Sounds rotten. Why would ignoring the views of all the others lead to good decisions?
There’s every reason to believe that public spending is not efficient, for the simple reason that public officials lack the information required to make good choices. The information simply isn’t available to them, because it is created through the act of being forced to make choices in a free market. For example, we can be fairly confident that the production of hammers and the cost of hammers reflects a very good approximation of how much people need and value hammers. If you asked the government to figure that out, say by polling people or simply deciding by fiat or through historical comparison, the answer they’d come up with is almost guaranteed to be way off the mark.
Go look at the history of public infrastructure choices. Look at how many highways are under-utilized vs the number that are overcrowded. Have a look at how the predicted ridership of Amtrak worked out when tested against reality. For that matter, for a real laugh go back and look at the Congressional Budget Office’s predictions for future economic trends, and see how those actually worked out.
Or, you could look at the ‘visionary’ infrastructure projects that other governments have undertaken, to see whether they actually helped a country move into the future. France’s Minitel system was the darling of left-wing advocates of government technology policy - until it turned out to be a complete waste of money and actually set France back in adopting the internet as compared to other countries in Europe. Thanks to Minitel, France lagged behind Europe in internet connectivity and PC adoption rates for years. Japan’s ‘visionary’ 5th generation AI project was supposed to leapfrog them into the lead in artificial intelligence, and it was an utter failure. Japan’s big infrastructure projects of the last 15 years, meant to provide a ‘stimulus’ to their recession, not only failed to stimulate the economy, but have now saddled it with too much unnecessary infrastructure and high maintenance costs.
I can’t count the number of times a U.S. President has promised energy independence. I think Nixon was the first to make that claim.
But I’m sure this time all this money will be spent wisely and on exactly the right things, because finally a really smart guy is at the helm, eh?
This was certainly the case a long time ago, when new infrastructure brought radical improvements. Rural electrification and the interstate highway system are examples. But at some point you reach diminishing returns, and I’d suggest that funding infrastructure in an ‘emergency’ fashion with borrowed funds and choosing projects based not on need but by how fast they can be done and how many people they can temporarily employ is almost guaranteed to drive you towards decisions that are not, on balance, beneficial.
The Brookings Institute says:
There are many reasons for this. A big one is that unlike the big ‘network’ infrastructure improvements of the past, the current infrastructure spending is often on very local things - new buildings, for example. This boosts that local area, but the costs are widespread. This causes a fundamental distortion in the current distribution, which can actually lower efficiency. For example, if you build a new bridge to nowhere, and tax the entire state to build it, the location where the new bridge is will attract investment, but the tax money slows investment everywhere else. This causes business and residential dislocation. Basically, your infrastructure changes are pushing things around. The value of real estate goes up near the bridge, benefiting rent-seekers there. People move out of an older neighborhood, driving values down.
Now you add in the financing cost of the money you borrowed to build that infrastructure, and the ongoing maintenance and energy costs of that new infrastructure, and you may find that on balance, you’ve just made your country LESS productive.
I don’t dispute that there are market failures. The correct response to those is to fix them - sometimes with new regulation, sometimes by simply absorbing what you’ve learned. But to decide that markets therefore don’t work and government should run the show is throwing the baby out with the bathwater. For all the various failures of markets, including the latest ones, their track record in terms of resource allocation and efficiency is still orders of magnitude better than what central governments have managed. Can there be any dispute over that?
No, what’s being crowded out is private sector saving. A country with its balance sheets massively out of whack, which has suddenly realized that it’s not as wealthy as it thought it was, is trying to correct. People are not spending as much. Businesses are chopping fat and cutting spending. This is a painful process, and will likely result in a rolling back of GDP to levels that existed maybe 5-10 years ago. That’s a painful thing. But it’s reality asserting itself. The government is essentially saying, “Come on! Let’s keep the good times rolling, people! If you’re not going to keep borrowing and spending, we’ll just borrow the money in your name and spend it for you!”
At some point, reality WILL assert itself. It would be better done now that in 10 years after government has racked up another 20 trillion dollars in debt. What the government should be doing now is helping to manage the retraction, and spending money in very careful, directed ways to help those hit hardest and to prevent a ‘virtuous cycle’ decline into a full-scale depression.
Here’s a paper suggesting that long-term tax cuts have a much bigger fiscal multiplier than do spending increases - 3.0 vs 1.4. However, history shows that when governments have attempted countercyclical tax cuts or spending increases, they haven’t worked at all. The reason? Because governments aren’t capable of getting the money out fast enough or targeting it at the right things, whether it be a tax cut or a spending increase.
You may recognize the author. She’s the chair of Obama’s council of economic advisors.
And if you’ll read the paper I linked in the last message, you’ll see that governments have actually been really bad at doing this. Basically, the economy just rolls along, through the peaks and valleys of the business cycle, and government flails around and then takes credit when things improve and blames the market when things get worse.
Or perhaps you’d like to point out a time when countercyclical policy has demonstrably worked? Lets leave the depression out of it for now, since there is widespread disagreement on that. Of the umpteen recessions since then, can you point to one and show how countercyclical policy made it less intense or shortened it? Serious evidence would be appreciated.
She’s also the co-author of this. (Warning: pdf)
In it, she estimates that the stimulus plan would raise the country’s GDP by 3.7% over what it would be without the stimulus plan.
The fallacy is in the unstated assumption that ANY infrastructure spending is good, and it doesn’t really matter what the spending is for.
Ah yes, it’s always the fault of the specific people involved when government inevitably fails. When you believe that, you can always ignore the past, because this time it will be different, by God! We just had to find someone good enough and smart enough for the job, and finally government planning will work!
It’s going to be a little tougher to dole out the blame this time, so it should be fun to watch the mental gymnastics when the inevitable problems develop.
By the way, it’s 350 billion, not 3.5 billion.
I actually supported the first bailout, on the notion that it was actually going to be used to clean out those ‘toxic assets’. Even my meagre respect for government’s ability to work properly was challenged, apparently.
As for banks merging - that would be in part because of the moral hazard of creating a condition where some banks are ‘too big to fail’. We’ve created a great incentive to grow as big as you can. Not exactly ideal, hmm?
Regardless of any merits you want to assign to this, which I don’t want to debate here, this had nothing to do with the current need for a fiscal stimulus. It was a liberal wish-list item slid into the stimulus package. Pelosi’s already had to pull it - probably after being taken to the woodshed by Obama who’s having a hard enough time trying to get bipartisan support for this white elephant of a bill without the Democrats playing games.
The speed of getting it to his desk was to signify the necessity of getting the money into the economy as fast as possible, with ‘fast’ being so fast that individual days actually mattered. But now the CBO is saying that only a little more than 10% of the money will be spent by the end of this year, about 25% in FY2010, and another 20% in 2011. The full stimulus will not be spent until 2019.
This is exactly why countercyclical policy has never worked well. By the time it becomes apparent that the economy is in recession, it’s usually almost on its way to recovery. Then it takes time for government to act, and for its actions to be felt. Usually, the ‘stimulus’ hits just in time to help push the already-recovering economy into another bubble, as the Bush tax cuts in 2001 probably did.
This recession will probably be longer than most, so this stimulus may have some effect in mitigating it. But at great cost - somewhere down the road, interest rates and/or taxes are going to go up to pay for this, and hurt the economy then.
By the way, the biggest impact of the stimulus in the first two years will not be job creation in infrastructure, but payments to individuals through tax credits and enhanced social programs. The last time this was tried was about a year ago, and there was NO multiplier, because people just saved the money instead of spending it. We can expect the same result this time, as personal finances are in even worse shape now than they were then.
It will come from the same place it always does - first will be the bargain hunters, taking advantage of depressed prices. Then eventually, as the economy recovers and balance is restored, there will be low inventory levels because of reduced business investment and increased demand for goods and services as people feel better about their situations, and the economy will recover naturally.
There IS a risk of an overshoot on the bottom due to a ‘virtuous spiral’, and proper government policy should be focused solely on avoiding that.
You’re joking, right?
If I say anything that you feel needs a cite that I didn’t provide, all you need do is ask.
Greatest ponzi scheme in human history is unwinding. It’s likely that only about half of the wealth destruction has taken place. The big question is whether the next half takes place over the next 2 years or next decade. The risk of the Great Depression 2 is still in the 20% range.
Second, one needs to realize this is not a normal “recession” nor part of the normal business cycle. Think of this as a “reset.” The high consumption, living far beyond one’s means lifestyle is dead. A good lesson is to look at the experience of the Japanese bubble era and the moribund 2 decades since.
These are not normal times, and the economists you cite likely will not maintain their views in the face of this new economy. As **Punoqllads ** already highlighted above.
Private sector does what is best for them in the short and maybe long term. And the private sector is littered with companies that grew too big too fast and made extremely poor investment decisions. Can you say GM or Lehman’s? Few people would argue that the government is the most efficient allocator of resources, but government is THE investor when the rest of corporate America slash spending, investment and jobs.
NYtimes correction on the spending impact and timing cited above:Two weeks ago, a Congressional committee posted a table of numbers on its Web site that gave an early answer. The numbers came from the Congressional Budget Office and seemed to show that only 38 percent of the money in the bill would be spent by September 2010. That didn’t sound very stimulating, and the numbers soon caused a minor media sensation.
But anyone who looked closely would have seen something strange about the table. It suggested that the bill would cost only $355 billion in all, rather than its actual cost of about $800 billion.
Why? It turns out that the table was analyzing only certain parts of the bill, like new spending on highways, education and energy. It ignored the tax cuts, jobless benefits and Medicaid payments — the very money that will be spent the fastest.
On Monday evening, the Congressional Budget Office put out its analysis of the full bill, and it gave a very different picture. It estimated that about 64 percent of the money, or $526 billion, would be spent by next September.
BTW, Paul Krugman is not a librul economist, whatever the heck that might mean. He’s a liberal and an economist (with you know degrees, a body of published work, a Nobel prize, etc), and to denigrate his message in such a fashion reflects more on the messenger than anything else. If you actually read the OpEd piece I cited above, he already debunks most of your talking points.
To be ruthlessly fair, “debunks” is a poor word choice. Economics is not physics, there are no definitive experiments, there are only opinions. Whatever decision is made is going to be somewhat of a gamble. I think Mr. Krugman is probably mostly right and his arguments are cogent and persuasive. But that is not the same thing as “debunk”.
Sam has every right to his faith in the Holy Free Market, and if you accept his premises, his conclusions are perfectly sound. If you don’t, and I don’t, then it’s turtles all the way down.
Strawman. No one is arguing that there’s no economic loss from borrowing a trillion dollars. No one denies the cost of interest payments.
Without a stimulus, we’re looking at more than a trillion shortfall in output. You can’t compare 1 trillion in real output from government spending versus 1 trillion of imaginary private spending.
You also can’t compare the efficiency of government spending during times of plenty with government spending during economic shortfalls.
You can’t distort markets that don’t exist. You can’t divert investment that isn’t being used. You can’t crowd out private capital that’s rusting in idle factories.
This is not to say that all government spending will be perfectly efficient. But 1 trillion of spending during a prolonged recession does not have the same risks of inefficiency as 1 trillion at full production.
Doing nothing right now is efficient only in the sense that we will efficiently piss away a trillion worth of potential.
None of the choices in front of us is perfectly efficient. But we will get much closer to efficiency than if we sat around and swallowed year after year of stagnation.
Straw man. This is the single worst macro misrepresentation I’ve ever come across in an econ discussion.
No one is claiming that we can magically create 100 trillion of real output from this stimulus. What we can do, however, is make up for the production shortfall of this recession.
No one who actually gave a damn about macroeconomics would ever make such a mistake.
Medicare is indeed a problem, and we need to work immediately on comprehensive reform of our health care industry to handle the imminent shortfalls.
Social Security is not. It will eventually need patching, but the problem is smaller and farther in the future. It is not a present concern.
This is specious reasoning, and your facts are wrong. Greg Mankiw did claim that Romer’s research gave bigger multipliers to taxes. This was a misanlysis of her paper and was contrary to her own interpretations of multipliers.
Romer believes that multipliers can sometimes be larger than they’re given credit for and that spending is stronger than tax cuts. This is supported by the bulk of evidence and the beliefs of most economists.
This is false. The Japanese approach came in fits and spurts. Their plans lacked consistency, and they were almost universally smaller than was recommended.
But the one time they actually buckled down with a large stimulus, it had a correspondingly large effect. They just didn’t stick with it.
This is contrary to macroeconomic theory, contrary to economic history, and contrary to the beliefs of most economists. Like you, the staunch conservatives are throwing all sorts of arguments against the stimulus. Like you, most of their arguments are entirely without merit. They’re just slinging everything they can think of and hoping something will stick.
This doesn’t mean that they’re wrong. They could be right for the wrong reasons. But if they want to be persuasive, the doubters are going to have to do more than toss out arguments that have been known to be wrong for three quarters of a century.
There have been very specific criticisms of the bailout in the past. Bush’s appointees did not listen.
If Obama’s do not listen, we will have cause for concern. If Obama’s do listen, then we will have the ability to judge the effectiveness of the policies being suggested. This is a simple analysis that rational observers are capable of doing.
Also, be aware that your pathetic little ideology is sticking out again. You might want to put it away before people start pointing and laughing. Government policy has had real success in the past. Failure is not “inevitable” when smart policies are put in place. It is possible to take human incentives into account when devising government regulation, and by doing so, preserve the most productive aspects of the market while curbing its excesses.
This is false. Any increase in deficit spending which is used to increase consumption relates to the current need for a fiscal stimulus. This might have been bad politics, but it was potentially good economics.
Debt-to-GDP after WWII was over 120%.
Prosperity after the war was unprecedented.
There’s no apparent reason that the debt has to weigh us down. At the very least, though, this is one of the few arguments being thrown around that has any potential validity. Most of the others are dogshit on the carpet, tracked in by people who don’t care where they step. I still don’t agree with it, but the debt concern does have some substance.
Circular reasoning and only half the story.
The markets work extremely well in competitive industries with no externalities. Hammers, sure. Energy, not so much. High finance, not at all in recent years.
The markets can be just as distortionary as the government in the case of externalities such as pollution or when management incentives are not in line with firm production. The result is distortions, exactly the same as the ones you always complain about from the government. And when the market screws up, only government intervention can reduce those distortions again.
A good thing Keynesian stimulus isn’t about raising taxes.
If investment dollars were actually being used by the private market, as during healthy economic times, then this would be a concern. But they’re not. We’re sitting at 0% short term interest right now. We’re looking at deflation. Right now, the government could get away with borrowing enough money to pave all of Rhode Island with 100 dollar bills. Or we could keep our bridges from falling down and create higher quality education for our students.
With respect to public goods, yes, there is dispute about that. This is why they’re called “public goods”. They have positive externalities that the market does not account for.
There is no market information about these positive goods, because the market fails to provide them. That’s basic public finance. Just because these values are hard to measure doesn’t mean they don’t exist.
Cogently stated, golf claps proffered.
And how do we measure the “Tinkerbelle Factor”? (If we don’t believe and clap, she dies.)
That is, much depends on the public confidence that Something Is Being Done. More than anything else in our consumerist economy, we need people to start spending their money, rather than hoarding it to buy ammunition when the Great Collapse comes.
At what point does that confidence outweigh other factors? I think that if we spend a trillion dollars, and one-tenth of that is pissed away but we restore confidence, our money is wisely squandered.
On the other hand, if we are scrupulously careful with every dime, but it takes so long that the lack of consumer confidence cripples us, then we have been penny-wise and pound stupid. Brain dead stupid.
Put out the fire, worry about saving water once the fire is out.
This is what I’ve been saying all along. This is not a normal business cycle recession that can be smoothed through Keynesian stimulus. This is a ‘balance sheet’ recession that we HAVE to go through because we need to correct and pay down the debt. We thought we had reasonable debt-to-asset ratios, and it turns out we don’t, so now we’ve got to pay the piper. You can’t stimulate your way out of a recession like that, because borrowing the money for the stimulus just prevents the correction. The government should borrow just enough money to smooth the ride down to the bottom so we don’t overshoot, but it can’t make this recession go away with a giant stimulus such as Krugman recommends.
I would argue that the problem is much more complicated than just saying the private sector made bad decisions. The private sector doesn’t operate in a vacuum. For example, GM operates under the knowledge that if it screws up really badly, the federal government will bail them out. Moral hazards abound. But that said, it’s clear that there’s some work to be done to understand how so many companies got themselves into this mess.
But let’s not forget that an even bigger problem coming down the pike is the gross under-funding of government programs that were supposed to be actuarially sound. For example, the ‘stimulus’ package includes 84 billion dollars to bail out state medicaid systems that were supposed to be fully fundeed but weren’t. And we’re just scratching the tip of the iceberg when it comes to failed government pension and health care funds.
Yes, I caught that as well. But what’s missing from that is the fact that the difference between the two numbers was the amount of money going into people’s pockets in the form of tax credits and things like added unemployment benefits. There’s good evidence to believe that this will not be stimulative, because the money will be saved and not spent. That’s what happened to Bush’s last stimulus at the start of the real-estate collapse.
Paul Krugman is two different people - the academic economist, who is quite good, and the political polemicist/editorialist/advocate, who has a history of making statements without backing them up, drawing sweeping conclusions from inconclusive data, and of always twisting things to support his very liberal political viewpoint. Just throwing around his Nobel prize doesn’t impress me in the slightest. F.A. Hayek and Milton Friedman won Nobel Prizes, and that doesn’t seem to make the liberals around here worship at their feet and accept every political statement they’ve made as gospel, does it? Yet Krugman’s Nobel is supposed to trump all conversation and the mere uttering of his name is supposed to close debate.
A wild exaggeration. For myself, I simply point out that he has considerable credentials and expertise, despite the fact that he disagrees with you.
They don’t deny it - they just ignore it.
You also can’t assume that every factory that is idle is a factory that *should be producing things. This is the problem with the current recession. It’s the result of a whole bunch of over-spending and over-investment that is not sustainable, and some of it should be permanently reduced. Governments are terrible at knowing exactly which industries just need to be propped up until the recession is over, and which ones are overbuilt and need to be scaled back. Political considerations make good decisions in this area especially unlikely.
Take the auto bailout. What makes us think that the amount of auto production that currently exists in the U.S. is the right amount going forward? And yet, the bailout assumes that it is. It’s entirely possible that the correct thing to do was to let the big 2.5 auto companies be, allow them go into Chapter 11 if necessary, and emerge with perhaps one less auto company in the end but with the others then having larger market share and being healthier. But that debate isn’t allowed to happen when government is in the mix.
As it turns out, the real basket case of the big three is probably Chrysler. But now it’s been bailed out with the rest. And GM wasn’t allowed to restructure its expensive labor costs. So the government spend 34 billion dollars and may have actually made the industry less competitive overall.
Problems like that are why it’s folly to just accept a fiscal multiplier of X and assume it holds regardless of how government spends its money.
And of course, the other problem is that numerous studies of past attempts to end recessions with fiscal stimuli are, at best, inconclusive. There’s really no evidence that this sort of thing works at all. There’s much better evidence that monetary policy can have an effect, but there’s not much room for that any more. That’s not an argument for trying something that history shows may not even work.
That’s true. But 1 trillion borrowed and spent to correct a recession caused by too much borrowing has other risks. Such as devaluing the dollar, eliminating the U.S.'s preferred borrower status, driving up interest rates, and preventing painful but necessary corrections to get the economy back on track.
Or conversely, spending a trillion now is inefficient in the sense that it props up a trillion worth of economic output that we shouldn’t have and can’t afford, and just kicks the can down the road, with interest added.
Really? You see no disadvantage in adding a trillion dollars to the debt? What if you spend that trillion, and it gets soaked up into the economy to no real effect? What if there is no multiplier, and all you’ve done is trade a trillion dollars worth of future growth for a trillion dollars worth of funding to enterprises that we no longer need or should maintain?
You’re talking like this is a business cycle downturn, and not a fundamental correction. It seems pretty clear to me that, for example, there is over-investment in real estate and construction. It seems to me that the right answer is to let those industries contract. Propping them up with borrowed money is not the right answer, because it’s not a temporary slump we just have to get past. We discovered we had more than we need, and now it’s time to let it go.
That’s a gross over-simplification. Go back and look at the distinction she draws between permanent tax/spending plans and countercyclical ones.
As I said, they tried numerous fiscal stimuli, which failed to work. Your claim is that if they had just spent even more, and spent it all at once rather than in fits and spurts, it would have worked. That’s an unproven assertion, but it also does not bode well for the current stimulus package which will not be fully spent until 2019.
Here’s a fairly short article from The Atlantic from two days ago: How economists analyze the stimulus. It gives a skeletal framework for analysis:
The “effects” are explained therein, followed by pro/con arguments by two economists, Kevin Murphy at University of Chicago and Brad DeLong at Berkeley, with their estimated multiplier effects.
I was gonna put this in a new thread, since the framework provides a decent structure for advancing arguments, but then thought it wasn’t different enough to warrant it…
I had a longer reply which I accidentally deleted but let me a couple of quick points.
The first point has been made by Hellestal but it’s worth repeating; the public sector usually operates in markets where there are systematic market failures like externalities, assymetric information etc. and for one reason or another the private sector isn’t producing enough or perhaps producing at all. IOW the market mechanism isn’t working for those products. So it’s no good invoking the brilliant informational properties of the price mechanism in the market for hammers when the market for ,say, pre-school education for poor children isn’t like that at all. The main point is that there is no theoretical reason to believe that public sector spending is less efficient than private sector spending; you need to look at the specifics of the spending and its costs and benefits.
Secondly it’s not true that a “balance sheet recession” means that the case for a fiscal stimulus is weaker. Government spending can’t crowd out private saving because savings isn’t in itself a part of aggregate demand. It becomes so only when saving is converted into private spending which isn’t happening right now. There is no reason why the private sector can’t reduce leverage while the government takes on more debt; the constraints governing the two are fundamentally different. This is especially true for the US government which has enormous powers and where debt/GDP ratios are well below their peak. Indeed since the private sector is seeking low-risk assets like treasury bonds, there is a complementarity between greater government borrowing and lower private sector leverage. From the macroeconomic pov, private sector deleveraging means lower aggregate demand so it makes sense to make up with greater government spending.
I think you missed the point of my examples. No one is going to be able to eliminate the peaks and valleys, and those who try are fools. Central planning certainly does not do it, not even close. The goal is to maybe smooth them out, but in any case reduce the cost of the inevitable collapses.
For example, in the US we have the FDIC, thanks to FDR. Do you dispute that if we did not have the FDIC, there would have been runs on banks such as WaMu? You might remember the bank run in England before the government guaranteed deposits. Such policies damp out the swings.
Before I look for an answer, can you define what success would be? If I say policy shortened a recession, compared to what? Do you think the 2001 tax cuts shortened the recession? There was a long, jobless recovery (during which employment typically rose less than the number of potential workers). How do we know how long a recession would have lasted without fiscal policy? Even pre-Fed panics were addressed by private bankers. I’m not sure those are good controls, because we had a different economy then.
We’re in rainy season now. If I get out my rainmaking costume, and claim that I can create rain in 1 week with a 2 sigma being a month, I’d be hard pressed to prove I did better than nature without me, even if I had something for real.
Well, I thought it was a good pun. When you say that the Fed’s low interest rates contribute to the bubble, I don’t think you need a cite since that is common knowledge. However you also claimed that the Interstate Highway System is not an example of a successful government program since roads are either underutilized or overutilized. That I’d want a cite for, from a recognized traffic planner. I very much doubt anyone would say this is a problem. Some roads, like I80 through Wyoming, say, naturally have low traffic since their purpose is to complete the network. Traffic planners are well aware that roads with expanded capacity fill up in time, since people stop avoiding them and businesses move to take advantage of them. That isn’t a failure of planning.
I could go through yelling “cite, cite, cite” but I find that obnoxious. I’d rather, if I have time, find contradictory evidence for things I disagree with.
Cite that GM conducted its business in expectation of a possible bailout? The only previous example was the Chrysler one of the mid-70s. What probability do you think they’d assign to a Republican administration supporting a bailout?
During a recession the income supporting such programs drops and the expenses grow. Full funding assumes a certain environment, which was almost certainly wrong. Remember, state governments must balance their budgets, which causes them to do things that make a recession worse - cutting jobs, raising taxes, or both. That is why there is some call for the feds to bail out the state governments. I heard on Forum this morning that the proposed bailout should cover about 25% of the expected California deficit by funding things now paid for by the state. The giant size of the deficit, by the way, comes from the reasons I gave above.
Are you saying that unemployment benefits are going to be saved, not spent?
This was covered in the New Yorker’s economics column last week. Dick Thaler has the concept pf mental accounts. Large lump sum payments, like the rebate check, go into an account that covers windfalls, and is more likely to be saved. Some, regular increases, like unemployment or a change to withholding, go into an account that got spent. As a stimulus, Bush 41 cut the amount of withholding while not actually reducing taxes. This caused an increase in spending, even though people’s incomes were unchanged. Luckily Obama has a behavioral economist on his economics team, which might be why he is calling for a tax cut through withholding, not a lump sum payment.
Krugman called the impact of the end of the housing bubble quite well. He’d been warning about it at least a year before it happened. He was a lot more accurate than Greenspan was.
I presume it’s the same with GOP legislators in other states?