evidence to analyze how the stimulus worked out - with very mixed results. Of course, they were pretty much ignored.
And now Lobohan posts a CBO report as if it is the beginning and end of all the evidence you will ever need to know that the stimulus was necessary and help the U.S. avoid armageddon. But there are serious limits to what you can glean from CBO scoring reports.
The CBO reporting process is not scientific, because the CBO is forced by mandate to accept the assumptions given to it for analysis. A lawmaker can go to the CBO and say, “Hey, assuming my tax cut returns twice as much revenue as it costs, what will that do to the deficit?” And the CBO will dutifully come back with a detailed report explaining that the deficit will be reduced by this magic tax cut. It is NOT allowed to say, “Your assumptions are stupid.” That would be meddling with policy. It’s a number-crunching outfit, and that’s all.
Another thing you need to know is that the CBO has to give you an answer. “Who knows?” is not acceptable. So they’ll use whatever best methods they can find, but that doesn’t mean the methods are accurate. This isn’t the CBO’s fault - its whole purpose is to do its best to put numbers to things. Sometimes more caution is warranted than at other times.
As a result, politicians on both sides of the aisle have used CBO reports as political tools for years. Bake in the right assumptions, and you can have the CBO give you detailed ‘proof’ of whatever it is you’re trying to prove. This is also why CBO reports aren’t considered scientific evidence or proof of anything.
Now, they can be useful, and I’ve quoted them myself. Because they do force you to lay out your assumptions, and they do allow you to figure out if a program is sound, so long as your assumptions are correct. So they have value.
In the case of this particular CBO report (you can read it here), they had no reliable data on what actually happened as a result of the stimulus. So the report they generated was based on the same macroeconomic models used for the first (highly inaccurate) reports on what the stimulus would do when it was passed, plus historical data about how economies in the past responded to economic inputs. At best, these are mere estimates - at worst, they are wildly wrong.
Says the CBO:
Allow me to translate: “To test whether the Keynesian principles behind the stimulus are correct, we used a model that makes the assumption that Keynesian economics are correct. There are other models that we could have used, and they wouldn’t have found as large an effect, but we didn’t use them.”
I hope you can see the limitations of this. Now, that doesn’t make the report wrong - it’s perfectly valid to say, “Hey, let’s assume that Keynesian economics is correct. Given that, did the stimulus work as advertised?” However, what such a report is not, is a proof that the stimulus actually worked. Remember, they didn’t actually use any DATA from this recession. They basically re-ran the same old models, got the same conclusion, and said, “Well, there you go.”
The CBO is at least honest. Right in the appendix to that paper they admit that there are plenty of people who disagree with the general-equilibrium models they used, and that a lot of the report’s conclusions are dependent on the assumptions you make - the very assumptions economists are still debating.
All that said, let’s take the CBO at face value, and assume the report is an accurate assessment of what has happened. Does it validate Lobohan’s claim that the stimulus was a good thing and helped divert a catastrophe? Not even close.
For example, the CBO’s low estimate for the stimulus is that it lowered unemployment by a maximum of 0.8% in 2010, and increased GDP by a maximum of 1.7% (in Q1 2010). Its high estimate (assuming a multiplier of 2.5) is that it lowered unemployment by 2% and increased GDP by 4.2%. There would have been a sharper recession, but it wouldn’t have been economic catastrophe.
But even this does not mean the stimulus was a good thing - because after that high point, it’s all downhill. The spending starts to run out, and the bills for it come in and have to be paid. The result is that by 2012, even the high estimate only has GDP increased overall by .3%, and unemployment by -.4%. The low estimate has .1% GDP and -.1% unemployment in 2012. A barely measurable result.
And that’s where this CBO report ends, which is a good thing for Lobohan. Because if you look out further than 2012, the stimulus suddenly doesn’t look so hot. According to the CBO’s earlier report, based on the same models but stretching out ten years, the positive effects of the stimulus vanish by the end of 2012, and after that they start hurting employment and GDP growth. You can see that diagram here. After 2012, the debt servicing cost on the stimulus becomes a net drag on the economy, to the point where the CBO’s projection is that by 2020 the U.S. will be poorer by a total of 1.1% of GDP if the stimulus works as advertised. That’s hardly the saviour from doom. It’s choosing between a shallower recession and not having the weight of a trillion dollars on your back forevermore.
What the CBO basically said is that without the stimulus the recession would have been sharper, but ultimately not having an extra trillion dollar debt is worth more.
Now, if the stimulus is actually based on flawed or incomplete economic assumptions, then you didn’t even get the improvement in the recession. You basically just ripped up a trillion dollars by borrowing money which helped some people be a little more comfortable until the money ran out, leaving the country a little more impoverished in the end.
Cheese Louise, Sam, you keep giving us the rock solid economic science, there is no dissent, this is what everybody knows? None of those Ph.D. disagree, they all concur that the CBO’s modeling is wrong, etc. etc. No? There are other views on this, you say? Well, they must be put forth by fools or scoundrels, since you have the rock solid economic science behind you…
Unless there really isn’t such a thing. Unless the meta-application of economic sciences contains so many variables, like, for instance, people… unless that state of affairs makes the kind of confident quantification you assert a matter of opinion, rather than fact. Unless two equally intelligent, equally learned, economists might come to two entirely opposite conclusions about what is to be done.
What, exactly, have you to offer so that I might ignore such dilettantes and dabblers like Mr. Krugman, and follow the Light from the North?
'luci ole buddy, you need to clean your glasses. You may notice that at no time did I say that the CBO was wrong. I did not say Keynesian economics were wrong. I didn’t even imply it. In fact, the whole point of my message was to make it clear that there was still disagreement within the economics community on some very fundamental principles. The Keynesian analysis is simply the statement of belief from one side of that debate. Maybe it’s right, maybe not.
It was Lobohan who has been throwing around words like ‘certain’ and ‘fact’.
The esteemed dabbler Krugman was an senior economics advisor to Enron. And we know how that turned out.
The question for you is, why do you want someone else to spend your money and tell you what do you, at all? You rightly point out that any number of economists can be rounded up and it is certain you will get a large number of conflicting opinions.
In fact, some of them like Larry Summers and Christina Romer, change their own opinions and contradict their earlier assertions once they find employment in the executive branch.
So why would you want to empower those people with your resources and decision-making authority?
As it happens I don’t think I used certain once in that context. I did use fact for consensus opinions.
“Maybe it’s right, maybe not.” suggests that both sides of the argument have equal or nearly equal evidence. Maybe I don’t slink around the conservative side of the internet enough, but for instance, is there a conservative version of this: http://www.princeton.edu/~blinder/End-of-Great-Recession.pdf [<– PDF] floating out there from two highly respected working economists?
It talks about among other things how unemployment would be higher and that, amazingly, the deficit would be higher than it is today, because the cost of the stimulus was less than the increased debt that would have added up from doing nothing. (I presume from lowered tax revenues, more social services.)
Is there anyone who’s produced a rosy view of how we’d be better off if we didn’t do Tarp and Stimulus?
First of all, let’s separate Tarp and the Stimulus. They are very different things. I was actually in favor of Tarp. I’m not sure that I still am, but the economic rationale for it was completely different. So let’s stay with the stimulus.
Are there opposing views? Of course. Many, many of them. And lots of peer-reviewed papers.
You were a participant in the thread where I linked this: New Keynesian versus Old Keynesian Government Spending Multipliers A new peer-reviewed paper from economists at the Hoover institute and Stanford University:
In short, the CBO’s General Equilibrium models failed robustness tests, and the paper suggests that the actual effect of the stimulus is only 1/6 as large as the CBO suggests it was.
Growth in a Time of Debt: a new paper from economists at Harvard and the University of Maryland, which attempted to analyze fiscal shock history in an extensive manner, using 44 different countries. This paper shows that when debt gets high enough (above 90% of GDP), it starts to have a large negative impact on economic growth. The U.S. government will be in this debt regime in thsi decade, and the stimulus contributes to it. The CBO’s models do not take this negative growth effect into account at all.
The Macroeconomic Effects of Tax Changes:
Estimates Based on a New Measure of Fiscal Shocks By Christina and Paul Romer. Christina Romer is President Obama’s own head of the Council of Economic Advisors (now resigned). This paper does not directly address the fiscal stimulus, but it does provide new evidence that tax increases hurt the economy more than thought, and also implicitly suggests that deficts are more damagin than previously thought. It’s not conclusive, but it’s part of the new academic literature that is not even considered by the CBO.
Robert Barro, Professor of Economics at Harvard University:
Barro has done extensive work on fiscal multipliers using fiscal stimulus due to rapid wartime expansion (he explains why this is valid in a Keynesian sense if you read the work). He has found multipliers no higher than 0.8. And he feels that a general fiscal stimulus multiplier would be worse. The CBO used 1.5 to 2.5 as a multiplier.
Professor of Finance John H. Cochrane:
This is just a sample. I can name a number of Nobel Prize-Winning economists who are opposed to the stimulus or who have objections to one or more aspects of it. There are plenty of papers calling into question the assumptions behind the stimulus.
Oh, and by the way… Blinder’s paper wasn’t peer-reviewed, and he’s part of a core of Democratic policy makers, so he’s hardly unbiased.
You’re confusing me here, Sam. Not that its hard to do, but you ought not to do it just because its so easy and fun.
And the one hand, you deny suggesting that academic economics is solid evidence on behalf of your argument, since, as you say, “…still disagreement within the economics community on some very fundamental principles. The Keynesian analysis is simply the statement of belief from one side of that debate. Maybe it’s right, maybe not…”
Then you turn right around and belabor poor, cringing Lobohan with…a barrage of academic economics!
I wanted to comment on this. It is entirely possible - even likely - that employment is somewhat higher today because of the stimulus. It’s hard to come up with a net job loss when you throw a trillion dollars at an economy.
But that’s not a measure of whether a stimulus works or not. The logic behind a stimulus is that if you don’t prop up demand, it will be followed by a drop in productive capacity, so that once the economy tries to recover, there will be a shortage of production and net GDP declines. The idea is that if you pump money into the economy, you’ll protect those productive assets so they’ll be there when the economy recovers.
The other thing a stimulus is supposed to do is to prevent a demand spiral where low demand causes job losses in the productive economy, which causes a further drop in demand, which causes more job losses, etc. Eventually you reach a bottom far lower than you would have if you maintained demand through stimulus.
But for this to work, you need to get a multiplier out of your stimulus. If there’s no multiplier, then that means your spending isn’t causing positive secondary effects, and maybe it’s even hurting. Maybe ‘aggregate demand’ is a bad measure to use, and the more important factor is structural imbalances between various sectors. Maybe you can’t treat demand as a single lump, but as a complex function, and just tossing money at it won’t have the effect you think it does, because the money isn’t going to the right places.
So there is dispute as to whether or not fiscal stimulus is even the right policy tool to soften a recession. But once you get past that, you have another problem: Once the money runs out, the stimulus effect goes away. After that, you have a trillion dollars in additional debt. That weighs down markets, and debt servicing alone starts pulling 30-50 billion a year out of the economy until the debt is paid off.
So to determine whether or not a stimulus ‘worked’, you have to add in the negative costs that come after the money is spent - something the CBO has not really done except in a simple way (and even they find a .3% annual loss in GDP growth in every year going forward as a result of the stimulus spending).
One of the papers I linked to above found that when the debt gets above 90%, the negative effects on GDP become greater than previously thought. Another finds that taxes are more damaging than previously thought, and tax cuts more effective. All of these new findings have a tremendous impact on a long-term assessment of the stimulus, and none of them are included in the CBO report or the Blinder paper.
So even if the stimulus had some positive effect so far, it will likely be a net negative for the country. Even the CBO says it will reduce GDP by 1.1% by 2010. If in fact the stimulus hasn’t resulted in new job creation, then it’s a disaster, because the negative effects coming will not be offset by any positive effects. It will be remembered as essentially a giant spasm of wealth burning caused by fear.
Okay, but that’s not what the vast majority of the people on the right are doing. The average tea partier makes no distinction.
I understand that the TARP was mechanically different, however, Shodan and others lump it up with the deficit that Obama has heaped, heaped I say, upon the heads of their descendants.
I was asking for an assessment of the results of TARP and the Stimulus. Not some dudes nitpicking the multipliers used. I was hoping specifically for something reputable and backed up by a bunch of mainstream economists that says it wasn’t worth doing and why. Considering that the majority of working economists supported a stimulus, perhaps not in the form and size it was enacted in, but something.
I guess that’s a great argument for allowing the Bush tax cuts on the wealthiest Americans to expire.
And how much other literature do they consider? I’m not an economist, but I’m sure if there were a compelling case for this to be considered, it would be considered.
So 20 cents on the dollar disappear… amazing.
Because the US economy is working under capacity? :dubious:
It’s not a sample, it’s a glurge of stuff shotgunning. I’m asking for a single bullet in the ten ring, not a handfull of ball bearings forming a rough ellipse on the bottom third of the target.
Ok. I’ll take that into advisement.
The CBO didn’t assess the results of the ARRA. They specifically said that the evidence that was available was inadequate. As a result, their report relied on the same models they used for their first report, only slightly modified because the nature of the stimulus was slightly changed from their first report.
If there’s no evidence, then all we can do is look at the models being used to justify the stimulus. Let’s be clear here - if you want to spend a trillion dollars of other people’s money, the burden of proof is on YOU to show that it is being wisely spent. Yet all that has been offered has been the output of model simulations and a lot of bluster. So, the only line of attack against this is to look at whether the model itself is built on good assumptions, whether it covers all the possible effects, and whether it has good inputs.
The papers I posted call into question all of this. The general equilibrium model used has no track record of accuracy. There is plenty of dispute around the basic assumptions of fiscal stimulus. There is new research which suggests there are negative effects that have not been considered. There are hundreds of economists who do not agree with using fiscal stimulus to spend your way out of this recession, including a number of Nobel Laureates.
All of this is presented to show you that it is not a FACT that the stimulus has been a net benefit, that it has created millions of jobs, or that it saved the country from a depression. Hell, even the CBO report you used as evidence for your assertions doesn’t say that. Even if we use their Keynesian analysis, the best we can say is that the economy improved somewhat while the spending was taking place, but once the spending stops the economy will under-perform because of the additional debt, and by 2020 the stimulus will have been a net negative for the country.
One more big negative for the stimulus - the huge deficit it has caused has spooked markets and politicians, and has Democrats running scared in this election cycle. As a result, they may let the Bush tax cuts expire, which will be an anti-stimulative jolt three times bigger than the stimulus was. If this happens, then the Democrats will be repeating the same mistake they say Roosevelt made when he succumbed to fears over the deficit and raised taxes in 1937, plunging the economy back into the depths of the depression.
Oh, crap! Listen, Sam, don’t do that, OK? “Other people’s money”, my ass, its our money because its our country. Point of fact, any of us here have more claim to it than you do.
According to the latest Gallup Poll, Obama’s approval rating is 41% and his disapproval rating is 52%.
It did not have to be that way. Two years after Roosevelt was elected in 1932 his approval rating was higher than before. Progress on employment would have given Obama credibility he has not earned yet.
In 1936 the unemployment rate was 16.9%. That grew to 19.0% in 1938. This increase is often attributed to cuts in government spending, rather than tax increases. At any rate, in 1940 the top tax rate was increased to 81% from 79%. Unemployment declined to 14.6%.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213
Unfortunately, unemployment continued to grow after the inauguration of Barack Obama. As a result the left is demoralized, and the right is energized. 