The Unseen Effects of the Stimulus

Did the American Recovery and Reinvestment Act destroy jobs or create them?

According to an old joke, if you ask any two economists a question you will get back at least three opinions. As humor goes it’s only mildly funny. But as a gloss on the discussion of the stimulus, it’s terrifically on point.

Conservatives have slammed the American Recovery and Reinvestment Act of 2009 (ARRA) as a grotesque waste of money, claiming it has not created any jobs. Liberals counter that, to the contrary, it has created or saved millions. For instance, the White House Council of Economic Advisers claims the stimulus deserves credit for perhaps as many as 3.6 million jobs created or saved. Writing Tuesday in The Wall Street Journal, economist Alan Blinder says, regarding the claim that federal spending of more than $600 billion had zero effect, "that would be quite a trick."

He’s right—at least in a very superficial sense. If you throw a rock that big into a pond it is bound to make some ripples. And it is categorically undeniable that the stimulus has funded positions which otherwise might not exist. State governments alone have increased payrolls by more than 40,000 since the recession began, generally using stimulus dollars to cut the paychecks. Just the other day a Republican lawmaker who had blasted Obama’s "failed stimulus" attended a ceremony at a jobs placement center in Rome, New York. Stimulus money paid local youth to refurbish the building. Would they have been jobless otherwise? Impossible to say.

Still, more than 7 million jobs have disappeared from the economy since Barack Obama took office. He will be only the second president since Herbert Hoover to face re-election with fewer people working than when he started. (George W. Bush was the other.) So it seems fair to ask whether stimulus projects have increased the net number of jobs in the United States—or whether they simply have moved a diminishing number of jobs around.

Analogy time. Consider a robber who steals a purse containing $500, who then uses the money to buy himself a new TV. It is categorically undeniable that the theft has created a sale for the TV store. Conservatives who pretend the stimulus has not created any jobs whatsoever stand in the position of an observer trying to deny the TV has been sold.

Yet the liberal analysis lacks any recognition that the purse owner now has $500 less to spend on the laptop computer she was going to buy. The theft has generated one sale only by destroying another.

The first effect is easily seen. The second is not. But only the economically illiterate would conclude that just the first effect occurred, and that therefore the way to increase consumption is to encourage more purse-stealing. So in addition to looking at the number of jobs created or saved by the stimulus, shouldn’t we also consider the number of jobs destroyed or forestalled?

That all might sound rather speculative. But it is no more speculative than the methods used by the administration’s supporters. If you think they audited every single one of the jobs the stimulus ostensibly created to make sure each position can be traced back to the ARRA, then you have another think coming. Note how the various pro-stimulus studies estimate the program created somewhere between 800,000 and 4.2 million jobs. That’s a huge variation. What accounts for it? Huge variations in the assumptions built into the studies.

For instance, the White House Council on Economic Advisers supports its claims by comparing real changes in GDP to projections—i.e., against educated guesses. Then it declares the stimulus deserves the credit for any difference. This is known as assuming the conclusion.

True, other sources—such as the Congressional Budget Office—also say the stimulus has created or saved jobs. Yet still more sources say the opposite. Last month economists Timothy Conley of the University of Ontario and Bill Dupor of Ohio State University found that while the ARRA created or saved about 443,000 (mostly government) jobs, it destroyed or forestalled more than 1 million private-sector jobs—for a net loss of 595,000.

Liberals say that’s bunk. "I don’t find that very compelling," says a director of the liberal Center for Economic and Policy Research. (So there!) Conservatives retort that the pro-stimulus studies are programmed to produce a positive result, so they’re no good either.

That’s one of the fun things about economics: You can always find a study to support your position. And the human tendency toward confirmation bias means you’ll probably believe the studies that support your view, and dismiss the ones that don’t.

Given how economists still vigorously debate the economic effects of the New Deal, it’s not surprising that they would differ over the 2009 stimulus as well. So remember the old joke. You might ask for a definitive answer about the stimulus. The best you’ll get back is conflicting opinions.

A. Barton Hinkle is a columnist at the Richmond Times-Dispatch. This column originally appeared at the Richmond Times-Dispatch.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • ||

    "Analogy time."

    My favorite time of the day!

  • ||

    He didn't steal the money from the purse. He borrowed it. He'll pay it back. Really. He said so.

  • spencer||

    NO, he stole the money from someone who had so much money that the $500 wouldn't impact their other purchase at all. They were probably just going to leave it to their spoiled kids when they died anyway.

  • sarcasmic||

    The rich don't pay their fair share.
    We know this because they are rich.
    If they paid their fair share then they would not be rich.
    We must take all the wealth from the rich until there are no more rich people.
    Then, when everyone is poor, we will be equal and happy.

  • Barely Suppressed Rage||

    Slavery is freedom.

    Arbeit macht frei.

  • Tony||

    Just because you are incapable of finding a middle ground on anything doesn't mean everyone else is the same. What would be a fair share, to you? I suspect it's going to be always less than the status quo.

  • Destrudo||

    Just because you are the caboose on a human centipede doesn't mean everyone else is the same. There's no middle ground when it comes to an appropriate amount of my wealth to be looted.

  • Tony||

    There's no middle ground when it comes to an appropriate amount of my wealth to be looted.

    But we're not talking about looting, we're talking about taxing.

  • Destrudo||

    You know that nobody here agrees with you, and yet you persist. Why?

  • Tony||

    You know that nobody here agrees with you, and yet you persist. Why?

    The more interesting question is why you people find it intellectually useful to spend time in tightly sealed echo chambers.

  • stephendedalus82||

    You never spend time in tightly sealed echo chambers?

  • Devil's Advocate||

    Tow-may-tow / Tow-mah-tow

  • Jim||

    But we're not talking about looting, we're talking about taxing.

    Winner of the "Distinction Without a Difference" award of the century.

  • Tony||

    If taxing is the same as stealing (things that are both defined only by law), then all taxation and hence all government is a crime, and that makes it pointless to talk to you. Now, I find the many colors of anarchism quite interesting, but I don't think most of you have thought it through that much, since you don't even seem to realize that anarchism is logically necessitated by the claim you are making.

  • Jim||

    Yes, I have thought it through, which is why I'm an anarchist. You and I have been through this before.

  • Tony||

    I don't recall; I was drinking heavily back then. What kind of anarchist are you?

  • Jim||

    An anarcho-capitalist, natch. Rothbard, all that jazz. Strictly voluntary associations.

    It is more accurately described as "panarchy", because any group could get together and institute any kind of governing scheme that they wanted, as long as a person was always free to leave if they so desire.

  • spencer||

    But what would Tony do then, in a system like that, without FORCING people to do what he thinks is right?

  • Tony||

    It is more accurately described as "panarchy", because any group could get together and institute any kind of governing scheme that they wanted, as long as a person was always free to leave if they so desire.

    So what distinguishes that from any modern republican nation-state such as the US? You are not forced to remain a citizen or within its territory. Seems to me that any voluntary society on a large enough scale would necessarily institute citizenship rules similar to a modern country's. You seem to be in favor of the (democratic) world as it is, just without acknowledging the legitimacy of the extant large-scale voluntary societies.

  • Jim||

    See my response below.

  • KPres||

    Taxing for redistribution is theft (which is what we're talking about since the topic here is inequality). Taxing for public goods is not.

  • Tony||

    I don't know of any dictionary that defines theft by what is done with the money after it's taken.

  • Jim||

    Oh christ Tony, why'd you have to go and do that. You made a cogent statement in agreement with my principals...now I have to go kill myself, per the user agreement I signed when first commenting here.

  • DLM||

    I don't know of any dictionary that defines theft by what is done with the money after it's taken.

    I'm sure someone will write one, if that's all you need.

  • Jim||

    I would suggest, Kpres, that that is a matter of opinion.

    The way it was finally broken down to me is this: is it ever acceptable to initiate force against people against their will, and not in retaliation?

    If not, then -all- taxation is theft, because I may not want to pay for a highway in Maine if given a choice.

    Of course, the opinion part comes in where many, in fact the vast majority of people, think it is perfectly acceptable to rob person A at gunpoint in order to build public works that may not benefit them, because somewhere else, person B's money is being stolen to pay for something that may benefit person A.

    I say, that is redistribution. Cut out the middle man - government - and just let people pay for what they want.

  • Tony||

    Jim,

    The crux, to me, is the issue of voluntariness. How would you organize voluntariness on the scale of a modern nation-state? Seems to me something like representative democracy would be necessary. Not everyone can get everything they want in that system, but that's true of any level of action involving more than a couple people working together.

  • Tony||

    You could start, I suppose, by imposing an upper limit on the number of people allowed in a "voluntary" society, but that's definitely a restriction on freedom rather than an enhancement of it.

    But I don't think that's remotely adequate, since as any married couple will tell you, even as few as two people trying to do things will necessitate some restriction on your ability to do all the things you want.

  • Jim||

    It isn't "voluntary" when there are onerous umbrella-regulations for whom may or may not enter and under what circumstances. This goes back to ownership rights.

    For example, if I wanted to have a bunch of Mexicans come onto my property to work and live without papers, under current law, I am technically not allowed to do that, despite the fact that the government does not own my property - I do (in theory; I know about taxes and yada yada).

    If there were no community anywhere nearby that organized itself in a fashion that I was willing to accept, I would not be forced to be a part of it. No matter where in the world you go, you're technically subject to some power. In a panarchist society, if you owned the property, you could completely opt out of any greater social obligation if you so choose.

    It may not be wise to do so in certain circumstances, but it would be possible. For example, if I didn't want to agree to taxes, but all the communities nearby required it, then I might contract with them to simply pay a user fee for their services. But if I'm not part of the voluntary arrangement with that community, then the fire dept., for example, is not obligated to help me unless I have a contract with them to do so. Likewise, I'm not obligated to adhere to whatever rules that community has made up, because I am sovereign on my property.

  • Tony||

    It isn't "voluntary" when there are onerous umbrella-regulations for whom may or may not enter and under what circumstances.

    Allowing for voluntary societies but restricting their ability to say who is allowed in isn't pro-freedom. That's just a question of immigration policy, isn't it?

    No matter where in the world you go, you're technically subject to some power. In a panarchist society, if you owned the property, you could completely opt out of any greater social obligation if you so choose.

    That there is no perfect society for you is simply a reflection of the scarcity of land on planet earth. You have no right to expect a perfect society; there are billions of people and their societies, voluntary or otherwise, have laid claim long before you came along. What about their property rights?

    I'm not sure how you have a society in which property rights are respected but that require no other social obligations. The very first conflict over what belongs to whom would be the beginning of a bureaucracy to make your rights secure.

  • spencer||

    NO. REP. Democracies still blot out the will of the individual. They are closer, but still not cigars.

  • Tony||

    Just how much autonomy do you want spencer? Seems like you guys want far more than anyone is ever entitled to in any arrangement of more than one person, no matter how official. Ever been part of a couple?

  • Anomalous||

    Anarchy is like Benetton to you?

  • Anomalous||

    Damn, this went to the wrong thread.

  • Tony||

    Anarchy is troubled by problems of consistency, which is probably why there are so many flavors of it: communist, capitalist, nudist...

  • ||

    Without question, income taxation is theft.

    Living boiled to its essence is a limited slice of time.

    In essence, work exchanges crafted time for money.

    Taking some of that money is taking someone's time by force. This is stealing or enslavement, take your pick.

  • Mercurus||

    Taxation is confiscation.

    User fees, judgements, tolls, bonds...these are ways to fund government by voluntary means.

  • yofed2||

    uh.... taxation to pay for things that are not constitutionally supported IS looting. are you not entitled to the fruits or your sweat and labor? why must the government take your money not to protect your individual rights, not to defend you from foriegn threats, not to protect your property, or transactions you undertake from fraud, but to redistribute to others who have not staked any claim in society by producing for society? individuals (or corporations) how expect special privelege to make them "equal"? how about if your boss does this... the guy that works next to you gets a part of your paycheck, because he is not as good as you, but for the sake of fairness and equality, some of YOUR earnings goes to him, because it is fair. isn't that just another form of "taxing" in your little world?

  • ||

    What would be a fair share to you? I suspect it will always be more than the status quo.

    That's rhetorical. I don't suspect it will always be more, I know for a fact you would never set a maximum because you always will need the option to take more to compensate for the destruction caused by your policies.

  • Tony||

    I honestly believe there are upper limits to the amount we should tax. I just think we should pay for the things we buy as a good first step. Buying things (like, say, massively expensive wars) and then trying to dismantle programs you don't like (such as keeping old people from starving) by forcing a fiscal crisis is not responsibility by any definition.

  • Devil's Advocate||

    You might have had a point, if people on here were arguing in favor of massively expensive wars. Also, it is bullshit to say that Democrats are not in favor of old people starving, since they are the ones preventing any reforms that might keep the entitlement programs from bankrupting the country and disappearing altogether.

  • Tony||

    Maybe not current Democrats, but liberals certainly are the only ones in the room with realistic ideas to make entitlement programs sound. The right wants to dismantle them, and all hysterical rhetoric on their part is in service of that.

    A huge first step in getting healthcare spending under control is to go to single-payer as the left advocates. And only the left are willing to raise revenues to cover costs.

  • KPres||

    "The right wants to dismantle them"

    Maybe, but none of the proposals being considered, that the Dems are blocking, do anything of the sort.

  • fred astaire||

    Yes lets eliminate competition and give everyone comprehensive care. That will surely reduce spending on healthcare.O MY LORD ! How do you people deal with is day in and day out ?

  • Tony||

    Yes lets eliminate competition and give everyone comprehensive care. That will surely reduce spending on healthcare.O MY LORD ! How do you people deal with is day in and day out ?

    Deal with what? Evidence right in front of your face? Every other developed country has some sort of centralized healthcare system, and they pay half what the US does (with its "competitive" relatively freer market system) per capita. So what's your point again?

  • KPres||

    "Deal with what? Evidence right in front of your face? Every other developed country has some sort of centralized healthcare system, and they pay half what the US does (with its "competitive" relatively freer market system) per capita. So what's your point again?"

    We pay more because we have a higher per capita GDP, and because they ration care to cut costs. The problem with your "it's the free market's fault!" narrative is that we outspend them on our elderly by a similar amount, even though they're covered by medicare.

  • soonerliberty||

    I live in one of those countries, Germany, and it is going bankrupt. All of Europe is going bankrupt from single-payer systems. Doctors are fleeing. I have seen the evidence. Even my wife's advisers tell her to flee the social state, because the system is falling apart. Doctors are overworked and underpaid. Technology is lacking and the public share of the burden is increasing by the second. Yes, evidence is quite important. But you'll refuse to look at it. You'll fail to recognize that more specialized care is more expensive. Would you really want a discount heart surgery? That's what you get in Europe.

  • yofed2||

    thank you for giving us the straight dope.

  • ||

    Tony, take a look at what Germany, the Netherlands, Switzerland and especially France have. Single payer may be the British and Canadian model, but it's hardly the only one, and frankly there are far better alternatives. Seriously, no rational person would choose Britain's NHS over the French model.

  • spencer||

    What the fuck?! Are you serious? You've sunk to a level of retarded policital thought I didn't think you capable of Tony.

  • KPres||

    "I just think we should pay for the things we buy as a good first step. Buying things (like, say, massively expensive wars) and then trying to dismantle programs you don't like (such as keeping old people from starving) by forcing a fiscal crisis is not responsibility by any definition."

    You're right about the wars as a piss poor use of taxpayer money. Problem for you is the amount we spend on the wars vs. the amount we spend on social programs is not comparable. We spend vastly more on those social programs.

  • Tony||

    I bet you if granny and grandpa were left totally to their own devices, per capita spending on their needs would either be vastly more than it is with a centralized safety net or we'd have an unacceptably medieval society in which their corpses simply piled up in the streets (which we'd need a centralized program to clean up).

  • The Gaul||

    Tony says the right is using "hysterical rhetoric" to dismantle social programs, then follows a few posts down describing the elimination of social programs as creating "...an unacceptably medieval society in which their corpses simply piled up in the streets". Luckily you're not using hysterical rhetoric, right Tony?

    I live in Canada, and trust me, our system is not in great shape by any means. Emergency, surgery and cancer treatment wait times can be unacceptably long. I have witnessed first-hand the incompetence of characters right out of Atlas Shrugged "taking care" of my wife after a miscarriage in the most socialist-leaning province in Canada (Quebec).

    But fear not, our politicians know what to do: Jack Layton, the leader of our social democratic party went to one of the few private clinics in this country to have his hernia treated. The leader of Newfoundland went to the US to have heart surgery, because he could afford it. God forbid average Canadians should have more of those options.

  • KPres||

    "I bet you if granny and grandpa were left totally to their own devices, per capita spending on their needs would either be vastly more than it is with a centralized safety net."

    Nope. Because if grandma and grandpa had been responsible for themselves, they would have taken the necessary steps to lower their costs. But since it all comes from magic fairy land of limitless government cash, well...eat, drink and be merry!

  • Tony||

    Fairy land is assuming that it's remotely possible to ensure that all elderly people will be able to survive without a safety net if only you wag your finger at them enough.

    It's downright cruel and unusual to punish poor old people for not saving enough to retire on and pay medical expenses in total (since private insurance would be hard to come by!), not to mention radically economically irresponsible.

    So to recast your wonderful world of freedom in a more honest way, you want more old people dead in the streets, and you want the surviving ones and their families to pay more for basic needs than any taxpayer under a safety net, all in the name of morally scolding people for the temerity of not figuring out how to be millionaires in a world where that's not even logically possible.

  • KPres||

    "It's downright cruel and unusual to punish poor old people for not saving enough to retire on and pay medical expenses in total"

    I'm not punishing them, they would be punishing themselves, which is why they won't do it, they'll manage their own health better instead.

    "So to recast your wonderful world of freedom in a mind-numbingly obtuse, unbelievably stupid, and unconscionably hyperbolic way, you want more old people dead in the streets"

    FIFY.

    And no, that will not be the result. The result will be that people will take care of themselves better, health care costs will drop, and people will have more money to spend to live happier, healthier lives.

    "and you want the surviving ones and their families to pay more for basic needs than any taxpayer under a safety net"

    No. They will pay less because people will take care of themselves better.

    "all in the name of morally scolding people for the temerity of not figuring out how to be millionaires in a world where that's not even logically possible."

    No, all in the name of correcting the perverse incentive structure that has corrupted the industry, driven up costs unnecessarily, and made everybody poorer and less healthy than they otherwise would have been.

  • Tony||

    Very interesting. So not only does libertopia not admit children, it doesn't acknowledge the reality of old people either. If only everyone were fit and strong in the prime of his life AND the macroeconomic picture allowed for full employment, we wouldn't need social welfare programs! Only very minor conditions huh?

    Sorry, but people get old and sick. Bodies break down. It's nature, and it can't be corrected by wishing hard enough. So the only choice available to you is to let nature take its course and allow millions of old and poor people die earlier than they do now. You can't hand-wave this reality away with appeals to nonsense. The social safety net was created to address a problem that the free market couldn't. It wasn't a conspiracy to oppress you. The fact is it's cheaper for everyone to have the safety net in place--unless everyone suddenly agreed that it would be better simply to let granny die from lack of healthcare even though we're perfectly capable of delivering it.

  • KPres||

    "The social safety net was created to address a problem that the free market couldn't."

    Medicare is not a safety net. Medicare is the state doing all the work for you.

  • KPres||

    The rest of your post was too stupid for me to respond to.

  • ||

    "The social safety net was created to address a problem that the free market couldn't."

    That problem was called "The Great Depression," and it was not created under a free-market system. You underestimate the role of centralized economic policy in creating that "problem", and you deride "the free market" (which didn't exist) for not correcting it.

  • KPres||

    "I bet you if everybody were left totally to their own devices, per capita spending on food would either be vastly more than it is with a centralized department of food production or we'd have an unacceptably medieval society in which their corpses simply piled up in the streets (which we'd need a centralized program to clean up)."
  • Tony||

    And why do you guys constantly do this thing about food when you know damn well that we DO subsidize food for the poor in this country.

  • KPres||

    "And why do you guys constantly do this thing about food when you know damn well that we DO subsidize food for the poor in this country."

    Food stamps are rationed, and I haven't said anything about Medicaid.

  • ||

    That's right! As the Medieval period was immediately preceded by the Enlightenment, we can all see how a society of free individuals has proven itself to inevitably result in streets swimming in corpses. Of course, had those citizens been truly free, there would have been no streets to speak of...but still.

  • ||

    That's right! Because we all remember that the Medieval period was immediately preceded by the Enlightenment period, hence the obvious conclusion that a society of free individuals will be one swimming through streets filled with corpses. Of course, in this free society, there would be no streets...but you get the point.

  • ||

    [sips his booze and feels irritated that his comment didn't first appear where he expected it to, as per the link he clicked]

  • yofed2||

    let me ask you tony, is your entire retirement strategy have one source of income called social security? if so, then you are correct. the average american is too fucking stupid to be left to their own devices... your point is well taken, and justified by your oh so articulate arguments about the frailties and weaknesses of being human needing nanny's protection. no thank you, i will fend for myself, and do just fine.

  • ||

    I honestly believe there are upper limits to the amount we should tax.

    By all means prove me wrong and tell me your limit:)

    forcing a fiscal crisis is not responsibility by any definition.

    Who is forcing a fiscal crisis? You can't borrow your way out of debt. There's no case where that worked.

    #1 if we defaulted we'd be able to borrow less and that would be better in the long run.

    #2 there's no reason we have to default, that's a choice the administration would make. Pay debt service or cut other spending

    #3 a progressive (dem or GoP) president would never default because the increase in debt interest would cause them to have to drastically cut spending in their own term

    The debt ceiling has progressives hysterical because they know they will never default. Teabaggers have them over a barrel. Cut some spending now or cut a lot of spending very very soon.

    Raise debt ceiling? Hell no. Let's see brave brave Sir Obama's dust trail.

  • DLM||

    I just think we should pay for the things we buy as a good first step.

    How about not buying those things we can not afford?

  • Mr. FIFY||

    A fair share would be at or less (preferably) to the top rate now applied to The Richest, Luckiest White Male Oppressors, LLC.

  • ||

    "What would be a fair share, to you?"

    The "fair" share would be a flat 15% for everyone. Then we all have the same amount of skin in the game.

  • ||

    "Then, when everyone is poor, we will be equal and happy."

    The Socialist Manifesto.

  • ||

    No, man. We will take our apparently fatally-limited resources and distribute them amongst all of those who make up our horrifically overpopulated race in such a manner as to create equal affluence among all of these walking cancer cells. At that point, they'll all be equipped with fantastic educations and plentiful resources to pursue their life's goal of being the same as everyone else.

  • Major Johnson||

    Churchill once said something along the lines of capitalism leads to unequal shares of prosperity, socialism leads to equal shares of misery.

    Misery is great politics. Look at the number of people who would much rather make their neighbor as miserable as they are rather than make themselves as prosperous as their neighbor.

    The entire democrat platform is built around bringing everyone down to the same level of miserable, and the republicans only want you to enjoy something if it's something they themselves would enjoy, otherwise it should be illegal.

  • ||

    No he stole the money from someone who would have spent it or invested it so someone else could have spent it. Borrowing similarly reduces available credit for other people.

    You can't make Disney economics work by shifting the who/whom around.

    It's taken from someone, whom before you took it likely had a sustainable enterprise or job (ie it didn't need to take from someone else to succeed) and gave it to someone who either 1) did not need it to survive as a business, in which case it's pure political theft, or someone who did need it to survive as a business, in which case it is inherently unsustainable and wealth destroying.

    No sustainable jobs were created but sustainable jobs may have been destroyed by the theft. At best we are creating jobs that require government subsidies at the cost of jobs which did not require government subsidies. But the best rarely happens. This is why unemployment keeps going up and will continue to do so.

    Even in the degenerate case where someone puts their cash in a hole (which is insane given inflation) all they do is make everyone else's money worth more. Essentially they would be countering monetization.

  • some guy||

    Excellent point. Even as we argue about how many jobs were created or destroyed we rarely talk about the value of the jobs "created". After all, you can pay a man $100k to do a job, but that doesn't imply that he created >$100k value in doing the job. In the private sector this situation would quickly be rectified as the job provider would run out of the money. In the public sector the job provider never runs out of money.

  • KPres||

    If the stimulus was $800 billion, and it "created or saved" 3 million jobs, that's $266,000 per job. Since most of the unemployment is in construction and manufacturing, you're talking $30-$40,000/year jobs.

    It'd have been better to just give out cash.

  • Tony||

    that's $266,000 per job

    If those $30–$40,000/yr jobs lasted more than 5 or 6 years then it would seem the investment paid off.

  • KPres||

    Nope. Because even more people will get fired when you raise their taxes to pay back the debt.

  • Tony||

    Were taxes higher or lower in the 90s when we had full employment?

  • ||

    Yes and the debt and deficit was much lower.

    Let's go back to 2000 level spending and I will support whatever tax level is required to support that burden.

    Deal?

    Hehe, also rhetorical, same question actually, you would never commit to any level, because you know the results of your policies will always require more plunder from sustainable enterprise.

    1) Plunder remaining sustainable enterprise to support unsustainable enterprise.

    2) Create more unsustainable enterprise.

    3) go to step 1

    4) profit!

    Problem is we never get to step 4.

  • KPres||

    "Were taxes higher or lower in the 90s when we had full employment?"

    Government spending and the deficit were lower in the 90s, meaning the while the state took a little more in taxes, they were taking a whole lot less of the supply of loanable funds.

  • Tony||

    Sorry I was responding to the claim I thought you were making, namely that small differences in tax rates have a measurable effect on the employment picture, a claim baldly contradicted by recent history.

  • KPres||

    My claims do not exist in a vacuum. In the 90s a significantly larger part of society's resources was left in the hands of the private sector. Taxes are only one way the state can confiscate wealth from the private sector. Borrowing up all of our loans is another.

  • ||

    Sorry I was responding to the claim I thought you were making, namely that small differences in tax rates have a measurable effect on the employment picture, a claim baldly contradicted by recent history.

    They make differences in relation to their magnitude. I will be the first to tell you that tax cuts have multipliers below unity in the long run. Unfortunately those are the best they get. As we saw in the great depression under FDR, in Japan, NOW, giving money to connected interests has a much much lower multiplier.

    The whole matter is asinine. This whole stimulus debate is exactly the same debate that the calculation argument put to bed. Yet planners persist. And they persist in planning things for other people they never accept themselves.

  • ||

    Tony you a cannot "plan" the economy through taxes.

    The only thing taxes will ever do is remove money from the economy. Like it or not Keynesian economics will always fail once you run out of productive people to "tax" or willing slaves to "work" for the government.

  • yofed2||

    sorry, no correlation to tax rates in the 90s and job creation. job creation in the 90s was due to one thing. the inability for the federal government to regulate the internet and personal computer explosion. if the government had found a way to intrude on the whole 90s technological explosion, i am fairly sure, you and i would not be exchanging our ideas now. no correlation.

  • um||

    "If those $30–$40,000/yr jobs lasted more than 5 or 6 years then it would seem the investment paid off."

    That's a pretty big "if". The unemployment rate just ticked up a notch, and so far indicators for this month don't look too promising either. Did the AR&RA; specify time-length for its contracts? From what I've seen in Michigan, it's mostly been one-off road reconstruction projects that last 4 months, at most. Also, the city of Detroit initially received stimulus funds to add more cops & firefighters - 30k-40kish jobs - and it lasted only 18 months before new layoffs occurred.

    The surplus in the 90s was driven by Clinton conceding spending cuts/welfare reform ("era of big government is over" etc...), in addition to the 1993 top rate increases (sidenote: 1993 also had increases for the "middle class" as well: http://www.nytimes.com/1993/02.....t-new.html). Furthermore, there was a surge of revenue in the 90s due to the tech boom, conditions unlikely to repeat themselves anytime soon - especially since it's now known as the tech bubble. Tax increases and unemployment may not track exactly, but the conditions in the 1990s are unlikely to repeat themselves (and so far aren't).

  • ||

    "If those $30-$40,00/yr jobs lasted more than 5 or 6 years then it would seem the investment paid off."

    That's a fascinating equation you have for evaluating ROI. Are you hiring, by any chance?

  • ||

    The money was intended for things like infrastructure improvement, which would presumably entail hiring private sector workers for a limited time, thus giving a temporary boost to the workforce. But most states used it to support existing or new government jobs, jobs that are now unfunded as they ARRA money is discontinued. And of course the states are complaining that they can't maintain their current workforce.

  • ||

    This is quite right. And there was little to no planning and oversight of government money given to private businesses, as well. One company given five million in "stimulus"money to make energy efficient light bulbs has just announced in its annual report that it has started construction on a new factory IN CHINA. They plan to triple their US production. But whose economy has been stimulated?

  • Appalachian Australian||

    Correct; and until he pays it back, the purse owner will benefit from the increase in aggregate demand. For example, perhaps the purse owner owns shares in a glass factory. She'll benefit from the increase in demand for glass. The multiplier effect will proceed from there to turn that $500 theft into a $50,000 increase in GDP.

    If anything, purse owners should be thanking thieves.

  • Brohammer Time||

    Ah, the old "multiplier effect", and the fanciful belief that multiplying money also multiplies production factors and resources.

    basic physics fail.

  • ||

    Impossible. My 10 year old daughter does not yet have a purse.

    She, however, is the one we have borrowed the money from.

  • ||

    Since much of the stimulus money was provided by monetary expansion, the "steals a purse" analogy is not really a good one.

    Probably the stimulus did cause some degree of short term economic activity.

    However, the long term effects of inflationary policies probably means that the stimulus will destroy more jobs than it creates.

  • The Other Kevin||

    Good point. It's more like instead of stealing a purse, he broke into the bank and took 5% from everyone's account.

  • JD the Elder||

    I was going to say it's more like he took $1 from 500 people. And then said, "Jesus, you whiny bastards, it was only one dollar; you probably lost more change than that in your sofa cushions, you won't even notice. The store made a good sale and I got a new TV, and you're saying that's not worth one dollar? Come on.

    Now give me another dollar, I need to go get a fur coat."

  • some guy||

    Actually, it's more like he counterfeighted $500 and never got caught.

  • ||

    BINGO. (Spelling aside.)

    "counterfeighted"???

  • some guy||

    It's been a long day at the end of a long week... towards the end of a long month. Also, I think my office A/C is broken.

  • fred astaire||

    Or how about if he counterfeited it and bought govt. debt ??

  • ||

    It would be a good point if stimulus was a simple tax cut. That would be like doing speed, you feel good for a short period but you pay for it.

    IE Bush. That sort of stimulus actually works in the short term. Long term it doesn't.

    But crony capitalist stimulus, where you give money to waste to your buddies too stupid to succeed on their, or give money to buddies actually successful enough that they don't need it (but will funnel it back to your campaign) that sort of stimulus doesn't even work in the short term at a macroeconomic level.

    As we clearly see.

  • The Other Kevin||

    Here's what you cannot dispute about the stimulus: it created a shit load of new debt. The lib position is that this is a short term problem, and that the debt will be repaid when the economy gets back on track.

    So even if jobs were created, were they enough to justify the debt increase? Were they enough to get the economy growing enough so we can reverse the debt increase? Didn't think so.

  • some guy||

    Let's do some rough calculations. We'll even make them liberally optimistic. $600B spent. 5 million jobs created. That's $120,000 per job. Sounds about right for government jobs.

    Do I need to add /sarc?

  • ||

    It created or saved government jobs; the most important kind.

  • ||

    *ding* and the man wins a ceegar.

  • Tony||

    Consider a robber who steals a purse containing $500

    What does this relate to in your analogy? No taxes have been raised. That's why it's called deficit spending.

  • ||

    Quantitative Easing one, two three.....

    Your $500 magically transforms into something with the purchasing power of $400. Ta-Da!

    So we get the best of both worlds: The savings we have suddenly become worth less, and we still are on the hook for all of the deficit spending fueled debt. Kind of a pay-me-now and pay-me-later double-whammy.

  • Tony||

    On the other hand, the debt is worth less too.

  • ||

    ---"On the other hand, the debt is worth less too"---

    Is that some sort of admission that inflating the currency supply devalues the money?

  • Appalachian Australian||

    Why would any sane person buy and hold on to this debt?

    Last I heard Greek bonds are trading at a discount rate of 20%.

  • Esteban||

    The debt has to be paid somehow.

  • Tony||

    Not according to those most hysterical about the debt. Those same people, because of an obligation to unelected radical anarchist Grover Norquist, won't allow for any revenue increases, yet the apocalyptic scenario they are worked up about is the taxes our grandchildren will have to pay. Wonder why our grandchildren can't just pledge absolute fealty to Norquist too.

  • Esteban||

    But the $800 billion that the 'stimulus' cost is still extra spending that will be paid one day by later generations.

  • spencer||

    Not if we ride this baby out until the country no longer exists!

  • Tony||

    Or we could pay for it once the economy improves. We could stand to raise top-tier taxes, but the whole point is to reduce unemployment and hence create for revenues. Nothing hits the budget quite so bad as a recession. The short-sightedness of the fiscal hysteria on the right is that it has no solution to weak economic growth or recession--a primary factor in the revenue/outlay imbalance.

  • Esteban||

    That's only if you assume that the ARRA was actual stimulus, government spending provides a multiplier, and it kickstarted the economy. Are those things true?

  • Tony||

    Yes, though politics got in the way of it being enough. You did notice the major depression that didn't happen?

  • Esteban||

    A depression was inevitable without the 'stimulus'. Is that your unfalsifiable claim for the day or will your have more?

  • Tony||

    That's what people of all political stripes thought. Now you explain how the economy exited what was universally thought to be a huge downturn even despite the so-claimed economy-killing policies?

  • Esteban||

    That's what people of all political stripes thought

    Citation needed.

  • sarcasmic||

    Did you notice the recession didn't go away?

  • Devil's Advocate||

    This is the Democrats' only hope - that people are stupid enough to assume that unemployment would have reached 100% and that the DJIA would have reached zero had Obama and the Dems not stepped in. Yes, there would have been a major correction, and yes, there would have been some pain as the economy adjusted. The Dems have all but admitted, however, that the stimulus was not really aimed at job creation or the holy grail of stimulus talk - "infrastructure." All it really did was to shift investments from being economically driven to being politically driven.

  • some guy||

    You did notice the major depression that didn't happen?

    You did notice the quick recovery that didn't happen?

    We can both play that game and neither of wins. We both just sound stupid.

  • Brohammer Time||

    did anyone else notice that planes didn't fall out of the sky? Did anyone else notice that things weren't as bad as they could have been despite the fact that we can't prove we made them any better? Does anyone understand logical fallacies anymore?

  • fred astaire||

    actually it is still happening . What on earth makes you think it's over ?

  • ponchy||

    Did you notice that you didn't die of suffocation during the 80's? That proves Reagonomics creates air!

  • spencer||

    You cannot raise more revenues by using those revenues to pay people. It doesn't work that way.

    You take $1 from 10 people to pay someone an hourly salary of $10. Now, you only get $1 from that person in tax revenue- given these are government jobs typically being created and not "for profit" positions- but even if they were, they are being created at a cost that would prohibit any positive returns on the expenditure- how long can that last?

    Doesn't that seem just DOOMED from the start- to anyone that isn't short-sighted, that is.

  • sarcasmic||

    Or we could pay for it once the economy improves.

    Haaaaaa ha ha ha ha!
    That's a good one!

    Politicians repaying debt?
    That's great!

    Here, I got one.

    A baby seal walks into a club... WHAM!

    Ha! I impress myself.

    Here, here, I got another one.

    My uncle shoots pool with a twelve... gauge that is!

    Ha!

    I'll be here all week, don't forget to tip your waitress.

  • Juvenile Lurker||

    Q: How are economic analyses like assholes?

    A: Every economist has one, and they all stink.

  • Tony||

    Politicians repaying debt?
    That's great!

    It can happen. Just vote for Democrats.

  • ||

    I feel bad for anyone who clings to a belief that a partisan political party will do the right thing. Both parties are fucking us, as hard as we let them get away with.

  • Tony||

    I feel bad for anyone who clings to the pseudo-intellectual narcissism of the false equivalence fallacy in politics. The parties are diametrically opposed on nearly every issue. So it stands to reason that one intends to fuck us more than the other.

  • sarcasmic||

    I feel bad for anyone who clings to the pseudo-intellectual narcissism of the fatal conceit in Keynesian economics.

  • T||

    The parties are diametrically opposed on nearly every issue.

    In theory, maybe. In practice, not so much. Nearly every policy that lead us to where we are has had some level of bipartisan support.

  • ||

    ---"The parties are diametrically opposed on nearly every issue"---

    No, seriously, you have to stop.

  • Devil's Advocate||

    Bullshit. They both may be in opposition as to the direction in which the government direct our lives, but neither party is generally willing to ask the question as to whether or not it is the government's job to do so at all.

    They also are both largely in favor of foreign interventionism, massive entitlement programs, a complex tax code that guarantees massive lobbying activities, the fallacy that forced "greenness" will create jobs and be economically stimulative, corporate welfare, the war on drugs, special favors for preferred classes of constituents, and many other things.

    The fact that they sometimes disagree as to who the government should prop up and who it should knock down doesn't address the question as to whether or not it is the government's job to pick winners and losers at all.

  • Brohammer Time||

    "The parties are diametrically opposed on nearly every issue. So it stands to reason that one intends to fuck us more than the other."
    And suddenly, without warning, Tony looked like an even bigger asshole when mountains of historical data to the contrary of his vacuous claim have existed for decades!

    The rest of the onlookers had emotions of disgust mixed with pity for Tony, since they knew that he was hopelessly brainwashed into believing the modern day equivalent of "FOUR LEGS GOOD TWO LEGS BAD".

    Despite the stupidity of his statements, Tony bleated on...

  • Untermensch||

    I do not think this plays out the way you want it to.

  • Untermensch||

    This was supposed to be about Tony's comment above, where I've reposted it.

  • Untermensch||

    I do not think this plays out the way you want it to.

  • Untermensch||

    Never mind. Threaded comments don't look threaded here.

  • Barely Suppressed Rage||

    Yes! We just need The Right People(tm) in charge! Once we get The Right People(tm) in control of Congress and give them complete control and authority over every aspect of our daily lives, they will fix everything, repay the debt, eliminate the budget deficit, eliminate hunger and racial animosity, and the terrorists will throw down their weapons, plant daisies and will love us once again, just like they did the last time Democrats - uh, I mean The Right People(tm) were in power!

  • ||

    ---"It can happen. Just vote for Democrats."---

    Stop it. You're killing me. I can't breathe I'm laughing so hard.

  • some guy||

    [citation needed]

  • ||

    Riiiiight!!! Please tell me you're gonna cite the deficit spending going down under Clinton! I need another good laugh at your expense, as everybody who has ever actually paid off debt points out that borrowing less is not paying down debt - IT'S INCREASING IT, ASSHOLE!

  • ||

    They make more Debt before they make more debt....then they smoke two joints before they smoke two more.

    They never pay anything back fool they leave that up to the "next guy" that is why we are in trouble.

  • iamtheeviltwin||

    Since you don't seem to think that spending too much is a problem (ie your support for the deficit spending of the stimulus), then why do we need to bother raising taxes?

    By magically spending more than it takes in the Government is stimulating the economy...according to your theory.

    See no need to raise taxes. Just spend more...

    ...that is unless the excess spending is the real problem...

    I know you are real fond of raising taxes to the "Clinton Era" level...but you sure seem reluctant to lower spending to that same "Clinton Era" level.

    What made the so-called balanced budget of the Clinton era was the fact that spending and taxes were close to the same level. (~18% of GDP)

  • Tony||

    Since you don't seem to think that spending too much is a problem (ie your support for the deficit spending of the stimulus), then why do we need to bother raising taxes?

    Good point. I'm not the one hyperventilating over deficits. I just wonder why those who are hobble themselves by taking revenues off the table. Actually I don't wonder, since I know that they don't actually care about fiscal responsibility, they just use that as an excuse to attempt to impose their ideological agenda.

    My point is that if you're very concerned about deficits, if you're not entertaining the idea of revenue increases (when taxes are at their lowest levels for the better part of a century), then you're showing all your dishonest, lying cards already.

  • iamtheeviltwin||

    Considering I think that the Government spends too much money, I see no reason to increase "revenue"...

    My preferred method for reducing deficits is to lower spending to an amount that is less than the revenue taken in.

    Nothing lying or dishonest about it. There are more ways to control the Government's budget than tax increases/spending cuts.

  • iamtheeviltwin||

    *the bi-polar one or the other argument that team red/team blue advances

  • Tony||

    But you have to admit that choosing the current level of revenues is totally arbitrary, and more than a little ideologically motivated since they are historically low (in part because of stimulative tax cuts).

    There's nothing wrong with wanting different policy, even if that policy amounts to taking away healthcare benefits for poor old people in order to maintain tax levels for millionaires. I just wish more people would state the policy preferences clearly rather than try to distract from them with stupid, vacuous talking points like "we have a spending problem, not a revenue problem."

  • KPres||

    "But you have to admit that choosing the current level of revenues is totally arbitrary, and more than a little ideologically motivated since they are historically low (in part because of stimulative tax cuts)."

    Of course, government spending is also historically high. So lets cut it back to historical levels (19%), then talk about taxes, OK?

  • fred astaire||

    Yes there must be some way of taking 3.6 trillion in revenues perhaps a bake sale ?

  • KPres||

    "I'm not the one hyperventilating over deficits."

    Of course not. The guy in the White House has a (D) next to his name.

  • Tony||

    As a good Keynesian I think deficits are bad in a good economy, the opposite of Republicans who benefit from good economies created by Democrats, deficit spend like crazy, then suddenly become fiscal hawks when the next Democrat gets elected to clean up their mess.

  • ||

    Tony get over the "republican" vs "democrat" thing they are all progressives and they all do the same ting while blaming the other "side" just to gain political "power".

    "As a good Keynesian" there is no "good Keynesian" but a dead one.

  • JD the Elder||

    "Or we could pay for it once the economy improves."

    Why am I reminded of a gambler who wants to borrow $50 from you to play the horses? Of course he'll pay you back, it's a sure thing!

    Or as the great economist J. Wellington Wimpy put it, "I'll gladly pay you Tuesday for an economic stimulus today."

  • DLM||

    Or we could pay for it once the economy improves.

    I've heard this long before. You know we will never pay for it. As the economy improves and revenues to government increase, elected officials will merely increase spending and keep kicking the can down the road as long as they can.

  • Tony||

    I'll repeat: if you want the government to actually pay down debt in times of growth, vote for Democrats. They are not the ones wedded to an insane ideology that makes no sense and is deliberately designed to be fiscally ruinous.

  • yofed2||

    the debt is not getting paid off. it will NEVER be paid off in our current system, even if we have surplusses for the next 50 years in a row. it is not possible mathematically.

  • Grandpa||

    Hey! I welded in a shipyard, owned my own house and bought a new car every year. Took vacations with the kids, bought my wife jewelry.

    Sorry you're generation is screwed. Your father's to blame for that.

  • sevo||

    "...Those same people, because of an obligation to unelected radical anarchist Grover Norquist, won't allow for any revenue increases,..."

    Tony, that's close to a record for lies and pejoratives in a single sentence.
    You are a lying sack of shit.

  • Tony||

    So you're saying that the Congressional GOP is open to tax hikes and haven't almost universally signed a no-tax-hikes pledge to Grover Norquist?

  • Appalachian Australian||

    Are you saying increasing taxes will help stimulate the economy?

    In another thread, you agreed the U.S. needs to lower its personal and corporate income tax rates to Canadian levels.

  • Tony||

    Increasing taxes will not stimulate economic activity. But it will help pay down deficits. I'd prefer we only be focused on the former right now, but the least those who only care about the latter can do is be honest and admit that there are two sides to a ledger.

  • KPres||

    Borrowing money doesn't stimulate economic activity. All it does is use up the supply of loanable funds.

  • fred astaire||

    What a croc of $hit

  • DLM||

    But it will help pay down deficits.

    Unless those being taxed choose to move to another country. Those with the money to do so have that option available much more now than they used to.

  • Mr. FIFY||

    How will raising taxes five cents on the dollar, cure our deficit woes?

    Answer: It won't.

  • Tony||

    How will raising taxes five cents on the dollar, cure our deficit woes?

    Answer: It won't.

    How will dismantling the welfare state? It won't. In your ideal minimalist world, it may transfer government debt onto individuals, but that's not really an improvement.

    I'm not saying taxes are the only thing we should do, but they certainly are part of the picture for a couple reasons. One, just rescinding the Bush tax cuts will take care of half the problem over 10 years. Two, it's the absolute least painful means of balancing the budget available.

    But that doesn't matter to anti-tax zealots, whose goal is actually to inflict the most pain possible, because the parasitic looters (old, poor people) deserve it.

  • mgd||

    We can't raise taxes high enough to resolve the core issues. I'd be interested in seeing you dispute this, Tony:

    http://iowahawk.typepad.com/io.....03/page/4/

    This is not a Republican/Democrat issue. The House controls the purse strings, and they always approve more spending--doesn't matter which party has the majority. (Unless, as recently, they don't do their job and fail to pass a budget at all.)

  • Carston||

    We didnt get into this mess by not taxing enough, we got into it by creating ridiculous spending programs (wars included) during the good times where gov't revenues were fat. Now we have hit a downswing, and even if the Federal government took all money from everybody, they still wouldnt be able to pay what they owe. Spending cuts are the only cure, no one should have ever expected social security or any other government program to last in perpetuity and save them.

  • Mr. FIFY||

    Norquist is many things, but he is not an anarchist.

  • sarcasmic||

    The money borrowed to finance the deficit spending could have been lent to someone else who was going to do something productive with the it.

  • ||

    The theft has generated one sale only by destroying another.

    The government should have forced her to buy insurance.
    Everybody wins!

  • ||

    Yep because insurance is a bottomless well of money that can buy everyone a $50 dollar purse even though most only paid $25 for the stolen purse it's replacing.

  • Tim||

    If you're starving eat your feet! We can regrow them later when free health care kicks in.

  • ||

    The pro-stimulus studies seem to use the worst-case scenario for what would've happened without the stimulus, and the best case for what the stimulus accomplished, and they're still not that compelling.

  • sarcasmic||

    Why not rob banks to save the economy?

    The banks are insured so they don't lose anything.
    The stolen money will be spent, helping the economy.
    The newspapers will have something to print, the police will have something to investigate, the people at the water cooler will have something to talk about.

    Everyone wins!

  • ||

    the debt is worth less too.

    Or not

  • OO||

    a substantial amt of the stim was taxcuts. bad obama

  • Devil's Advocate||

    Wasn't a significant portion of the ARRA "tax cuts" in the form of refundable tax credits and other targeted tax credits? Such credits are more in the form of welfare (people can get money whether or not they have paid in, and politically-favored businesses are rewarded), rather than a reduction of the tax burden on those who actually pay into the system. The tax burden on the productive sector has a depressive effect on the economy, and that area was largely left untouched.

  • Carston||

    Exactly, they were "tax credits" mostly to people who dont pay anything in taxes anyway. Basically, their refund is bigger than what the paid in over the year.

  • N Quringmynz||

    Did the American Recovery and Reinvestment Act destroy jobs or create them?

    Serious question: Why can't the federal government use selected states to experimentally determine this? States X1 & Y1 get stimulated; X2 & Y2 do not. Check back in two years, publish the results, and STFU.

  • sarcasmic||

    Because that opens up the possibility of them being shown to be wrong.
    A politician is only wrong when the politician is on the other team and there is an election coming up.
    Laws, once written, do not go away.
    Government programs, once created, do not go away.
    This is because politician are never wrong.
    If they were ever wrong then bad laws and bad programs would go away.

  • Carston||

    This is expanded by the fact that once a government program is finally declared a failure, the never disband it, they put more committees and programs on top of it to try and fix it, making it even more costly and inefficient.

  • DLM||

    If any government program is failing, all that means is not enough money was thrown at it; because the initial motivation, design, and implementation could never be flawed.

  • iamtheeviltwin||

    In a way they did do this. Government stimulus money was not distributed equally among the states.

    Here is the Governments own breakdown

    Now I haven't seen a good breakdown of money spent per "job saved/created" in each state, but I'm sure those numbers are out there. Not to mention which states have the best economies and lowest unemployment rates compared to stimulus spending.

    ...then there are all the outside factors that could throw off this sort of analysis, like underlying strength of a state's economy before the recession, how badly a state was hit by the housing bubble or the financial bubble, individual state reactions to the crisis, etc.

    This is one of the reasons that Economics is really more of a philosophy than a science. It is too difficult to provide true and accurate data and to factor out all of the outside cause and effect to do the kind of study you suggest.

    (it is also why the Federal Government should remove itself from most economic matters and let states handle it. Then you would have those "50 experiments" you were looking for based on each state's reaction to the crisis.)

  • DLM||

    This is one of the reasons that Economics is really more of a philosophy than a science.

    That's why I like Hayek. He has experience in Psychology and Sociology in addition to Economics. He understands the human factor. Too many economists seem to make simplistic assumptions about an economy merely to make the mathematics easier.

  • ||

    It's okay -- we can just throw worthless money at the problem created by the same institutions and people throwing worthless money at it to fix it.

  • ||

    But only the economically illiterate those who masturbate furiously to Paul Krugman would conclude that just the first effect occurred

    Fixed

  • sarcasmic||

    Those two things are not mutually exclusive.

  • ||

    If I were Jonah Hill in 'Get Him to the Greek', I would have sat on Krugman and murdered him that way.

  • ||

    We must feed the MoneyHole!

  • Rock Action ||

    I love the money fire...

  • BR||

    As others have said -- since the stimulus was all deficit spending, we pay for it in inflation and future debt payments (which may reach crisis levels not too long from now). Of course, inflation and debt payments divert resources that may have otherwise gone towards job-creating investment. And to the extent that the stimulus does work, it also creates uncertainty, since business holds back, fearing that positive market signals are only an artificial and temporary effect of government activity.

  • Appalachian Australian||

    A good example is how reducing FICA from 15.3% to 11.3% total hasn't made a dent in anything.

    I can certainly attest that a payroll tax holiday would not induce me to hire any extra workers. How am I going to keep paying them when the holiday is over?

  • Devil's Advocate||

    It is even worse than that. The payroll tax deductions are only on the employee side, not the employer side. Because employee take-home pay is effectively increased, it means that potential employees see higher wages, and are more likely to seek employment than they would be at a lower wage. The result is a larger number of employees seeking employment among the same limited number of jobs. More people want to work, but it gives employers no more incentive to hire than before. The only way that it encourages employers to hire more is if having an increased number of job-seekers drives down the wages for the jobs, essentially diverting the value of the tax savings to employers. Giving it to employees rather than employees was a political decision, not an economic one.

  • Frederic Bastiat||

    And I'm just getting so very dizzy from rolling over in my grave.

  • A Serious Man||

    Arguing with liberals on the stimulus is like arguing with Birthers. They just make one ridiculous unfalsifiable claim after another. Tony above just proved it: we needed the stimulus to prevent another Great Depression, a Great Depression did not happen, ergo the stimulus was a total victory and anyone who says otherwise is a right-wing fanactic that hates the poor. You can't refute logic like that!

    And then of course we you attempt to puncture their delusions with facts about the stimulus tempering effects of inflation, debt, and uncertainty, you get the whole lecture on who we just didn't spend enough because of reichwing obstructionists. It's heads I win, tails you lose.

  • MJL||

    I noticed Bernanke and company didn't allow the money supply to contract, perhaps that is the real reason we didn't have a depression. Maybe Friedman and Schwartz were right about the great depression, even if Tony and friends can't admit it.

  • Appalachian Australian||

    The inflation in the money supply to counteract the deflation in housing prices is probably the only reason we didn't have a depression.

    The "stimulus" is just window dressing. The money could just have well been used to build pyramids, or dig up bottles with money in them.

  • Lord Keynes||

    Damn right.

  • BigT||

    Increasing the money supply only delayed the fall in RE prices - we will see another big drop as interest rates rise. We have a slow motion Depression that will last another decade without a major shift in Econ policy.

  • Brohammer Time||

    winner! Liberals, like most republicans, simply think that government action does not involve a displacement of private sector resources.

    They don't understand logic, causality, accounting, economics, or physics.

  • Tony||

    You guys rely just as much on counterfactual history. You claim that the world would have been better off without stimulative spending. So prove it.

    There are facts about inflation out there, and they all say that it's a remote threat compared to, say, the risk of deflation and the actuality of high unemployment. The fact about debt is that the austerity brigade are far more likely to make the problem worse because they are focused on simple-minded short-term actions (namely, austerity) that will do nothing to increase employment and thus will ensure prolonged imbalances in government revenues vs. outlays.

    Uncertainty is totally made-up partisan bullshit. It amounts to "a Democrat is in office, ergo things are uncertain."

  • Devil's Advocate||

    Maybe "uncertainty" is not the best term. It is more accurate to say that centralized decision-making makes it more certain that the domestic business environment is going to continue to decline for anybody that doesn't have a federal politician in their back pocket.

    Austerity sucks in the short run, and has huge benefits in the long run. Unfortunately, most politicians only care about their short run reelection prospects.

  • Tony||

    What does austerity do in the long term? By what mechanism does it produce long-term benefits? Such programs do not claim to reduce unemployment (except in transparently dishonest Orwellian Republican talking points), so clearly the revenue shortfalls as a result of fewer and smaller paychecks going out won't get better except by outside forces.

    I'm totally with you on being against the improperly cozy relationship between politicians and business. But everything you believe is tailor-made to worsen that problem. To create a barrier between the two, we'd need stronger "centralized" rules and regulations.

    Let's not pretend to be so naive that we claim that fewer regulations, lower taxes, and all other aspects of "small government" rhetoric isn't directly from the memo typist at the Chamber of Commerce.

  • ||

    Might as well just say that anyone who disagrees with you is in league with Satan, and denying that they're in league with Satan means.. they're in league with Satan!

  • Tony||

    You're the ones who share economic policy with Republicans, who I don't claim are in league with Satan, but rather with Jesus and his pet dinosaur.

  • Lord Keynes||

    Let's not pretend to be so naive that we claim that fewer regulations, lower taxes, and all other aspects of "small government" rhetoric isn't directly from the memo typist at the Chamber of Commerce.

    And what do businessmen know about business anyway.

    It's not like they a PhDs or government contracts.

  • ||

    "You claim that the world would have been better off without stimulative spending. So prove it."

    We had a debt before the "stimulus spending" that was trillions of dollars less than we have now. There has been no provable and measurable positive effect of that spending, but we now have to service the principal and interest on the new debt with money that is worth less than it was before.

    What part of this needs "proof"?

  • Tony||

    I think we'd have higher debt because we'd have twice as many people not getting a paycheck and thus not paying as many taxes. It's not like the effects of the stimulus haven't been studied.

    But it is the convenient cowardice of the fringe that allows you to be against something everyone with actual political power knew was political poison but did anyway, because the edge of the abyss is no time for silly voodoo economics bullshit.

  • ponchy||

    Dude, earlier in this thread you saw and acquiesced to what happens when you divide the amount of stimulus by the number of jobs ostensibly created. So how do those forty thousand dollar jobs create more tax revenue than what it cost to create them? Are they in your fantasy 120% tax bracket?

  • ponchy||

    Excuse, me...how do those $40,000 jobs create more tax revenue than the $226,000 it took to create them? Are they all in your fantasy 5650% tax bracket?

  • Tony||

    But that entire formulation is extremely dishonest. It's not all about the jobs and nothing else. The larger point is to put more capital into the economy to stabilize it and jumpstart growth—thereby preventing more contraction (and with it more loss of government revenue.)

    This is why it's called stimulus spending. For example, one of the most efficient uses of such spending is on assistance to the unemployed. That's not about creating a job immediately, it's about getting money flowing, which ends up helping to unemployment as demand goes up rather than down (including demand for labor).

  • ||

    I believe there is a much easier and more direct way to put capital into the economy, which is, not take it out in the first place (i.e. lower taxes)

  • ||

    Tony, I just read that "study" in the NYT and think it's poor suppot for your argument. It's mostly theory and opinion from 2 guys with contradictory empirical evidence from a third guy. *meh*

  • Bawls||

    Since there has never actually been deflation in modern America, what makes you say it would actually be bad? I would love it if stuff went down in price so i can actually afford it.

  • Tony||

    There hasn't been deflation since modern economic policy was put into effect following our last, rather unpleasant, experience with it. Consumer prices did drop by record rates at the beginning of the current crisis, and the only thing that prevented further drops was, you guessed it, implementation of modern economic policy tools.

  • MJL||

    "There hasn't been deflation since modern economic policy was put into effect". Friedman and Schwartz were correct weren't they Tony?

  • fred astaire||

    You ever hear of the recession of 1920 ?
    Most people haven't because it went away so quickly. With a total lack of stimulus.
    http://www.unitedliberty.org/a.....h-us-today

  • Tony||

    Yes I've heard many times of the nearly century-old example you guys trot out to claim that fiscal stimulus is unnecessary. It wasn't that big of a recession, and was merely one of many in a time before modern economic tools were established.

  • ||

    How about Black Monday? No need for giant stimulus bill there, because Reagan knew if you didn't touch it it would be fine in 6 months or less.

  • Mr. FIFY||

    Prove there would have absolutely, 100%, been a financial disaster without the stimulus.

    Do it, Tony. C'mon. We triple-dog dare you.

  • Tony||

    All I can do is point to what nearly every economist was saying at the time. Given the political realities of the bailouts and stimulus, why on earth would presidential candidates of both parties and a normally gridlocked government acquiesce to the emergency policies? If they weren't necessary why didn't McCain just say so?

  • BigT||

    McCain is a stupid fuck, who jumped on the hysteria bandwagon in an effort to be seen as a serious leader. He might have won if he had been strongly against TARP.

    Peter Schiff and many others were firmly against all the emergency' spending. Dems were busy fanning the flames of the so-called crisis, and dumb ass Reps went along. Most on both sides are clueless.

  • Jersey Patriot||

    Crazily enough, progressive economist and super-Keynesian Dean Baker compares the stimulus to counterfeiting. FAVORABLY! It is difficult to reason with this sort of insanity, like trying to convince the tribal chief that virgin sacrifices have no effect on volcano plate tectonics.

  • Faux Tony||

    You can't PROVE that throwing virgins into that volcano had no effect! Look at all the eruptions that DIDN'T happen!

  • fred astaire||

    Nice one FT

  • DLM||

    But only the economically illiterate would conclude that just the first effect occurred...

    Um...

  • ||

    The stolen purse analogy is inappropriate. The money was not taken by taxation, it was borrowed (or printed?).

    Further, that the analogy was based on a robber and the purchase of a consumer good is wrong as well. I think a more appropriate analogy would be my roommate who lost her job some months ago, and as a result had to borrow from family and credit cards to stay afloat until she found a new job.

  • Republicans||

    But that's far too reasonable a comparison. As we know, government should do the opposite of what responsible individuals and families do: wildly run up the credit cards when you're gainfully employed, and then cut them up and starve to death when you lose your job.

  • Dems||

    We keep using the credit cards under all circumstances, accelerating the pace when times are tough.

  • ||

    You Christ-fags ought to be slitting your own throats to prove your loyalty to Obama and His wise monetary policy.

    I would, but I'm a chickenshit.

  • Justathouight||

    According to the American Psychological Association,what most beneificial to individuals well-being is personal autonomy. So, eliminating a massive debt burden, unreasonable tax scheme, and institutionalized poverty actually will make people the happiness in the long run.
    "Ronald Fischer, Diana Boer. What is more important for national well-being: Money or autonomy? A meta-analysis of well-being, burnout, and anxiety across 63 societies.. Journal of Personality and Social Psychology, 2011"

  • ||

    I'm sure this was said before in the comments, but I'll say it again: broken window.

  • ||

    Given the composition of Federal debt holdings, all he did was marginally impoverish some people in the Chinese middle class. Taxes are down, my friend, not up.

  • ||

    Let's do some math.

    Assume that the stimulus only cost $600B, and it really did "create or save" 3.6M jobs. How much did each job cost?

    Right around $173,000.

    It would have been FAR cheaper to leave those folks on unemployment.

  • Tncm||

    Ladies and gentleman, this is why I don't argue economics with Tony. You are wasting your breath on him. Linked articles will be ignored, entire schools of thought will be swept away in his ignorance (he refuses to read anything by Mises or Rothbard because it's "old"), and you will be strawmanned ad nauseam. The only other people on this board who are comparably bad to Tony in terms of debate ethic are Chad and MNG.

    Tony, I've tried to help you. If my posts detailing basic economic theory to you were collected I'm sure they'd total at least 40 pages by now. You don't care about optimal money supply theory, you don't care about how the AD/AS analytical model collapses in the face of the most elementary of criticisms, you don't care about the problems of inflation (among them a coordination problem in the economy, redistribution of property to the politically-well connected, capital consumption, lower real wages, etc.), you don't care to bring any substantial criticism against the Austrian school or its methodology to the table (Minge shares this problem), and you don't care about honesty. I'm beginning to doubt you've read anything on economics outside of The New York Times or The Huffington Post. I'd gamble that you call yourself a neo-Keynesian because the prefix is the name of a character from The Matrix.

    Why are you wasting your time here? What do you gain about repeating the same tired talking points over and over again? It's not like as libertarians we haven't heard any of this before. The Mises Institute, CATO, and Reason address the problems of Keynesianism almost every day. The paltry criticisms of methodological individualism have been exploded as fallacious. You are a broken record stuck replaying the same pedantic nonsense over and over again.

  • ||

    This is where I shut up and +tons.

  • Neu Mejican||

    Analogy time. Consider a robber who steals a purse containing $500, who then uses the money to buy himself a new TV. It is categorically undeniable that the theft has created a sale for the TV store. Conservatives who pretend the stimulus has not created any jobs whatsoever stand in the position of an observer trying to deny the TV has been sold.

    Yet the liberal analysis lacks any recognition that the purse owner now has $500 less to spend on the laptop computer she was going to buy. The theft has generated one sale only by destroying another.

    This is an inapt analogy. I am sure many here believe otherwise, but the elements in the analogy do not line up with the stimulus.

  • Tncm||

    No need to explain why it's an "inapt" analogy, though. This is Neu Mejican; he doesn't need to justify assertions!

  • ||

    Two points:

    The ARRA money was borrowed, so the lost jobs will be lost future jobs: robbing our children and grandchildren of their employment opportunities.

    The Obama administration's estimate of jobs created was based on surveys. Those receiving money were simply asked to report how many new jobs were created. The whole data collection part of this was a joke. Schools that used the money to buy new computers would list one new job created for each computer they bought. They had to show some cooperation with the purpose of the program. The WSJ had an article offering examples of how ARRA recipients just made up their data.

  • ||

    Word of advice, don't bother writing about what "conservatives" think. We are not a monolithic group. Most of us have read Bastiat too. Your condescending tone is very annoying and your otherwise pedestrian analysis makes this post a waste of time.

  • Almanian||

    Does your ass hurt? Cause it sounds like your ass hurts...

  • ||

    How come that we got out of the 01-03 downturn much faster than this one in spite of not throwing a 800 billion pound stimulus in the pond??? Answer: TAX CUTS!!

  • ||

    You write: “The theft has generated one sale only by destroying another,” as though these economic activities are essential the same. Obviously, however, the simulative effect of various economic exchanges is far more complicated than that. All purchases to a certain extent pay back to investors some or all or more than all of the money already spent in bringing the product to the market. The point to note is whether the money spent on any purchase stimulates the economy going forward – that is to say, whether the expenditure increases productivity. If, as in your example, the thief bought a TV with the money he stole, pretty clearly the “stimulus” ends there: the people who designed, built, transported, stored and sold the product will all get their fraction of the profit, if there is a profit. But suppose the woman in your example runs a business out of her home using a computer. Over time, the business grows and it becomes economically advantageous for her to hire a second person to work beside her on a second computer. If both the new hire and the purchase of the second computer genuinely increase the productivity of her small company, then the purchase of the computer will have a simulative effect going forward that the purchase of the TV obviously does not have. This is an important distinction, one which the many folks who claim to be neo-Keynesians should consider when they talk about government expenditure “stimulating” the economy. Not all expenditures are equal.

  • ||

    I paid $32.67 for a XBOX 360 and my mom got a 17 inch Toshiba laptop for $94.83 being delivered to our house tomorrow by FedEX. I will never again pay expensive retail prices at stores. I even sold a 46 inch HDTV to my boss for $650 and it only cost me $52.78 to get. Here is the website we using to get all this stuff, BuzzSave.(c)om

  • ||

    That was an interesting yet lame analogy. Part of the stimulus was a tax cut,so the $200 was borrowed. It hasn't been stolen yet via higher taxes. We don't yet know who is going to pay for it but it looks like it will be the sick, and elderly if the republicans win the budget battles.

  • ||

    Too bad those places I post comments to could not assemble all my comments for a pattern would be clear. I attack all partisan nonsense on both sides.

    Obama came in on the wings of a failure, whether to sell an adventure or to choose the right one can be argued, but a failure. He's somewhat stabilized things nationally and internationally and on top of that bet on history and not on any reward for him in putting health care reform through. Perhaps since he is smarter than I (which I will say about few living), he has made the right bet, done the best he could.

    By this I mean that the American version of the middle class dream has always differed from Europe’s or Japan’s, but its maintenance was the excuse for debasing the currency lately. The bubble and the crash came directly from that. The affects will be long in sorting out, regardless of policy. Voters probably would not vote for candidates loudly declaiming that neither they nor anyone else can help us much in the short run, but those candidates would be right.

    The Stimulus projects have bought some time, if they have also extended some lies past their sell date, principally the devaluation of the dollar through QE2 and zero interest rates. The deficit and debt problems are just examples of the currency issues, not independently important.

    Perhaps we will see a competent government again in this Country, which we last had with that *ssh*le Mr Clinton. I mean a leader who will make choices, explain them, and invite but not try to compel folks to agree. A leader who can win back to the ‘rising tide lifts all boats’ consensus. A quarter century of innovation and of growth would bury our present problems.

    Would it be to much to suggest that critics accentuate the positive or at least offer options which they favor?

  • ||

    I think the analogy of the robbery is wrong. The stimulus money is an investment where money infused in the system will ultimately be returned to the government thru the taxes that will be generated.

  • ||

    Joe Wrote: "How come that we got out of the 01-03 downturn much faster than this one in spite of not throwing a 800 billion pound stimulus in the pond???"

    The recession in 01 lasted from Marcy 01 to Nov 01. The fact that you give the date of the downturn as 01-03 concedes the economy turned around slower. Unemployment rose for two years after the recession ended in Nov 01. In contrast, unemployment rose for a mere 6 months after the recession ended in June 09. Also, the downturn was much worse between Dec 07 - June 09. Real GDP was crashing at an annualized rate of 6.8% in Q4 2008. Real GDP was expanding at an annualized rate of 5% in Q4 2009. So contrary to your claim, the turn around was far stronger this time and the answer is the stimulus.

    Also, we now know as a matter of fact that the Bush tax cuts created no jobs. There were 131 million payroll workers in Jan 2000 and there were 130 million payroll workers in March 2011. The claim that the Bush tax cuts ended the 01 recession is laughable.

  • ||

    Gee 3.6 million jobs saved after spending 900 billion dollars. Comes to about $250,000 per job. Where's my check?

  • Math101||

    If we count the $600Bln figure cited in the article by Alan Blinder and divide by the 4.2 million jobs cited under the "most optimistic" economic projection, each job created cost over $142,000, at best.

  • steve||

    It is unfortunate in this day of age, that no one can give us an honest, unbias,report. I guess the powers to be are still encased in the 1800's, and most journalist have become only commentators.

  • ||

    The point about the number of jobs created or saved can be debated forever without a conclusion. What are facts however, is that we spent close to $1 trillion we did not have without any sustained change in the economy or in the unemployment rate and that paying back the debt plus the interest owed on it will nullify any positive temporary impact it might have had. The reason this stimulus and others before them, whether here or elsewhere, continue to be debated is that the data have consistently failed to find any definitive positive effects for them. The liberal response to Japan's efforts or to FDR's, considered the biggest and longest lasting stimulus programs that failed to provide sustained success, is that they were either interrupted to soon, not big enough or not big enough quick enough in distributing funds, or were carried out in one way or the other improperly. It's sort of like those who still argue that communism would be a great system of government--it's just that it really hasn't ever been tried as it was meant to be.

  • ||

    It is so unfortunate when columnists lack the ability to understand the difference between micro-economics (robbers stealing from purses) and macro-economics (governments taking such significant actions that they change the way the economy behaves).

    I am sorry that I do not have the time to give this columnist an education in macro-economics.

  • ||

    A brilliant, well-documented, well-executed, article.
    Kudos to Barton Hinkle

  • موقع زفات||

    thank you

  • زفات||

    Not Funny

  • wedding||

    We need a smart, which can solve the practical difficulties of government

  • Kentucky Jobs||

    Such a informative Post.. I am going to share this with my friends via facebook to get more reviews..thanks for sharing..

  • قبلة الوداع||

    thank u

  • قبلة الوداع||

    ThaNk U

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties

SUBSCRIBE

advertisement