Just Think How Much Stimulation We'll Need If the Economy Ever Stops Growing!

Matt Welch | August 11, 2008

You don't need a weatherman (or a Weatherman) to know which way a Washington Post op-ed entitled "A Moment for Fiscal Courage" is gonna blow in these re-regulatory, sky-done-falled-already times. But Sebastian Mallaby earns extra credit for his sheer audacity in deploying proof-less axioms in the cause of having the government spend more money:

The upshot is that things are desperate. The unemployment rate in the headlines (which understates the real number) is heading toward 6 percent; home prices are falling hard; and the two forces that have averted outright recession − a timely fiscal stimulus and strong growth abroad − are fading. The Fed has cut interest rates as much as possible given the worry about inflation. Foreign central banks are similarly boxed in. With the world's inability to agree on anything, there's no prospect of a coordinated global response − witness the breakdown in trade talks. And so the United States must act using the only tool it has: It is time for a second stimulus.

I'm old enough to remember when "unemployment heading toward 6 percent" was a scare phrase when said rate was heading downward, because the Phillips Curve-quoting consensus was that anything lower than 6 percent would trigger automatic inflation. Yet for the past 167 months, unemployment has indeed been lower than 6 percent for all but a seven-month stretch in 2003, during a time when total nonfarm employment increased from 115.2 million to 137.6 million, according to the Bureau of Labor Statistics. Things are desperate!

But wait, home prices are falling hard, right? Yes! All the way down to ... 2004 levels. Which were still nearly double 1997 levels in real terms.

As for "outright recession," yes indeedy that has been averted, to the tune of 1.9% GDP growth in the second quarter. And much as I hate to see global trade talks break down, a "coordinated global response" to allegedly "desperate" economic situations worldwide (think: the 1997-98 Asian flu, or the peso crisis not long before that), are about the collective actions of central bankers, not trade negotiaters. And fer cryin' out loud, how come it's only spending more guvmint money that indicates "courage," rather than performing the much-rarer feat of spending less?

Am I the only one who feels like we're in for a long silly season of economic journalism?

We took a survey of leading economic grumpiness in our June issue. 

Comments

Nigel Watt|8.11.08 @ 11:32AM|#

It's been averted if you believe the government's inflation numbers.

Warty|8.11.08 @ 11:33AM|#

Quibble: was there ever a time when economic journalism wasn't silly?

|8.11.08 @ 11:35AM|#

we're in for a long silly season

"in for"? We've been in the silly season for six months now, at least.

BTW, I'll get it out of the way now...unemployment numbers are massaged as part of the massive government conspiracy to make everyone believe things are better than they really are(*).

(*) No, I don't actually believe this. But I hear it repeated ad nauseum every time a positive government produced statistic is published.

PS - See, Nigel went all conspiracy before I even had time to complete this post.

|8.11.08 @ 11:36AM|#

Nigel,

I agree. The economic "stimulus" looks more scary than silly to me. Worsening economic news will only inspire a response that will worsen the economy. And yes, I see this going on for a very long time.

Episiarch|8.11.08 @ 11:38AM|#

You, too, can be an economic journalist! Just take our correspondence course, which involves beating yourself in the head with our custom hammer (only $19.95) repeatedly. Or buy our special version of Treatise on Money (only $99.95) and beat yourself in the head with that.

Nigel Watt|8.11.08 @ 11:39AM|#

MP: Can you think of a reason why a government that can barely build a road should be trusted with economic analysis?

|8.11.08 @ 11:47AM|#

Nigel,

You don't even have to "believe" the government's numbers. You only have to believe that they are calculating the numbers in the same manner consistently. Even if they are doing it wrong, the trend lines that result from their analysis is still meaningful.

Nigel Watt|8.11.08 @ 11:48AM|#

MP, true.

Invisible Finger|8.11.08 @ 11:51AM|#

You only have to believe that they are calculating the numbers in the same manner consistently.

We already know that the manner in which the numbers are computed have changed several times over the last 20 years.

|8.11.08 @ 11:56AM|#

Dear government,

Please stop trying to "help" us.

Love,
America.

ed|8.11.08 @ 11:56AM|#

There is a large percentage of individuals in this country who have a vested interest in beating the drums of crisis and despair. It's usually the party who is not in power but this time it's the party that controls all of Congress. (I assume they take no responsibility for the last two years.) If and when they capture the White House I predict that, by next election cycle, all will be sunshine and lollipops.

Guy Montag|8.11.08 @ 11:57AM|#

Matt,

Who the heck am I supposed to believe now? You or the people who keep commenting here about the recession that exists because nobody should trust any evidence that it does not show a recession?

Next up: revisiting the Obama birth certificate scandal Sorry, that was already covered recently.

ROFLMAO

|8.11.08 @ 11:57AM|#

Wow - this guy hits the economic journalism hat trick: bad (or no) data, bad reasoning, bad conclusion.

Guy Montag|8.11.08 @ 12:09PM|#

Badly worded. Trying again.

Who the heck am I supposed to believe now? You or the people who keep commenting here about an alleged recession that exists in their minds? Because, of course, nobody should trust any evidence that does not show a recession.

Conservationist|8.11.08 @ 12:19PM|#

Is it possible... our whole economy is a Ponzi scheme based on growth?

Hmm.

Eleutherian|8.11.08 @ 12:21PM|#

Since when did people stop trusting numbers from the US and start trusting numbers from China?

|8.11.08 @ 12:25PM|#

My girlfriend is always whining for a second stimulus when my growth starts fading, too. She doesn't like it when I tell her it's all in her head, either.

|8.11.08 @ 12:40PM|#

Wow - this guy hits the economic journalism hat trick: bad (or no) data, bad reasoning, bad conclusion.

Give him a regular spot at the NYT! He's a natural!

Occam @ 12:25 has the early lead for threadwinner, BTW.

Episiarch|8.11.08 @ 12:44PM|#

My girlfriend is always whining for a second stimulus when my growth starts fading, too. She doesn't like it when I tell her it's all in her head, either.

Is she Chinese?

|8.11.08 @ 12:46PM|#

Let us not forget the 1992 recession, a mild one by historic standards and one that ended before the election, but none the less allowed the media to call Bush I the worst President since Hoover. The crisis continued into the summer of 1993 where it was needed to justify Hillarycare and the famous midnight basketball stimulous package. By 1996, however, with a Democrat needing re-election, the economy was found to be booming again. The media will continue to play the economy as the worst since 1937 until there is a Democratic President in need of re-election.

Dagny T.|8.11.08 @ 12:53PM|#

On entourages:

"It's Grizz's job to sit on me when I get overstimulated."

This role apparently goes unfilled in both Congress and the MSM.

♪|8.11.08 @ 1:05PM|#

All I have to do is think to myself how prosperous the economy should be if it weren't for stupid economic policies and begin to tear up.

For example, the price of everything should go down over time with advances in productivity and whatnot (think computers). When calculating inflation, the calculation should be: the amount the price increased over time PLUS the amount the price should have decreased over time. Thus it would be theoretically possible to have inflation on an item even though the price of it went down (because it should have went down more).

|8.11.08 @ 1:07PM|#

Is she Chinese?

Does it matter? Who are you, Mrs. Costanza?

Naga Sadow|8.11.08 @ 1:22PM|#

Occam's Toothbrush,

Oh, it matters. Everyone knows Chinese girls give better stimulus.

Episiarch|8.11.08 @ 1:22PM|#

Does it matter?

Sorry, got confused which thread I was in (I thought it was the "China will out-manufacture us next year" thread.

I fucked up a joke. Now I feel dumb. Are you happy? Why are you so mean?

Naga Sadow|8.11.08 @ 1:29PM|#

Don't worry Epi. I had your back.

jimmy|8.11.08 @ 1:31PM|#

we have entered the age where any slightly bad economic statistic will bring calls for new stimulus checks from both left and right, just like any slightly close election now automatically brings calls for recounts. remember in 1972 when george mcgovern proposed giving every american a check for $1,000 and he was labeled a wacko? now he'd be a fricking moderate.


at least "economic journalism" is still better than rank-and-file news media trying to report on the economy. a new tv news channel in san diego reported last week that "prices went up one-quarter percent last month, mostly due to things costing more (sic)" and "prices (sic) are now higher than at any time since 1981."

Episiarch|8.11.08 @ 1:42PM|#

Don't worry Epi. I had your back.

I appreciate it, but it doesn't change the fact that he called me Mrs. Costanza.

|8.11.08 @ 1:45PM|#

Epi,

I've got your back too. When there was only one set of footprints in the sand, that was when I left you passed out on the beach.

|8.11.08 @ 2:01PM|#

a new tv news channel in san diego reported last week that "prices went up one-quarter percent last month, mostly due to things costing more (sic)"

I guess the rest of the price increase was due to inflation.

Episiarch|8.11.08 @ 2:09PM|#

I've got your back too. When there was only one set of footprints in the sand, that was when I left you passed out on the beach.

Because you're too much of a sissy to carry me. I can't help it if I can't hold my liquor!

|8.11.08 @ 2:09PM|#

I guess the rest of the price increase was due to inflation.

Let's not forget the reduced purchasing power of a dollar. It's a complicated issue.

|8.11.08 @ 2:26PM|#

The GDP figure is irrelevant if inflation is prevailing. Say you get a 2 percent wage increase but inflation is 4 percent. You lose.

I have a suspiscion in fact that the GDP figure is affected by the inflation rate itself...

♪|8.11.08 @ 2:29PM|#

Don't they make a show of adjusting GDP for "inflation"?

|8.11.08 @ 2:49PM|#

Episiarch, you seriously need to watch more Seinfeld.

|8.11.08 @ 2:53PM|#

I fucked up a joke. Now I feel dumb. Are you happy? Why are you so mean?

If you were rubbed against a monk's teeth every morning, you'd be mean too. Then again, someone like you would probably love it.

|8.11.08 @ 10:21PM|#

So, about that sixty trillion dollars in debt and unfulfilled entitlements that'll come due in our lifetimes, then... Glad to see the libertarians finally taking a hard line on irresponsible monetary policy.

Or where would we turn for an alternative view on the wasteful two party system?

|8.12.08 @ 4:46AM|#

Think back to 2000 and the dying days of the Clinton Administration. If you weren't transfixed by the spectacle of the Horny Hillybilly pardoning his brother's drug dealer (and lots of other folks who were happy to slip a contribution or two into the Clinton war chest), then you might just have noticed that the economy was in recession -- the first quarter of the mandatory pair that makes recession official.

Did you read about that at the time? Hardly, because the MSM cheerleaders were busily pimping for Gore and didn't want to give the electorate a shiver.

But the moment Bush settled into the Oval Office, it was wall-to-wall woe-is-us and it's-all-the-moron-texan's-fault.

Yes, the economy isn't super-duper just at the moment (that 1.9% will most likely be adjusted down a few months hence). But all the bleak chatter is just business as usual for the people who populate the NYTimes, WaPo and just about every other paper, big media website, and TV talkshow.

Ignore the chatter. Those old media types' careers will be deader than their papers in next to no time. Have a good laugh at them when they come asking if they an mow your lawn for a sandwich.

Terrorizing weeds is all they're it or, anyway.

|8.12.08 @ 8:38AM|#

I thought the problem was lack of affordable housing? Now housing prices are dropping and that's bad?

Andrew Garland|8.12.08 @ 11:43AM|#

Stimulus spending doesn't work as advertised. See my post

"Econ 201: The Myth of the Economic Multiplier

$1000 Business Sales x 4 Economic Multiplier = $4000 Economic Benefit. No.

Politicians and business owners gain public support by giving an inflated "Economic Value" or "impact" for the project. This sounds good but has no meaning. Call the project X-Corp. The Economic Value of X-Corp is supposed to be its spending increased by an Economic Multiplier of about 4. If X-Corp spends $1 million per year, it is supposed to have an Economic Value of $4 Million to the people of its town and state. [more]

|8.13.08 @ 1:19PM|#

"Things are desperate"?

J.H. Christ, does this clown not remember Jimmy Carter? Or is he not old enough?

I graduated from one of the top Ivy League universities in 1980 with a scientific degree. I COULD NOT GET A JOB. The only companies hiring were Exxon, Conoco, etc., and gold/commodity producers.

The prime rate was about 20%. Almost no one could afford a house. Government bonds were yielding something like 15%. Stock market was almost destroyed.

It was a hideous situation, not repaired until Reagan and Volcker forced changes through, to the caterwauling of EVERY DEMOCRAT IN THE COUNTRY.

Now the prime rate is 5% and THE ECONOMY IS GROWING. Compare and contrast.

This guy is an utter putz.

If Obama gets in, a similar outcome is somewhat likely IMO, with the tax increases and extra spending he has threatened. Companies have a lot more options now than they did 30 years ago to invest and produce elsewhere.

Anytime someone says; "It can't get any worse," check to make sure that person is at least 45 years old, preferably older. If not, ignore.