Thread: New Consensus Sees Stimulus Package as Worthy Step

Initially I questioned the stiumulus privately, but after seeing how the ARRA funds have been disbursed & utilized thus far in MI, I am less skeptical than I was.

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From: http://www.nytimes.com/2009/11/21/bu...?_r=1&emc=eta1

New Consensus Sees Stimulus Package as Worthy Step

By JACKIE CALMES and MICHAEL COOPER
Published: November 20, 2009

WASHINGTON — Now that unemployment has topped 10 percent, some liberal-leaning economists see confirmation of their warnings that the $787 billion stimulus package President Obama signed into law last February was way too small. The economy needs a second big infusion, they say.

No, some conservative-leaning economists counter, we were right: The package has been wasteful, ineffectual and even harmful to the extent that it adds to the nation’s debt and crowds out private-sector borrowing.

These long-running arguments have flared now that the White House and Congressional leaders are talking about a new “jobs bill.” But with roughly a quarter of the stimulus money out the door after nine months, the accumulation of hard data and real-life experience has allowed more dispassionate analysts to reach a consensus that the stimulus package, messy as it is, is working.

The legislation, a variety of economists say, is helping an economy in free fall a year ago to grow again and shed fewer jobs than it otherwise would. Mr. Obama’s promise to “save or create” about 3.5 million jobs by the end of 2010 is roughly on track, though far more jobs are being saved than created, especially among states and cities using their money to avoid cutting teachers, police officers and other workers.

“It was worth doing — it’s made a difference,” said Nigel Gault, chief economist at IHS Global Insight, a financial forecasting and analysis group based in Lexington, Mass.

Mr. Gault added: “I don’t think it’s right to look at it by saying, ‘Well, the economy is still doing extremely badly, therefore the stimulus didn’t work.’ I’m afraid the answer is, yes, we did badly but we would have done even worse without the stimulus.”

In interviews, a broad range of economists said the White House and Congress were right to structure the package as a mix of tax cuts and spending, rather than just tax cuts as Republicans prefer or just spending as many Democrats do. And it is fortuitous, many say, that the money gets doled out over two years — longer for major construction — considering the probable length of the “jobless recovery” under way as wary employers hold off on new hiring.

But there are criticisms, mainly that the Obama team relied last winter on overly optimistic economic assumptions and oversold the job-creating benefits of the stimulus package.

Optimistic assumptions in turn contributed to producing a package that if anything is too small, analysts say. “The economy was weaker than we thought at the time, so maybe in retrospect we could have used a little bit more and little bit more front-loaded,” said Joel Prakken, chairman of Macroeconomic Advisers, another financial analysis group, in St. Louis.

While some conservatives remain as skeptical as ever that big increases in government spending give the economy a jolt that is worth the cost, Martin Feldstein, a conservative Harvard economist who served in the Reagan administration, said the problem with the package was that some of its tax cuts and spending programs were of a variety that did little to spur the economy.

“There should have been more direct federal spending that would have added to aggregate demand,” he said. “Temporary tax cuts and one-time transfers to seniors were largely saved and didn’t stimulate spending.”

Even the $787 billion price tag overstates the plan’s stimulus value given changes made in Congress, economists say. Nearly a tenth of the package, $70 billion, comes from a provision adjusting the alternative minimum tax so it does not hit middle-income taxpayers this year. That routine fix, which would do nothing to stimulate the economy, was added in part to seek Republican votes. But to keep the package’s overall cost down, provisions that would stimulate the economy — like aid to revenue-starved states and infrastructure projects — got less as a result.

Among Democrats in the White House and Congress, “there was a considerable amount of hand-wringing that it was too small, and I sympathized with that argument,” said Mark Zandi, chief economist of Moody’s Economy.com and an occasional adviser to lawmakers.

Even so, “the stimulus is doing what it was supposed to do — it is contributing to ending the recession,” he added, citing the economy’s third-quarter expansion by a 3.5 percent seasonally adjusted annual rate. “In my view, without the stimulus, G.D.P. would still be negative and unemployment would be firmly over 11 percent. And there are a little over 1.1 million more jobs out there as of October than would have been out there without the stimulus.”

Politically, however, the president is saddled with his original claim that, with the stimulus, the jobless rate would peak at 8.1 percent — a miscalculation that Republicans constantly recall. While the administration has said its economic assumptions were in line with private forecasts, most of which also underestimated the recession’s punch, it was more optimistic than most.

“That was a mistake,” said Jeffrey A. Frankel, a Harvard University economist and former Clinton administration official who is a member of the National Bureau of Economic Research panel that judges when recessions start and end. “I thought so at the time.”

Christina D. Romer, chairwoman of Mr. Obama’s Council of Economic Advisers, said attention to that too-rosy projection “prevents people from focusing on the positive impact of the fiscal stimulus. So of course I find that frustrating.”

Much federal infrastructure money has gone not to new job-creating projects but to finance existing plans, which otherwise would be unaffordable to states.

So the stimulus has not “supercharged” transportation construction as was hoped, said Charles Gallagher, an asphalt company owner, speaking for the American Road and Transportation Builders Association, but it has nonetheless been “a welcome Band-Aid” to offset state cuts.

“Many contractors across the nation have been able to sustain, if not add to, their work force,” he said.

That sort of impact is what makes federal aid to state governments rank high in economists’ reckoning of the stimulus value of various proposals. Every dollar of additional infrastructure spending means $1.57 in economic activity, according to Moody’s, and general aid to states carries a $1.41 “bang” for each federal buck.

Even more effective are increases for food stamps ($1.74) and unemployment checks ($1.61), because recipients quickly spend their benefits on goods and services.

By contrast, most temporary tax cuts cost more than the stimulus they provide, according to research by Moody’s. That is true of two tax breaks in the stimulus law that Congress, pressed by industry lobbyists, recently extended and sweetened — a tax credit for homebuyers (90 cents of stimulus for each dollar of tax subsidy) and extra deductions for businesses’ net operating losses (21 cents).

Economists said Republicans’ recent proposals to rescind unspent money would be a mistake.

James Glassman, a senior economist at JPMorgan Chase & Company, said: “If we could be absolutely convinced that the growth we’re getting is for reasons beyond the help the government is giving, then that would make sense. But the fact is we can’t be certain of that.”

ARRA is such a tricky subject. I'm working on an ARRA project this week and there are so many regulations and loopholes and stipulations that I am not sure if this is a great thing or not. Buy American is a difficult, overly thorough and slow program to work with in my experience this fall. Some projects I'm seeing are worthwhile as they would not have happened without the stimulus, jobs are being created and some are making money again. But as with anything, there are abuses of the system and the money is not available for needed projects fast enough...

Just one question.

How can you POSSIBLY measure the number of jobs not lost? You can't. You can measure something that has happened, not something that has not. I mean - pick a number. 50 million. 50 MILLION KEPT THEIR JOBS THANKS TO THE STIMULUS BILL. Oh wow! Great! See how easy that is?

I am so sick of hearing about "saved jobs" that it makes me want to vomit. It's riduculous, self congratulatory, mental masturbation.

Originally Posted by BSS

How can you POSSIBLY measure the number of jobs not lost? You can't.

A good statistician may be able to estimate it using regressions and the like.

Put it this way: It wouldn't pass muster as scientific proof, but it's enough to be admissible in court.

Doesn't mean it's not a lot of chain yanking. Could be. Might not be. Depends on who's doing it and how.

A good statistician might be able to, but in this case we're not talking about a good statistician we're talking about a White House that is in over it's head and resorting to gimmicks in an attempt to justify it's existence.

Saved or created? W.H. can't tell

In a briefing with reporters, officials acknowledged they can’t tell the difference between jobs “saved,” and jobs “created” by the $787 billion stimulus package.

http://www.politico.com/news/stories/1009/28956.html

Independent Statisticians:

Are those^^^the same guys who said unemployment wouldn't rise above 8% if we passed the stimulus?


Feb 09? Are you sure you are not just a shill for this Admin? You know, part of the community organizing effort Obama is fond of? You always seem to be apologizing for them.

^^^ Nope; just a member of the reality based community... in this case, in accord with Cato:

Quoting Cato, which follows a similar theme to my own:

Obama’s FY2009 performance is like a relief pitcher who enters a game in the fourth inning trailing 19-0 and allows another run to score. The extra run is nothing to cheer about, of course, but fans should be far more angry with the starting pitcher. That having been said, Obama since that point has been serving up meatballs to the special interests in Washington, so his earned run average may actually wind up being worse than his predecessor’s.

Then myself:

Just to add some perspective, even supporters of the stimulus plan criticized the way Congress treated the “stimulus” as a huge pork project targeted against specific spending proposals as new grant applications needed to be submitted for their pet projects back home.

Originally Posted by Triage

^^^ Nope; just a member of the reality based community...

I wouldn't call myself part of the 'reality based community' then turn around and immediately compare Obama to Bush. That comparison has no relevance to reality whatsoever. More of a bad thing does not a good thing make.



BTW, if you do some more digging at the Cato site you will find that the actual cost of Obamacare is closer to $6 trillion. So I am not sure what that chart represents but something tells me it is soon to be outdated.

Originally Posted by Rubicon

So I am not sure what that chart represents...

Always happy to help illuminate the darkness:

All the charts are meaningless to the one who can't buy groceries, the statistics are useless to someone who can't fill a prescription. The overcharges and money wasted that I've seen on some of these stimulus projects is what makes me want to vomit, especially when I have to look at a sign screaming "This is a stimulus project" to "show" taxdollars at work.

Originally Posted by montanagirl

All the charts are meaningless to the one who can't buy groceries, the statistics are useless to someone who can't fill a prescription. The overcharges and money wasted that I've seen on some of these stimulus projects is what makes me want to vomit, especially when I have to look at a sign screaming "This is a stimulus project" to "show" taxdollars at work.

That sign put someone back to work !! man the short sightedness of some people !

Originally Posted by OSECS

That sign put someone back to work !! man the short sightedness of some people !

Not necessarily short sightedness as much as experiencing first hand.

That is not my experience with ARRA. With the projects I'm involved in there are tight cost control measures. So tight the contractors are complaining because change orders are very tough to get approved. I have however seen more than one letter have to be rewritten because it was not put on paper with the ARRA watermark.

Originally Posted by montanagirl

Not necessarily short sightedness as much as experiencing first hand.

No disrespect intended, just a tongue in cheek comment about the sign. Definitely not needed, but somebody made some money and their company benefitted because of it.

Even if it did work (a huge assumption) all "stimulus" does is bring demand forward, not magically create new demand. In other words, we are borrowing consumer demand from the future, just as we are borrowing money from the future.

Neither will solve the real problem, which is an excess of debt created by a fractional-reserve banking system out of control, which the banks that created it refuse to acknowledge or mark to market. Instead, they have simply transferred the debt to the Fed and the US Government, i.e. to you and I, the taxpayers, where it continues to drag the country down like an albatross.

See Japan for what continued efforts at "stimulus" get you. They've spent over 200% of GDP and their economy is still declining -- because you cannot spend your way out of debt. Any fifth-grader can understand this, but an advanced degree in economics allows you to obfuscate it enough that politicians and the credulous believe it. Don't be fooled.

The Treasury Department expects to recover all but $42 billion of the $370 billion it has lent to ailing companies since the financial crisis began last year and the estimated TARP cost is expected to be cut by $200 Billion this year. Timothy Geithner said in an interview last week that he expects the TARP to get as much as $175 billion in repayments from banks by the end of 2010. This could lower the 2010 deficit to somewhere around $1 Trillion, down from the $1.42 Trillion 2009 deficit, that is, unless the money is spent on a jobs program or some other excess.

Well, looks like this thread came alive after it looked like it was headed for oblivion.

Originally Posted by montanagirl

ARRA is such a tricky subject. I'm working on an ARRA project this week and there are so many regulations and loopholes and stipulations that I am not sure if this is a great thing or not. Buy American is a difficult, overly thorough and slow program to work with in my experience this fall. Some projects I'm seeing are worthwhile as they would not have happened without the stimulus, jobs are being created and some are making money again. But as with anything, there are abuses of the system and the money is not available for needed projects fast enough...

Originally Posted by Grange

That is not my experience with ARRA. With the projects I'm involved in there are tight cost control measures. So tight the contractors are complaining because change orders are very tough to get approved. I have however seen more than one letter have to be rewritten because it was not put on paper with the ARRA watermark.

These two takes are interesting. Are you both in Montana or in separate states?

Those that I know have described their experience with ARRA projects to be similar to Grange's, with a few exceptions.

I wonder if it varies from state-to-state or even on a contractor-by-contractor basis.

Originally Posted by Spats

Even if it did work (a huge assumption) all "stimulus" does is bring demand forward, not magically create new demand. In other words, we are borrowing consumer demand from the future, just as we are borrowing money from the future.

Neither will solve the real problem, which is an excess of debt created by a fractional-reserve banking system out of control, which the banks that created it refuse to acknowledge or mark to market. Instead, they have simply transferred the debt to the Fed and the US Government, i.e. to you and I, the taxpayers, where it continues to drag the country down like an albatross.

I find it telling that no matter what the issue is, you trot out the anti-fractional reserve argument time and time again. Why is that? Do you view the resolution of that issue as a cure-all to right the economic predicament we find ourselves in? It's kind of ironic that you use a bird well-known for its' perpetual gliding ability to describe the US economy; it makes no sense.

See Japan for what continued efforts at "stimulus" get you. They've spent over 200% of GDP and their economy is still declining -- because you cannot spend your way out of debt. Any fifth-grader can understand this, but an advanced degree in economics allows you to obfuscate it enough that politicians and the credulous believe it. Don't be fooled.

There's a difference between macro- and micro- economics; any college freshman could have pointed that out to you.

Labor Dept: Available Labor Rate Increases To 10.2%
December 5, 2009

WASHINGTON—In what is being touted by the Labor Department as extremely positive news, the nation's available labor rate has reached double digits for the first time in 26 years, bringing the total number of potentially employable Americans to an impressive 15.7 million.

Hilda Solis briefs the press corps on the unprecedented level of untapped manpower.
"This is such an exciting time to be an employer in America," said Labor Secretary Hilda Solis, adding that every single day 6,500 more citizens join America's growing possible workforce. "There's such a massive and diverse pool of job-ready Americans to choose from. And each month the number only gets higher."

"While our current available labor rate of 10.2 percent isn't quite as robust as it was in 1982 or 1933, we're happy to say that reaching that benchmark is no longer out of the realm of possibility," Solis continued.
According to the Department of Labor's report, nearly 200,000 more Americans suddenly became fully hirable in October alone. And November saw unprecedented gains in the number of high-quality auto workers, teachers, lawyers, part-time retailers, and even doctors who could be employed.
The report also explained that, because of the booming would-be-employee market, college graduates are having an easier time than ever joining the ranks of those ready and able to receive monetary compensation for work performed at some point.

Moreover, it found that, while all Americans were benefiting in some way from the new trend, the nation's African Americans appeared to be in the best position to take advantage of the upward swing in potential employment, with 15.7 percent of all black citizens now situated to have a chance of becoming wage-earners someday.
"We are very lucky to be living in a time when so many people can just go out whenever they feel like it and get a job application," Deputy Labor Secretary Seth Harris announced. "Compare that to the late '60s or late '90s, when the available labor rate plummeted to 4 percent and employers didn't have their pick of millions upon millions of Americans dying to put on a hard hat or suit jacket for practically peanuts."
Added Harris, "Those were scary times in America."
Though Labor sources said the new figures were encouraging, officials were quick to point out that the exact number of those now possessing the capacity to be offered work someday is actually much higher.
"Our findings don't take into account all the men and women who are available for work but haven't applied for a job in the last month," Solis said. "That's another 2.4 million Americans out there who can proudly say they wake up every day, get their kids ready for school, and then sit in their living rooms praying for the phone to ring."
Solis told reporters she is also encouraged by the vast number of citizens in every state who are willing to take jobs beneath their personal dignity and education level.
The Labor Secretary cited the fact that California boasts an impressive available labor force of more than 2 million citizens, while in Oregon, 11.5 percent of the state is ready to fill out a growing stack of empty W-2 forms. In Michigan, more than 15 percent of all citizens said they could start work either today, tomorrow, or right this very second if that's what it takes.
"I'll do anything," said Ohio resident Garret Landry, who was last not available for steady employment more than 10 months ago. "Seriously, anything. Cars? I could learn how to fix cars. Manual labor? An office job? Just say the word and I'm there."
"I'll transcribe what you're writing for $50," Landry added. "Okay, $25."

Originally Posted by 13

These two takes are interesting. Are you both in Montana or in separate states?

I'm in WI.

Originally Posted by 13

I find it telling that no matter what the issue is, you trot out the anti-fractional reserve argument time and time again. Why is that?

Because it's the underlying problem.

In a fractional-reserve banking system, every single dollar in existence represents a debt of someone to a bank. Try to wrap your head around this for a moment, because it's important, and every single economic problem we have is a direct result of this fact.

Just for example:
-If we try to decrease our debt load, we decrease the money supply, causing a deflationary spiral. Therefore, in a fractional reserve banking system, everyone must be always be in debt to banks or the economy collapses.

-Interest is always charged on debt. When every dollar is a debt, the economy must constantly grow in order to keep up with interest payments -- or it dies. Fractional reserve banking demands infinite unbounded growth, which makes sustainability impossible. That's right: it is impossible to be an environmentalist and support fractional reserve banking.

"The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear- and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money." -Sir Josiah Stamp, director of the Bank of England

Originally Posted by 13

Do you view the resolution of that issue as a cure-all to right the economic predicament we find ourselves in?

No, but it is a necessary step, without which we will continue to watch the banking oligarchs take and control everything while producing nothing, and the rest of us will continue to slide deeper and deeper into serfdom. (Real wages peaked in 1974.)

Originally Posted by 13

It's kind of ironic that you use a bird well-known for its' perpetual gliding ability to describe the US economy; it makes no sense.

Dude, it's an analogy. You can't put grease on lightning either, but people understand what you mean.

Originally Posted by 13

There's a difference between macro- and micro- economics; any college freshman could have pointed that out to you.

There's an important difference between macroeconomics and claiming that 1 + 1 = 5. We all know that taking money away from one person and spending it for them doesn't make anyone any richer. How is doing the same thing for 100 million people an "economic stimulus"?

Hint: it's not. That's not macroeconomics, it's just foolishness in a nice suit.

Economics isn't complicated at all. It seems complicated because a lot of people make billions of dollars off the fact that they understand it and you don't, and they'd rather keep it that way, so they use lots of big scary words and long, complicated equations. which mean nothing and predict nothing. Which "mainstream" economists predicted the current crash? NONE OF THEM. Ergo, they're all blowing smoke.

Originally Posted by Spats

Because it's the underlying problem.

So what is your alternative to fractional reserve banking?

Originally Posted by JimmyCarter

So what is your alternative to fractional reserve banking?

The flip answer is "What is your alternative to legalized theft?" How about: not legalized theft? But as you mentioned, that's only identifying the problem, not proposing a solution.

This runs us smack into the real question:
If money is not debt issued by banks, then what is money?

The simple answer:
1) Money can be a commodity of intrinsic agreed value (usually the noble metals, e.g. gold, silver, platinum -- but everything from chickens to hours of labor has been used)
2) It can be representative of a commodity (e.g. a piece of paper standing for one of the above)
3) It can be fiat -- a piece of paper with no intrinsic value, but which everyone agrees to accept. (Or, in the case of the US government, is legally forced to accept by the legal tender laws.)

In any case, the most important question is: Who gets to create the money? In our current system of fractional reserve banking, the answer is "Banks have a government-granted monopoly on the creation of money," which is why they have so much of it despite producing nothing of value themselves.

In the case of commodity money, the answer is simple: the producers of the commodity itself create the money, and the supply is constrained by their ability to produce it. In the case of fiat money, there are many possible answers, many competing theories, and we have a whole new discussion.

Originally Posted by Spats

The flip answer is "What is your alternative to legalized theft?" How about: not legalized theft? But as you mentioned, that's only identifying the problem, not proposing a solution.

This runs us smack into the real question:
If money is not debt issued by banks, then what is money?

The simple answer:
1) Money can be a commodity of intrinsic agreed value (usually the noble metals, e.g. gold, silver, platinum -- but everything from chickens to hours of labor has been used)
2) It can be representative of a commodity (e.g. a piece of paper standing for one of the above)
3) It can be fiat -- a piece of paper with no intrinsic value, but which everyone agrees to accept. (Or, in the case of the US government, is legally forced to accept by the legal tender laws.)

In any case, the most important question is: Who gets to create the money? In our current system of fractional reserve banking, the answer is "Banks have a government-granted monopoly on the creation of money," which is why they have so much of it despite producing nothing of value themselves.

In the case of commodity money, the answer is simple: the producers of the commodity itself create the money, and the supply is constrained by their ability to produce it. In the case of fiat money, there are many possible answers, many competing theories, and we have a whole new discussion.

So, you haven't come up with an alternative yet?

Originally Posted by 13

So, you haven't come up with an alternative yet?

I think there are two good alternatives. (I haven't "come up" with anything...this is a well-explored field.) One gets me called a paleoconservative, and one gets me called a socialist -- though both are less capitalist *and* less socialist than the government-controlled private monopoly we have now.

The simplest is to go back on a commodity standard of gold, silver, platinum, copper, etc., just as was done for thousands of years of civilization, and for the USA until 1973, when we decided it was more important to fight the Vietnam War than maintain a stable economy. This is not difficult: note that a copper penny is worth more than 1 cent, a nickel made of nickel is worth more than 5 cents, a silver quarter is worth a lot more than a quarter, and so on. This has the advantage of a stable money supply that tends to grow at roughly the rate of economic growth without anyone having to do anything.

The other alternative is to create a fiat system in which the government reserves the right to create money entirely to itself. This has the advantage that the money supply can be controlled, unlike our current system in which interest rates have an indirect and lagging effect, and the tradeoffs between deficit spending and money supply inflation are both obvious and direct.

Both systems are superior to our current system in that that debt is not necessary to the functioning of the system, that productivity is rewarded more than debt is, and that flat economic growth or small dips in GDP does not result in a cascade of bankruptcy, default, and deflationary depression, in addition to solving the other problems I mentioned.