Stimulus Failed, so we need More Stimulus!

[SFC Ollie]

I don't buy it.


No More Spendulus ! ! ! ! ! ! ! ! !

 

[boedicca]

*cough*

The 2007 Federal budget was $2..7T. The current one is $3.8T. That's a compounded annual growth rate of 12%. Why on earth do we need the government to grow at a rate that is faster than GDP or inflation?

 

[Oddball]

The point is, yes, you actually could use more stimulus, because the other stimulus was not big enough. Furthermore, by far the most important stimulus is that to state and local governments.

 

[Epsilon Delta]

The point is, yes, you actually could use more stimulus, because the other stimulus was not big enough. Furthermore, by far the most important stimulus is that to state and local governments.

That's it?? I knew I shouldn't have bothered. =\

 

[Oddball]

What do you want when you invoke circular reasoning that cannot be objectively proven?

 

[masquerade]

http://steynian.files.wordpress.com/2009/08/brass-balls1.jpg

 

[saveliberty]

By definition isn't a stimulus supposed to generate a response? The proper response by state and local government should have been more reductions on programs and employees. This is not a failure of a stimulus, but a failure of government.

 

[Epsilon Delta]

What do you want when you invoke circular reasoning that cannot be objectively proven?

Look, all I'm saying is that the total stimulus was not even half of what would've been required to offset the fall in demand. And taking into account that $80 billion was the AMT (which doesn't count) as well as the fact that almost all of the portion allocated state and local government just offset the tax increases and budget cuts of those governments, the final net stimulus was tiny in relation to the giant fall in GDP that occurred. There's nothing surprising about a stimulus not working when there's not enough of it. What you're saying is that it cannot be proven that HAD the stimulus been the required $900 billion a year over two years it would've worked, but by that same token anybody could say that without the stimulus unemployment would be, say, 40% and you likewise couldn't prove it. Nobody can "prove" what would've happened with no stimulus, or with a bigger stimulus, and there's nothing circular around it. If I was fixing a house and the owner gave me insufficient wood or brick or whatever to fix it and the house was still screwed when I was done, it'd be a little ridiculous to claim that it is circular reasoning that with more material I could've finished the repair. The only sensible thing is that I was a lousy foreman for not telling the owner that I needed more material in the first place, and this would be a sensible thing to say about the Administration and most importantly Congress.

 

[Epsilon Delta]

By definition isn't a stimulus supposed to generate a response? The proper response by state and local government should have been more reductions on programs and employees. This is not a failure of a stimulus, but a failure of government.

Well, that all depends. If your goal is to prolong the recession, then spending cuts would certainly be a proper answer. If you want to minimize the effects of a recession, basic economic theory would tell you that doing so would amplify the impact of the downturn.

 

[Oddball]

Oh, bunk.

That's the traditional fall back spin of Keynesian witch doctors, when all their Utopian technocrat plans don't pan out -- like they usually don't.

"Oh, our know-it-all central planning didn't work because we didn't do enough of it soon enough!"

No sale here, bub.

 

[boedicca]

Keynesian economics has about as much effectiveness as a medieval doctor bleeding someone for a tumor.

 

[Epsilon Delta]

Oh, bunk.

That's the traditional fall back spin of Keynesian witch doctors, when all their Utopian technocrat plans don't pan out -- like they usually don't.

"Oh, our know-it-all central planning didn't work because we didn't do enough of it soon enough!"

No sale here, bub.

Yeah well... Ok. There's not really much to say about that. I guess there is some legitimacy in the idea that the millions of ordinary people who lost their jobs and houses should just suck it up and wait with their thumbs up their ass for the economy to normalize in two-thousand-who-knows-when, but we'll just have to agree to disagree on that one.

 

[Oddball]

And why did all those people end up so screwed up?

Many by their own fault...Also, largely because a bunch of know-it-all Keynesian central planners really don't know what the hell they're doing, let alone be they able to plan the lives of 300+ million people.

Now, we're supposed to expect that the arsonists can be trusted to put out the fire?

 

[boedicca]

Considering that government debt at more than 90% of GDP suppresses growth by at least one full point, adding more government spending is just going to result in prolonging the unemployment of the people are are out of work.

 

[Epsilon Delta]

And why did all those people end up so screwed up?

Many by their own fault...

And many more not by fault of their own.

Also, largely because a bunch of know-it-all Keynesian central planners really don't know what the hell they're doing, let alone be they able to plan the lives of 300+ million people.

Aaaand nobody's talking about anyone planning the lives of anybody else.

Now, we're supposed to expect that the arsonists can be trusted to put out the fire?

Now THERE, there you've hit in on the head. There we can definitely agree on and you make a good point. The fact is that the past three heads of the Fed and virtually the entire economic establishment in government is in large part responsible for this. They are, as you said, the arsonists, and shouldn't be trusted. These people should have been fired. I can't go into detail now cuz I gotta go, but yes one would be right to give more money to play with to these people who maintain their positions despite having fed an 8 trillion dollar bubble which they themselves ignored for years. But the solution there is to fire those responsible, not to toss decades of economic theory behind it, precisely because they were not following it.

 

[Oddball]

Keynesian economics is, in the end, all about central planning.

Sticking to the claim that there wasn't enough intervention soon enough no only fails the test of logic, it fails on account of the fact that if the models really did work, we wouldn't have these problems to start with.

It's high time to quit trying to polish economic turds.

 

[saveliberty]

By definition isn't a stimulus supposed to generate a response? The proper response by state and local government should have been more reductions on programs and employees. This is not a failure of a stimulus, but a failure of government.

Well, that all depends. If your goal is to prolong the recession, then spending cuts would certainly be a proper answer. If you want to minimize the effects of a recession, basic economic theory would tell you that doing so would amplify the impact of the downturn.

Artifically inflating the economy with unsustainable goods and services is what we have here. Expanding housing to people without the means to make payment, credit as a common means of purchasing and squeezing profits from companies that were not bringing new product to market are all reasons this happened.

Trying to reignite that scenario is total madness. An economic contraction is in order and the main effect will be a jobless recovery. Side stepping corrections with government intervention is no insurance against economic cycles.

 

[The Rabbi]

The point of the stimulus is to make up for the underutilization of the factors of production produced by a lack of confidence in the economy. The $790 billion stimulus that got passed did not cover even half of the total loss in demand the economy was going to experience. It would've required something like 900 billion a year over two years to make up for the 10% of GDP that was lost, but of course after both Democrats and Republicans had been preaching about "balanced budgets" for so long the climate was ripe for people to get upset over this massive amount of spending.

This huge outcry is a little misplaced. The first thing is that debt is not entirely a bad thing always. Debt is an instrument. Like consumers, governments use debt to smooth consumption. Right now, that we are in a recession, it makes perfect economic sense for the government to run a large deficit (high spending, low taxes) for consumption-smoothing (and that is just basic macroeconomic theory). The flip side to that is that governments have to run surpluses (low spending, high taxes) during booms. This was the major policy mistake of the massive Bush deficits: it's not that Bush's policies created the recession (the Fed had been playing the leading role there independently), it's that he triggered a huge deficit (tax cuts and spending increases to fund his global wars) in the middle of a giant boom - THAT is what makes no sense. By the time this recession came and that administration ended, there wasn't really anything else to do but go further into deficit. In other words, the deficits that began emerging in the 2000s with the Bush policies limited the governments abilities to use its would-be surplus to counter the recession.

Another point is that surely massive and unlimited deficits can't go on forever, but the fact is that we're talking about a situation in which the US government ceases to be able to pay off its debt. This isn't going to happen in the foreseeable future, beginning with the fact that debt today is not historically that alarming (it's far below the peak burden as % of GDP, which was back in the early 1990s, or peak total debt-to-GDP ratios, which were MUCH larger than now, during WWII). The fact that "them darned forrrnerrsss" hold tons of US debt (especially China) is actually subsidizing the US ability to acquire more debt. None of the big holders have absolutely anything to gain (but a lot to lose) by a massive sell-off of US debt, China least of all.

The point is, yes, you actually could use more stimulus, because the other stimulus was not big enough. Furthermore, by far the most important stimulus is that to state and local governments.

No.
Geezus. Government cannot spend money. It can only move money from one place to another. In this case it is moving money from productive people to unproductive people. That does not "stimulate" anything except the libido of SEIU officers contemplating further riches.
This was debunked by Hazlett in Economics in One Lesson, as long as ago as 1949. Keynesian "stimulus" or pump priming has never worked. There is not a situation where it did. The Japanese tried exactly the same thing we are, low interest rates and high government spending, and their economy went into a 20 year free fall.

 

[CrusaderFrank]

Obama is doing all he can to inflict as much damage as possible before the Dems lose Congress in November

 

[2Parties]

The stimulus is working just like it did when FDR tried it. He dragged out the depression much longer than it had to be. You are seeing the same thing now...