Why we want stimulus now and worry about deficits later

[Oddball]

By making the economy growing so fast that the permanent increase in the government revenues would quickly outpace the temporary rise in spending.

Suddenly, the leftbats have turned into Reaganite supply-siders!....Y'know, the ones who blame the deficits all in Reagan, Bush 41 and every other convenient scapegoat who doesn't have that (D) by their name?

Un-fuckin'-believable.

 

[ilia25]

You believe this recession was so much more severe than any other? The recession of 1981 was actually worse and it ended sooner and with much larger increases in GDP and much faster decreases in unemployment. So all that spending sure didn't do much to make this recession resolve faster did it?

Larry Elder: 5 Myths About President Obama Economic Recovery

This recession was caused by the government's artificially low interest rates and the wanton borrowing and spending and the huge bubbles in housing it caused.

If you look carefully you'll see the government is doing the same wanton borrowing that tanked the economy.

Again, there are different kind of recessions. Some are deliberately caused by Fed to bring down inflation -- those (even severe ones) end right after Fed loosens the monetary policy. The recessions of early 20s or early 80s are the examples.

Other recessions are caused by a bubble bursting -- like dot-com, or the retail one. Fed can lower rates to fight it, but it only can can go as far as zero. And if zero rate is not enough, then economy gets in a prolonged slump -- unless the government rises spending enough.

Again, you're flat out wrong about Bam Bam spending us out of a recession.

The fact is that the recession of 81-82 was more severe than this one and we came out of it faster and stronger than we are coming out of this one.

Did you read my post? I told you that 82-82 recession was deliberately created by the government. Read again: 82-82 recession was deliberately created by the government. Get it? Got it?

Now since it was the government that created the conditions for 81-82 recession (by tightening money supply), the government could quickly end the recession at will by removing those conditions (by loosening money supply).

And all of this has nothing to do with 2008, when the economy went into a deep recession against the will of the government, so the usual loosening the money supply was not enough to pull the economy out of it.

 

[Oddball]

Therefore we need more stimulus to help the economy closing the gap (which basically means creating more jobs) -- because it will also reduce the deficits.

I totally agree! Plus, the first stimulus was too small and was not allocated properly.

Right...Failure is evidence that you need to fail on a more massive scale!

 

[Oddball]

Did you read my post? I told you that 82-82 recession was deliberately created by the government. Read again: 82-82 recession was deliberately created by the government. Get it? Got it?

Now since it was the government that created the conditions for 81-82 recession (by tightening money supply), the government could quickly end the recession at will by removing those conditions (by loosening money supply).

And all of this has nothing to do with 2008, when the economy went into a deep recession against the will of the government, so the usual loosening the money supply was not enough to pull the economy out of it.

 

[ilia25]

By making the economy growing so fast that the permanent increase in the government revenues would quickly outpace the temporary rise in spending.

Suddenly, the leftbats have turned into Reaganite supply-siders!....Y'know, the ones who blame the deficits all in Reagan, Bush 41 and every other convenient scapegoat who doesn't have that (D) by their name?

Un-fuckin'-believable.

Don't be an idiot. Supply-side economics are not about the economy growth reducing budget deficits. It is about mumbo-jumbo ways of creating the economy growth in the first place -- and it is completely wrong about it.

 

[Oddball]

By making the economy growing so fast that the permanent increase in the government revenues would quickly outpace the temporary rise in spending.

Suddenly, the leftbats have turned into Reaganite supply-siders!....Y'know, the ones who blame the deficits all in Reagan, Bush 41 and every other convenient scapegoat who doesn't have that (D) by their name?

Un-fuckin'-believable.

Don't be an idiot. Supply-side economics are not about the economy growth reducing budget deficits. It is about creating the economy growth in the first place -- and it is completely wrong about it.

It's also about "growing out of the deficit", idiot.

 

[ilia25]

Did you read my post? I told you that 82-82 recession was deliberately created by the government. Read again: 82-82 recession was deliberately created by the government. Get it? Got it?

Now since it was the government that created the conditions for 81-82 recession (by tightening money supply), the government could quickly end the recession at will by removing those conditions (by loosening money supply).

And all of this has nothing to do with 2008, when the economy went into a deep recession against the will of the government, so the usual loosening the money supply was not enough to pull the economy out of it.

Hey genius, what do you think happens to economy when Fed rises rates though the roof? Or do you think Fed was forced to do it by zombie Martian rays?

 

[ilia25]

Suddenly, the leftbats have turned into Reaganite supply-siders!....Y'know, the ones who blame the deficits all in Reagan, Bush 41 and every other convenient scapegoat who doesn't have that (D) by their name?

Un-fuckin'-believable.

Don't be an idiot. Supply-side economics are not about the economy growth reducing budget deficits. It is about creating the economy growth in the first place -- and it is completely wrong about it.

It's also about "growing out of the deficit", idiot.

No, it is not, you moron.

 

[ShaklesOfBigGov]

It did not fail, it stopped the economy from sliding deeper into recession.

Absolutel no proof of that.

There is even less proof that it didn't.

However when the stimulus was announced the gov't set unemployment goals that the stimulus would produce.

The government clearly underestimated the depth of the crisis and the size of an adequate stimulus. But it does not mean that the stimulus we had was useless.

That's what Obama said "clearly underestimated the depth of the crisis" . . . that's what I would say if my policies only turned a bad economy worse, blame anyone else rather than take any responsibility (liberal democrats are so good at that one, that's why they want to still make it Bush's fault after 3 years of Obama pushing what HE wanted in government policies).

 

[hortysir]

That's what Obama said "clearly underestimated the depth of the crisis" . . . that's what I would say if my policies only turned a bad economy worse, blame anyone else rather than take any responsibility (liberal democrats are so good at that one, that's why they want to still make it Bush's fault after 3 years of Obama pushing what HE wanted in government policies).

Is that the quote that he was chuckling throughout???

"Guess those 'shovel-ready' jobs weren't so 'shovel-ready' after all"

 

[bripat9643]

The last stimulus was $1 trillion and it failed.

It did not fail, it stopped the economy from sliding deeper into recession.

ROFL! What it really did is turn a recession into a depression. Handing out money to parasites does not increase the productivity of our economy. I can't think of any plausible explanation of how it would.

Can you?

 

[Oddball]

Don't be an idiot. Supply-side economics are not about the economy growth reducing budget deficits. It is about creating the economy growth in the first place -- and it is completely wrong about it.

It's also about "growing out of the deficit", idiot.

No, it is not, you moron.

I was around and paying attention in the early '80s...You were obviously not.

Same neo-Keynesian shit, different flies.

 

[Intense]

The chart above shows a deeply depressed economy. The US still produce about 1 trillion less in annual GDP than they are capable of. Not only it results in a lot of human suffering, but it also starves the government of tax revenues, creating huge budget deficits.

Therefore we need more stimulus to help the economy closing the gap (which basically means creating more jobs) -- because it will also reduce the deficits.

I totally agree! Plus, the first stimulus was too small and was not allocated properly.

So a mismanaged small stimulus caused compound downward spiraling, because it was not enough. Now you want more,what is the interest alone on that debt? A bad formula further compounds the problem. The wrong kind of spending has no return, bad math may hide the problem from the unsuspecting, not that they have any interest in the truth in the first place. You are just fooling yourself. That, and pissing away other peoples hard earned money.

 

[ilia25]

The last stimulus was $1 trillion and it failed.

It did not fail, it stopped the economy from sliding deeper into recession.

So $1 trillion was just enough to stop us from diving deeper.

Do we throw $5 trillion at it to get it to climb positive?

The right size of the stimulus in over 2009-10 should have been around 2 trillions -- because the gap between the actual and potential GDP was about 1 trillion per year.

Another way to stimulate the economy would have been a promise by the Fed to rise the inflation target to 4-6 percent -- but politically it would not fly. Too bad, because we will have to do it eventually -- 2-3% inflation does not give the Fed enough room.

 

[Oddball]

Did you read my post? I told you that 82-82 recession was deliberately created by the government. Read again: 82-82 recession was deliberately created by the government. Get it? Got it?

Now since it was the government that created the conditions for 81-82 recession (by tightening money supply), the government could quickly end the recession at will by removing those conditions (by loosening money supply).

And all of this has nothing to do with 2008, when the economy went into a deep recession against the will of the government, so the usual loosening the money supply was not enough to pull the economy out of it.

Hey genius, what do you think happens to economy when Fed rises rates though the roof? Or do you think Fed was forced to do it by zombie Martian rays?

And what do you think when the economy is so bad that a 0% Fed interest rate can't generate economic activity, Mr. Know-it-all?

 

[ilia25]

Absolutel no proof of that.

There is even less proof that it didn't.

However when the stimulus was announced the gov't set unemployment goals that the stimulus would produce.

The government clearly underestimated the depth of the crisis and the size of an adequate stimulus. But it does not mean that the stimulus we had was useless.

That's what Obama said "clearly underestimated the depth of the crisis" . . . that's what I would say if my policies only turned a bad economy worse.

So would I, and I have little doubt that Obama hurts himself politically by not admitting that mistake.

But it does not mean that his underpowered stimulus did not help at all, or that we do not need another stimulus now.

 

[ilia25]

Hey genius, what do you think happens to economy when Fed rises rates though the roof? Or do you think Fed was forced to do it by zombie Martian rays?

And what do you think when the economy is so bad that a 0% Fed interest rate can't generate economic activity, Mr. Know-it-all?

??? Would you please rephrase that?

 

[Oddball]

The last stimulus was $1 trillion and it failed.

It did not fail, it stopped the economy from sliding deeper into recession.

ROFL! What it really did is turn a recession into a depression. Handing out money to parasites does no increase the productivity of our economy. I can't think of any plausible explanation of how it would.

Can you?

Here's the4 neo-Keynesian cheat sheet:

Piss away $1 trillion and the economy gets better?...Proof that we were right.

Piss away $1 trillion and economy doesn't get better?...Proof that we needed to piss away more money sooner.

No matter what happens, the central controllers are always right.

 

[Oddball]

Hey genius, what do you think happens to economy when Fed rises rates though the roof? Or do you think Fed was forced to do it by zombie Martian rays?

And what do you think when the economy is so bad that a 0% Fed interest rate can't generate economic activity, Mr. Know-it-all?

??? Would you please rephrase that?

We have a defacto 0% Fed rate in the right here and now....According to your neo-Keynesian witch doctor "logic" (for lack of a better term), the economy should be rippin' and roarin' by now.

Or is it just possible that Fed interest rates aren't the only thing that can cause and/or lead us out of a recession?

 

[ilia25]

And what do you think when the economy is so bad that a 0% Fed interest rate can't generate economic activity, Mr. Know-it-all?

??? Would you please rephrase that?

We have a defacto 0% Fed rate in the right here and now....According to your neo-Keynesian witch doctor "logic" (for lack of a better term), the economy should be rippin' and roarin' by now.

Not at all. Keynes was arguing precisely the opposite -- that in a deep recession lowering rates to 0 will not be enough, and printing money would not help either. He called that a "liquidity trap", and we are living it now for the first time since the Great Depression (that's why 81-82 recession is irrelevant).

Here is from Greg Mankiw's blog, we needed negative rates to pull out (still do):

Or is it just possible that Fed interest rates aren't the only thing that can cause and/or lead us out of a recession?

Of course! Recession can be caused by the private sector over-investing, aka bubble. And there are other ways to stimulate the economy at zero lower-bound -- fiscal stimulus is one of them, which was advocated by Keynes.