[luke warm]

jdonn, on Oct 16 2009, 05:12 PM, said:

I understood the intention all along as to "create or save" jobs in combination, not merely to create them as you and the wsj both seem to believe. Are you trying to deny that unemployment would be higher if these jobs hadn't been saved?

read again what i wrote... another (dissenting from the wsj, and more or less) opinion:

article here

Quote

In an interesting opinion piece for the Wall Street Journal, Robert Barro and Charles Redlick give empirical evidence supporting the claim that stimulus spending doesn’t work. By “doesn’t work” they mean that the government spending multiplier is less than 1. This means that stimulus spending increases national income by less than the amount of new spending. Why? Barro and Redlick are vague on the reasons. They invoke “crowding out” and, presumably, the “permanent income hypothesis”:

It would be good to know more about why private investment fell. Is Robert Higgs’s “regime uncertainty” hypothesis about the Great Depression the explanation? Another possible explanation is the traditional Hayekian one: A substantial part of the problem is the prior misdirection of resources that aggregate government spending does not address or may even make worse.

[Winstonm]

An aspect of this ordeal I find sadly amusing is how quickly the media goes to the same sources who never saw this coming and didn't think it could even happen at all to explain how we will overcome the problem.

[matmat]

I'd love to see the error bars on the estimates. (not to mention a plot that starts at 0... blowing up a section like this should be a big no-no)

[cherdanno]

Winstonm, on Oct 16 2009, 06:34 PM, said:

An aspect of this ordeal I find sadly amusing is how quickly the media goes to the same sources who never saw this coming and didn't think it could even happen at all to explain how we will overcome the problem.

Not to go all Winstonm, but isn't this the normal course of action? (Need I mention Iraq?)

[Winstonm]

There are certainly many reasons to doubt a V-shaped recovery is in the cards. Bloomberg reports:

Quote

U.S. state tax collections tumbled the most in almost half a century in the second quarter as the economic recession curbed levies on incomes and sales.

The 16.6 percent plunge was the biggest since at least 1963, the Nelson A. Rockefeller Institute of Government said today.

“We’re looking at a multiyear problem hitting essentially every state,” Robert Ward, the institute’s deputy director, told reporters. “It has happened during recessions before, but the depth of this decline is unprecedented in modern times.”

It's not unreasonable to try to be optimistic - but it is equally unreasonable to rely on delusion as a basis for optimism.

[Winstonm]

Quote

The national data won't be available until later this month. But based on preliminary information obtained by The Associated Press from a handful of states, teachers appear to have benefited most from early spending. That's because the stimulus sent billions of dollars to help stabilize state budgets, sparing what officials said would have teacher layoffs

There is no doubt that assisting states helped preserve government jobs. Unfortunately, the present Great Recession has been so severe as to overwhelm the stimulus attempt - and why I doubt the V-shaped recovery scenario that MSNBC financial T.V. and their green shoots boosters tout.

Again from Bloomberg:

Quote

For the 12 months to June 30, the fiscal year for most states, revenue declined 8.2 percent, or $63 billion, about twice what states got from the $787 billion U.S. economic stimulus package, the institute said.

If you look to grocery chains like Kroegers and Safeway you will see they are in a pricing war to lower prices - nationwide rents fell for the first time in 17 years - high unemployment keeps a lid on wages - it is this type recurring deflationary pressure that will keep the jobless rates high for much longer than anyone believes.

[jdonn]

Winstonm, on Oct 17 2009, 04:23 PM, said:

Quote

The national data won't be available until later this month. But based on preliminary information obtained by The Associated Press from a handful of states, teachers appear to have benefited most from early spending. That's because the stimulus sent billions of dollars to help stabilize state budgets, sparing what officials said would have teacher layoffs

There is no doubt that assisting states helped preserve government jobs. Unfortunately, the present Great Recession has been so severe as to overwhelm the stimulus attempt

Sounds like a good argument that the stimulus should have been much bigger, as many believe.

[Winstonm]

jdonn, on Oct 17 2009, 04:35 PM, said:

Winstonm, on Oct 17 2009, 04:23 PM, said:

Quote

The national data won't be available until later this month. But based on preliminary information obtained by The Associated Press from a handful of states, teachers appear to have benefited most from early spending. That's because the stimulus sent billions of dollars to help stabilize state budgets, sparing what officials said would have teacher layoffs

There is no doubt that assisting states helped preserve government jobs. Unfortunately, the present Great Recession has been so severe as to overwhelm the stimulus attempt

Sounds like a good argument that the stimulus should have been much bigger, as many believe.

The problem as I see it with Keynesian-like methods being attempted is that the stimulus has not promoted an increase in aggregate demand but replaced a large share of aggregate demand, and thus it is not a one-time event but will have to be repeated again and again.

Repetition of government stimulus can only be accomplished in one of three ways: raise taxes, borrow more, or issue debt and monetize it (print more money).

Each method has a limit - a limited means cannot sustain an unlimited need.

I do not believe we will know for many years all the unintended consequences of the actions taken with fiscal policy and with monetary policy, or whether or not these actions had a net negative or net positive effect.

All actors in this play are pretty much flying by the seat of their pants.

[Mbodell]

Winstonm, on Oct 18 2009, 04:37 AM, said:

The problem as I see it with Keynesian-like methods being attempted is that the stimulus has not promoted an increase in aggregate demand but replaced a large share of aggregate demand, and thus it is not a one-time event but will have to be repeated again and again.

The argument, as I'm sure you know, is not whether aggregate demand increased. But whether aggregate demand increased relative to what would happen.

The analogy is when you are sky diving you might be accelerating in your declining altitude, then you deploy a parachute, a smart person would realize that even though you kept getting lower and lower the parachute worked to decrease your decline relative to what it would have been. You don't argue the parachute didn't work because you kept falling.

Likewise, the argument should be what was the difference relative to what would have taken place. A lot of work has been done relative to what the gov't multiplier generally is for both tax cuts and increases in spending.

But it is pretty silly, IMO, for non-experts to debate this. While experts might not agree, at least they do more than think about things in silly blog post and board threads. I mean can you make a primary researched argument against Christina Romer and David Romer's work showing the multiplier to be 1.6 (that is you get back 60% more than you spend) based on looking at gov't changes isolated from other effects over the past ~100 years?