Will Lack of Accord on Stimulus Obscure Economic Lessons? 37 comments
-
Font Size:
-
Print
- TweetThis
When President Obama came to office, he pledged to focus governance on what works and not on ideology. This approach to government comes out clearly in his book, "The Audacity of Hope: Thoughts on Reclaiming the American Dream
Unfortunately, this idealism is off to a rocky start with near unanimous Republican opposition to the economic stimulus bill. I suppose after President Bush presided over a record-breaking expansion of government deficits and a ninth-inning suspension of many free market principles, it was too much to ask Congressional Republicans to allow a Democratic President to twist them into even more government spending and bigger deficits. Republican Representative Zach Wamp from Tennessee probably referred to this frustration when speaking out against the stimulus plan: "Just because Republicans spent too much money after September 11 and lost our way on financial matters doesn't mean the Democratic Party should be allowed to wreck our ship of state...This is taking us quickly down the wrong road. Vote no."
The Republicans have made a fascinating political calculation that could be the all-or-nothing bet of a generation. If Obama succeeds, the Republican Party will solidify an impression that they are out of step with the majority of America. They could lose most major elections for at least a generation. If Obama fails, the Republicans get a huge flashpoint for the 2012 (or 2016?) elections. The Democrats have also made a fascinating political calculation. By ramming through such massive legislation (over 1000 pages!?!) against such strong Republican resistance and opposition, they have removed a lot of the motivation for Republicans to cooperate for the remaining years of Obama's administration. The Republicans are now in a nothing-else-to-lose situation.
But what exactly will we learn as this stimulus program slowly works its way through society in the coming years? Are we even ready to learn? I am afraid that this early, massive failure of bipartisan cooperation has set the stage for years more of bias confirmation. If the stimulus program fails, supporters will assert that the stimulus program simply was not big enough. If the stimulus program works, opponents will claim that the economy recovered despite the massive government intervention. For example, how do you really prove that a stimulus program has saved jobs that would have otherwise been lost? As another example, we have economists like University of Nevada, Reno, Professor Bradley Schiller who wrote a Wall Street Journal opinion piece titled "Obama's Rhetoric Is the Real 'Catastrophe'" suggesting that Obama's warnings of Depression are actually causing a deepening economic malaise.
Schiller finds an odd comfort in the fact that the economy only appears about as bad as the 1981-1982 recession: "Real gross domestic product (GDP) rose in 2008, despite a bad fourth quarter. The Congressional Budget Office projects a GDP decline of 2% in 2009. That's comparable to 1982, when GDP contracted by 1.9%."
Let's put aside whether the CBO is including assumptions for Federal stimulus. Schiller confuses Obama's warnings of future, deepening calamity with a conclusion that we are already there. But if you are pre-disposed to hate government intervention in the private economy then certainly Obama's warnings might sound alarmist and overblown. Now that a stimulus bill is in place, Schiller's argument suggests that criticism of the bill may undermine confidence in its ability to work...and thus undermine its stimulative potential. Somehow, I doubt such concerns will quiet critics. Finally, once we act to avert future catastrophe, we can only speculate on how bad things could have been. Just as we can only speculate on what would have happened had President Bush directed Paulson and advised Bernanke to let all the bad financial firms go the way of Lehman last year.
Indeed, I suspect the very definition of success and failure of the "American Recovery and Reinvestment Act" will depend upon ideological biases. Moreover, economists will be able to find ample data and statistics to support either (any?) position and will perpetuate the festering, endless debates that mark the "dismal science" (EconTalk recently posted an interesting podcast discussion on truth and bias in economics). Fortunately, President Obama is already fully aware of the judgment that awaits him, the only judgment that matters in the end. He responded to a questioner at a townhall meeting in depressed Fort Meyers, FL as follows: "I expect to be judged by results. I'm not going to make any excuses. If stuff hasn't worked and people don't feel like I've led the country in the right direction, then you'll have a new president.” I am relieved to have now a President who indicates that he is willing to accept the judgment of the people and has some sense that actions do not equal success, results do.
We already know how difficult it is to learn the "right" lessons from singular moments in economic history. For years, I have always accepted what I learned in high school about the Great Depression. It was the basic storyline that President Roosevelt's programs slowly but surely got America back on its feet. World War II came along and put the final icing on the cake of recovery. As has happened to many other people, this current crisis motivated me to review history and gain a more sophisticated appreciation of what happened during the Great Depression. The podcasts of EconTalk have been very helpful in providing me a richer perspective on the Great Depression. Moreover, I realize that there is on-going debate with many merits on just what worked and did not work during that time.
Insufficient or incomplete data are sometimes the barrier to understanding. This time around, we should be getting a lot of transparency on how and where these many billions will get spent at Recovery.Gov. We should all hope that this record will teach us the critical lessons we need to learn - that it will deliver more answers to economists, politicians, and regular citizens than fodder for more endless debates.
Be careful out there!
Full disclosure: None. For other disclaimers click here.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 37 comments:
Everything is build upon models and assumptions. The CBO argues that the recovery measures will increase/sustain employment by around 3 million while Mark Zandy of S&P, a supporter of the measure, believes the number is closer to 2 million.
From a political perspective, you can count on politicians making the same old arguments. If the economy deteriorates further, suppporters of the package will argue, perhaps, for another tranche of spending and assure us that things would have been worse without the spending bill.
If things improve, supporters of the bill will glow in the aftermath and the architects of the stimulus package will hail themselves as saviors of the nation.
Sadly, though, we will never know the true delta between doing nothing and (1) the present recovery measure and/or (2) a stimulus package with more tax cuts and more spending directed towards efforts most likely to produce jobs and enduring national infrastructure.
I WAS NOT A GREAT FAN OF BILL CLINTON. THIS WEEK PELOSI AND HER TAX EVADING BAND OF JESTERS OVERTURNED BILL CLINTONS GREATES CONTRIBUTIONS TO OUR COUNTRY. COME ON BILL, TEAR THEM NEW --- HOLES. THEY DESERVE IT
Truth is there isn't necessarily a binary outcome with this stimulus, or the previous one. For example, I think TARP, as badly designed and managed as it was, still helped. Not as much as it could have, but without it there might have been total chaos out there, with Dow at 3000, etc.
But I think people need to move away from perfection, as Obama said. Because there is no time and because you can't reach perfection in this, exactly because it's so difficult to prove anything in economics.
So I don't much care for criticizers of the stimulus. I do listen, though, to those who say ANY stimulus is bad. But I also think it's a value statement. Will Iraq be better off without Saddam long term, even if Saddam didn't have WMDs? Sure. Tell that to the 200,000 Iraqis who died as result of violence since the US invasion.
Would the US be better off LONG term without the stimulus package, and just letting all these banks fail? Perhaps, maybe. But lots of... bad things... would happen in the mean time.
You may be right that capitalism corrects itself eventually but only after it has taken as much of the state and taxpayers as it can get away with when it goes through one of its momentary crises
And it's obvious now that capitalism only works when we have sound fiscal policies backing it up. This is not a perfect game theory model, unbridled greed can never be a good thing all the time.
Economists who are anti-stimulus claim that the market will correct and that market corrections are better for the economy than government stimulus. The problem for anti-stimulus economist's is the societal cost - people need to suffer to get them to take less than optimal jobs so self-correcting economies cannot have significant social safety nets (unemployment insurance etc.) Beggars on the street is usually not considered the sign of a successful society so most economists end up pro-stimulus in one form or another.
The lesson we learned from Hoover's actions that resulted in the Great Depression is that we need to correct all the immediate economic problems before we get to longer term budget balancing. We have the same two problems that Hoover was faced with: a financial system that is in the process of breaking down and the loss of consumer confidence that is causing a consumption recession.
If we don't fix either, we're going to have the Greater Depression. If we only do one or the other, stimulus or fix the financial system, we'll end up with the Great Recession.
His actions are the complete opposite of his words.
Eventually Americans will see it.
The two party system is the structural result of winner-take-all elections without provision for representation proportional to votes (as in the parliamentary system). So long as we keep that system in the U.S., our governance will be handicapped by limiting debate and political action to a choice between two opposed parties that strive primarily to best the other rather than to create the best policies.
To do list:
1. Find caps locks key. Turn it off.
2. Learn about grammar and spelling.
Even after Clinton routed the Gingrich shut down of government, the GOP continued with the Cultural populism.
The GOP is not making a bet if the economy recovers... they will take credit for "forcing" the tax cuts into the package "made it work," or get onto what every other non-provable and ram that message over and over.
On Feb 16 11:48 AM hipobamacrite wrote:
> Transparency, what joke, every thing Obama says he’ll do he doesn’t.
>
> His actions are the complete opposite of his words.
> Eventually Americans will see it.
The bottom line on POTUS is that 4.6 out of 10 did not vote for Obama. If we round up, well ... and if disaggregate by race, SES, location, etc. we get even more profound differences. To say that the majority of the american public believe X or Y is somewhat misleading ... I don't consider 5.1 (or similar range) out of 10 people to be a tsunami of support.
As I've written elsewhere, we all know this will happen again. The moral hazard castle that has been erected with surely create the next crisis. There is too much $ to be made in problem deferral and in literally and figuratively mortgaging one's future. We are all paying for malfeasance and vegas-style bets. The partisan glasses on both sides will only strengthen their respective positions ... I don't have a lot of hope that a political/economic epiphany will happen. It is often the brightest that have a strong hardening of the attitudes.
> jack
Unfortunately, this idealism is off to a rocky start..."
Unfortunately this article is off to a rocky start. Focusing on an ideology would be idealistic. Focusing on "what works" would be called pragmatic.
Pragmatism is not an ideology so much as a method.
"Bank CEO' s drop bombshell: Bailout actually not necessary."
bizzlo.com/story.php?S...
Pure socialism never works. As when the government owns the means of production. Europe has a socialistic safety net, but a lot of private enterprise. I can buy shares of Nokia, Siemen, BMW, ... they are not owned and controlled by the state. It is a mixed economy, and so is the US. All the econ talk about capitalism vs socialism refers to strawman models that don't apply to the real world situation.
And Europe is NOT in better shape than the US.
www.cbsnews.com/storie...
www.globalresearch.ca/...
"Unfortunately, this idealism is off to a rocky start with near unanimous Republican opposition to the economic stimulus bill."
1. No one should EVER vote for a bill that is UNREAD!!
2. Fellow democrats should be ashamed and imprisoned for such negligence..
I don't care what your political colors are! I already dislike politicians due to their lack of spine! But THIS is absurd!
If any of you are 'happy' that this bill went through in the manner in which it did... you should turn in your seeking alpha card immediately!
you are an idiot!! irresponsible, impatient, ideological idiot!
A secular shift like this requires active investment to counter in shorter order, apart from a short-term stimulus of the economy. If the POTUS gets credit for his action plan, it will be a realization that he is addessing this secular shift while finding a way to stimulate the economy. If he fails at either task, power in the US will be for the taking and it could get ugly.
As for what will solve the crisis. I feel that this problem is structural, meaning a return to regulated, not socialized banks under a Glass-Stegall like structure again. Banks need to make loans, retain the proper reserve requirements, and stop gambling in derivatives and brokerage get quick schemes.
Brokerages on the other hand should not get easy access to bank deposits by calling themselves a bank and then try leveraging that money infinite amounts and then ask for government guarantees even though they don't reserve any money and don't have an FDIC type insurance fund. They are essentially insuring themselves with taxpayers money. No wonder the system is broke. You just gave the most money hungry wolves who don't know the concept of long term viable business full access to the US treasury.
Sure they will say re-regulating them will be painful. Well not re-regulating them is painful. We have found out not re-regulating them is passive socialism since the government insures everything and must give them equity injections. And apparently not re-regulating them gets us Recessions and Depressions. What's more painful than that?
- Wrong. If you want American prosperity to succeed, you want the anti-prosperity Democrat policies to not be enacted.
"LOL we fell on our face under a Republican President already. This crisis supersedes partisan bickering. "
NO it doesn't.
The highly partisan Democrats wrote a hoax bill that bilks the taxpayers for $1 trillion and spends hundreds of billions for political payoffs for their friends and allies, funds every liberal pet project under the sun, has scads of pork barrel wasteful spending, and calls tax credit gimmicks 'tax cuts' to add insult to injury.
It was written 100% by Democrats, in the conference they EXCLUDED the Republicans, and then gave the country only 12 hours to even see the 1000 page bill before they voted on the stinker.
It was a travesty and a tragedy.
Obama is an incredibly divisive and partisan President who has already abused his position to attack and engage in a war against Republicans in Congress, urging people to attack his opponents verbally. And he goes after Rush Limbaugh and the free press by encouraging anti-first amendment "Fairness Doctrine" garbage.
The only honest thing the Republican minority in Congress can do is declare their total opposition to the destruction of economic and political freedom that the Democrats and Obama are assaulting us with.
"Either try to offer a legitimate solution or get out of politics."
The Republicans offered an alternative that cost half as much and did twice as much in creating jobs. The Democrat hoax bill was scored by CBO as makng economic activity be LOWER 10 YEARS OUT and would COST $4 TRILLION IN TOTAL 10 YEAR COSTS.
"Sure they will say re-regulating them will be painful. Well not re-regulating them is painful. " This is pure and utter myth. Banks have not been non-regulated. And more regulation is only making it worse. There is pure quakcry going on in Washington by politicians who have no clue how much damage they create. Schumer flapped his gums and a bank imploded. Sen Reid makes a comment and insurance stocks tumble 20% in one day. market swoons 300 points because the plan is a no-plan.
The reality is that Govt only does harm. Get it out of the way. Those banks that took risks should cost the shareholders and bondholders their savings and the strong banks should pick up the pieces. leave the govt to secure the basic FDIC-level savings and *THATS IT*. The rest is PURE FOLLY.
Obama and the Democrats have done to the taxpayers and workers of this country what Madoff did to his investors. It's a massive and shocking trillion dollar con job and theft. Our savings, our investments, our hard work - poof - it's now been massively grabbed by the Govt. They WILL tax you, rob you via inflation and debt and higher interest rates, and make you poorer weaker and stupid. Which will make you a ... Democrat. Their goal all along was a huge dependency class, just like FDR made, to cement a political majority.
A huge scam just to stay in power - at the cost of American prosperity.
Any patriot is sickened at what has happened.
> Eventually Americans will see it."
Obama lied. Jobs died.
They use to lead the world, yet socialistic welfare state policies retarded job growth and economic growth for decades. the European countries that went the low tax direction, like Ireland, because economic powerhouses.
" and will get through this recession in much better shape than us."
Well, that is because we we stupid enough to elect both Obama and a Democrat Congress. Dumb, dumb, dumb!!!
USA is now more socialistic than many European states, and our poorer economic state will show it.
"We need all work together in a way that was present in WW2 to bring this crisis to end."
"We need all work together in a way that was present in WW2 to bring this crisis to end."
The party in power is engaging the politics of Joseph Goebbels. Deposing them from power is something ALL patriots can agree on.
False. Do not confuse the stimulus concept with this phony hoax prok barrel Pelosi trashy bill. Hundreds of economists came out against this hoax bill. Cate Institute collected the names and they put an ad out. They know its not a stimulus of the economy but a massive stimulus for bigger govt.
CBO scored this bill as having lower economic activity in 10 years, already interest rates are higher and gold is up. And consumer confidence is way down. The recession would have ended anyway, but now we are repeating the folly of FDR and the folly of Japan 1990s - we will saddle debt without any real improvement to the private sector economy as a result of this.
Had it not been for this stupid Govt interventions, the recession could have been milder and shorter. We just keep making it worse.
Longing for the 1970s Carter economy? Bring back disco and 25% misery index!
This very stupid bill, which itself ADDS to the pro-consumption anti-production bias in the nation, will only accelerate our economic demise.
Consider this stupidity: An expensive, mostly useless tax credit for buying HEV cars. The japanese excel at them, so we are now going to TAX American business MORE in order to pay Americans to buy Japanese.
That's just one provision. Add to that the fact that we are throwing billions at states for govt consumption in general programs - these do NOT raise the education level, but our over-paid over-expensive but underperforming education system is getting more money for doing less and less each year.
"A secular shift like this requires active investment to counter in shorter order" ... the REAL solution? Abolish the income tax and/or lower it and the corporate income tax and increase consumption taxes. This bill, as I said, goes in the opposite direction of where you think US needs to go.
It appears, however, that the problem with capitalism is exactly the same. Eventually you run out of other people's money.
The question is whether you want capitalists in charge of the process or governments.
Perhaps if we looked at this question objectively and without ranting and raving at each other, we might actually find a balance that works.
On Feb 16 06:50 AM NITRAM wrote:
> WE CONCENTRATE ON THE NUMBER OF REPUBLICANS WHO VOTED AGAINST THE
> SPENDING BILL. REMEMBER IN THE HOUSE MANY DEMOCARTS VOTED AGAINST
> THE SPENDING BIIL. THE SENATE WAS DIFFERENT.NANCY PELOSI SAID ANYONE
> WHO VOTES AGAINST ME WILL BE SENT TO MY PLASTIC SURGEON FOR IMMEDIATE
> FACIAL WITHDRAWL. OBAMA DOES NOT WANT CROSS PARTY AGREEMENTS. IN
> ORDER FOR TZAR/CAR SALESMAN OBAMA AND ALL THE LITTLE TZARS, TO ESTABLISH
> THEIR SOCIALISTIC COUNTRY THEY MUST HAVE TURMOIL. THE TZAR WILL PUT
> OUR COUNTRY INTO A DEPRESSION. PELOSI KEEPS HIM ON THE ROAD SELLING
> CARS BECAUSE SHE KNOWS HAVING HIM IN WASHINGTON HURTS THEIR SOCIALISTIC
> PLANS.
> I WAS NOT A GREAT FAN OF BILL CLINTON. THIS WEEK PELOSI AND HER TAX
> EVADING BAND OF JESTERS OVERTURNED BILL CLINTONS GREATES CONTRIBUTIONS
> TO OUR COUNTRY. COME ON BILL, TEAR THEM NEW --- HOLES. THEY DESERVE
> IT
How big a difference? $1 put in tax cuts will put $1.02 back into the economy. The same $1 put into job creating investments will put $1.59 back into the economy.
Republicans are claiming the stimulus bill had no bipartisanship, when actually Obama offered them way more than they deserved to start with. Pay attention. This is a typical Republican, and more specifically, Carl Rove strategy. Accuse your opponent of doing what you yourself are doing, thereby deflecting attention from your own sins.
What no one is talking about is that the stimulus debate revolves around the Republican disdain for science and it's overwhelming evidence and scientific consensus on climate change. They objected to just about anything green in the bill, staying true to their colors.
We have a serious dumbing down of America, when 79% of Republicans think they are smarter than the 97-99% of climate scientists who agree with the IPCC and the theory of anthropogenic global warming(AGW). Meanwhile the science is clearly showing that the IPCC played down climate change and it's effects, contrary to the propaganda from the right that insists that scientists are being alarmists. The IPCC reports have been watered down by government input, exactly the opposite of what those on the right believe. The science is getting stronger, not weaker. Global warming has not stopped and the Earth is not cooling. No credible scientists believe that nonsense. The conclusion is only reached by cherry picking data and manipulating graphs to fool the gullible. It is absolutely false.
Righties cling to absurd arguments that were disproven 10-20 years ago in many cases. Some were decent arguments then, but are woefully behind the science now. But these arguments are repeated thousands of times a day on the internet by amateur skeptics who don't even bother to see what the real scientists say, only paying attention to the lunatic fringe of right wing anti environmentalists with their bogus science and oil company funded scientists. Little do they know or care that they are being deceived by perhaps the biggest and best funded propaganda campaign in history.
And in a desperate attempt to prove there is no scienitfic concensus, they cling to the phony lists of skeptic scientists like
those of Senator Inhofe and the much debunked Oregon Petition.
There can be no compromise on climate change with Republicans. They are just plain 100% wrong. And the future of civilization and half the species on earth are dependent on doing the right thing, right away. like yesterday
The 8 years of Bush administration stalling and censoring of science, in a time of such danger to all humans, will make future generations wonder why they weren't charged with genocide and hung on the White House lawn. Yes, it's that serious and it is not some future problem, it is now.
Here's some good advice. Believe absolutely nothing you read or hear about climate change from FOX noise, the WSJ, The Washington Post, Lou Dobbs on CNN, or any of the various right wing propaganda mills that advertise themselves as think tanks or research organizations, like the Heartland Institute, The George C Marshal Institute, the American Enterprize Institute, the inaptly named Friends of Science, The Fraser Institute, and others.
Their interests are not your interests. Period.
Want real science? Go to these websites.
Realclimate.org
Skeptical science
Logical science
Desmogblog
Open Mind
Greenfyre
Deltoid
Rabbet Run
Climate Progress
Read the books by Ross Gelbspan "The Boiling Point" and "The Heat Is On" - both of which document and spell out exactly how the fossil fuel industry and the Bush Administration have obstructed and censored science and used the vast wealth of oil and coal to fool the American public and many in Congress.
And read the new book " The Carbon Age" by Eric Roston.
It's a fascinating book about carbon, the carbon cycle, the formation of the earth, it's atmosphere and it's life forms, with carbon playing the lead role.
And you will learn that releasing the carbon into our atmosphere in the geological blink of an eye of 150-200 years, that took 60 million years to accumulate in the form of coal, is upsetting the carbon cycle that has supported the kind of atmosphere that is condusive to life as we know it, for at least 250 million years.
Coal is the result of carbon precipitating out of the carbon cycle, and being locked into coal deposits in the earth, over a period of 60 million years. Now we are putting it all back into the carbon cycle in 150-200 years.
Even common sense would tell you that won't work. Everything about life on earth, and how life and the atmosphere and oceans interact and effect each other, depends on the balance of that carbon cycle.
If 80% of Americans agreed with the 80% of scientists in general who agree with AGW, not to mention the 97% of active climate scientists who agree on AGW, and if they really understood the seriousness of the problem, and how critical it is to act right away, there would be million man marches on Washington demanding action and that the stimulus package be nothing but green.
Wake up America.