Greg Roach's Berkshires Blog
Friday, February 13, 2009
  Limbaugh Declares He is Moving to New Zealand if Stimulus Works

Love it or leave it, Rush. Buh bye.
big assumption I'd say. New Zealnad might not let him in. there's always Uganda.
of course the stimulus is going to work....whether or not it provides a single new job or prevents a single layoff....the great mesiah obama created it and the dems approved it....the additional welfare provisions alone will be a boost to the economy.....what a joke....states are using this stimuls to shore up their budgets....all this stimulus is going to do is allow the inevitable to be postponed....throwing more money at issues that need to be fixed isn't going to do us any good....

Another great reason why the stimulus plan just has to work.
CJT, if you don't throw money at issues that need to be fixed, how do you propose they will be fixed?
by fixing don't put air in a tire that has a hole in get a new tire....
Along with a new tire, could you possibly use an air pump? Many of those currently unemployed have already maxed out (or will max out before the end of the year) any unemployment benefits. How will a tax cut help them if they have little or no income to tax?
Additionally, I keep hearing that it's the small businesses that should be helped. There are so many such businesses that individually helping each is an impossible task. It would take years to do so. It is much better to help the big businesses who in turn will hire smaller businesses as suppliers. The same help to the big businesses will also help restore confidence in the everyday consumer who will begin to spend their money with small businesses to paint their houses or install new kitchens once they have confidence that their paychecks will continue.
President Roosevelt stated that the only thing we have to fear is fear itself. He was right in 1933 and the same holds true today. Until people have money to spend and no fear of loosing their jobs the economy will not recover. Tax cuts when you don't have a job or worry that your job will end at any time are 100% useless.
I agree the GOP tantrum to get their tax cuts (that failed miserably before) was not worth spending any political capital on.

Someone has to make the new tire, air pump, and know how to use them.
the additional welfare provisions alone will be a boost to the economy.

Dude, that's the whole point. People spending money is what stimulates the economy.

We are in trouble, though.

As much as I find myself agreeing with Chris, I'm doing it for different reasons. Chris has some sort of political axe to grind rather than an economic one, and I'm fine with him doing that--not that it addresses the issue.

What's always pulled the economy out of jams before has been the opening and exploiting of new markets. The post-war boom came from the rise of the military-industrial complex. The 80's found the rise of technology and finance as we know it. The 90s and 00's were fueled by the internet AND telecom AND housing AND finance--that's why it ran so hot for so long.

So the government can throw lifelines out all it wants. I'm afraid the best it can do is keep as many people afloat as possible before American ingenuity comes up with the Next Big Thing.

They want it to be green energy or some sort of government-fueled infrastructure business...but it's a bit early to tell if those will wash.

Hurry up, Next Big Thing.
Ross- What pulled us out of the recessions of 1957-8 and 1960-1?
Greg--what do I look like, Wikipedia?
You get my point, though. Not all recessions require booms/wars to recover. Sometimes just spanning the gap with government spending works. Granted the recessions I cited were short and shallow, but....

Your point on the next big thing is well taken. I was reading an article earlier today that predicted that such a phenomenon will be the rise of a consumerist Chinese middle class. Sadly, this notion is dependent on the US losing its driver's seat in the global economy.

And since you nailed my source, I admit that I rely far too heavily on Wikipedia, mostly because it is generally quick, easy and relatively comprehensive. What I prefer is delving into the wiki citations and resource links to see where certain POVs come from. It's a simple but reasonably effective way to tease out a multi-sourced perspective - almost always a mile wide and an inch deep but better than BS.
Greg, what got us out of other recessions relatively quickly, while the recession responded to by the most massive spending increases (federal spending went from 3% of GDP to 10%) still saw unemployment at 19% nine years in (at the start of 1939)?
I wasn't calling you out on the wikipedia thing, really. It was just a good punchline that I could drop to avoid having to discuss the issue at a granularity with which I am probably unprepared.

I have thought of a few things, farfetched as they may be right now, but may be candidates if there are serious breakthroughs here:

-Hydrogen/Fuel Cell transportation
-Advanced building materials
-Personal entertainment

Anyway, who knows. This whole bailout/stimulus could really go either way. Ain't nobody can convince me they know for sure which way that is, neither.
Dave- Look at the correlation of spending and employment between 33 and 36, when spending was at it's highest. You will find that unemployment dropped to 11%. In 37 FDR and Blue Dogs sparked a recessive dip by cutting back the programs too soon and starting to raise taxes. Only then did unemployment start to rise.

You can't leave out those middle years.
OK, but no other market panic resulted in a recession lasting even as long as 5 years.

What was different about the 1930s was that the government decided it had to take various drastic actions, notably adding to tariffs, tax rates, spending, and regulation of prices and production. (Overall Hoover was as guilty as FDR on that score.) Given how long the Depression lasted (indeed, very long even if it had ended in 1936), I think drastic action's record is worse than that of minimal action.

The government could of course guarantee a job to everyone, giving us an unemployment rate of zero, but the side-effects of this action would include reduced economic growth and expanding debt. Eventually, the buck would have to stop somewhere, or we would certainly end up worse off than if the government had done nothing.

Perhaps the nonpartisan Congressional Budget Office was right last week when they said that the stimulus could have positive effects in the very short term, but would, overall, lead to reductions in economic growth?
Dave- Nobody denies that the point of a Keynesian stimulus is for future GNP to be borrowed upon to smooth out the present day dip. However, it is not a zero sum game and the "rate" of growth may slowed by the shallow curve, but ultimately we should be in a stronger position long before "the invisible hand" would naturally get us there.

We wasted 3 years between 29 and 32 by listening to classical economists and the recovery started from a much deeper place than it should have because of it.
However, it is not a zero sum game and the "rate" of growth may slowed by the shallow curve, but ultimately we should be in a stronger position long before "the invisible hand" would naturally get us there.

This is the central point, and Randroids/Capitalism-Über-Alles types would do well to absorb that.

i have no political axe to point is that by putting money to welfare or extending more unemployment benefits or putting more money into medicare caid whatever...the root problem is not being addressed...we have shipped all of our jobs overseas and now we sit here in this situation...our country was founded on the principle of hard work will get you there....the american why work when the government will pay you to sit home....this stimulus package should include provisions to put people to work....civilan consrevation corps.....go out and work....don't say "oh we're in a bad time....h ere's some more unemployment"....give me a job...republicans and democrats are to blame for the position we're in....

people hyped up obama just like they did patrick....patrick hasn't done 1 thing that he said he would get done...they both look good on tv and can throw out a speech but can they get anything done to help out the situation?
To All Who Think The Stimulus Is Bad for the Country and Your State:
Exercise your right to protect your state and your community. Tell your governors and your mayors not to accept any of the money. Tell them you will not vote for them in future elections if they join the democrats by participating in programs that are just pork. Stick to your guns and what you truly believe.

"We wasted 3 years between 29 and 32 by listening to classical economists"

I guessed I missed the lesson where Adam Smith et al said the best response to a market panic was to raise the top income tax rate from 25% to 63%, and to increase tariffs on imports.
i didn't know about the u.s. steel provision in the package....i may have to rethink my position....on some of the stimulus...

Dave- I agree completely with the notion that tax hikes and tariffs are a poor reaction to economic contraction, but my mention of classical economists was referring to Say's Law.

Emotion and its effects on consumer and business behavior has far more to do with how deep and long a recession goes than traditional supply and demand. And for that matter, Smoot-Hawley is a perfect example of emotional reaction on the Gov't's part. You're correct. It made things worse.
OK, but I don't know if Hoover is a great example of a President who failed because he believed in Say's Law. Hoover did increase federal spending by almost 50%. He also jaw-boned major industries into promising not to decrease wages and prices.

Most economists agree that the reason Say's Law does not always apply is precisely because wages and prices are not flexible enough -- not allowed to drop sufficiently when demand decreases. So we can blame Hoover for the extent to which Say's Law failed (we can also blame FDR).

Finally, if the stimulus is supposed to work precisely insofar as it is spent -- not saved and invested -- then mustn't we also beware another difference between now and 1933?: As a country we've already been saving close to nothing, with foreign securities buyers already financing our massive deficits.

So we are borrowing from foreigners (notably the Chinese) in order to consume stuff produced in China; with the foreigners necessarily buying Treasuries and other securities (funding this "stimulus") instead of buying US goods. Aren't we now repeating the mistakes of the last 8 years, doubling them up, in fact?
Dave- Your timing is impeccable. Go read today's Krugman. He deals with the paradox you mention quite nicely.
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