I remember that it was said that it would take too long, not that it would be a waste. but I may be conflating the issues of The Bailout with The Stimulus. If you look hard enough I'm sure someone said that it would all be over soon.
Well, right -- that it would be wasted as stimulus because it would take too long. I'm recalling eighteen months as what people were saying about how long it would take to spend money on big infrastructure projects: we're at eighteen months, and we still need more stimulus.
Infrastructure projects should go forward because they are needed. And there are plenty that are needed. Infrastructure as stimulus is a bad idea, because you get the Bridge to Nowhere.
because it would take too long to spend the money, and by the time the money got spent everything would be okay and all that infrastructure stimulus would be a waste?
I don't actually remember this at all. I remember all the talk about shovel-ready projects.
2: von at ObWi made this argument at the time.
4: As I recall it, that was why we could only fund shovel-ready projects: anything that required any planning would be too slow. Now, it looks as if mixing in some more money to be spent this year and in future years would have been a good idea.
6: That's why Pittsburgh got more money for the subway tunnel that basically serves sport stadia and no money to run the buses.
5: Agreeing with me, or making the argument that I'm now thinking was misguided in hindsight?
that we couldn't do stimulus with big infrastructure projects because it would take too long to spend the money, and by the time the money got spent everything would be okay and all that infrastructure stimulus would be a waste?
That's pretty much the argument from the Great Moderation Monetarists - that only monetary policy is supple and quick enough to react to changing circumstances. Bah, ok, we're talking about Robert Lucas and the Islands model that he came up in the 70's, that gave us this:
An important consequence of the Lucas-island model is that it requires that we distinguish between anticipated and unanticipated changes in monetary policy. If changes in monetary policy and the resulting changes in inflation are anticipated, then the islanders are not mislead by any price changes that they observe. Consequently, they will not adjust production and the Neutrality of money occurs even in the short-run. With unanticipated changes in inflation, the islanders face the imperfect information problem and will adjust production. Therefore, monetary policy can influence output only as long as it surprises individuals and firms in an economy.Note that he's arguing for unexpected changes in monetary policy; fiscal policy is much too slow by this model and supposedly cannot accomplish anything.
Lucas himself was making this argument back in March of 2009, and I believe it was taken up by the Republicans in a me too! kind of way.
max
['Lemme poke around.']
What happened with all the proposed rail travel improvements?
10: Probably spent cleaning the seats on the Wilmington to D.C. train.
8: The latter. IIRC a number of people made the argument you're making now in response.
We recently got a new train service up here, between Lynchburg and DC. Not sure when the money was appropriated though.
3: Infrastructure as stimulus is a bad idea, because you get the Bridge to Nowhere.
I haven't followed current discussions about an infrastructure investment chiefly because it seems dead in the water (obstructionism), but isn't the proposed Infrastructure Bank supposed to bypass the Bridge to Nowhere, i.e. the pork, problem?
This looks like the kind of post I was talking about, from von last year. Thanks, Josh.
I don't see how the Infrastructure Bank would be any lees prone to pork than current mechanisms. It is not really a bank. This explains it:
http://reason.org/news/show/a-national-infrastructure-bank
Seems like it could work if done right.
Infrastructure as stimulus is a bad idea, because you get the Bridge to Nowhere. the WPA, which built the nation's bridges, sidewalks, and public squares.
Is that how you do, "There, fixed that for you."? I never really know.
Just about every time I happen upon a nice piece of sidewalk or public square, I find a WPA plaque.
ari- all that work needed to be done. $360 million on a bridge to an island where 50 people live pumps federal money into Alaska, but isn't needed when finished. If there is a project that needs to be done, by all means do it. But don't spend money just because you can in the short run.
Really? All that work needed to be done? Providence needed an art deco fountain?
Also, I'm not sure you entirely get the point of Keynesian stimulus.
What emdash said. Moreover, the sheer quantity of things that need to be done -- RIGHT FUCKING NOW -- in this crumbling country beggars description. Two birds and all that.
22: The feds don't like to fix old crumbling infrastructure. They like shit they can put a congressman's name on. Which is why the local transit authority has $600 million to build a new subway tunnel to Heinz Field and is short $40 million to run the actual buses that take me to work.
It boggles the imagination that politicians can't figure out that the best way to win votes -- as well as to coopt local elites, like developers, to your side -- is to spend a shitload of money on highly visible, useful projects. I honestly can't understand how so many of the current generation of politicians simply lost their appetite for that kind of thing.
23: A whole field full of ketchup seems wasteful, I'll grant you that.
And why the bridge I cross most frequently is not slated for repair (unless you count the recent refurbishment of the net to catch chunks of crumbling concrete) despite being rated deficient.
25: It's like walking on a cloud of fresh pork!
21: Oh crap, now I have to stop masturbating.
24: The problem, I would guess, is that if the feds fixed stuff that crumbled, local governments would stop paying to maintain anything and just let it crumble until it got so bad the feds would step in. At least, our local government would. (We're about to sell the city parking garages and meters, because watching Chicago screw the pooch wasn't sufficient. Our mayor has to go balls deep into a pug for himself.)
28 Oh crap, now I have to stop masturbating.
Only in the long run.
9: Is there a definition of the distinction between fiscal policy and monetary policy that you or anyone can point me to? Up until five seconds ago I'd have said they were the same thing.
We recently got a new train service up here, between Lynchburg and DC.
And very excited you are, too! Seriously, at least five separate people (not all of them waiting for the train) remarked upon it to me during my visit to Charlottesville. And indeed, it was a very fine thing to have, and I pumped at least $500 into the Charlottesville economy because of it. Go stimulus!
(Around here, I've had the great pleasure* of seeing several rail and subway stations meaningfully revitalized because of it. It's like watching the a charming Hollywood montage of renovations scenes. I've been thisclose to writing a letter to the editor in the paper about it, but it's a small town and I don't want people to identify my name with mindless Democratic boosterism and ignore my future letters. Timeless works of genius that they are.)
*Alloyed a teeny tiny bit by the tragedy of additional hypens on the zillions of bright new signs for the Spring-Garden subway stop. (It's Spring Garden.) But I vented to the Man In Charge, so I'm mostly over it.
Hyphens. I'm doing my part to live up to whatever law it is that says complaining about spelling/punctuation means you're going to commit one of the errors in your complaint.
31.1: Fiscal policy is economy stimulus by government spending, such as infrastructure or aircraft carriers or welfare or whatnot. Monetary policy means increasing the money supply (lowering interest rates, mostly) to increase spending on the part of everybody else.
They let Moby Hick do the signs? Odd choice.
31.1 From Wikipedia, "In economics, fiscal policy is the use of government expenditure and revenue collection to influence the economy. Fiscal policy can be contrasted with the other main type of macroeconomic policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and the supply of money."
That's as good an explanation as I could come up with, I guess.
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Man, if there is one thing I hate, it is multi-millionaire property developers who try to cheat non-profit arts organizations out of thousands of dollars. I hate that.
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33: Ah, okay. Thanks.
increasing the money supply (lowering interest rates, mostly)
Except that lowering interest rates doesn't seem to be actually having that effect this time around, right? I mean, I keep hearing actual business owners that I actually know -- as well as ones in the news -- complain that they can't get loans.
hat we couldn't do stimulus with big infrastructure projects because it would take too long to spend the money,
I thought this was going to lead to the graph in this recent article that shows 35% of the stimulus unspent.
31: 9: Is there a definition of the distinction between fiscal policy and monetary policy that you or anyone can point me to? Up until five seconds ago I'd have said they were the same thing.
Monetary policy is blanket terms for the actions undertaken by the monetary authorities, that is, the people charge with printing money (basically), setting the price level and loaning money out to the banking system. Fiscal policy is whatever spending policy is put into effect by Congress (which means that spending on invading Iraq was a form of fiscal policy), but the term tends to be used in a slang form to refer to a subset of spending mainly intended to stimulate the economy. That's spending from taxes or from issuing treasuries. The Federal Reserve just buys and sells T-bills with the dollars they print themselves, usually to juggle monetary policy, but these days the Fed's investment portfolio is much more... varied.
max
['I think that covers it.']
Man, if there is one thing I hate, it is multi-millionaire property developers
Assholes, to a man.
Except that lowering interest rates doesn't seem to be actually having that effect this time around, right?
As I understand it (poorly) the problem is that interest rates are effectively zero, so there's not that much that can be done that way, and the Fed is reluctant to use any other tools. So.
Thanks, max.
On the general topic of economic issues, I have to say I missed the news that Obama et al. had expanded the AmeriCorps/VISTA program, and am very much hoping it gets properly funded all the way through.
I've dealt with about two dozen VISTAs in the last year alone, and while they've individually ranged from so-so to fantastically skilled, I can honestly say I've never run into a better real-world way to warehouse shepherd 20-somethings toward productive participation in the adult world.
That and the "stay on your parents' health insurance until you're 26" may be the most significant practical steps towards keeping lower-middle and middle-class young people out of stagnation/debt that I've seen. On a day where I've seen nothing but dismal news for young, poor men, it's good to think that we may not be increasing the ranks of poor people quite so fast as might otherwise occur.
34: I think I've gotten better. Now I just need to get neb to work on my self-doubt.
Nominal interest rates can't be lowered any more, so the only way to lower real rates is to increase inflation, but the Fed is full of people who only like the first half of their price stability/full employment mandate.
Full employment is an illusion. Did you know that of the 300 million people in this country, as many as 12% are wraiths, spectra, or water nymphs, magical and therefore ineligible for social security cards? You just can't help them.
Infrastructure as stimulus is a bad idea, because you get the Bridge to Nowhere.
Find out how "Helicopter Ben" Bernanke got his nickname, and why it's no longer justified.
Then reflect on WWII, and how we actually spent huge amounts of money on things that were subsequently blown up and then understand how WWII ended the Great Depression.
In fact, there is a huge amount of useful infrastructure to be built. But if you just drop money from helicopters, that would do the trick too.
I think this rather hackish WaPo article ("Critics Say Roads Projects Won't Jump-Start Economy") from 10/30/08 might show some of the thinking you are getting at.
"These projects take a long time to get approved, they take a long time for the money to get out into the system, and a lot of the claims that are made about how much transportation could actually help build the economy are overblown," White House press secretary Dana Perino said yesterday.An interesting criticism of the push for speedy projects was in Popular Mechanics of all places.
The programs that would meet the bill's 90-day restriction are, for the most part, an unappealing mix of projects that were either shelved after being fully designed and engineered, and have since become outmoded or irrelevant, or projects with limited scope and ambition. No one's building a smart electric grid or revamping a water system on 90 days notice.
Effective infrastructure development, planning and financing take time--most relevantly, longer than any given president's, governor's, senator's or mayor's most vividly-imagined timeframe (I.e., and I don't mean this as harshly as it may read, the next election). Arguably, NYC should be connected to Long Island and the mainland by two or three more bridges and/or tunnels, but even Bloomberg hasn't tried.
OT: I am stuck in a motel in the Mountain Time suburb where HBO's Big Love is set, waiting out some bad weather. It is boring.
49: I'm not really quibbling with any of your points, but it's not exactly as though NY lacks for long-serving Congresspeople, right? I mean, there are a class of people for whom the outcome of the next election is less of a mystery than others.
50: Lack of imagination on the parts of the electorate and the elected?
Arguably, NYC should be connected to Long Island and the mainland by two or three more bridges and/or tunnels
If there's one thing NYC doesn't need, it's additional ways for cars to get into the city.
NYC doesn't need bridges or tunnels to be connected to either LI or the mainland. If you mean Manhattan, there's already too much traffic, so spending money on more road access is a waste. We could use more money for the new rail tunnel to Jersey and the LIRR Grand Central connection.
52, 53: Things other than cars use bridges and tunnels, too. E.g., trucks bringing the bounty of the Earth's breast to various farm-to-table restaurants.
Surely some way of increasing ease of truck access to Manhattan would bring significant benefits, in terms of lower costs for supermarket items, other goods, etc.? I don't really see how simply building new bridges and tunnels would help, though.
I mean, isn't the truck delivery to NYC largely a last-mile problem, so that even if you increased the number of bridges and made them truck-only, you'd still have a problem of what to do with the trucks?
Please note that I am basically talking out of my ass here.
We are many. We want to block your streets and make you remake Cats you hipsters pig fuckers.
Look who has the room to keep pigs.
E.g., trucks bringing the bounty of the Earth's breast to various farm-to-table restaurants
Alternatively, a community vegetable garden on the entire WTC site would be a nice step toward sustainability and community. There could be a farmers' market!
6
As I recall it, that was why we could only fund shovel-ready projects: anything that required any planning would be too slow. Now, it looks as if mixing in some more money to be spent this year and in future years would have been a good idea.
You are conflating two different issues, how big the stimulus should be and how it should be distributed over time. I don't think stretching out a stimulus of fixed size makes sense.
The theoretical framework behind stimulus spending seems pretty shaky to me. And the theory appears unfalsifiable because apparent failure is explained away as being because the stimulus wasn't big enough (and with claims that things would have been even worse without it).
I think a big issue is that people are hoarding money because they lack confidence in the government and the future of the economy. If deficit spending contributes to this lack of confidence by feeding a perception that things are out of control it may be counterproductive in practice regardless of any theoretical benefits.
And you would argue people base their confidence more on the exact amount of government debt rather than the employment security of themselves and their social circle?
Building concentrating solar power plants in the SW desert where there are a gazillion unemployed construction workers: still sitting there as the best policy to do.
"The theoretical framework behind stimulus spending seems pretty shaky to me."
hah.
61
And you would argue people base their confidence more on the exact amount of government debt rather than the employment security of themselves and their social circle?
I would argue that if people believe we are being led by clowns this has a bad effect on the economy.
Only your hairdresser needs to know.
I'm heartened to see James condemning the right wing propaganda machine.
61: Can't wait to see the impact of Speaker Boehner in that case.
69 -> 65 and pwned and off to swim bed.
It's not that I don't agree that worries of government solvency could have some effect (particularly via business hiring decisions). It's that these worries don't seem strongly based in reality, and if we avoid potentially beneficial options because of myths, why would we expect those myths to disappear? It's not like the Fox News will change their coverage.
At least I put apostrophes in all those.
73: I tried that with "the economy is". The sixth suggestion is "the economy is suffering let it die".
I think a big issue is that people are hoarding money because they lack confidence in the government and the future of the economy.
Crikey. If the US gov't buys a million cars from GM this month and promises to buy a million a month for the next few years, (and then dumps them in Lake Superior) GM adds a plant even if borrowing costs go from 1 to 3% The only way there is any problem at all, would if there was so much competition for Capital that GM's expansion costs became prohibitive. At that point we would be booming. People would be buying GM stock with their hoarded money, or buying very cheap cars that didn't get dumped. Supply cannot create demand, but gov't demand can create supply. It's pretty easy actually.
A Gov't with a sovereign currency cannot run out of money. We can print until they make us stop, mostly because of inflation.
One problem was with the New Keynesian pump-priming, the stimulus had a timestamp and an end point. Somebody who knows that the checks are gonna stop starts saving. TVA, Hoover Dam, Lend-lease, National Highway System were long term projects. How do we pay for it? Print. China gets scared and starts dumping treasuries? Means long rates go down. Terrific. Print more.
MMT or Chartalism says if we do get inflation or high rates before full employment it means there is still hoarded money, or too much finance and speculative money. Tax it. (I think)
Supply side is obvious insanity, people who think a billion lollipops creates a billion suckers, automatically, just cause lollipops are really cheap.
But if the gov't says 1$ a lollipop forever, we got factories and jobs, as long as $1 is above costs.
Unfortunately, Obama is mostly a supply sider, giving money to banks (in tax cuts and credits, cheap money) and thinking the lollipop shoppes will just come begging for expansion money even though they have no customers. Because money is cheap.
Unfortunately, Obama is mostly a supply sider, giving money to banks (in tax cuts and credits, cheap money) and thinking the lollipop shoppes will just come begging for expansion money even though they have no customers.
And bob let's slip that he doesn't always believe Obama is intentionally evil, but may merely be misguided.
And I agree with most of what you wrote.
75 last was very generous and just a standard Keynesian interpretation of what is going on with Obama.
Not what I really believe, but an argument to take to Congress or something.
Fact is, Shearer's hoarded money, with no demand, will just spin around inside finance looking for arbitrage opportunities. Margin ain't great, but they make up for it with quantity. Plenty is available right now for takeovers.
If Obama wanted to create jobs instead of finance profits he knows what to do, or at least say. By pushing business tax cuts, its obvious he just wants more money spinning around.
Anybody want links?
And I really need to start reading what I write before I hit post.
76:Oops
Enough, I need Don and Peggy.
Heh, I was wondering how you wrote that response so quickly.
Alternatively, a community vegetable garden on the entire WTC site would be a nice step toward sustainability and community. There could be a farmers' market!
About as good for sustainability as zoning it for McMansions with minimum two acre plots. That's prime real estate with the second best mass transit in the country after Midtown. From a sustainability perspective it should be solid very big skyscrapers. This is where you want the maximum physically possible density of people working.
I am stuck in a motel in the Mountain Time suburb where HBO's Big Love is set, waiting out some bad weather. It is boring.
The light rail goes downtown and the weather was gorgeous you dork. I live in said suburb and have tomorrow off. Will be taking the family out for my older daughter's b-day in the evening but have nothing going on during the day if you need to be shown the good places to buy crack or something.
Dude. That wasn't meant to be a serious suggestion, even if it would be pretty awesome by my standards.
83 to 81, but the next time I'm in SLC jonesing for crack, swift, I'll let you know.
We've been watching Breaking Bad lately. And every time it's on our teevee I think of gswift.
There's all kinds of other stuff here like chocolate shops run by little people and I bet there's still a bloodstain on the concrete where that dude fell and shattered his ankles the other night. A tourist's paradise I tells ya.
I keep meaning to bump Breaking Bad up on my Netflix list. The problem is that once I discovered streaming on the Wii I've gotten really forgetful about the disc mailing thing.
Let me be clear. I've read some of your suggestions, on this blog and others. And you're right. But until we hear what the Republicans in Congress really want to do, we have not moved on to a post-partisan United States of America.
If you'd have put "Opinionated" in front of the name, I wouldn't now be sending my mom and e-mail to show her how the blog I comment on is super important.
I was that convincing? I should be a speechwriter!
I demand that you become a speech writer.
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Man, if there is one thing I hate, it is packing for a two-and-a-half-week trip with a Supershuttle picking me up in five hours.
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82 sounds like the best Unfogged meetup ever, by an order of magnitude. I demand that Flippanter accept the offer and liveblog it.
Keynes is dead.
In the long run.
This: One problem was with the New Keynesian pump-priming, the stimulus had a timestamp and an end point. Somebody who knows that the checks are gonna stop starts saving.
Is in fact the correct answer to this: I think a big issue is that people are hoarding money because they lack confidence in the government and the future of the economy.
Keynsian solutions work better the bigger they're implemented, which is why World War II was such a lucky happenstance for all the economists who had decided to stop spending in 1937, a mere eight years after the beginning of the depression.
Seems as if having put more money into infrastructure projects back in 2009 would actually be looking like a good idea right about now, wouldn't it.
But it might have worked, and then you'd have Australia's political problems, namely "why did we spend all that money? there's no problem! there was never a problem! down with the spendthrift 'stimulus' pushing government!"
Of course, Australia's problems would be good problems to have, relatively. (Unemployment is quite low, government borrowing is very low, there's just arguments about whether the stimulus helped achieve that.)
95. As I remarked in a different context on another thread, people who take maintenance seriously in and field are on a hiding to nothing. If they take measures which work, they've wasted time and money; if they don't, it's their fault.
On a grander scale, this is why fiscal policy is always out of fashion.
re: 96
Yes, I've seen this quite a bit. For example, when the people who deal with certain kinds of maintenance have tried to implement internal billing; to make clear to people managing projects that ongoing maintenance is a cost that has to be budgeted for. It doesn't seem to go down well ...
82: Thanks. By "bad weather," I meant "weather I can't fly in," but the forecast is improving.
The theoretical framework behind stimulus spending seems pretty shaky to me. And the theory appears unfalsifiable because apparent failure is explained away as being because the stimulus wasn't big enough (and with claims that things would have been even worse without it).
Nope. If interest rates and inflation had skyrocketed, thus stifling business expansion, the stimulus theory would have been proved incorrect. But that's not what happened.
The claim that the stimulus was insufficient is not a post hoc rationalization of failure - it's something that was said at the outset by Krugman and all the others who have been, you know, consistently right about stuff. They have been proved right this time, too.
Also, crack is whack. Stay in school! That's where it's really at.
OT, except insomuch as discussion of stimulus anything is potentially a mute point in 8 weeks:
CA judge declares Don't Ask, Don't Tell unconstitutional.
http://www.talkingpointsmemo.com/news/2010/09/calif_judge_to_stop_dont_ask_dont_tell_policy.php?ref=fpa
(I don't know html or whatever. I'll learn...later.)
I like Josh Marshall's take: "This should add to the pervasive state of calm."
Also? Log Cabin Republicans? I can't despise them anymore? Very confusing morning for me.
http://intelligentdiscontent.com/2010/09/09/the-perfect-post-modern-party/
discussion of stimulus anything is potentially a mute point
i.e DADT
except insomuch as discussion of stimulus anything is potentially a mute point in 8 weeks
I am not sure why, perhaps because of a greater history of success, but the British Socialists do not give up. At least some don't. Besides the Marxist theory, I do find reading them on electoral or leadership disputes just a little encouraging and try to find guidance there.
Krugman may provide leadership. I don't think he will ever stop talking Keynesian stimulus, no matter how seemingly difficult the politics looks.
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Charli Carpenter's ninth grader is assigned Elie Wiesel and Pompeii and returns to sleeping with her light on.
"Mom, will you lay over me to protect me from the ash?"
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99
Nope. If interest rates and inflation had skyrocketed, thus stifling business expansion, the stimulus theory would have been proved incorrect. But that's not what happened.
Actually it is not readily apparent that anything happened. I believe the economy has more closely tracked the adminstration's without stimulus projections that its with stimulus projections. The fact the medicine didn't kill the patient hardly shows it was effective.
The claim that the stimulus was insufficient is not a post hoc rationalization of failure - it's something that was said at the outset by Krugman and all the others who have been, you know, consistently right about stuff. They have been proved right this time, too.
Predicting failure is easy, doing better yourself is harder. It certainly hasn't been proved that Krugman and the others would have done any better if they had been running things. Particularly when political constraints are taken into account.
Not all problems have fixes (particularly easy painless fixes which are the only ones politicians seem willing to consider). I think the economy has some serious long term issues which likely to be a drag on economic performance indefinitely and which the political system does not seem capable of handling in a reasonable way.
re: 102
Log Cabin Republicans? I can't despise them anymore?
Being a Republican is sufficient to be an object of your despisal, I'd have thought?
It certainly hasn't been proved that Krugman and the others would have done any better if they had been running things. Particularly when political constraints are taken into account.
For "political constraints" read, basically, "obstruction from the idiot Republicans who thought that the correct policy was not a stimulus, not even business as usual, but spending freezes and spending cuts". That was, after all, the alternative, remember?
Actually it is not readily apparent that anything happened.
The CBO disagrees with you.
"CBO estimates that in the second quarter of calendar year 2010, ARRA's policies [in other words, the stimulus - ajay]:
* Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent,
* Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points,
* Increased the number of people employed by between 1.4 million and 3.3 million, and
* Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 4.8 million compared with what those amounts would have been otherwise."
http://www.cbo.gov/publications/collections/collections.cfm?collect=12
And don't forget that "otherwise", as I say, means "business as usual", not "following the policies suggested by idiot Republicans".
Actually it is not readily apparent that anything happened.
Unless, you know, you drive somewhere. Pretty much anywhere, ime.
108
The CBO disagrees with you
The CBO is using the theoretical framework behind stimulus spending to estimate its effects. Making the estimates meaningless as support for the theoretical framework.
109
Unless, you know, you drive somewhere. Pretty much anywhere, ime
Certainly some individual projects were undertaken. The overall effects are less clear.
Predicting failure is easy, doing better yourself is harder. It certainly hasn't been proved that Krugman and the others would have done any better if they had been running things. Particularly when political constraints are taken into account.
I think you're hedging here and waivering between two different kinds of arguments.
1) Stimulus spending doesn't really help the economy
or
2) Krugman and other Obama critics couldn't have done any better at getting a bigger stimulus package out of Congress, so their criticism is unfair.
I guess the two arguments don't actually contradict each other.
Actually it is not readily apparent that anything happened.
Actually, it is. You quoted me, but you apparently didn't read the quote. Here it is again:
If interest rates and inflation had skyrocketed, thus stifling business expansion, the stimulus theory would have been proved incorrect. But that's not what happened.
Interest rates and inflation remained stable and low. That happened. The bond vigilantes failed to materialize. That happened.
The reaction of the economy was exactly what Krugman predicted, and what the neo-Hooverites failed to predict.
It certainly hasn't been proved that Krugman and the others would have done any better if they had been running things. Particularly when political constraints are taken into account.
Well sure - Krugman himself has been quite clear that he wouldn't be effective as a politician. So what? Krugman's policy preferences have been vindicated by events - that's my only point.
It may well be that Obama did the best that could have been done. When one political party has near veto power, and is determined to fuck the economy, you've got a huge political problem.
I believe the economy has more closely tracked the adminstration's without stimulus projections that its with stimulus projections.
Well, yes. The government's policy choices were wrong, and based on a misunderstanding about the nature of the problem (or a political inability to deal with the problem). That's what I'm saying.
60: You are conflating two different issues, how big the stimulus should be and how it should be distributed over time.
This is true, I am conflating those issues. It makes sense to do so because the too-slow argument was used against a larger stimulus that would have been more politically viable because it would have contained more useful, popular projects. The shovel-ready stuff that got funded was mostly too picayune to be impressively popular, and the more direct tax stimulus was, as I understand it, deliberately designed to be inconspicuous so that people would spend rather than saving the extra money, leaving nothing conspicuous as a benefit of the stimulus.
It may well be that Obama did the best that could have been done. When one political party has near veto power, and is determined to fuck the economy, you've got a huge political problem.
And this looks to get better when?
Look, guillotines are never my first best option, I am willing to subsume my personal preferences to the public good.
But given that this slow decay will not benefit Democrats and progressive policies, evidence for which is accumulating, patience with a fucked economy is not an attractive option either.
Kunstler's "head for the hills", consider this a metaphor for "small, local, personal," will fail for 90% of the population. Unacceptable.
Sean Paul Kelley on the DADT decision yesterday(?)
They are the single most dedicated group of people in America. They want their rights, they are willing to go up against Obama and embarrass his administration to get them.Guess what happens when they do?
They get what they are fighting for.
saving GM happened. Existing mass transit systems have gotten quite a bit of federal money to stave off decay and expand a bit.
Financial regulatory reform is captured by investement banks. That's a big, nonpartisan problem. Yves Smith and Mark Thoma are two sources of information that I like.
107: Well, yes, but there's a special level of contempt reserved for gay Republicans.
At some point I stopped following the economic disaster because doing so, by reading the blogs I read and working in the field I did, started to so remind me of the Cassandra myth that I found myself thinking about cabins in the woods and how long it would to take to learn how to bowhunt. In other words, it got weird. To some extent my reaction since has been to bury my head in the sand and try to work out the best possible outcome for myself and immediate family. Not noble, but whattayagonnado.
It does seem that the various supply side interventions have at least delayed the worst possible outcomes, but hardly cleared the system of disease. (Obviously.) I'm still planning for deflation, particularly if the Republicans take back the house.
I am genuinely curious, though: since the stimulus was always expected to take forever, was there an actual policy justification for foregoing badly needed infrastructure projects? If I've missed this in the thread I apologize, but I honestly can't think of a good policy argument against it -- either at the time the stimulus was being debated, or now. I just sort of accepted that it was the result of lobbying.
Yes. Nakedcapitalism.com. A few others. They give me anxiety now.
The CBO is using the theoretical framework behind stimulus spending to estimate its effects. Making the estimates meaningless as support for the theoretical framework.
Well, okey dokey then. Let's go for the chief economist at Moody's and the former vice-chairman of the Fed.
"We find that the effects on real GDP, jobs, and inflation are huge, probably averting what would have been called Great Depression 2.0. For example, we estimate that, without the policy responses, GDP in 2010 would be about 6½% lower, payroll employment would be about 8½ million jobs lower, and the nation would now be experiencing deflation."
http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf
As well as the point made in 113 that the stimulus opponents were utterly wrong about the bad effects of the stimulus. So who's got the better theoretical framework now? It's impossible to prove what would have happened in the absence of a stimulus, but it's probably safe to assume that the people who were 100% right about the impact of a stimulus were also 100% right about the impact of not having a stimulus.
110: You, however, are arguing purely from the revealed truth of your own theoretical framework without even attempting to introduce any data, so perhaps you should be less smug.
started to so remind me of the Cassandra myth
I know! Me too!
But honestly, it's not like this stuff is brain surgery; Krugman et al weren't obviously right (at least to me) when they were talking about a housing bubble five years ago - but when they were talking about neo-Hooverism 18 months ago, that was pretty much self-evident.
Keynesianism is so counterintuitive (again, to me at least) that I'm not surprised that Keynes never fully saw his policy preferences realized during the Depression. But there's just no excuse today for believing the bond vigilantes are about to strike.
Or the only excuse is the same one for believing in Iraqi WMD: all the Serious People say it's so.
Here in the rust belt we really feel the need for infrastructure money. The main bridge that links the western suburbs to Cleveland generally has a lane closed in each direction because officials believe it can no longer take the weight of full rush hour traffic. Also, all the water and sewer works are over 100 years old and need all sorts of maintainable.
The old industrial cities along the great lakes in some ways get the ass end of red state/blue state rhetoric. We aren't like Republican flyover country. We're urban, and unionized, heavily minority. On the other hand, as far as people in New York, Boston and LA are concerned we are flyover country.
Obama shows up here every election season because he knows we are the natural constituency for a living democratic party, but our only place in the media narrative of the country is of a dying place that doesn't matter anymore.
|| Shouldn't Palin vs. Savage be in a single venue? |>
Yglesias "Structural Unemployment"
Given the destructive impact the Dallas, Minneapolis, Richmond, and Kansas City Feds are having on national policy, it's really time to revisit the absurd governance structure of these entities. The regional Fed presidents exercise important public policy authority, but they're primarily selected by local for-profit business interests rather than by public officials.
There is a reason to listen to Shearer. There are members of the FOMC that share his ideology. I would add Bernanke to the obvious, but he is slicker than most.
Bernanke's smarts are evidenced by his saying that monetary policy has reached its limits, fiscal stimulus is necessary, but the he will not change his commitment to 2% or less inflation
This means that even should we get the political conditions for a large infrastructure stimulus, Bernanke will strangle the growth in the crib.
The baseline fell off the cliff in the early thirties. But in 1934 inflation, from the baseline, averaged 3-6%. During the 40s, when we were finally really closing the output gap, inflation ran 5-15%. The latter is possibly what we need to recreate all the jobs that have been lost.
Inflation Rates ..first google, I don't know the site.
122 is right. Also, Cleveland sucks. (Sorry. It's fall.)
122: I don't think it's as if the infrastructure of NYC, Boston, and LA isn't also crumbling (See, for example. our recent "Aquapocalypse" break of the pipe that brings water to ~all of metro Boston, or the highway bridge that developed two car-size holes in them during two rush hours in a row).
126: Do you get around much? The issue isn't this or that piece that is crumbling, but how much is crumbling.
Are there no active threads. I am waiting to go into a meeting, and am bored. I am become bob, killer of Unfogged.
I am become bob, killer of Unfogged.
I don't want to kill Unfogged, but to unite and revitalize Unfogged. In opposition to me.
I don't want to hurt anybody. (Annoy, irritate, bore..umm)
Repeat: I don't want to hurt anybody
But there is this paranoid fantasy of having the entire world hate me, for no substantive reason, just a spontaneous irrational unjustified outpouring of universal loathing, that is a little attractive.
Al the armies would lay down their arms. All exploiters would join with subalterns. Lions lay down with lambs. Dogs sexing cats.
All saying:"Fuck you, Bob"
The fantasy doesn't work if they have cause. It must be an unconditional hate.
(This is a joke.)
Better production values, but not actually shorter unless you read very slowly or watch videos on fast.
132: Don't know how to do a "stop time" for a YouTube video. Consider it to be 2:33 (6 seconds in).
Lee Morgan
Totem Pole ..give it time
or the highway bridge that developed two car-size holes in them during two rush hours in a row)
Fucking christ--it's my phobic fear of this that keeps me from taking the Tobin Bridge. Where did this happen?
133: I was comparing to listening to the whole musical.
114
This is true, I am conflating those issues. It makes sense to do so because the too-slow argument was used against a larger stimulus that would have been more politically viable because it would have contained more useful, popular projects. The shovel-ready stuff that got funded was mostly too picayune to be impressively popular, and the more direct tax stimulus was, as I understand it, deliberately designed to be inconspicuous so that people would spend rather than saving the extra money, leaving nothing conspicuous as a benefit of the stimulus.
Actual useful popular projects don't need to be justified on the basis of stimulus. In fact a lot of people took advantage of the occasion to push useless boondoggles like high speed passenger rail which made little sense from either an investment or stimulus point of view.
If you wanted a larger stimulus larger tax cuts were possible. And why do you care if they are conspicuous?
113
Well sure - Krugman himself has been quite clear that he wouldn't be effective as a politician. So what? Krugman's policy preferences have been vindicated by events - that's my only point.
They have been vindicated by events only to the extent that anyone predicting the economy would recover slowly has been vindicated. Events have not shown his policies would have worked any better.
120
You, however, are arguing purely from the revealed truth of your own theoretical framework without even attempting to introduce any data, so perhaps you should be less smug.
I don't really have theoretical framework for macroeconomic questions. I think they are poorly understood. It is interesting how people who scoff at Economics 101 theory suddenly think everything is crystal clear when it comes to macroeconomics. Which is more complicated than microeconomics.
121
Keynesianism is so counterintuitive (again, to me at least) that I'm not surprised that Keynes never fully saw his policy preferences realized during the Depression. But there's just no excuse today for believing the bond vigilantes are about to strike.
You don't have to believe stimulus spending to be immediately disastrous to question whether it is worth the cost. I have doubts the benefits are as great as claimed.
The economy has changed quite a bit since the 1930s. Trade is more important. More spending on imports from China doesn't boost the US economy much. And labor seems less fungible than it used to be. Some jobs are never coming back and it is not easy for the workers who had them to start over at the bottom of a new career path.
They have been vindicated by events only to the extent that anyone predicting the economy would recover slowly has been vindicated.
Sigh. For the third time:
If interest rates and inflation had skyrocketed, thus stifling business expansion, the stimulus theory would have been proved incorrect. But that's not what happened.
What you're not getting here, James, is that I have - yes, twice previously - explained a set of circumstances in which one view of a slow recovery is vindicated, while the other is refuted.
I don't know how to be more clear on this, but I'll take a crack at it.
The neo-Hooverite view is essentially that Obama's spending would lead to a justified fear of inflation. That fear, along with the government's own borrowing, would crowd out private investment and strangle the economy. Businesses would be unable or unwilling to expand because capital would be scarce/expensive.
This view predicts a slow recovery, but it is entirely dependent on another prediction: High real interest rates. Without high real interest rates, this theory has no method of accounting for a slow recovery.
Contrast that with the neo-Keyensian view. (You could also call this the "Friedman" view, by the way. Friedman was something of an ideologue, but he wasn't an idiot.)
Under this view, investment is stifled by a lack of demand. Nobody wants to build a new widget factory if consumers aren't buying widgets. The problem is not that capital is too expensive, it's that there is no point in deploying capital in the absence of demand.
As Friedman would explain, there's generally an easy response to this situation: reduce interest rates. But when you've cut interest rates as much as possible, and demand is still stalled, you have to take other steps.
As I noted in 47, the Great Depression was mitigated substantially by the New Deal, but it didn't end until the government decided to spend massive amounts of money on items that they then proceeded to blow the fuck up.
I'm curious here, what's your explanation for the end of the Great Depression?
The problem is not that capital is too expensive, it's that there is no point in deploying capital in the absence of demand.
As Friedman would explain, there's generally an easy response to this situation: reduce interest rates.
You understand as a Post-Keynesian I have a problem with this, and a problem with a particular focus on the zero-bound. Low interest rates necessarily increase demand for commodities, capital investment, and consumer goods? This was the idea behind the "Great Moderation"
Or you can get financialisation, massive debt, bubbles, and eventual collapse
142
What you're not getting here, James, is that I have - yes, twice previously - explained a set of circumstances in which one view of a slow recovery is vindicated, while the other is refuted.
I don't know how to be more clear on this, but I'll take a crack at it.
The neo-Hooverite view is essentially that Obama's spending would lead to a justified fear of inflation. That fear, along with the government's own borrowing, would crowd out private investment and strangle the economy. Businesses would be unable or unwilling to expand because capital would be scarce/expensive.
You are asserting what you call the neo-Hooverite view is the only alternative view. This is not the case. As I said before you don't have to believe stimulus spending will lead to immediate inflation (or crowding out) to doubt it will provide the claimed benefits. I will agree that predictions of immediate inflation have not come true (but I suspect the excuse is the same as for stimulus proponents, the stimulus wasn't big enough).
I'm curious here, what's your explanation for the end of the Great Depression?
I am not certain of the explanation, my claim is these things are poorly understood. Perhaps the depression ended for the same reason as most cases of biological depression end, the patient got better on their own. Which doesn't stop doctors from claiming credit.
Actually I probably more or less accept the conventional explanation but I doubt it is easily applied to current conditions.
I'm curious here, what's your explanation for the end of the Great Depression?
Very high marginal tax rates, enforced and encouraged savings in gov't bonds, and an unprecedented degree of labor leverage and success.
Look, that period was complicated.
You are asserting what you call the neo-Hooverite view is the only alternative view.
James, you said Keynesianism in the current context is unfalsifiable. In fact, it made specific predictions that have turned out to be correct.
But if you've got an alternative theory - or you see actual inadequacies in the evidence for Keynesianism - you should tell us. So far, all we've got is your unfalsifiable feelings about how the world works.
I doubt it is easily applied to current conditions.
This, of course, is another thing that Krugman was correct about, though it was an easy call.
146
James, you said Keynesianism in the current context is unfalsifiable. In fact, it made specific predictions that have turned out to be correct.
The administration's specific predictions about the effects of the stimulus were wrong.
Lots of people made predictions and naturally some came close. Keynesian in its current form doesn't give really specific predictions so it is hard to empirically test.
But if you've got an alternative theory - or you see actual inadequacies in the evidence for Keynesianism - you should tell us. So far, all we've got is your unfalsifiable feelings about how the world works.
I am just saying current macroeconomic models (including Keynesian based ones) are not very well validated. They are not like quantum electrodynamics that actually predicts things to 12 (or whatever the number is) decimal places. Which means basing large (and apparently risky) policy initatives on them requires an act of faith which I am not enthusiastic about.
James is right to the extent that the economy is in fact an uncontrolled experiment.
I await his alternative course of action, however.
The administration's specific predictions about the effects of the stimulus were wrong.
That's true. I'll say it again: The administration fucked up. We know in what ways it fucked up. While the administration was in the process of fucking up, its fuckup was explained.
Keynesian in its current form doesn't give really specific predictions so it is hard to empirically test.
Please. I've repeated myself regarding specific predictions three times, and each time you've made no substantive response. Do you really need to hear it a fourth time? I understand that you don't want to deal with it, but geez.
Which means basing large (and apparently risky) policy initatives on them requires an act of faith which I am not enthusiastic about.
Are you coming out against macroeconomic policy? Or simply having macroeconomic policy based on the study of economics? What policy do you propose in this situation that is neither (by your definition) large nor risky?
And what do you see the risks as being? Neo-Keynesian opponents have already proposed that high interest rates and inflation are the relevant risks - but you've said those risks aren't the ones you are talking about. If those aren't the risks, then what are the risks?
And what about your theory is falsifiable? (Or are you really, seriously saying that it's wrong to have economic theories at all in difficult economic situations?)
149
Please. I've repeated myself regarding specific predictions three times, and each time you've made no substantive response. Do you really need to hear it a fourth time? I understand that you don't want to deal with it, but geez.
The specific prediction you keep mentioning was that some unlikely sounding disaster would not occur. I do not consider this a powerful test.
Are you coming out against macroeconomic policy? Or simply having macroeconomic policy based on the study of economics? What policy do you propose in this situation that is neither (by your definition) large nor risky?
I am against putting undue faith in models that are not well validated. I would favor conservative policies (where I am using conservative in the same sense as when one speaks of conservative medical treatment).
And what do you see the risks as being? Neo-Keynesian opponents have already proposed that high interest rates and inflation are the relevant risks - but you've said those risks aren't the ones you are talking about. If those aren't the risks, then what are the risks?
I see the main risk as being throwing away a trillion dollars (or whatever) for nothing.
And what about your theory is falsifiable? (Or are you really, seriously saying that it's wrong to have economic theories at all in difficult economic situations?)
I don't have a theory. It's fine to have theories but it is important to realize some theories are dealing with poorly understood phenomena and hence are speculative and are likely to be crude approximations of reality at best.
