Economics

Point of Obama Op-Ed: Stimulus II In Turnaround

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President Obama's Washington Post op-ed contains an item of interest: The president is putting an official kibosh on plans for a second stimulus package:

The American Recovery and Reinvestment Act was not expected to restore the economy to full health on its own but to provide the boost necessary to stop the free fall. So far, it has done that. It was, from the start, a two-year program, and it will steadily save and create jobs as it ramps up over this summer and fall. We must let it work the way it's supposed to, with the understanding that in any recession, unemployment tends to recover more slowly than other measures of economic activity.

There's more, including some expensive-sounding plans (thrown away in the bottom grafs) to "reform our community colleges" and help Americans "better afford a college education." Bill Kristol slams the president for failing to promote profit, markets, enterprise or invasions of other countries.

But the most important thing is the rejection of the second stimulus. By Paul Krugman's lights that means the president doesn't understand basic logic, but it's a relief nonetheless. As Mish Shedlock writes:

This is good news for the treasury market as well as good news for fiscal sanity, but I doubt the stock market sees it that way. Keynesian clowns will not see it that way either.

I am all for waiting two more years to see if the first stimulus works given that the whole idea of stimulus packages is misguided from the start.

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  1. “Krystol” sounds like a knockoff brand of champagne.

  2. Okay, the wife and kids must be out at the in-laws or parents house. Way too much free time this week. (this is not a bad thing for us trolls and weekend hermits)

  3. Sorry about that John-David. Of course, I was thinking of Mrs. DeFanti.

  4. That statement almost looks like a cover to the process not working as much as a kybosh on new stimulus. The stopping the free fall comment is pretty wishy washy and falls right in line with the end of the world bullshit we heard for 6 months to a year.

    That statement looks more like a “wait and see” than a “hell no never.” It does look like no for now though which will help maintain his political capital since most do not agree with more stimulus.

    I’d say calling it an outright kybosh is an over simplification. Especially considering who it is coming from.

  5. The crap about it’s being a two-year program is pretty clearly designed to put off talk of a new program. And it’s directed at his own side. When Obama wants to address the other side he uses the “There are some who will say…” setup, as he does here.

  6. I’d say calling it an outright kybosh is an over simplification. Especially considering who it is coming from.

    Seconded. He won’t push for a second stimulus until he thinks that one is needed.

  7. On to serious commentary, I like what the Big O is now saying. Probably only because he’s realizing he’s pissed away most of his honeymoon and needs to get serious if he has any chance at re-election. I wonder how long it will be before he drops health care reform as well?

  8. I like how they put at the end

    The writer is president of the United States.

    It would have been better if they had added

    The writer is president of the United States. I know. You can’t make this shit up.

  9. Is Obama smart enough to ignore morons like Krugman? Maybe, maybe not. I haven’t seen any indications that he knows what he’s doing yet.

    -jcr

  10. Of course the president doesn’t understand basic logic! I should know, I’m the reigning authority on not understanding basic logic. That’s why I consistently advocate bubbles to remedy the effects of previous bubbles.

    Listen to me, you ignorant peasants! I got a freakin’ Nobel Prize* in an unrelated subject!

    Love,

    Paul.

    *not an actual Nobel Prize, but one that some Swedish bankers want you to think of as a Nobel Prize.

  11. Krugman got his Nobel in the category Annoying George W. Bush, which was also the category which saw rewarded the superior intellects of Albert Gore and James Carter. Of course they couldn’t reveal the actual category for Krugman’s prize so they mumbled something about economies of scale, mass production, and assembly lines. Since Henry Ford already had that stuff pretty much worked out they briefly considered a new category: Reinventing the Wheel. The prize also came with an attachment he had to sign promising never, ever to advise any company the Nobel Committee members owned stock in.

  12. To be fair to Krugman, and that’s not fucking easy, his prize is in economics. While still a politically motivated prize, the two other peace prizes you mentioned are an absolute joke. Peace prizes are a politically motivated sham. At least the economics prize requires something that looks like research and not just smoke and an anus.

  13. I didn’t read anything in the link about invading other countries.

  14. This is very good news, and I’m glad to see Obama issuing strong language to nix it. The political calculation must I imagine factors in how talk of a second Obama era stimulus weakens the standing of the first and thus renders the president ineffectual, or Jimmy Carteresque.

  15. Dear Readers,
    Do me a solid and take out that ‘must’ above. I thought I had deleted it before submitting.

  16. It continues to shock and amaze that our genius president has determined this time of all times to raise taxes three different ways on the productive parts of society. If he prevails on cap and trade, health care, and EFCA I am pretty sure we will not see unemployment below the year for the rest of his term (as in 11% in 2011).

    I am not an economist, but I majored in it. I will tell you a common phrase in undergraduate economics classes is the latin ceteris paribus (spelling could be off, but look it up if you’re so interested). As used in economics, it means basically “all other things held equal”. Let me tell you, ceteris paribus, when you make it more expensive (or otherwise onerous, see EFCA) to have employees, you make employers less likely to hire. This isn’t my opinion, it is based on the math that a potential employer must look at in deciding to hire (or fire instead). You don’t have to believe in homo economicus or efficient markets to get this. Eastern european and former soviet nations like Hungary and Estonia apparently understands this lesson (of course they had the experience of living through communism already).

    And Obama’s big solution for the economy, the thing that is going to drag us out of this? Green energy investment. It will be like The Great Leap Forward meets the monorail episode from Simpsons.

  17. Krugman’s Nobel was deserved. Keep in mind, the Nobel is awarded for a specific piece of research, usually in a very specialized area of the field. So winning a Nobel prize in economics does not make you an expert in every aspect of the entire field…this is the mistake people make (and Nobel laureates love for people to make).

    To give an analogy, the guys who won the Nobel Prize in Physics two years ago for their brilliant work on Giant MagnetoResistance, which essentially made flash memory possible, should not be taken for experts on the absorption line distribution of quasars — even though that’s technically another area of physics.

  18. To be fair about the “green revolution”:

    Things like solar power: The more you invest in the technology, the cheaper the technology gets. We’re going to have to invest in solar sooner or later, why not start now? carbon-fuels are gonna be gone in 40 years, maybe we should start preparing for that.

  19. …in any recession, unemployment tends to recover more slowly than other measures of economic activity.

    Ummm, do we really want unemployment to recover?

  20. jjj, there is plenty of investment and interest in solar power. If the government throws too much money at it, we just end up with overpriced solar technology, and better ideas and business models not able to compete with subsidized not-as-good ideas and business models.

  21. Don’t kid yourself. A second stimulus is entirely dependent on his poll numbers. If he drops to around 40% in rust belt states like Ohio, there will be a second stimulus. It’s all politics with this guy.

  22. The more you invest in the technology, the cheaper the technology gets.

    Spoken like Krugman. The hard fact is, investment is a risk. It may or may not produce a better, cheaper technology. Personally, I’d rather leave that money in private hands.

    If we want cheap power, the way to obtain it is not to hand out tax money to anyone who can pronounce “photovoltaic” and hires the right lobbyists, but to let the market pick the winners and losers. Government spending on solar power is no more likely to produce useful results than the ethanol debacle.

    -jcr

  23. Eastern european and former soviet nations like Hungary and Estonia apparently understands this lesson (of course they had the experience of living through communism already).

    I would really love to see a flood of eastern europeans in our universities, ready to heckle any of the pinkos who advocate the crap they got rid of in the 1980s. When Vaclav Klaus retires, I would love to see him in charge of Harvard.

    -jcr

  24. Krugman’s Nobel was deserved.

    I think we’ll just have to agree to disagree on that claim.

    Be that as it may, when Krugman spews his bullshit about how we need another bubble, he’s like a chiropractor expressing an opinion on the treatment of a cardiac patient: utterly out of his depth.

    -jcr

  25. “But the most important thing is the rejection of the second stimulus. By Paul Krugman’s lights that means the president doesn’t understand basic logic, but it’s a relief nonetheless.”

    It’s a relief until you realize that he will simply change his mind as he has done so many times before.

  26. “It’s a relief until you realize that he will simply change his mind as he has done so many times before”.

    Who Krugman, Obama or both? I vote for both.

  27. We’re going to have to invest in solar sooner or later, why not start now?

    Why are you assuming that nobody is investing in it already? Or that the current investment isn’t enough?

    carbon-fuels are gonna be gone in 40 years, maybe we should start preparing for that.

    According to who? The revered Al Gore?

    You may be out of carbon based fuels, and maybe in a lot less than 40 years. For reasons I couldn’t even guess at.

    The rest of us won’t be out of fossil fuels in 40 years.

  28. “Who Krugman, Obama or both? I vote for both.”

    Oops, I should have been more clear. I meant Obama.

  29. “The more you invest in the technology, the cheaper the technology gets.”

    Not if the technology doesn’t work or isn’t effective in the first place.

  30. “It’s all politics with this guy.”

    And there’s some “other guys” it’s not all politics with?

  31. “Why are you assuming that nobody is investing in it already? Or that the current investment isn’t enough?”

    Because he wants solar power now, right now!!!

    Why don’t you hold your breath and stamp your feet, johnny john john. You might as well sound like the petulant child you are.

  32. I forgot to add in my piece that by writing that column I am creating or saving one editorial staff position at the Washington Post.

    See, the stimulus is working.

  33. help Americans “better afford a college education.”

    “But we won’t stop subsidizing it. Besides, it not like the two are related, am I right?”

    By the way, I yield to no man in my loathing for Paul Krugman, but I’m pretty sure his Nobel was awarded for work in defense of free trade…

  34. “The American Recovery and Reinvestment Act was not expected to restore the economy to full health on its own but to provide the boost necessary to stop the free fall. So far, it has done that.”

    What a crock.

    He can’t prove it has had any positive impact whatsoever on the economy.

  35. Basically agree with hmm’s 10:08 post.

    ARRA has its share of “ignoring big challenges and deferring tough decisions”; and, would that talk about clearing away wreckage and rebulding in its place *were* cheap!

    Also, I’m trying to untangle “Providing all Americans with the skills they need to compete”. Presumably Americans will not have to compete to get such skills — even though this is *much* easier said than done. (Maybe just download ’em from recovery.gov?) Then, who are all Americans to compete with (each other, the Chinese?), and how (entrepreneurship, subsidized trade wars?)?

    “You know I ain’t complainin’, just tryin’ to understand …”

  36. It’s pretty stupid to be arguing about anything Obama says. Since there’s no press willing to hold him accountable, he can say what ever the hell he wants.

  37. The political reality is that they cannot really go to the well again and justify another stimulus package and not have egg on their face. Plus, they want to spend lots of money on other things.

  38. chaos | July 12, 2009, 11:54pm | #
    I didn’t read anything in the link about invading other countries.

    Dude. It’s Bill Kristol. The part about invasions can just be taken as a given, to save ink and pixels.

  39. Ordinarily, I wouldn’t toot my own horn twice on H&R, but as this is a more directly relevant thread than Mr. Gillespie’s from yesterday, I offer a few ‘annotations’ to Obama’s column here.

  40. Is Obama smart enough to ignore morons like Krugman?

    Hell no. Look who he’s hired.

  41. Krugman’s Nobel was deserved.

    It has been years since I’ve really delved into the meat of his work. I recall him applying econometrics to economies of scale to justify a rather mercantilist public policy (which may seem capitalist friendly compared to his more socialist colleagues), but beyond that I don’t recall the work being qualitatively better than what less publicly renown economist at any typical university has done. Much less, those who put more than a decade into the real work before going off into public intellectual land.

    After he became a public intellectual and known for ‘The Road to Serfdom’, Hayek still produced his thesis on legal philosophy ‘The Ethics of Liberty’, and substantial work in economics. Comparatively, Krugman has just been a public nuisance.

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