Harvard Economist On The Stimulus

[Annie]

Quite interesting and seems there's a bit of a brouhaha with him, Paul Krugman, Brad DeLong, Greg Mankiw, Matt Yglesias, and Tyler Cowen.

An interview with Robert Barro - The Atlantic Business Channel

Feb 5 2009, 10:45 am by Conor Clarke
An interview with Robert Barro

...Conor Clarke: What I am trying to do is sort of apply a barometer to modern macroeconomics and see where the profession is, because I am sort of confused by a lot of things.

Robert Barro: [laughs] Probably the fault of the profession.

Well, one thing I am confused by is where all of this resurgent interest and fiscal policy came from. That's very broad. But where do you think it came from? When I took macroeconomics in college there was not a lot about fiscal policy.

It came from the crisis and memories of the Great Depression and the fact that monetary policy seems to have done not a tremendous amount, and conventional stuff doesn't look like its going to work anymore. And it's about grasping at straws to try and find something else.

And I take it from the Wall Street Journal piece you wrote last week... well, the piece is just specifically about measuring multipliers, but I take it that you are fairly skeptical in general that fiscal policy will boost aggregate demand.

Right. There's a big difference between tax rate changes and things that look just like throwing money at people. Tax rate changes have actual incentive effects. And we have some experience with those actually working....

...I'm not in a position to know things like the degree to which Paul Krugman counts as a relevant expert on new Keynesian economics.

He hasn't done any work on that. Greg Mankiw has worked in that area.

And Greg Mankiw is, I guess, skeptical of spending for the same reasons that you are: he says that there's some empirical evidence -- I think he cites the Christina Romer study from 15 years ago -- that a dollar of tax cutting has a larger impact than...

The Romer evidence is very recent actually. It's an ongoing project....

...The last thing is just about the stimulus bills as it stands. Two things here. One thing is what do you think about the ratio of spending to tax relief in the bill. And the second is, if you judge it by Larry Summers standard -- that stimulus be temporary, timely and targeted -- does it clear the bar?

This is probably the worst bill that has been put forward since the 1930s. I don't know what to say. I mean it's wasting a tremendous amount of money. It has some simplistic theory that I don't think will work, so I don't think the expenditure stuff is going to have the intended effect. I don't think it will expand the economy. And the tax cutting isn't really geared toward incentives. It's not really geared to lowering tax rates; it's more along the lines of throwing money at people. On both sides I think it's garbage. So in terms of balance between the two it doesn't really matter that much....

 

[auditor0007]

Surprise!!!!! I did not vote for Obama or any Democrats, but I was certainly willing to give them all the benefit of the doubt as they said they were going to put together a stimulus package that concentrated on infrastructure and tax cuts. The bulk of this package is handouts to special interest groups. Infrastructure spending only amounts to a little over 5% of this package. Hell, they would have spent that much on infrastructure anyway. This stimulus package is a joke and it's going to backfire on the Dems big time. When it proves to be useless as a stimulus to get this economy going again, people are going to really start looking at the cost, and then the shit is going to hit the fan.

No, Republicans didn't act like Republicans the over the past eight years. But now we have the Democrats increasing the deficit to four or five times what it was under Bush. Everyone complained then; but now it's okay to spend even more? The Dems better pray that they are right and this works. If it does not, they are going to write themselves a fast ticket right back out of power.

 

[Agnapostate]

Quite interesting and seems there's a bit of a brouhaha with him, Paul Krugman, Brad DeLong, Greg Mankiw, Matt Yglesias, and Tyler Cowen.

What's most atrocious about that is the apparent belief that Paul Krugman and Larry Summers (to provide an example) constitute the respective ends of the spectrum of what's considered acceptable discussion regarding economic matters. Debates between the likes of (purported) free marketers and neo-Keynesians ought not to constitute the extent of discussion of political economy, which is why Robin Hahnel and Michael Albert's discussion of participatory economics deserves inclusion, or why Samuel Bowles and Herbert Gintis's discussion of labor economics deserves conclusion.

When can we hope to see Bowles's observation that "the Coasian view of the capitalist economy as a multiplicity of mini-communal economies operating in a sea of market exchanges is...superficially indistinguishable from the Marxian view" represented in mainstream discussion circles?

This is probably the worst bill that has been put forward since the 1930s.

I found no direct reference to Keynesianism, but I think it likely that this is an indirect one. Putting aside capitalism's tendency toward market concentration and Keynesianism's according tendency toward stagflation prevention, Herbert Stein again deserves to be quoted here: "it is possible to describe the evolution of fiscal policy in America up to 1940 without reference to [Keynes]...y the outbreak of the war a large part of the fiscal revolution had already occurred. It was accepted policy that we would run deficits in depressions, that we would not raise taxes in depressions in an attempt to balance the budget."

 

[Munin]

No, Republicans didn't act like Republicans the over the past eight years. But now we have the Democrats increasing the deficit to four or five times what it was under Bush. Everyone complained then; but now it's okay to spend even more? The Dems better pray that they are right and this works. If it does not, they are going to write themselves a fast ticket right back out of power.

Well yeah, but the first line is really no excuse for republicans to just say now "we didn't act like republicans". The GOP supported Bush both in 2000 & in 2004, so really republicans can't hide from their mistake for voting for him (like they tried to do during the latest elections: saying something like "he s not one of us" ).


Secondly the spending that Bush did was not during an economic crisis (to fix a bad economic situation), his spending was the cause of the crisis: the spending of Bush was not investing in the economy. It was mostly spending the war, tax breaks for the rich and other non-economy stimulating efforts.

Also his budget cutting on schools, infrastructure, healthcare, ... other essential stuff for an economy to work properly didn't help the economy to much either. And his investments were without "return on investment": Iraq? (What did we get out of that except a huge debt and responsability over the outcome of the situation in Iraq? Afghanistan is no different but was at least justified, he managed to let this war last for at least 8 years.)

In short: the spending of Bush had very little to do with investing the economy and his tax cuts also had very little to do with stimulating the economy: whatever spin he d like to give it THE TRICKLE DOWN THEORY DIDN'T WORK!!! (as we can surely see by now).

He also failed to see that the import/export ratio of the US with China was seriously fucked up and that it was bad for US interests, he didn't fix it and he just let it go: Hoover Institution - Focus - The U.S. – China Trade Deficit: Reason for Worry?
Ever wondered why China owns so much of US debt (and how they are funding their army, space program, olympic games, ...), well then look no further then the graph in the link above. Also clinton failed to do anything about it, but the difference with clinton was that he didn't have a problem with it because it was still "under control".



But enough of the republican bashing now, that was just a reaction to that first sentence. We should sure not forget who got us into this mess in the first place.

The democrats don't deserve much praising either at this moment, they seem to abuse the crisis to put some very partisan stuff into the bill. They seem to abuse the weak position of the republicans who can not afford to completely reject the bill, while they did it the already one time they obviously couldn't afford to keep rejecting this "rescue package" while the economic situation keeps getting worse and worse (that originally started partly due to their failed policies of the past 8 years, with democrats to blame along with it but they re not voting against the rescue package now).

But if you re a bit objective you should see that Obama didn't fuck up anything up to this point (except appointing people who didn't pay their taxes). He didn't cause any bad things to happen yet, he is being criticized for actions that have not been proven to be bad or good because it is too early to see any effects.

 

[editec]

44% of the current bail out proposal comes to us in the form of TAX CUTS.

 

[Annie]

44% of the current bail out proposal comes to us in the form of TAX CUTS.

You'd almost think the Democrats were listening to Rush Limbaugh. Not to worry, Nancy will fix that up.

 

[del]

you can always tell a harvard man, but you can't tell him much.

 

[WillowTree]

you can just hear the distain and sarcasam dripping from his opinion of Krugman!

 

[indago]

The Dems better pray that they are right and this works. If it does not, they are going to write themselves a fast ticket right back out of power.

And then what? Put the Republicans back in again?

 

[dilloduck]

The Dems better pray that they are right and this works. If it does not, they are going to write themselves a fast ticket right back out of power.

And then what? Put the Republicans back in again?

Is there another choice ?

 

[indago]

The Dems better pray that they are right and this works. If it does not, they are going to write themselves a fast ticket right back out of power.

And then what? Put the Republicans back in again?

Is there another choice ?

Surely you jest...

 

[editec]

44% of the current bail out proposal comes to us in the form of TAX CUTS.

It amuses me that when the fact that 44% of this bailout is ALREADY TAX cuts, the knownothings continue to whine about Obama.

Read a book, kids, you're making yourselves look rather petty,

 

[Skull Pilot]

44% of the current bail out proposal comes to us in the form of TAX CUTS.

It amuses me that when the fact that 44% of this bailout is ALREADY TAX cuts, the knownothings continue to whine about Obama.

Read a book, kids, you're making yourselves look rather petty,

well why don't you post a link to the book where you get your figures?

And a one time so called stimulus check does not a tax cut make because next year the tax rate will be the same won't it?

 

[Shadow]

44% of the current bail out proposal comes to us in the form of TAX CUTS.

It amuses me that when the fact that 44% of this bailout is ALREADY TAX cuts, the knownothings continue to whine about Obama.

Read a book, kids, you're making yourselves look rather petty,

well why don't you post a link to the book where you get your figures?

And a one time so called stimulus check does not a tax cut make because next year the tax rate will be the same won't it?

Higher...wont the Bush tax cuts expire in 2010?

 

[auditor0007]

The Dems better pray that they are right and this works. If it does not, they are going to write themselves a fast ticket right back out of power.

And then what? Put the Republicans back in again?

Anyone fiscally prudent would be fine by me, whether they are Dems or Reps.

 

[Sinatra]

Quite interesting and seems there's a bit of a brouhaha with him, Paul Krugman, Brad DeLong, Greg Mankiw, Matt Yglesias, and Tyler Cowen.

An interview with Robert Barro - The Atlantic Business Channel

Feb 5 2009, 10:45 am by Conor Clarke
An interview with Robert Barro

...Conor Clarke: What I am trying to do is sort of apply a barometer to modern macroeconomics and see where the profession is, because I am sort of confused by a lot of things.

Robert Barro: [laughs] Probably the fault of the profession.

Well, one thing I am confused by is where all of this resurgent interest and fiscal policy came from. That's very broad. But where do you think it came from? When I took macroeconomics in college there was not a lot about fiscal policy.

It came from the crisis and memories of the Great Depression and the fact that monetary policy seems to have done not a tremendous amount, and conventional stuff doesn't look like its going to work anymore. And it's about grasping at straws to try and find something else.

And I take it from the Wall Street Journal piece you wrote last week... well, the piece is just specifically about measuring multipliers, but I take it that you are fairly skeptical in general that fiscal policy will boost aggregate demand.

Right. There's a big difference between tax rate changes and things that look just like throwing money at people. Tax rate changes have actual incentive effects. And we have some experience with those actually working....

...I'm not in a position to know things like the degree to which Paul Krugman counts as a relevant expert on new Keynesian economics.

He hasn't done any work on that. Greg Mankiw has worked in that area.

And Greg Mankiw is, I guess, skeptical of spending for the same reasons that you are: he says that there's some empirical evidence -- I think he cites the Christina Romer study from 15 years ago -- that a dollar of tax cutting has a larger impact than...

The Romer evidence is very recent actually. It's an ongoing project....

...The last thing is just about the stimulus bills as it stands. Two things here. One thing is what do you think about the ratio of spending to tax relief in the bill. And the second is, if you judge it by Larry Summers standard -- that stimulus be temporary, timely and targeted -- does it clear the bar?
This is probably the worst bill that has been put forward since the 1930s. I don't know what to say. I mean it's wasting a tremendous amount of money. It has some simplistic theory that I don't think will work, so I don't think the expenditure stuff is going to have the intended effect. I don't think it will expand the economy. And the tax cutting isn't really geared toward incentives. It's not really geared to lowering tax rates; it's more along the lines of throwing money at people. On both sides I think it's garbage. So in terms of balance between the two it doesn't really matter that much....

That is the most essential part of this post - this so-called stimulus bill was orginally a complete Democrate wish-list of social agendizing under the guise of economic stimulus.

The united vote of no confidence from the Republican House slowed down the railroading of the bill to allow more people to find out what was actually being proposed.

Since that time, the bill has improved somewhat - but it remains in great part, a reflection of what Democrats want - namely, increased support of programs that will ensure continued voting blocks for Democrats.

It is a clear example of party politics trumping national need.