Obama's Jobs Speech

[wmfellows]

What interesting magical reasoning… I have yet to read an actual economist advancing such theories re USA or other countries. Real (genuine, non ideologue) conservative economists such as Martin Wolf rather posit the exact opposite of Mr. ‘Regards’ analysis.

[wmfellows]

For the utility value of non ideological analysis:
(Martin Wolf, http://www.ft.com/cms/s/0/9cbe577a-d…#ixzz1XHwFLlEx)

"As Richard Koo of Nomura Research has argued, fiscal deficits help the private sector deleverage. That is precisely what is happening in the US and UK (see chart at bottom). In the US, the household sector moved into financial surplus after house prices started to fall, while the business sector moved into surplus in the crisis. Foreigners are persistent suppliers of capital. This has left the government as borrower of last resort. The UK picture is not so different, except that the business sector has been in persistent surplus.

So long as the private and foreign sectors run huge surpluses (despite the ultra-low interest rates), some governments must find it easy to borrow. The only question is: which governments? Investors seem to choose one safe haven per currency area: the US federal government in the dollar area; the UK government in the sterling area; and the German government in the eurozone. … The larger the surpluses of the private sectors (and so the bigger the offsetting fiscal deficits), the faster the former can pay down their debts. Fiscal deficits are helpful, therefore, in a balance-sheet contraction, not because they return the economy swiftly to health, but because they promote the painfully slow healing.

… there is a good answer: use cheap funds to raise future wealth and so improve the fiscal position in the long run. It is inconceivable that creditworthy governments would be unable to earn a return well above their negligible costs of borrowing, by investing in physical and human assets, on their own or together with the private sector. Equally, it is inconceivable that government borrowings designed to accelerate a reduction in the overhang of private debt, recapitalise banks and forestall an immediate collapse in spending cannot earn a return far above costs.

Another noteworthy objection – grounded in the seminal work of Prof Rogoff and Carmen Reinhart of the Peterson Institute for International Economics in Washington – is that growth slows sharply once public debt exceeds 90 per cent of GDP. Yet this is a statistical relationship, not an iron law. In 1815, UK public debt was 260 per cent of GDP. What followed? The industrial revolution.

What matters is how borrowing is used. … [if fiscal contraction is pursued] A more likely outcome, in present circumstances, is mass default, shrinking profits, damaged banks and a renewed slump. That is what would happen if today’s contained depression ceased to be contained.

…

Contrary to conventional wisdom, fiscal policy is not exhausted. … The need is to combine borrowing of cheap funds now with credible curbs on spending in the longer term. The need is no less for surplus countries with the ability to expand demand to do so.

It is becoming ever clearer that the developed world is making Japan’s mistake of premature retrenchment during a balance-sheet depression, but on a more dangerous – far more global – scale. Conventional wisdom is that fiscal retrenchment will lead to resurgent investment and growth. An alternative wisdom is that suffering is good. The former is foolish. The latter is immoral."

[Happy_Fun_Ball]

Quoted for Truth (from wmfellows’ Martin Wolf quote above - can’t access the link as it is behind a pay wall):

@Martin Wolf

… there is a good answer: use cheap funds to raise future wealth and so improve the fiscal position in the long run. It is inconceivable that creditworthy governments would be unable to earn a return well above their negligible costs of borrowing, by investing in physical and human assets, on their own or together with the private sector. Equally, it is inconceivable that government borrowings designed to accelerate a reduction in the overhang of private debt, recapitalise banks and forestall an immediate collapse in spending cannot earn a return far above costs.

I get the feeling that many conservatives are just preaching austerity to sink President Obama and as soon as they get into office they would show themselves as the hypocrites they are… Just a hunch.

[Shodan]

@Finagle

I think my phrasing would be more like “Obama seems to have run out of ideas on what to do about the economy based on how thoroughly the last administration torpedoed it and how intent the current Congress is on circling back around and machine gunning the survivors.” But that’s just me.

No, it’s pretty common amongst the lefties. I doubt they will ever stop blaming Bush for everything Obama cannot do until we elect a Republican.

But I’m curious. What is a 2/1 ratio of government spending cuts to stimulus going to do for jobs when the any sort of government spending cut is inevitably going to lead to job cuts either in government employees or government contractors?

It isn’t a combination of spending cuts and stimulus - it is a combination of spending cuts and tax increases. And it is not aimed at jobs. It is aimed at reducing the current, unsustainable deficit.

Much of the stimulus package went to pay increases for public sector workers. That doesn’t save jobs; it is just a sop to public unions, who are almost as reliably Democratic as blacks, gays, and feminists.

This latest stimulus isn’t going to do anything about unemployment, but it doesn’t have to. Next year is the Presidential election. Obama needs to rekindle his base, since independents are deserting him. He is apparently hoping that the lefties will pretend not to remember that they always claimed tax cuts were a bad idea, that deficits were a bad thing, and that the last stimulus didn’t do any of the things it was supposed to.

No doubt he is right, at least among the hard left, but the rest of the country may not be as flexible in their memories.

We shall see. Maybe BHO is just floating a trial balloon, and his suggestions about the economy will be something realistic.

It could happen.

Regards,
Shodan

[Finagle]

@Shodan

Much of the stimulus package went to pay increases for public sector workers.

Cite?

[UltraVires]

@Shodan

I didn’t see the speech - did Obama mention how he expected the $300B to affect the deficit? I thought there was going to be a committee to put together spending cuts whose report was due by Thanksgiving. Does this mean that committee will have to come up with another $300B in cuts and tax increases?

This and a million times this. Didn’t posters here lecture the Tea Party about having to allow some tax increases to offset spending cuts? And then others pointed out that we’ve been hoodwinked by that before? That the tax increases come and the spending cuts never happen?

Exhibit A is this. Just last MONTH, we reached a deal where a committee will find in excess of a trillion dollars to cut from the federal budget. Just last month! And now Obama is proposing $300 billion in new spending. He can’t stop spending. This is why so many in the Tea Party (albeit foolishly) refused to raise the debt ceiling: It is the single ONLY way to keep the Dems from spending more and more money that we don’t have.

What good was is the commission this fall if we are already increasing spending?

[elucidator]

I love these alternative history threads!

[Grumman]

And to channel Sam Stone for a moment, uncertainty is bad for growth. The federal government maxing out another credit card even as they promise to cut back is bad for growth, because everyone has to operate in such a way that they can’t get blindsided by that $1 trillion ($1.3 trillion?) in cuts. They can’t take the same risks (like expanding their business and employing more people) if it might leave them flat-footed when Obama starts tightening the belt.

[elucidator]

I live fairly close to the Canadian border, I think i just heard him scream.

[Sitnam]

Is anyone else expecting him to get up with cards and say, “Ok, looks like Spanky’s Washroom and Cleaner Service is looking for a janitor. Anyone? Anyone? Ok, how about a waitress job at Curly’s on Grand? We have a opening for busboy at Git-R-Done Rib’s, with possibility for advancement.”

[BrainGlutton]

@L. G. Butts

Quoted for Truth (from wmfellows’ Martin Wolf quote above - can’t access the link as it is behind a pay wall):

I get the feeling that many conservatives are just preaching austerity to sink President Obama and as soon as they get into office they would show themselves as the hypocrites they are… Just a hunch.

Even worse are the ones who seem to actually mean it.

[Chen019]

@Der_Trihs

:rolleyes: Ah. Again it’s all the fault of the brown people.

Argh, irony. Thanks for helping to make the point! When you get responses like that no wonder why people like Robert Reich & politicians are afraid to point out the obvious! They’ll get accused of being racist by arbiters of moral correctness like Der Trihs! The sad thing is your comment wasn’t even intended as satire. :smack:

Again, this is what Half Sigma wrote about Robert Reich:

It’s actually quite easy to see how we can get a vigorous recovery. If the economy isn’t creating enough jobs to cover the growth of the U.S. population, all we need to do is stop the U.S. population from growing, which can easily be done by cutting off immigration, because nearly all of the growth in the U.S. population comes from immigration.

Why is Robert Reich so blind to this simple solution? That’s a rhetorical question, because here is the answer: It’s racist to be opposed to unlimited immigration, and because a racist is the most evil type of person in the entire world, cutting off immigration is an entirely unacceptable solution to the problem of five to eight years of unemployment, and to suggest it would condemn his immortal soul to hell.

[Der_Trihs]

Yawn, we’ve already seen it and we already know what this is really about; your conviction that anyone with brown skin is less than human.

[Chen019]

@Der_Trihs

Yawn, we’ve already seen it and we already know what this is really about; your conviction that anyone with brown skin is less than human.

Thanks for the continuing satire of a person morally outraged at the idea of reducing immigration, silencing discussion through shaming tactics & proving Half Sigma’s point. More please.

[elucidator]

…because nearly all of the growth in the U.S. population comes from immigration…

Is this one of those not intended to be factual sort of things?

[Der_Trihs]

@Chen019

Thanks for the continuing satire of a person morally outraged at the idea of reducing immigration, silencing discussion through shaming tactics & proving Half Sigma’s point. More please.

This has nothing to do with immigration and everything to do with your racial hatred. If a few million white people wanted to immigrate I’m absolutely sure you wouldn’t be bothered in the least; it’s only the filthy, subhuman brown hordes that you fear will come here and taint the master race.

[John_Mace]

@elucidator

Is this one of those not intended to be factual sort of things?

I didn’t look it up, but I don’t find that statement unbelievable. Most 1st world countries have a reproduction rate right at, or below, the replacement rate. I’d be surprised if we were substantially different.

[Chen019]

@Der_Trihs

This has nothing to do with immigration and everything to do with your racial hatred. If a few million white people wanted to immigrate I’m absolutely sure you wouldn’t be bothered in the least; it’s only the filthy, subhuman brown hordes that you fear will come here and taint the master race.

Bravo! The satire is getting a bit over the top now though, I don’t think even real agitator’s against discussion of immigration go this far in trying to shut down discussion. They wouldn’t be taken seriously!

[Der_Trihs]

@Chen019

Bravo! The satire is getting a bit over the top now though, I don’t think even real agitator’s against discussion of immigration go this far in trying to shut down discussion. They wouldn’t be taken seriously!

It’s not satire and I’m quite sure you know that.

[Chen019]

@Der_Trihs

It’s not satire and I’m quite sure you know that.

It’s not?! You mean you’re deliberately proving Half Sigma’s point, using hyper emotional rhetoric to distract and chill any rational discussion?! Again, it’s no wonder rational policy measures can’t be discussed & poor Robert Reich is limited in what he can say.

I suppose it would be hard to recommend capitalist policies under Stalin either. Open logical debate not an option.