From Rep. Chaffetz's email newsletter:
Dear Cameron,
President Obama's $1.1 trillion stimulus package is not delivering the expected economic benefits, even according to the President's own benchmarks. The President projected that his stimulus package would prevent the unemployment rate from exceeding 8%. Today, the Bureau of Labor Statistics announced that May's unemployment reached 9.4%, and economists project that the rate will go even higher in the next several months.
Not only does the unemployment rate exceed the President's stimulus projection, it also exceeds the unemployment rate that the President projected if Congress had NOT approved the stimulus package. According to the President's own numbers, the unemployment rate would not have exceeded 9% if Congress had rejected the President's stimulus package.
Stimulus proponents may argue that more time is needed for the stimulus package to work. However, the following graph shows that the President was claiming that the impact of the stimulus package would be immediate. Not only is the recovery taking longer than promised, the job losses are higher than projected.
The Democrats' fiscally irresponsible stimulus plan has not delivered the promised benefits and has driven us further into debt, which already exceeds $11 trillion.
Click here for the report and please keep in mind the following:
(1) The only change to the President's graph is the insertion of the actual unemployment rate (in red) for the months since the President's signing of the "stimulus" law.
(2) As the graphic displays, the May 2009 unemployment rate of 9.4 percent is HIGHER than the worst unemployment rate the President predicted WITHOUT passage of the "stimulus" law.
Sincerely,
Jason Chaffetz
Member of Congress
37 comments:
LOL. This really only confirms Chaffetz lack of understanding when it comes to the economy. Economic recovery on this scale can take 1 to 2 years before any sound numbers can really be found to determine it's effectiveness. But then Chaffetz has never really been concerned with such an inconvenient thing as reality.
LOL indeed. Chaffetz used the president's own graph which projected the unemployment rate, and then put actual numbers in it to compare. The actual numbers show that the stimulus is not having anywhere near the predicted effect.
Someone else with apparently the same lack of understanding of the economy, Harvard economist Greg Mankiw, interpreted the graph this way:
"What does this mean? One interpretation is that the fiscal stimulus has failed to achieve what Team Obama thought it would. Another interpretation is that the baseline was worse than they believed at the time. I am confident the report authors would adopt the second interpretation. If so, that fact is consistent with what I said in a previous post: In light of the shifting baseline, it is impossible to hold the administration accountable for whether its policies are achieving their intended effects."
Jason,
How convenient that it might take 1 to 2 years to have any effect. Then, 1 to 2 years later, when it doesn't work, we parade a new bozo in front the American people who says that it will take another 1 to 2 years.
We've been living with those lies for far too long. Hopefully, the American people are catching onto the cycle of crap perpetrated on us by both major parties.
Frank, I agree with the ridiculousness of the 1/2 year scenarios we are constantly offered from economic decision makers. But unfortunately (despite what Cameron and Rep. "Tent Cities" might be gullible enough to believe) it's the nature of the economic, and slow moving beast.
This is why economic decisions should be left out of the hands of politicians who will eventually face re-election.
That aside, there is no ounce of reasonable logic in a condemnation of the stimulus this early on, Cameron. This email simply makes Chaffetz look like an idiot so eager to criticize he's jumping every shark that swims past.
When the time comes for real criticism, you'll have cried wolf so many times, absolutely no one will be listening.
Premature hand-wringing to score what you believe is a witty political point = bad for America. Especially when you can only score that cheap point by being as obtuse when it comes to simple economics as Chaffetz letter makes him look.
Jason what exactly in one to two years do you hope or think will change? By then it will be a little too late when everyone will have lost their jobs and all will be expecting the government to "bail" them out. When you give your kid a dollar for doing nothing, they will never work to earn another.
That's cute that you lecture people on obtuseness. The cognitive dissonance must be killing you.
The long term excuse might make sense if the stimulus hadn't been sold with a "we must do it now or the economy gets it" argument.
If you or the president didn't want accountability for your actions, it probably wasn't a good idea to make a prediction graph so readily available.
See, in order to sell the stimulus, the president, before he even took office btw, disseminated a graph purporting to show how much better off we'd be by passing his stimulus package. If the stimulus wasn't supposed to do anything for the first six months, why include those months in the prediction?
Those moths were included because it was a central part of the sales job for the stimulus. It had to be the biggest stimulus package in the history of the planet because it would help right now. It's incredibly disingenuous to attempt to move the goal posts now that the facts aren't backing you up.
Cameron, those are all words that I've taught you. Good to see you learning though. :)
The stimulus package is for "economic recover." That's why they called it that in the act passed. That means overall economic recovery. Even in discussions on the hill during the vote, it was acknowledged that the economy probably wouldn't hit bottom until later this year. It was common knowledge. The greatest aspect of the recovery act that you seem to be missing is that the money is an investment in job creation, opening doors that had been closed by the Bush administration, and creating a springboard of jobs that would get people spending again.
Considering the simple "fact" (I put that in quotes because it seems to be a word you have trouble with) that the transportation department, for example, has only spent $150 million of the $15 billion alloted in the recovery (http://app.mx3.americanprogressaction.org/e/er.aspx?s=785&lid=22492&elq=E29920979FC24C97AFAB4498ADEFAE89) it does indeed seem to be a little early to be judging the stimulus as a failure and be taken all that seriously.
There may come a time when such a criticism would be warranted, and that time may indeed come, as economic matters are often unpredictable. Chaffetz jumping on the bandwagon of idiocy so early, and your eagerness to perpetuate his idiocy, is unrealistically premature, and very hard to take seriously.
I think part of the stimulus package should have included an "Economy Basics" text book as well. It seems so many have no clue how all of this complicated economy thingamajig really works, and why we haven't completely rebounded in 90 days. In the days of fast food drive up windows and instant downloads, it's understandable.
But that doesn't make it intelligent.
Yes, you have long made a great example of what obtuseness means, among other things.
One of which is willful ignorance. Fact #1 is that the stimulus was sold as a quick fix. That's why the early numbers were included in the president's graph in the first place. You argue that it was known that the economy wouldn't hit bottom until later this year, but that has nothing to do with anything. The point of the stimulus was to raise the bottoming out, to soften the landing, and the unemployment rate was the benchmark chosen by the administration to track its success. Fact #2 is that the benchmark is showing that there has been no softening whatsoever. In fact, the unemployment rate is worse than their projections of if they'd done nothing.
What you're doing here is simply reshuffling the deck in an attempt to divert attention from the early returns of failure.
cameron you haven't been paying attention, if it was sold as a quick fix then why did it not spend all the money up front? as far as the soft landing goes, well, i suppose that depends on your definition of a soft landing, when you're already a few quarters into a recession when you take stimulus action, soft landings are similar to not falling too far.
secondly, no one knows what the economy would be like if the stimulus hadn't passed, you can use whatever numbers you want, but at a certain point forcasting is guess work (educated guess work, but guess work none the less). so trying to say something like the stimulus didn't work is nothing more than political posturing, since there's no way to know. granted the same can be said about the stimulus's positive affect, so we're basically stuck with comment shouting matches like this. i haven't seen many democratic congress members saying the stimulus fixed anything though. and from an economic point of view, for a turnaround to happen someone had to spend money, consumers weren't/aren't, businesses weren't/aren't, so who is going to spend the coin to turn it around if the government doesn't?
one last point, chaffetz shouldn't complain so much, more government spending means he can have more 'congressional directed spending' which, mind you, isn't an earmark, except that it is. more bloviated grandstanding from someone trying to get attention in congress.
Fellas, look at the graph. The president predicted the effect of the stimulus. They're his numbers. They're what he expected the stimulus to do. It's his definition of what a soft landing was. I'm really sorry that he was wrong, but facts are facts.
Now this line is very interesting:
no one knows what the economy would be like if the stimulus hadn't passed, you can use whatever numbers you want, but at a certain point forcasting is guess work
Again, look at the graph. Not only did the president predict what the stimulus would do, but he also predicted what not passing the stimulus would do. So I'm not using "whatever number you want", I'm using the president's numbers.
Cameron, I don't think you heard. Obama is the new "Messiah" He will save us. I know because I saw it on tv.
Jamie, you make me laugh in your petulant childishness. It's like arguing with a third grader who didn't get to go to recess. I'm sorry that your side lost the election with such embarrassing lack of grace, but pouting about it isn't winning you any points.
Cameron, what you're actually using is a projection that was off. It's something that happens quite often (every time, actually) in the big-boy world of economics, even if it doesn't in your little boy world of over-simplification and willing suspension of disbelief for anything Chaffetz says.
The point still stands that neither you nor Chaffetz have even remotely hinted at a success or failure of the stimulus, but only your own willingness to look uneducated on the issue in an attempt to score a cheap political point.
Personally, I'm glad you do it, as I like knowing that I'm pushing your buttons, and at least (hopefully?) making you think about things a little more before you write about them.
But, again, let's not call it intelligent.
oh you cut the quote off a little too soon, it ends with
(educated guess work, but guess work none the less). so trying to say something like the stimulus didn't work is nothing more than political posturing, since there's no way to know.
i would assume you left that part about political posturing out since it's basically what your doing. but you're neglecting the fact that everyone makes projections. make a graph of your projected bank account over the next 5 years, think it's dead on at all points. probably not, now project the countries unemployment rate for 5 years, did you get that one right. i don't know of anyone's projection ever being right on the mark. but now you and the congressional cot man have polished your crystal ball to the point where you can look back and say we'd be better off without it?
your argument here is that his projection was right and the stimulus made things worse, which is either a partisan bait and switch argument, or extremely naive, i'll let you be the judge of which you're doing here.
one last point, if you're so willing to use the administrations projection graphs, lets assume that they were right on the effectiveness of the stimulus, but they were wrong on how much trouble we were already in (or, more partisanly, how badly bush had led us astray). that would leave us at 10% + unemployment by the end of next quarter.
so the question to you, and chaffetz for that matter, if the government doesn't stimulate, how do we get out of the recession? there aren't many answers to that, other than the let it crumble and we'll rebuild it. which is an option, although not one i've ever heard taken seriously, because letting it crumble literally means just that, and no one wants to see unemployment/poverty/third worldness become the way of life in this country for sake of keeping the invisible hand strong, especially when an unfettered invisible hand got us here to begin with.
Cameron, what you're actually using is a projection that was off.
And now we're finally getting somewhere. In my first comment to this post I quoted and linked to Harvard econ professor Greg Mankiw. I'm not sure how you big boy economists missed it, but I'll repeat it here so you don't have to scroll all the way up there.
"What does this mean? One interpretation is that the fiscal stimulus has failed to achieve what Team Obama thought it would. Another interpretation is that the baseline was worse than they believed at the time. I am confident the report authors would adopt the second interpretation. If so, that fact is consistent with what I said in a previous post: In light of the shifting baseline, it is impossible to hold the administration accountable for whether its policies are achieving their intended effects."
Translated it means there can be no real accountability for spending a gajillion dollars. Did it work? There is absolutely no way to tell.
In an earlier post, Mankiw wrote about a question the president was asked shortly after the stimulus was passed. Here's the question and the president's answer,
Question: The American people have seen hundreds of billions of dollars spent already, and still the economy continues to free-fall. Beyond avoiding the national catastrophe that you've warned about, once all the legs of your stool are in place, how can the American people gauge whether or not your programs are working? Can they — should they be looking at the metric of the stock market, home foreclosures, unemployment? What metric should they use? When? And how will they know if it's working, or whether or not we need to go to a plan B?
Answer: I think my initial measure of success is creating or saving 4 million jobs. That's bottom line No. 1, because if people are working, then they've got enough confidence to make purchases, to make investments. Businesses start seeing that consumers are out there with a little more confidence, and they start making investments, which means they start hiring workers. So step No. 1, job creation.
Of course, thanks to Craig and Jason's brilliance, we know now that the metric the president wants us to use to judge him by is full of crap; completely worthless.
He certainly knew this. In fact, I'm certain he counted on it. He knew that by using this metric he would have zero accountability for his actions because for every Representative Chaffetz out there willing to criticize using the president's own metric, President Obama knew there would be many more Jason The's and Craig41's out there swallowing the charade hook line and sinker. Thank you both for brilliantly illustrating how to be led around by the nose by a politician.
Now, this all assumes the president's own projections are wrong. If they're right, then we can fairly objectively say the stimulus is failing. If they're inaccurate, we're left to wonder how his economic team could have failed so completely, or we could just wonder why he wanted us to measure his performance by a stat he knew to be completely bogus. Though I suppose you two have just shown why we don't really have to wonder what his motivations were.
(took this one down once, i gotta check like spelling stuff before putting things up)
cameron, you're good at dodging questions, i'll give you that. but i still want to know, if the government doesn't spend, then how will gdp grow? i've asked it twice now, you haven't answered yet though. i know it's because you don't have one other than the free market will fix it, stop spending my tax dollars. i mean that's you and chaffetz's talking point here, gotta stick to it right.
it's simple macro economics, one of the components of gdp is government spending, if you want gdp to increase then government spending more money will do it. did the stimulus work, yes. could something else have worked? well, you haven't answered that one yet have you.
i look forward to reading your next non answer of this question.
"did the stimulus work, yes."
Now compare that with your earlier statement,
"trying to say something like the stimulus didn't work is nothing more than political posturing, since there's no way to know. granted the same can be said about the stimulus's positive affect, so we're basically stuck with comment shouting matches like this."
So, is there a way to know, or isn't there? I'm eagerly awaiting the metric you're using that allows you to state unequivocally the stimulus did work. Especially mere days after stating unequivocally that there's no way to know if it did work, even though the president himself told us how to check on it. I'm left assuming your statements are just political posturing, as you asserted in your first comment.
If you want a conversation about fiscal policy affecting the economy, we can certainly have one. You could start here, here and here.
But you haven't really addressed my post. You spent a number of comments desperately refuting that there's any way to know if the stimulus is working, but at the same time you're so very sure that it is. That seems odd to me.
did it increase gdp, yes, simple macro economics. did have the effect on the unemployment rate that cot man's chart says it did, who knows.
as to that conversation on fiscal policy's affect on the economy, here's the unequivocal metric it's called GDP. if the government spends more GDP increases. since a recession is defined as a period of negative growth in GDP lasting 2 or more quarters, then increasing GDP ends recessions. sorry for not making it more clear that i was talking about GDP in the last comment, though i thought it was clear when i said it's simple macro economics, one of the components of gdp is government spending, if you want gdp to increase then government spending more money will do it. i'll try and elaborate more in the future to avoid such misunderstandings.
even your guy mankiw agrees
If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes. Although Keynes died more than a half-century ago, his diagnosis of recessions and depressions remains the foundation of modern macroeconomics. His insights go a long way toward explaining the challenges we now confront.
(...)
That leaves the government as the demander of last resort. Calls for increased infrastructure spending fit well with Keynesian theory. In principle, every dollar spent by the government could cause national income to increase by more than a dollar if it leads to a more vibrant economy and stimulates spending by consumers and companies. By all reports, that is precisely the plan that the incoming Obama administration has in mind.
though i do appreciate the links to searches on your blog and a paper from a bush economist. i mean really, if mankiw is so great why didn't he do something to avoid this, he had a position of influence for a few years. instead he waits til the plane has hit the mountain, then objects to the way the wreckage is being cleaned up. so yes, i understand why you think he's such a cool economist, he's doing the same thing as you and rep tent cities.
also, pointing out your posts irrelevance is addressing it. you and chaffetz (it's actually his post, you cut and pasted his email, give the guy the credit he's due) want to talk about is government spending, and how it's not doing anything for the economy. yet you don't point to alternatives to getting the economy back on its feet. do you even want the economy to recover? it certainly doesn't seem like it, i mean as long as government spending stays low who cares about the economy right? i know you aren't saying that, but by focusing only on spending (and your objection to it, and your opinion that it's had no positive effect), without suggesting alternatives you're basically saying that recession is better than spending. that seems odd to me.
Jason don't get your panties in a bunch, calm down. I am just adding on to your bogus stand here. Keep them coming, they are quite entertaing. For you to say my side lost, that's the problem, you think there are only "Two sides" to America. People way on the Left and people way on the Right. Until people can meet in the middle, America will never be united.
Jamie, again with such maturity!
Your side lost.
Neener.
Craig/Cameron, this is an interesting read, and admittedly, I don't have the economic background Craig has, so it's great to see the discussion taking shape in such a wonky way.
Also, it's fun to see someone else pointing out how overly simplistic Cameron's arguments are. Heh.
you make me laugh and I love knowing I am annoying the heck out of you.
My maturity? Let's look at yours. So far as to what I have read you have tunnel vision. You only will ever see your "Side" as right and won't open your mind to see that both sides have good and bad in them. Can you tell us one thing that you disagree with on your "Side"? Give credit where credit is due instead of trying to make up excuses.
Larf @ "Neener." Jamie ever notice how it's always the minority party with poor election prospects concern trolling about how important it is we find the middle? If elections mean anything, it's that the majority owes the minority nothing. It's why we have the elections in the first place. And Jason I was going to write something similar. I enjoy these discussions and I follow Craig and Frank's economic debates just as closely. It's nice to read someone with Craig's academic economic background, so I hear, out in the Utah blogs challenging some of this conventional wisdom we swallowed from Reagan to Bush Jr. Obviously it's time we approached the economy from a new point of view. What Cameron writes here to me represents a failed status quo that my fellow conservatives can't let go of either out of nostalgia or a refusal to face facts. Being conservative doesn't mean we have to stick our head in the sand when something we try fails and that is just what has happened in the past decade. I don't agree with the extent to which Obama will probably take the country but I think it's self defeating to pretend what we've already tried again and again is the solution to the problem those same principles caused. When we talk economics, we should put the campaign talking points away and approach it as a science. Cameron, Chaffetz is not a good source to use for such an approach. There's my two cents, I hope this discussion continues here and elsewhere.
Your GDP metric has the same problem you were railing about just yesterday. The baseline can move. In Jason's words, you're using a projection that was off. So we either use the president's graph and conclude the stimulus is failing, or we say the president's economists make crappy predictors and there's no way to tell if the stimulus is working or not (isn't that what you wrote just a day or so ago?). Either way, your comments here are bogus.
To address your Mankiw link, you would do well to read the rest of it. It doesn't mean what you think it means. You might actually read the Mankiw editorial I linked to, and just for fun you could read the other links which talk about fiscal policy as well. Or you could just keep stomping your feet and say it's all Bush's fault. Whatever.
If you had read the links, you would have seen how just about every economist agrees that fiscal policy can have an effect on the economy. What they don't agree on is what kind of fiscal policy. Your insistence that government spending can increase GDP is meaningless. The real question is what policy will have the greatest effect. The Chair of President Obama's Council of Economic Advisers released a study which shows that tax cuts can have a far greater positive impact on GDP than gov't spending does. About twice as much in fact.
Jason,
Be careful when lecturing on maturity. That whole cognitive dissonance thingy again.
Tom,
"ever notice how it's always the minority party with poor election prospects concern trolling about how important it is we find the middle?"
Uh, that was pretty much the president's entire campaign strategy.
"refusal to face facts."
By all means, show me where my facts are wrong. What I've stated so far is that using the metric President Obama told us to use, his stimulus has failed so far. Those are facts. Jason and Craig then caught on that it's useless to try and pin down the president on anything because he can change the baseline when it doesn't turn out how he predicted. Craig confidently proclaimed that there was no way to know if the stimulus worked or not. Of course, he's now trying to change his story. That shows we like to play pretty loose with the facts, despite all that supposed economic training.
Tom Your right the majority owes nothing to the minority. I won't even go into all the things we as a society are allowing for the MINORITY. However, what's wrong with me saying people need to meet in the middle? Obviously it's not working way to the left and way to the right, but hey if we want to continue to be divided so be it. Hopefully Obama will do some good, he is human and will make mistakes. FOr your information Jason, there was a lot of bull crap McCain pulled too. I guess I should go over to the "Dark Side" now eh. lol
just in case you still want to discuss tax cuts vs government spending in terms of fiscal policy effectiveness in stimulating the economy, paul krugman has some thoughts.
needless to say when i saw it i had to point it out to y'all
Really? That's what you come with? After a week of bashing a graph, finally getting to the heart of the matter (so much so that Jason had to drop out because it was going over his head), you wait four days after the last comment and leave a link to a graph? A graph that if the tables were turned you would have ripped to shreds? Really?
And this after I offered up an actual study conducted by actual economists which conclusively shows that tax cuts have a larger immediate stimulus effect than does spending? A study which was published by President Obama's own lead economist?
I was hoping we were getting somewhere. There are a number of questions you could have posed concerning that study. A few tacks you could have taken. A simple Google search would have given you some interesting quotes from the study's author. But you didn't do that. Nope. Instead of a real live discussion that might actually lead somewhere, you wait four days to post this.
Boy, Cameron, it's just impossible to expect you conduct yourself in a manor more mature than a 12 year old typing on his Daddy's computer, isn't it.
I was actually sitting back enjoying the discussion, and learning a few things.
Judging by how it seems to be going for you, it's something I believe you could use a little more of.
But please continue... (not you Jamie, you just sound foolish)
(so it turns out blogger will only let comments go up if they're 4096 characters or less, so this one's coming in 2 parts)
part 1
well, i certainly apologize for the delay, i had no idea my response was so eagerly awaited. in my defense it was quite a busy weekend, and even the most intense of college course work takes the weekend off. now back to your lesson. i posted the graph from krugman's blog in response to your invitation to a discussion about fiscal policy directed at stimulating the economy, you said tax cuts are better than spending. i disagree of course, from a theoretic prespective, and here's some evidence, using the same metric you used in the original post to boot. really, how could i not put it up?
the problem with tax cuts is that while you can give people money, you can't force them to spend it, it's that whole leading a horse to water problem. currently consumer spending is down, throwing money at uneasy consumers doesn't result in all of that money being spent, some of it will go to that gdp hole of saving, or defacto saving via paying off debt.
the stimulus did of course include a tax cut, but instead of a stimulus check, which went oh so well last time we tried it last year at about this same time, it came as a withholdings cut, giving people smaller amounts of money over a period of time rather than one lump sum. remembering back to a white house press briefing from the time of the stimulus debate (i'm not qualified on google, as you've pointed out, so i can't provide a link here, you'll just have to take my word for it i suppose) gibbs said that the theory was that people would be less inclined to save or pay off debt if the money came over time, rather than at once. i'm not sure i'm on board with that claim myself, to me it seems like any tax cut will be subject to the same risk of savings. but i also am of the opinion that the tax cut was thrown in as an appeaser to ideologues like you and mankiw who seem to think that tax cuts are the most effective way to stimulate the economy from a fiscal policy stand point (and lets face it, monetary policy doesn't have much dry powder left at this point).
part 2
which brings us back to the krugman graph, reagan tried, it didn't really work. throughout these comments i've been asking what else we should do, to which the only response you've given is tax cuts work better. i disagree, and if you want to look at this debate like a poker game, the graph was a call to your graph. granted i didn't post a letter from a congressman, but if you'd like i could find one. also i wasn't trying to rip your graph to pieces (although i do question the spacing on the points in red), i was trying to point out that it isn't a valid measurement on the stimulus. call that moving the baseline if you'd like, but as i've previously pointed out (and you agreed), government spending does stimulate the economy. saying the stimulus didn't work after that seems rather odd at that point. but as you've insisted that your graph has merit i responded with one showing the outcome of your suggested course of action, which would be cutting taxes.
and finally, where did you think we were getting with this real conversation. i mean when you tout this
I offered up an actual study conducted by actual economists which conclusively shows that tax cuts have a larger immediate stimulus effect than does spending? A study which was published by President Obama's own lead economist?
as what you've linked to. it's not in any way acurate of course, since it's not a study, it's a new york times oped, but it does manage refer to studies done recently at berkeley. as to that published by obama's lead economist, well, no, it wasn't.
It is a fair bet that much of the Obama team started learning how the economy works through Mr. Samuelson’s eyes. Most notably, Lawrence H. Summers, the new head of the National Economic Council, is Mr. Samuelson’s nephew.
the studies weren't even published by his uncle, but nice grandstanding for your link. since you're a fan of studies, here's a blogpost talking about a study on multiplies done (with a link to the study itself even). funny thing though, their findings don't match the 'study' you linked to. here's another recent (1/21/09) study on multipliers. i link to it more so you can see what a study looks like, note the analysis, numbers, oh and footnotes. all studies need footnotes, opeds, not so much. one last note on that oped, turns out, others have questions about it. my favorite quote:
It is somewhat puzzling that Mankiw appears to believe that the Romers do think that tax multipliers are larger than spending multipliers, as they do not, and this is something that he could have very easily checked.
i'm so glad you taught me about that google thing.
I think the reason the stimulus has had little immediate effect is because not enough effort was put into shovel-ready infrastructure projects. I'm one of the first people to say that dropping rolls of Benjamins on infrastructure (roads, telecom, power, water, etc.) is what dug us out of the Depression. It could have done the same thing for this recession except that certain elements took advantage of a crisis to push at least a third of the money into new ongoing federal programs with no real plan to finance them in the future. (That's the expansive health care proposals for those who didn't read between the lines.)
Jason,
You know what's been interesting about this thread is that I decided to conduct a little experiment. I've noticed that here and elsewhere your MO is to leave a single flaming comment and never return for an actual discussion. So I decided to match you insult for insult along with the topical parts of my comments. And you know what? You came back. You kept right on commenting. Then, when the discussion really got interesting, you left, stating it was over your head. But all it took was one little jab in my last comment to bring you running back. So I apologize if you feel I've been mean to you, but apparently it's the only language you understand.
Craig,
Let's review what's occurred so far so we're all on the same page.
Immediately after the stimulus is passed, President Obama tells us the way to judge whether or not it's working is by jobs. So here we are 4 or 5 months later and some are doing just that. Since that measurement doesn't exactly turn out in the President's favor, you and Jason admit that the jobs measurement is completely bogus because there's no reliable baseline to compare with. Because of this you both say there is no way to know if the stimulus worked.
But then, perhaps realizing what you've just admitted to, you change your stance to say we can know. The new metric you want to use is GDP. Unfortunately, if we were to take the president's graph and switch out jobs for GDP the objection you had to using jobs as a measurement, namely that the baseline is off, still remains.
So since we're all agreed that there's no real accountability for the stimulus, you've retreated to a more broad theoretic defense.
You're arguing the stimulus worked simply because your ideology says it should have.
Which is fine and dandy. Except that Christina Romer, President Obama's chairman of the Council of Economic Advisers (that would be the president's chief economist), recently published a study which makes a considerable dent in your ideology. I referenced this study in the final paragraph of my last comment. I didn't link to it, as I assumed you weren't going to read it anyway - and I was right.
Instead, you linked the Krugman graph. I was disappointed in that because,
1) It has the same problems you brought up for President Obama's graph
2) After all your lambasting of Mankiw, you went and used an economist who writes a regular column in the NY Times titled "The Conscience of a Liberal"
Until that point I thought we were getting somewhere because Romer's study and others like it are fascinating, new, and relevant. Even Jason thought it was "Making Economic Policy Interesting". I was looking forward to your response to Romer's study. Instead I got Krugman's statistically irrelevant graph.
Some responses to the study include this quick write up in the Huffington Post,
"What they found about both issues surprised them. Tax cuts provide powerful short-run stimulus to the economy, but there is little evidence that tax cuts restrain government spending.
It turns out," Christina explains, "that tax cuts have led, eventually, to tax increases. Basically, something has to give. What we thought gave when you cut taxes was spending, but we seem to find that in postwar U.S. history what actually gives is the tax cut itself. A substantial fraction of a tax cut is typically undone in the subsequent five years."
Also, David Henderson from Forbes wrote about it.
In addition to Romer's study, The National Bureau of Economic Research released a paper which shows,
"We construct the impulse responses to three linear combinations of these fiscal shocks, corresponding to the three scenarios of deficit-spending, deficit-financed tax cuts and a balanced budget spending expansion. We apply the method to US quarterly data from 1955-2000. We find that deficit-financed tax cuts work best among these three scenarios to improve GDP, with a maximal present value multiplier of five dollars of total additional GDP per each dollar of the total cut in government revenue five years after the shock."
Additionally, there's a litany of tax options to choose from, each with potential for stimulus, from bonus depreciation, to section 179 limits, to credits, to tax rates. There are real live scenarios which fly in the face of your ideology. It really shouldn't be so scary to try and understand them.
thanks for the recap, i assume your response to the bulk of my comment is coming soon?
You're arguing the stimulus worked simply because your ideology says it should have.
so we share an ideology? i had no idea. you said
If you had read the links, you would have seen how just about every economist agrees that fiscal policy can have an effect on the economy. What they don't agree on is what kind of fiscal policy.
to the romer study, first you didn't offer it, you didn't even really mention it, though you did claim that you did. you brought up mankiw's oped (do you think he and krugman go to lunch sometimes? i mean they both write opeds for the times) which vaguely refers to some studies done at berekely (more on that later). and while i didn't read the study (i read the abstracts of a few of romers studies, anyone that reads more than that either has a reason to that they're getting paid for or a degree, or needs a hobby), i did read some things written about it, one of which was from brad delong a collegue of romer's at berkeley. if you'll notice he stated that mankiw made quite a mistake in comparing the romer studies. of course you wouldn't know that, since you didn't read the link, or the study itself (have at it). you've read what mankiw and the likes have said about it, and ran with it.
and the krugman link, hey, he's a princeton professor, nobel prize winner, and yes, a liberal. does that make his opinion any better or worse than mankiw's? i think better, you think worse, but that's just ideology talking.
but of course you missed the entire point of the graph. you stated that tax cuts worked better, puppeting mankiw's misrepresentation of the romer study to do so. i linked to a graph on unemployment rates (same metric, same flaws as your graph, so a level playing field) from the 80's to show what happened after reagan cut taxes.
as to your litenaly of tax cuts, look at the other studies, they detail them, your ssection 179 limits aka depreciation acceleration has a multiplier of 0.29. the only tax policies which come close to the multiplier of government spending are refundable lump sum rebate, and payroll tax holiday. the stimulus included a payroll tax cut, but who's counting.
the problem you're running into here is that you have this 'fascinating, new, and relevant' study that your guy mankiw either misread or was intentionally misleading of the findings, and you're now not responding to the criticisms. none the less i link (and by that i mean provide a link to, not that hypothetical link that you offered up) to a study that says your study is wrong. ya, you ignored it. because i linked to paul krugman? it must be tough being so sensitive.
We share an ideology? Did you read my comment before you pasted it? Here, try one more time,
just about every economist agrees that fiscal policy can have an effect on the economy. What they don't agree on is what kind of fiscal policy.
Economists don't agree on what kind of fiscal policy has the greatest effect - tax cuts or government spending. There are a number of recent studies which suggest tax cuts have a greater effect. I've linked to some. What I'm pointing out here is that your ideology is preventing you from seeing the disagreement in economic circles. You pretend that it's all settled and if we're in a downturn we should have the government spend because that's the cure all. You state here that the stimulus must have worked because gov't spending automatically increases GDP, and you state that as if all spending is created equal.
As for the Romer study, here's what I wrote,
The real question is what policy will have the greatest effect. The Chair of President Obama's Council of Economic Advisers released a study which shows that tax cuts can have a far greater positive impact on GDP than gov't spending does.
I assumed that someone with your economic training would know the person and the study to which I referred. Apparently I was wrong. Lacking that, googling would have brought it up in a few seconds. Since then I have linked to various interpretations of the study, as well as linked to another study which found very high tax cut multipliers. Here's another just for fun.
For Krugman,
and the krugman link, hey, he's a princeton professor, nobel prize winner, and yes, a liberal. does that make his opinion any better or worse than mankiw's? i think better, you think worse, but that's just ideology talking.
No, it's just quite disingenuous/hypocritical to harp on one source as being too partisan and then use your own partisan source to back you up. If you don't like Mankiw's work, then use your genius to prove him wrong.
For instance, Krugman's graph plots an unemployment rate over a period of time. That's it. There's no causality proven there. It's the epitome of the partisan fluff piece you've pretended to dislike in your own comments. In fact, since Krugman's graph shows the beginning of recovery about 15 months after the tax cut, we can take Jason's first comment in this thread and aptly apply it to Krugman's graph,
This really only confirms 'Krugman's' lack of understanding when it comes to the economy. Economic recovery on this scale can take 1 to 2 years before any sound numbers can really be found to determine it's effectiveness. But then 'Krugman' has never really been concerned with such an inconvenient thing as reality.
Now, you linked to some sites which disagree with Mankiw. Your 'favorite quote' follows,
It is somewhat puzzling that Mankiw appears to believe that the Romers do think that tax multipliers are larger than spending multipliers, as they do not, and this is something that he could have very easily checked.
Which is quite a zinger. Except it zings something which Mankiw never said. Mankiw said the Romers' study shows that tax cut multipliers are larger than previously thought. Not that the Romers now think those multipliers are higher than their spending counterparts. In fact, Mankiw wrote that he thought it likely that those that hold that the spending multipliers are always larger than tax multipliers would probably meet the Romers' study not by leapfrogging tax cuts ahead of spending, but by increasing the spending multipliers accordingly.
I've read your links. I've read many more before this thread even began. I've been very interested in the ongoing debate surrounding fiscal policy and multipliers. Your insistence on focusing on only one form of fiscal stimulus reveals your partisan bias. Our competing links show that a division does in fact exist within the economic community about which form of stimulus is best.
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