If by that you mean “economists” I should remind you that most economists did not see the 2007 crash coming. In fact, some of them supported governmental policies that led directly to the 2007 crash. Economics is a “scientific” discipline that is uniquely prone to be influenced by ideology, since the interests of the wealthy are directly linked to economic policies.
Evil Captor -
We have a pretty decent grasp of the effects of fiscal and monetary policy. As an example, take the stimulus package of 2009: rough calculations show that though it might staunch the bleeding, it wasn’t going to be sufficient. And sure enough, it wasn’t. Realtime forecast. There were others, from more systematic observers.
We understand financial crises less well, mostly because we haven’t experienced enough of them. That said, it was fairly obvious in 2005-2006 that we had a housing bubble on our hands. But some economists are in the reassurance business and boy is there a market for that. Serious people don’t watch TV news and they pay less attention to those who are consistently wrong, even if they find their ideologies congenial.
That said, prediction is hard. Upthread,** Terr** announced he sold his shares on Monday and that he welcomed a correction. Today the S&P 500 closed about 1% up from Monday. Hardly the end of the world, provided Terr has a symmetric and exhaustive strategy. The point being though is that one can correctly elucidate certain processes in the economy, while others remain opaque and still others intrinsically random. Just like any other aspect of reality. Stock market timing is especially difficult. Better to avoid pointless crises (and wars) altogether.
Correction/ nitpick:
We have a fairly decent grasp of the effects of fiscal and conventional monetary policy. The effects of unconventional monetary policy are up in the air, as they have a short track record.
Economists keep saying that, but they keep getting things wrong. Sometimes some of them get things right, and when they do economists claim that it vindicates the whole field. It’s almost like tribal shamans claiming that they can cure cancer by shaking gourds and dancing around their patients, because some patients recovered (because their cancers happened to be in remission). A harsh analogy, true, but I am so sick of hearing conservatives announce that economics supports their ideology, when the fact is that economists in general tend to draw conclusions that support conservative ideology because there’s money in it. Economists get THAT aspect of fiscal policy very very thoroughly.
Remember “trickle down”? I do, vividly.
Krugman gets things right more often than other economists, and is called a maverick because of it.
Some of the “pundits” on that list are identified as economists. Are you making a distinction here that is no distinction. Anyway, thanks for that list, it’ll come in very handy next time I have to argue with someone on this topic.
Yes, prediction is hard, but come on, economists have argued for years that the middle class is simply screwed by current economics and that nothing could be or should be done about it. I’m finally starting to see a few economists like Krugman point out out that in a consumer demand driven economy, gutting the middle class’ income is a very bad idea. But it’s not exactly GOSPEL among economists, now is it?
Economics has more than its share of [del]lying whores[/del] frauds and deluded professionals, and schools that teach young people to believe the [del]lies of lying whores[/del] misconceptions promulgated by frauds and deluded professionals.
That doesn’t mean that real scientific economics doesn’t exist.
Yes, there is a pony there underneath all that horseshit. The problem is, since economics is about money and who should get it under what circumstances, the wealthy see that tons of horseshit are regularly shoveled on top of that pony. See: “trickle down economics.”
Well I’ll also say that we understood the fundamentals of gravity in 1950, though the three and four body problems were pretty involved and the subject matter remains a topic of active research.
I think I see our problem. There are conservative schools of economics: they are nicknamed “Freshwater schools”. Among them are University of Chicago, University of Minnesota and University of Rochester. There are center left institutions, most notably MIT, Harvard, Princeton and Yale. There aren’t really any supply side schools. The idea that you can cut taxes and added incentives to work will make up the difference in government revenue c. 1975+ never had any microeconomic empirical support and was essentially crackpot stuff. The proponent, Arthur Laffer, didn’t express this position in a peer-reviewed publication. He presented it over lunch with a representative of the Wall Street Journal’s editorial page.
Here’s a guideline: if somebody supports their conceptual position with a You-tube video, you can dismiss them. Look for peer-reviewed work.
No. He’s a mainstream economist presenting textbook economics. Mankiw, head of the Council of Economic Advisers under George Bush, characterized the argument I related above as “Snake oil”, though the strong language was dropped in later editions.
It’s a little like global warming: the media presents the issue as a controversy. Among mainstream scientists the contention that it is a hoax is crackpot stuff.
Anyway, that’s my key phrase: textbook economics.
What does that have to do with the fed government shutdown? Those actions could still be taken today. Its not like even close to the majority of fed gov activity has ceased. I heard that the total affected spend that has been curtailed is like 18% that’s pretty meh.
First consider that we should be running larger deficits when GDP is far below potential GDP, not smaller ones. Then take a baseline where Federal spending is 22% of the economy. Add in the sequester imposed by the Republicans on the 2013 economy. Add on top of that an 18% drop caused by the shutdown.
Rough numbers: .22*.18= 4.0%. If you think typical GDP growth is 2.5%, that pushes you into recession. Not meh at all.
So much for a rough demonstration. Now for bells and whistles. My understanding is that the pros believe that every week of shutdown shaves the quarter’s GDP growth by 0.1 or 0.2%. So three weeks gives us 0.3% or 0.6% off of GDP growth. Manageable, but not good. And note those figures don’t reflect damage to long term growth potential. When the NIH furloughs research workers, silicon valley loses research grants, and the FAA stops issuing airplane registration permits it affects American strength. These cuts are made arbitrarily, with little serious planning – a feature within the modern conservative mindset.
I guess one of the things that’s surprising me is the continued lack of outrage as this debacle heads for its second week.
I get (courtesy of this thread) that the US Federal Government doesn’t actually have a lot to do with the day-to-day lives of US citizens (and the branches that do aren’t really affected by this) but I’m seeing a serious disconnect from a country full of people who vehemently don’t want all-inclusive price advertising laws because [something about the principle of knowing exactly how much tax on every individual item is going to The Government™] or universal healthcare because it sounds dangerously like Communism!, but seem pretty laid back about the Federal Government being shut down (even in principle).
Look, there have been about 20 shutdowns before this one, and they were all temporary. The shutdown of all shutdowns in 1995, which was viewed as so terrible that it scared everybody out of shutting down the government for the next seventeen years, lasted three (3) weeks. And it sucks when it happens, but for most people it’s going to be an eye-roll suck and not a rage suck. The federal government has never shut down forever, and when it has shut down, the lights still come on, the trash still gets picked up, gas stations still pump gas, and there’s still food at the grocery store. (I mean, unless you’re furloughed or working without pay, in which case you might be having severe problems paying for those things. But most people aren’t. Maybe if this continues for months it could end up being a Bonus Army situation.)
Do I understand then, that this is like one of those stupid game shows, where they announce - “And the winner is… long, long, interminable pause… (Insert name here)”
Honestly, if the Federal Government were to completely shut down instead of only partially shut down, people would totally feel it and be much more outraged. Social Security checks wouldn’t go out, the government weather forecasters wouldn’t be able to help with the weather forecasting, and a bunch of other things that were actually really important. As it is, essential services still go on, thus allowing for a shutdown to continue. If it wasn’t for the upcoming debt limit problem, this thing could probably go on for longer than the previous 21 day record.
How is that a disconnect? Of course people who (a) don’t want new laws, and (b) think more government involvement sounds like communism, would have little problem with temporarily shutting down some of the government’s nonessential functions.
“Oooh, that demon rum! How it ruins the menfolk! Oh, how I pray these saloons will ever remain closed on Sundays!”
“Says here they’ll also be closed on Wednesdays for a while, ma’am.”
“That in no way troubles me.”
“Not at all?”
“Er, no.”
That’s sort of how I understand it as well - the Republicans have gone “If you don’t do what we want we’ll shut down government !” and the Democrats have retorted with “Fine, go ahead and do that, asshole”. And it’s a stalemate until debt issues creep in. At this point, the question has become “Are the Republicans willing to go ahead and nuke their own country financially just to make a point, going against insistent advice coming from pretty much everybody including their own financial backers : yes/no ?”
If the answer is no, then all the Dems have to do is suck it up and wait. Which is what they seem to be banking on.
If the answer is yes, there never was any saving the country (or negociations to be had) in the first place anyway.
As for me, never underestimating the power of stupid, I’ve moved as much of my money away from assets backed by US debt as I could. Which is not a lot but if the shit does hit the fan, at least I’ll have a feather duster.
Those are real costs and the impact of the shutdown can certainly be significant. However, if the ultimate goal is in fact to reduce the size of government, then this would be seen as a step in the right direction. So GDP will suffer, but any downward correction in fed government spend will result in GDP suffering. That is, any top down approach like the government shutdown will yield that result. If there were some organic process where private sector growth took the place of the government pullback that could be flat or positive.
Yeah, that’s the rub.
If the Republicans want to shrink the size of government, the proper preliminary step is winning elections. As it is, most people sensibly voted for Democratic control of the Presidency and Senate. In fact most voted for Democratic control of the House, but gerrymandering and oddities of population distribution have the Republicans control.
The time to tighten federal spending is during times of prosperity.
Misleading. If federal spending is cut during good times, the Fed can compensate with lower interest rates (or delayed increases in the interest rate). So, no, there would be no need for a downturn. We saw something like this during the 1990s, a decade which had a fair amount of spending restraint and eventual budget surpluses. Unaffordable tax cuts, a pointless war in Iraq and an unfunded Medicare Part D - all Republican policies - destroyed that era of national strength.
I don’t think this is about what’s proper, however you are using that term. You can argue it’s an unwise move to use the budget process to shrink government but it’s a perfectly legitimate tactic. If just one congressman believes the will of their constituents who put them in office would prefer the government shutdown as a means to an end, and that congressman votes their conscience, that would be a proper exercise of congressional power. If enough believed this, we have the situation where we have today. The way to defeat this tactic is to either change the rules or win more elections. Complaints of gerrymandering or improper behavior are ineffective.
If a congressman evaluates the costs of shutting down the government vs. the potential long term benefits and they determine for themselves and their constituents that shutting it down is the best way to achieve their goals, economic downturn notwithstanding, then I would argue they should in fact shut it down or make every effort to do so.
I personally don’t think it’s a good tactic because it won’t work. If I believed it would work at the cost of short term economic volatility and negativity - I would support keeping it shut down for years.
Threatening debt default isn’t using the budget process. It’s holding a gun to the economy and threatening to put the US into recession if you don’t get your way. The House Republicans refused to confer with the Senate for about 6 months. Seriously, these acts have nothing to do with ordinary budget processes.
How about a Great Depression? Would it be worth that? How about unemployment going back to 10%?
Just what is your problem with the government anyway? [My response: fine. Then buck up and write a bill that cuts that. Advocating slash and burn cuts, economy be damned, lacks reasonable justification. It’s an act of cowardice to blandly advocate cuts without specificity. ] Since the unaffordable GWBush tax cuts expired, the budget deficit has been in decline.