Op-Ed: Too Little of a Good Thing - Paul Krugman »
Posted By deathray 1 month, 3 weeks ago in Business & Finance
The good news is that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, is working just about the way textbook macroeconomics said it would. But that’ s also the bad news — because the same textbook analysis says that the stimulus was far too small given the scale of our economic problems. Unless something changes drastically, we’ re looking at many years of high unemployment.
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deathray
Hm...summarizing a life...Investment banker, sailor, unintentional gourmet cook. Ex US Naval officer, also Foreign Service. Split my time between NYC and Miami Beach ...
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jordan111 month, 3 weeks ago
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http://www.nytimes.com/2009/11/02/opinion/02krugma...
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Here's a direct link. -
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tchef1 month, 3 weeks ago
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Here is the quandary. With our current budget crunch, and two wars still going on, how can we afford to push the deficit even higher by creating more stimulus? We can't base our economy on the housing market like Bush did. We need something more permanent.
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deathray1 month, 3 weeks ago
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this is what krugman has to say about that, with respect to unemployment:
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fta:
"Deficit hawks like to complain that today’s young people will end up having to pay higher taxes to service the debt we’re running up right now. But anyone who really cared about the prospects of young Americans would be pushing for much more job creation, since the burden of high unemployment falls disproportionately on young workers — and those who enter the work force in years of highunemployment suffer permanent career damage, never catching up with those who graduated in better times.
Even the claim that we’ll have to pay for stimulus spending now with higher taxes later is mostly wrong. Spending more on recovery will lead to a stronger economy, both now and in the future — and a stronger economy means more government revenue. Stimulus spending probably doesn’t pay for itself, but its true cost, even in a narrow fiscal sense, is only a fraction of the headline number." -
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hyperbola1 month, 3 weeks ago
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Actually our "spending" has not been too small, but mis-spent in ways that compound our problems. Remember that Obama is actually INCREASING our costs in Iraq (with a stealthy and very expensive expansion of the numbers of "contractors") and has spent far more on bailing out corrupt financial oligarchs than on American recovery.
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The More Things"Change"...
http://www.propeller.com/story/2009/07/14/the-more...
Let’s start with the two political parties that supposedly “run” this country. The truth is that political parties don’t run this country, money does. Our entire political system is based on wealth. This has been true in some degree since the day we gained our independence, but it has never been as apparent as it is now. Money drives political campaigns. All the politicos know this and so do most people.
We, the people, are supposedly equal under the law, and we are, except that some are more equal than others depending on their net worth and how their money is used. During the last presidential election, money coming from “ordinary folks” in a “populist surge of donations” put Barack Obama over the top and they supposedly carried the day.
It never happened.
What really happened is that the people who controlled the financial sector of the economy saw a massive train wreck about to happen and they needed someone malleable and ambitious enough to work with them to clean up the mess that would follow. At that time, A junior Senator from Illinois with his golden tongue a good understanding of quid pro quid, stepped into the batter’s box. The financial sector then showered him with campaign funds in order to minimize the catastrophe that was, beyond a shadow of doubt, going to happen. The truth was that everyone in government, and those working in the financial sector, knew that the only recourse available to prevent a financial meltdown, was for the Federal Government to bail out the bankers, the stock exchange, the real estate market and the hedge fund people, mortgage lenders and the manufacturing base (Automobile manufacturers and the defense industry).
Let’s take a look at campaign financing. Obama raised....
... When it comes to influence, the average American has very little. It’s amazing when you consider how the political parties package their candidates. They use the oldest trick in the book to win elections. Divide and conquer. Left, right, rich poor, black, white, legal, illegal, it’s all a ruse....
....The American people are slowly realizing that we have traded one war-monger for another. Once we were in Afghanistan to fight al Qaeda, now we are trying to kill the Taliban. In reality we are killing anyone that stops us from building that oil pipeline.
Almost a decade ago we saw a candidate tout “compassionate conservatism”. Nothing was further from the truth. Now we have a President that speaks of “change”. The only change I see is a different battlefield for people to die. -
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jordan111 month, 3 weeks ago
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I don't have the answers to this, but do wonder about the lending freeze put on small business which continues even after the bank bail out's. I'd like to know how many of those unemployment figures are a direct result of small business going under. It seems to me that little to nothing was addressed of how this crisis and the subsequent lending freeze affected those businesses. Why create new jobs, if there already were jobs that could have been saved?
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GWHayduke1 month, 3 weeks ago
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High unemployment is indeed a textbook example of a 'correction' in the market.
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Dont have a strong portfolio and a 6 figure income?
Should have gone to a top-tier University it seems.
Ironic or not so, the concentration of wealth in the upper-middle and monied classes are keeping this economic ship afloat, albeit uncomfortably for those without.
Seriously, how many people who are now without employment were one year ago driving a new 12mpg SUV and living in a home they could not afford while earning hourly wages?
This correction will bring 'value' back to earth.-
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beavith11 month, 3 weeks ago
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in fire assay analysis of gold ores, you use molten lead to extract any gold from the finely ground ore.
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once you've collected the lead slug, you actually burn off the lead to leave a tiny speck of gold.
the correction you speak of will burn away most of the economy to get down to the 'value,' very much like the depression did in the 1930s.
i never understood destroying the village to save it, but hoping for a correction of this scale may not be what you really want.
fix the banks.
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deathray1 month, 3 weeks ago
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for those who are skeptical about multipliers from government stimulus, here is an analysis of relative multipliers from mark zandi, chief economist at moodys.com:
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Tax Cuts
Bang for the Buck
Nonrefundable lump-sum tax rebate 1.01
Refundable lump-sum tax rebate 1.22
Temporary tax cuts
Payroll tax holiday 1.29
Across-the-board tax cut 1.02
Accelerated depreciation 0.25
Loss carryback 0.21
Housing tax credit 0.90
Permanent tax cuts Extend alternative minimum tax patch 0.51 Make Bush income tax cuts permanent 0.32
Make dividend and capital gains tax cuts permanent 0.37
Cut in corporate tax rate 0.32
Spending Increases
Extending unemployment insurance benefits 1.61
Temporary federal financing of work-share programs 1.69 Temporary increase in food stamps 1.74
General aid to state governments 1.41
Increased infrastructure spending 1.57
Note: The bang for the buck is estimated by the one-year dollar change in GDP for a given dollar reduction in federal tax revenue or increase in spending. -
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beavith11 month, 3 weeks ago
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how much of this is based on Krugman's version of 'probably' or 'would have' or 'might.'
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he has no idea what has worked, but he thinks he does.
Krugman? one more drop. the man is a leftie hack boob. i don't care if he won his Nobel on a technical economic question. with regard to political economics, he can't spend enough federal cash fast enough.
why can't he talk about fixing the banking liquidity issue? he talks about 3.5% growth, as if we are going to see 3.5% for years, even he notes a decade long employment recovery period, at that rate. if that isn't enough to tell him that he's on the wrong track, somebody needs to find a bigger 2x4 and smack him upside the head with it.
truth be told, this 3.5% upbump, is a onetime gov't cash for clunker economic disruption. does anyone see anything that will provide any impetus for economic growth in the NEXT quarter?
no. me neither.
folks. we are still mightily screwed.
has anyone seen the "American Experience" (PBS 1990) about the crash of 1929. i happened to bump into it. the OCtober 1929 crash was preceded by throttled liquidity some time before. we're dancing on the edge of a cliff.
a declining dollar and the simmering possibility of trade war make future outcome suspect.-
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Beau78901 month, 3 weeks ago
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beavith, regarding your question about why Krugman doesn't talk about banking liquidity, he has:
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http://krugman.blogs.nytimes.com/2009/05/02/liquid...
I'm no economist, so I may be misunderstanding his position or misinterpreting your objection, and I'm sure you'll disagree with his idea that government borrowing replaces consumer borrowing in order to free up bank funds. But the point stands that Krugman has written about government being instrumental in fixing banking liquidity. And if you'd say government borrowing is inflationary, that may be true in general; however, recent inflation data suggests we're currently facing deflation. (That's a working link to a table of government inflation data, masked so Propeller won't flag this comment as spam because it contains two links.)
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Hhussk1 month, 3 weeks ago
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I would have dropped the article, but since someone else posted a direct link, I'm propping.
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Krugman, unfortunately, is trying to hype his earlier columns that suggested more stimulus was needed.
And I ask you why?
Because, according to new estimates, we've barely spent 1/10th of what we already "set aside".
So why do we need more?
My opinion is that Krugman is wrong based on the fact that nearly everyone is saying the recovery is over and that so little of the stimulus has been spent. His thesis is that we should have increased the government takeover and spending by as much as 40% more (from a CSPAN interview).
Another Nobel Prize winner, for certain. -
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cowboygrandpa1 month, 3 weeks ago
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FTA:
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"So the government needs to do much more. Unfortunately, the political prospects for further action aren’t good.
What I keep hearing from Washington is one of two arguments: either (1) the stimulus has failed, unemployment is still rising, so we shouldn’t do any more, or (2) the stimulus has succeeded, G.D.P. is growing, so we don’t need to do any more. The truth, which is that the stimulus was too little of a good thing — that it helped, but it wasn’t big enough — seems to be too complicated for an era of sound-bite politics.
But can we afford to do more? We can’t afford not to.
High unemployment doesn’t just punish the economy today; it punishes the future, too. In the face of a depressed economy, businesses have slashed investment spending — both spending on plant and equipment and “intangible” investments in such things as product development and worker training. This will hurt the economy’s potential for years to come.
Deficit hawks like to complain that today’s young people will end up having to pay higher taxes to service the debt we’re running up right now. But anyone who really cared about the prospects of young Americans would be pushing for much more job creation, since the burden of high unemployment falls disproportionately on young workers — and those who enter the work force in years of high unemployment suffer permanent career damage, never catching up with those who graduated in better times.
Even the claim that we’ll have to pay for stimulus spending now with higher taxes later is mostly wrong. Spending more on recovery will lead to a stronger economy, both now and in the future — and a stronger economy means more government revenue. Stimulus spending probably doesn’t pay for itself, but its true cost, even in a narrow fiscal sense, is only a fraction of the headline number."
Well, the way I see it is we can allow the unemployment to overwhelm whatever gains we have actually made, and waste all the effort, time , and investment. Or we can continue to invest and bring in more work.
Not cheap service jobs that require little skill and offer low pay. But manufacturing jobs that offer a solid future to this nation.-
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Hhussk1 month, 3 weeks ago
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Well cowboygrandpa, I would disagree with your's and Paul Krugman's "truth", that it was "too little of a good thing".
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I, personally, see it as too much of a bad thing. If a stimulus is what we needed, then why didn't we spend more of it in these last 8 months? Still still have 85-90% of it unused.
Why do we need more, when there's a huge amount of it still sitting there? -
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Hhussk1 month, 3 weeks ago
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Not cheap service jobs that require little skill and offer low pay. But manufacturing jobs that offer a solid future to this nation.
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One steep comment concerning manufacturing in the United States. We've lost our ability to be competitive as a manufacturing nation. Perhaps you'd like to see some policies which increase trade tariffs, etc., but we both know that it's far easier and cheaper to build in other parts of the world.
The U.S. has currently turned the corner on manufacturing. The new jobs that come will be in other areas. Mostly.
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cowboygrandpa1 month, 3 weeks ago
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I continue to hear, people say we need to allow the money people the freedom to operate, so that money will be freed up.
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Hello !!!! That is what got us here in the first place. Overvaluation of properties, merchandise, stock, ...
Just because some yokel with a degree in finance, economics, ... Decides that money can be made by hyperinflating values of things does not make the values go up.
It is a con game. A pyramid scheme if ya will !!!!
That is part of the reason we still have high unemployment, falling values of the assets held by many banks, investment firms, large investors... Are holding back the work, no one wants to lose the money their investments are losing.
Instead, companies continue to lay workers off, inflating their profits by making people do the work of those who were let go.
We have received no raises, or bonuses. But we are damn sure the ones doing most of the work.
These jokers at the top have put a poison into the system that needs to be removed.
Themselves !!!!!!
It takes employment for people to build this country and it's economy. Not a few at the top lapping up the profits, while many search for work. -
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Endoscopy1 month, 3 weeks ago
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The failed fake stimulus package has spent only a fraction of the money. A lot of it goes into the government and not into JOBS like it was supposed to do. They claimed it would create 3 million jobs and keep the unemployment under 8% by 2010. It created 30,000 jobs by counting state by state the jobs created. Unemployment is almost 10% and the FED says it will go to 10.3% mid 2010 and be down to 8% by 2012. Failed and fake.
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What has a train project in the northwest have to do with jobs now. They will not be able to lay the first track for about 10 years. It will take that long to get the plans, public hearings, redo of plans, permits, law suits, and redo of plans. Then work can start. Why is this and other projects in this package that are long range spending and not jobs now. Fake and failed. -
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chevydog1 month, 3 weeks ago
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What I sort of wonder is how many of the jobs "saved" or "created" are temporary ones that will disappear the hour that govt financing does. I'm not sure how much the Feds should have to do with this; but wouldn't we be better of by working at structural improvements to assure that jobs "created" or "saved" will be permanent?
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fsev411 month, 3 weeks ago
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Every job saved or created means one more person paying local, state, and federal taxes rather than draining unemployment funds. The increased tax revenue helps the states or local governments deal with their financial troubles. That allows the to retain their employees.
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One interesting domino type effect of road improvements here in Illinois was that in a particular section of the state the stimulus funded projects, mainly repaving and congestion relief projects would result in a more than $300 per year savings for the average motorist in that area. Additionally there would be significant savings for the state in lower maintenance costs. That money will find its way back into the economy as well. -
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truthiness1 month, 3 weeks ago
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obviously, the list of reasons he gives why unemployment is bad are all true, but that does not necessarily correlate into a need for more stimulus.
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there is a tipping point where the country goes bankrupt. this is how reagan beat the soviet union. this is why bin laden targeted the towers.
as much as I agree an economy needs to be managed, that does not mean any and all management is good. there are long term consequences.
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