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Friday, October 01, 2010

Will you look at that?

From the Washington Post:
The massive economic stimulus package President Obama pushed through Congress last year is coming in on time and under budget - and with strikingly few claims of fraud or abuse - according to a White House report to be released Friday. 
. . .
Even some former skeptics who predicted that the money would lead to rampant abuse now acknowledge that the program could serve as a model for improving efficiency in government.
. . .
Biden delivered the report to Obama on Thursday during the president's daily economic briefing. In addition to assessing how the stimulus program has been carried out, the study restates the administration's case that the package has been effective economically, arguing that it staunched the worst bleeding in employment and led the economy to rebound late last year.
Many prominent economists agree with that assessment. The CBO has forecast that the package may be on track to meet the administration's goal of preserving 3.5 million jobs by the end of the year.
Of course, the Republicans, unable to use actual facts to argue against the success of the Stimulus, have stuck to their same tired old meme:  
"The administration predicted that unemployment wouldn't rise above 8 percent if the trillion-dollar stimulus became law. We know how that turned out," Senate Minority leader Mitch McConnell (R-Ky.) said Friday.”
 Yes, the Administration’s estimate of unemployment was incorrect; they underestimated the problem.  BFD.  That doesn’t mean that the Stimulus didn’t stave off a depression and certainly doesn’t negate the 3.5 million jobs preserved.  

It’s pretty much Economics 101.  In a recession, government spending can kickstart the economy, fending off the worst problems and stimulating economic activity.  In fact, government is uniquely suited to deal with the problem.  Yes, deficits go up in the short term, but you deal with them once the economy is moving again and tax revenue is up.  It’s actually pretty simple. 

Unless, of course, there’s a Democrat in office and you can’t allow him to have any accomplishments.  Then it’s “screw you, economy.”  Which is, by the way, one of the planks in the Republican playbook over the past 20 months.

8 comments:

Eric Haas said...

That doesn’t mean that the Stimulus didn’t stave off a depression and certainly doesn’t negate the 3.5 million jobs preserved.

And my magical tiger repelling amulet must work because there aren’t any tigers around here!

Ipecac said...

Perhaps you'd care to explain how the government could spend $500 billion on various projects and NOT create or save jobs?

Ipecac said...

Ya know, this isn't really rocket science. The oversight folk know how much stimulus money they have spent on which projects. They know the pre and post-economic condition of the contractors hired, and how many employees were kept on or hired specifically because of the government contract. This isn't fortune telling, it's measuring economic effect of specific expenditures.

Eric Haas said...

You’re the one claiming the putative cure prevented the disease. The burden of proof should be on you. But, I’ll take a stab at it.

If I take $100 from you and use it to buy you a $94.34 birthday present, are you any wealthier than you were before? How about if instead of taking cash from you, I charge it to your credit card?

It’s economics 101: The government doesn’t create wealth. To spend that $500 billion, the government either had to take that money out of the economy in the form of taxes, or borrow it. If money is taken out of the economy in taxes, that’s less money businesses and individuals have to spend and invest, which means less work available, so at best, it's break even with the government destroying as many jobs through taxation as they create through spending. If money is borrowed, then, yes, you can get a net gain in jobs, but that only lasts as long as the government can sustain its credit card spending spree, and then we have to pay all that money back, plus interest.

When Japan went into a recession after its real estate bubble burst in 1991, the Japanese government tried to spend its way out of the recession. It didn’t work, and the Japanese are still paying off the huge debt their government racked up.

Eric Haas said...

This isn't fortune telling,…

No, you’re right. It isn’t fortune telling; it’s homeopathy: giving putative cures to the patient and then claiming any improvement in the patient’s condition is due to the cure.

Ipecac said...

With regard to your first part, you're not taking $100 from me and buying me a $94 gift. You're taking a $.00001 cent from lots of people to buy the gift. Not the same thing.

"If money is borrowed, then, yes, you can get a net gain in jobs, but that only lasts as long as the government can sustain its credit card spending spree, and then we have to pay all that money back, plus interest."

That's the key. The government CAN borrow as much money as needed and pay it back later. Deficit spending is NOT necessarily a negative, it's a tool that can be used. Keeping the economy out of a depression is precisely the time you engage that tool. You pay down the deficit when the economy is doing well and revenues are up.

Ipecac said...

One more point. The money that is being paid to the contractors on stimulus projects is being injected directly into the economy. Those workers are now buying goods and services that they wouldn't have otherwise bought. People are employed who otherwise would not be.

Had we not jumped into two wars without any attempt at paying for them and simultaneously giving a trillion dollar tax cut to the wealthy, then we wouldn't be in this situation. But austerity isn't going to solve the problem. Jumpstarting job creation and private spending is.

Eric Haas said...

With regard to your first part, you're not taking $100 from me and buying me a $94 gift. You're taking a $.00001 cent from lots of people to buy the gift. Not the same thing.

I’m not sure I understand the point you’re trying to make here. I understand the cost is spread out over a great many people, but then so is the benefit.

The government CAN borrow as much money as needed and pay it back later.

Only until the creditors decide the US is no longer a good credit risk.

Had we not jumped into two wars without any attempt at paying for them and simultaneously giving a trillion dollar tax cut to the wealthy, then we wouldn't be in this situation.

Those factors certainly haven’t helped, but I really don’t think they are the cause of the problem. But the huge interest payments on the national debt ($375 billion so far this year, as of August 1) aren’t helping, either.