Government spending

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  • #26
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How do you know it had "a big impact on avoiding an economic depression and start a slow turnaround that could have otherwise taken many years?" - I say it didn't - who is correct?

Ahh - the "saved/created jobs" argument - how many people are now out of work - 5 million(?), 6 million(?), 7 million(?), 8 million(?), or could it be 15 million?

http://www.bls.gov/opub/ted/2011/ted_20110111.htm
I can only assume that saving or creating millions of jobs had a positive impact, just as you can only assume it had no effect. You specifically asked what I thought, so I told you.

I like your link though....it seems quite obvious from that chart that the unemployment rate stopped rising soon after the stimulus started going into effect, and also that is is now going back down. Good news!
 
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  • #27
Al68
It depends on what your definition os "successful" is.....I must question the logic of anyone who can, with a straight face, claim that spending hundreds of billions and giving hundreds of billions more in tax breaks had no effect whatsoever. That is just not dealing with any sense of reality IMO.
It's pretty easy to "question the logic" of an invented strawman, isn't it?

The reality is that government spending is out of control, and the increased spending over the last two years was a big mistake in the long term. Every dime of it is drained from the economy one way or the other. Borrowing only means that the drain is either shifted to our grandchildren, who will be in enough trouble already, or will come at the expense of the chaos caused by the U.S. government defaulting on the debt, and the collapse of the dollar.

And the latter is not just hyperbole. Who could blame our grandchildren for refusing to honor a debt that they never incurred?
 
  • #28
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I can only assume that saving or creating millions of jobs had a positive impact, just as you can only assume it had no effect. You specifically asked what I thought, so I told you.

I like your link though....it seems quite obvious from that chart that the unemployment rate stopped rising soon after the stimulus started going into effect, and also that is is now going back down. Good news!
The economy goes through cycles - naturally - without $1 Trillion of wasteful spending by a Government that needs to "print or borrow" the money to "save or create" jobs.
 
  • #29
166
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The economy goes through cycles - naturally - without $1 Trillion of wasteful spending by a Government that needs to "print or borrow" the money to "save or create" jobs.
C'mon, what we just went through (and are still recovering from) is hardly what I would call a "natural cycle". :rolleyes:
 
  • #30
149
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C'mon, what we just went through (and are still recovering from) is hardly what I would call a "natural cycle". :rolleyes:
What would you call it?
 
  • #31
mheslep
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CBO estimates over 2 million jobs were saved/created as of 1st quarter 2010.
BTW, I've read that this CBO estimate is not from any observation of post stimulus economic data, but from only from a govt. spending economic model, in fact the same one they used to predict that the stimulus http://gregmankiw.blogspot.com/2010/01/unemployment-update.html" [Broken] That is, the CBO ran that model two years ago which said given a net spending of $one trillion, ~2 million jobs will be created versus no stimulus. Two years later they essentially ran the same model again, provided it an input of, yes indeed we spent $one trillion and, Viola, the model said once again 2 million jobs were created.

Edit: also, would you say the author of http://www.cbsnews.com/8301-503544_162-20019468-503544.html" is "just not dealing with any sense of reality?"
Pres. Obama said:
there's no such thing as shovel-ready projects.
 
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  • #32
mheslep
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Here's https://www.commentarymagazine.com/viewarticle.cfm/where-did-the-stimulus-go--15610?page=all" [Broken] on why the ARRA/stimulus did not increase output:
Taylor said:
The impact of the ARRA grants on government purchases was negligible.* So where did the stimulus funds sent to state and local governments go? Graph 3 summarizes the results of our efforts to track the money. Our finding: most of it went to reduce borrowing by state and local governments.
That is, instead of increasing spending on this or that state road project, the states kept spending as planned and instead of floating the usual muni bonds they used the ARRA money.

graph3-300x246.png
 
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  • #33
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Here's https://www.commentarymagazine.com/viewarticle.cfm/where-did-the-stimulus-go--15610?page=all" [Broken] on why the ARRA/stimulus did not increase output:
That is, instead of increasing spending on this or that state road project, the states kept spending as planned and instead of floating the usual muni bonds they used the ARRA money.

graph3-300x246.png
This supports what I alluded to in post 28

"Btw - How much of that spending went into dead end projects with no financial return - only an ongoing need for more funding? "
 
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  • #34
166
1
BTW, I've read that this CBO estimate is not from any observation of post stimulus economic data, but from only from a govt. spending economic model, in fact the same one they used to predict that the stimulus http://gregmankiw.blogspot.com/2010/01/unemployment-update.html" [Broken]
Well, there is no way we will ever be able to have a completely accurate number, and the CBO estimates could be high (or they could also be low). But all the unemployment data I have seen seems to clearly indicate that the rate of job losses slowed right after the stimulus started going into effect, followed by a plateau, and now it is going back down.

The fact of the matter is that I have heard numerous republican politicians and pundits claim that not one single job was created by the stimulus, which I would hope everyone could agree is in the absurdly low estimate range. It would also seem to me based on the link you provided, that the economic disaster was actually much worse than they were anticipating.

I guess we should never expect any conservative to give any credit to our economic recovery on the stimulus, and who knows? ...maybe you're right, but the subject now seems to be a political trench that people are on one side of or the other. The true reality is probably neither her nor there, but actually in the ditch somewhere.

On another note, I notice that I am a lone liberal who is clearly outnumbered by conservatives in this thread. Maybe all the other PF liberals agree with you? :cry:
 
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  • #35
149
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Well, there is no way we will ever be able to have a completely accurate number, and the CBO estimates could be high (or they could also be low). But all the unemployment data I have seen seems to clearly indicate that the rate of job losses slowed right after the stimulus started going into effect, followed by a plateau, and now it is going back down.

The fact of the matter is that I have heard numerous republican politicians and pundits claim that not one single job was created by the stimulus, which I would hope everyone could agree is in the absurdly low estimate range. It would also seem to me based on the link you provided, that the economic disaster was actually much worse than they were anticipating.

I guess we should never expect any conservative to give any credit to our economic recovery on the stimulus, and who knows? ...maybe you're right, but the subject now seems to be a political trench that people are on one side of or the other. The true reality is probably neither her nor there, but actually in the ditch somewhere.

On another note, I notice that I am a lone liberal who is clearly outnumbered by conservatives in this thread. Maybe all the other PF liberals agree with you? :cry:
Help us out - how many saved and how many created?
 
  • #36
CAC1001
According to University of Chicago economist John Cochrane, stimulus spending was given up on by most macroeconomists back in the 1970s:

For these and other reasons, Keynesian ISLM models have not been taught in any serious graduate school since at least 1980, except as interesting fallacies or history of thought. I include my own graduate education at very liberal Berkeley starting in 1979. Even sympathetic textbooks, like David Romer’s Advanced Macroeconomics, cannot bring themselves to integrate Keynesian thinking into modern macro. The “new Keynesian” economics, epitomized by Mike Woodford’s Interest and Prices has nothing to do with standard Keynesian thinking5 . Not a single policy simulation from a Keynesian model has appeared in any respectable academic journal since 1980. Not one. The whole business was simply discredited as being logically incoherent 30 years ago.

Now stimulus advocates may say “all academia lost its mind in about 1975.” Paul Krugman’s New York Times article pretty much took that view. Maybe so. I think most of academic macroeconomics lost its mind about 1935 and only started to regain it in the 1960s, so it certainly can happen. But the claim “all academic economics from the last 35 years is wrong” is a far different form of scientific advice to policy-makers than is “sensible well-understood and widely-accepted economics supports my view.”
~~~http://faculty.chicagobooth.edu/john.cochrane/research/Papers/stimulus_rip.html

Keynesians gave up by the 1970s. They saw that fiscal programs took too long to implement. They especially disparaged temporary measures, which would not stimulate the consumption that classic Keynesians thought was important to stimulus. Every undergraduate text has repeated these conclusions for at least 40 years. I learned this view from Dornbusch and Fisher’s undergraduate text, taught by Bob Solow, in the 1970s. Even the optimistic projections by the Obama economic team say that fiscal stimulus will not really kick in for two years, validating the durability of this view.

The equilibrium tradition which took over professional academic economics in the mid-1970s has even less room for fiscal stimulus. Some “equilibrium” analyses do say fiscal stimulus can increase output – but by making us feel poorer, work harder at lower wages, and consume less.8 That’s not what advocates have in mind! A large fiscal program can affect prices, wages, and interest rates with all sorts of interesting general-equilibrium implications, but these analyses haven’t really converged on anything solid, much less the large “multipliers” necessary to make traditional fiscal stimulus attractive.

More deeply, macroeconomics was revolutionized starting in the 1950s, by the realization that what people think about the future is crucial to understanding how policies work today. As I have emphasized, the effects fiscal stimulus will have now depends crucially on whether people expect the new spending to be paid back by future taxes or whether they expect it to be quickly monetized. Classic Keynesian analysis analyzed policies by treating each point in time separately. We do not have to agree if expectations are formed “rationally,” all we have to agree is that expectations of the future matter crucially for how people behave today, and the classic Keynesian analysis of fiscal stimulus falls apart.

In textbooks and graduate curriculums across the country, stimulus is presented at best as quaint history of thought with no coherent defense that one should believe it in the context of modern economics. (For example, David Romer’s classic graduate text Advanced Macroeconomics.) At worst, it is presented as a classic fallacy. (My view of the treatment in Tom Sargent’s Dynamic Macroeconomic Theory and Sargent and Ljungqvist’s Recursive Macroeconomic Theory.)

“New-Keynesian” thought is devoted to defending the importance of monetary policy, and incorporating specific frictions in the equilibrium tradition, not to rescuing the ancient view that fiscal stimulus is important and abandoning that tradition. Mike Woodford’s New-Keynesian opus Interest and Prices has no mention at all of fiscal stimulus. More deeply, new-Keynesian economics is completely devoted to the proposition that expectations of the future matter centrally for how the economy behaves today. Its central thesis is that central bankers must manage expectations, not manage “demand.” It has no room at all for the sort of analysis in which one adds up “consumption,” “investment,” and “government” demands, without considering alternatives for those demands or expectations of the future, to determine output.

These ideas changed because Keynesian economics was a failure in practice, and not just in theory. Keynes left Britain 30 years of miserable growth. Richard Nixon said, “We are all Keynesians now,” just as Keynesian policy led to the inflation and economic dislocation of the 1970s--unexpected by Keynesians but dramatically foretold by Milton Friedman’s 1968 AEA address. Keynes disdained investment, where we now all realize that saving and investment are vital to long-run growth. Keynes did not think at all about the incentives effects of taxes. He favored planning, and wrote before Hayek reminded us how modern economies cannot function without price signals. Fiscal stimulus advocates are hanging on to a last little timber from a sunken boat of ideas, ideas that everyone including they abandoned, and from hard experience. If we forget all that, we could repeat the economics of postwar Britain, of spend-and-inflate Latin America, and of bureaucratic, planned India.

There has been no grand empirical reevaluation of fiscal stimulus either. Empirical work is hard, since governments try fiscal stimulus in bad times. If you bleed with leaches when you have a cold, empirical work might say that the leaches cured you. Empirical work has to find fiscal stimulus events that were applied randomly, without regard to the state of the economy. Harder still, it has to find stimulus spending that people expected to be paid off rather than inflated away. Most current empirical work does not make this distinction, and therefore is in danger of measuring the slope of the Phillips curve rather than the fiscal multiplier. Finally, empirical work without a plausible mechanism is hard to believe. Even so, doing the best to surmount these problems, nothing in recent empirical work on US data has revised a gloomy opinion of fiscal stimulus.9 Looking across the world, large government deficits and spending programs are clearly not the keys to economic health, and evidence of stimulus effects over time in the US needs to be reconciled with this supreme lack of evidence across countries.
~~~http://faculty.chicagobooth.edu/john.cochrane/research/Papers/fiscal2.htm
 
  • #37
Well considering the banking system that has been adopted by the entire world revolves around Keynesian economic ideals I think it is pretty safe to say.

Such as? Source?
Richard Nixon said, “We are all Keynesians now,” HAhaha! So true! You can't just put the genie back in the bottle. He either was incredibly stupid or an evil genius.

This is just a wikipedia page about him:
http://en.wikipedia.org/wiki/John_Maynard_Keynes#The_Times"
 
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  • #38
CAC1001
Well considering the banking system that has been adopted by the entire world revolves around Keynesian economic ideals I think it is pretty safe to say.
Which ideals? Fractional-reserve banking was around long before Keynes. Also, saying stimulus spending as a policy has a lot of flaws doesn't mean everything Keynes said was wrong.

Richard Nixon said, “We are all Keynesians now,” HAhaha! So true! You can't just put the genie back in the bottle. He either was incredibly stupid or an evil genius.
Nixon was one of the worst presidents economically that America has ever had though. He (I am assuming you mean Nixon) wasn't an evil genius (although he was very smart) or stupid, he was just wrong.

This is just a wikipedia page about him:
http://en.wikipedia.org/wiki/John_Maynard_Keynes#The_Times"
The Times quote says:

There is the man himself – radiant, brilliant, effervescent, gay, full of impish jokes ... He was a humane man genuinely devoted to the cause of the common good.
I am assuming by "gay," they mean "happy," the irony is that Keynes really was a homosexual (at least initially anyway :smile:).
 
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  • #39
149
0
Well considering the banking system that has been adopted by the entire world revolves around Keynesian economic ideals I think it is pretty safe to say.



Richard Nixon said, “We are all Keynesians now,” HAhaha! So true! You can't just put the genie back in the bottle. He either was incredibly stupid or an evil genius.

This is just a wikipedia page about him:
http://en.wikipedia.org/wiki/John_Maynard_Keynes#The_Times"

Other than to gain votes for Dems, why do you think Illinois and Ohio (examples I'm certain about) both spent large sums of money (over $1 million?) to install road signs labeling the construction work (some was already under way) as being paid from stimulus spending? Is it possible they knew the "priming of the pump" needed to be labeled as such - as most of the stimulus spending could not be recognized?
 
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  • #40
mheslep
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Well, there is no way we will ever be able to have a completely accurate number, and the CBO estimates could be high (or they could also be low). But all the unemployment data I have seen seems to clearly indicate that the rate of job losses slowed right after the stimulus started going into effect, followed by a plateau, and now it is going back down.
The question is what's meant by 'going into effect'. We know that i) little stimulus money went out right away, and ii) even today not all of has been spent. Then there's the question of where the money went. Per Taylor and Colgan much of it simply went into state coffers.

[...] It would also seem to me based on the link you provided, that the economic disaster was actually much worse than they were anticipating.
All we know from that link is that unemployment was worse than the CBO models anticipated. Whether the pre-stimulus economic conditions were at fault or the actions of the government itself is a subject for debate.

I guess we should never expect any conservative to give any credit to our economic recovery on the stimulus, and who knows?
Conservatives? How about the President with his "there are no shovel ready jobs" assessment?
 
  • #41
mheslep
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Well considering the banking system that has been adopted by the entire world revolves around Keynesian economic ideals I think it is pretty safe to say.
What do you mean, that modern banking revolves around Keynes?

Richard Nixon said, “We are all Keynesians now,” HAhaha! So true! You can't just put the genie back in the bottle. He either was incredibly stupid or an evil genius.
Nixon also implemented Wage and Price Controls, about which he was not necessarily stupid, or evil, but most certainly wrong as he was about Keynes.
This is just a wikipedia page about him:
http://en.wikipedia.org/wiki/John_Maynard_Keynes#The_Times"
I'm familiar with Keynes. What is your point about his wiki page here?

See CAC101's post above from Chicago's Cochrane on a little of what's happened in economic theory since Keynes left the planet.
 
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