Corporate Welfare

Christina Romer: Our War On the U.S. Economy Must Continue

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Christina D. Romer, the Berkeley economist who serves as chairwoman of the Obama administration's Council of Economic Advisers, has a paper out [pdf] called "Back from the Brink." It's worth reading as a specimen of the kind of totalitarian logic establishments use to create the illusion of popularity and success for actions that in fact have been imposed by force and have not been successful.

As the title suggests, Romer's argument is that the Federal Reserve and the Department of the Treasury succeeded in staving off an even Greater Depression that threatened to engulf the U.S. economy after the collapse of Lehman Brothers. Since there is no real evidence for this view, Romer relies heavily on gross domestic product, which may or may not have stopped declining. Strangely, in a paper committed to apple/orange comparisons between the 2000s and the 1930s (for example, Romer points out that credit spreads were more dire in 2008 than they were in 1929, without mentioning that Americans had a large positive savings rate in 1929 and a large negative rate in 2008), Romer points out that GDP grew rapidly in the mid-1930s. So how can GDP growth (which Romer believes will go positive again this quarter) be evidence that we're not in a new Depression?

I am not arguing that we are in a new Depression, but consider that during the period Romer is discussing—with plenty of imagery about pulling back from edges of cliffs—personal bankruptcies have skyrocketed; credit for anybody not named Goldman or Sachs has been virtually non-existent; Fed chairman Ben Bernanke's March reference to "green shoots" has become a national joke; and real estate, which was, is and will continue to be the heart of the decline, is still plagued by collapsing sales and rental markets, a cratering commercial real estate market, and a vast, still uncharted shadow inventory of defaulting mortgages.

But this is where the totalitarian part of the argument comes in. Romer is not interested in making a factual case but in making assertions and then othering opposite viewpoints. So there's reference to the "not-always-popular TARP legislation" and things that are believed by "every forecaster from industry, government, and the financial sector." In one choice bit, Romer asserts that the $787 billion American Recovery and Reinvestment Act has raised real GDP growth by "roughly 2 to 3 percentage points in both the second and third quarters," adding, "There is widespread consensus (except perhaps on the op-ed page of the Wall Street Journal) that [the stimulus package] has been highly effective."

Is it fair to point out that the economy is not Family Feud? It doesn't matter what the survey says; it matters what the truth is. U.S. GDP is about $14.25 trillion. So far, $164 billion of the ARRA stimulus money has been spent. Even if every dollar were perfectly spent and contributed directly to growth, that would be about 1 percent of the total GDP. And GDP growth was negative during this period. (Also, if you click on that last link you'll see that Romer is actually exaggerating the CEA's own estimate of the stimulus' effect.) If Romer can realize a 300 percent return on a quarterly basis during a deep recession, she should leave the CEA and start managing the Fidelity Magellan fund.

There are countless other offenses. Romer says, "Data…show that American factories are starting to produce again?" (They do?) She credits the Fed with minimizing deflation, which has been one of the few things that have made the last 18 months endurable for normal people.

She describes money market funds as instruments that were "once assumed to be completely safe," which is the precise opposite of the truth: Nobody who ever read a money market fund prospectus could have made this assumption, because they all contained the statement "It is possible to lose money by investing in the Fund." Even the tense is wrong: After what Romer calls "a high point in central bank history," it is now possible to make that assumption, because in September 2008 the FDIC unfathomably began guaranteeing money market accounts.

And in a paper comparing the Great Depression with the Great Repression, Romer makes no mention of tariffs and trade during either the Hoover or the Obama administration.

But these are details. The real purpose here is Panglossian: to convince you that whatever Power does is the right thing to do, and to discredit the idea that government should ever again reduce its presence in the private sector. Romer promises the war will go on:

The accomplishment of walking the American economy back from the edge of a second Great Depression is real and deserves to be celebrated. But, it deserves to be celebrated only in the same way that victory in one battle in the midst of a necessary war deserves to be celebrated.

NEXT: DA Accused of Stealing Money From Motorists Wants To Defend Herself With Money She's Accused of Stealing From Motorists

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  1. I don’t have much time right now but this just popped up on The Google side thingy:

    http://online.wsj.com/article/…..=rss_Today‘s_Most_Popular

    “Rent-Seekers Inc.
    Climate-change legislation helps a few big utility companies, but costs most Americans.”

  2. Perhaps she can use the work of doctors Stephan Bolliger, Steffen Ross, Lars Oesterhelweg, Michael Thali, and Beat Kneubuehl most recent work Ig Nobel prize winning work “Are full or empty beer bottles sturdier and does their fracture-threshold suffice to break the human skull?” in selecting a weapon for the war against the economy.

  3. “…Romer points out that credit spreads were more dire in 2008 than they were in 1929, without mentioning that Americans had a large positive savings rate in 1929 and a large negative rate in 2008…

    “She credits the Fed with minimizing deflation, which has been one of the few things that have made the last 18 months endurable for normal people.”

    Pro-deflation arguments from libertarians are one reason I’m having a harder and harder time taking this site seriously. (Drink?) Look, you spell it out in your own piece: Americans are a heavily indebted people. And deflation doesn’t just mean that the stuff you buy at the supermarket gets cheaper, but the price of labor goes down as well (unless you rely on Keynesian wage stickiness or hated government intervention). So as goods and services get cheaper, people also get paid less, and the whole thing turns out to be a wash. Except for one small problem: debts do not deflate along with everything else. The main effect of deflation is not to drive down the real cost of living, but rather to significantly increase the onerousness of our debts. This leads to more defaults, which leads to further deflation, and ultimately a prolonged and damaging credit crunch which substantially inhibits growth.

    If inflation is a tax on savers, deflation is a tax on debtors. As a nation, which term describes us better?

    1. Actually, the savings rate has gone positive since the start of the crisis. So somebody is learning. You’re right: Deflation is a tax on debtors. The way to avoid that tax is to to avoid debt, not to keep running up your plastic in the hope that the central bank will destroy the dollar for your benefit.

      1. I’m glad the savings rate has gone positive. Thrift is an oft overlooked virtue in modern society. But that’s immaterial to my larger point. Some libertarians, here and elsewhere, have cheered at signs of deflation in the economy, either oblivious to or deliberately ignoring the severe macroeconomic consequences of the thing. (Though I should note that other libertarians, who actually know what they’re talking about, are decidedly less enthusiastic: Tyler Cowen comes to mind.) Deflation is not going to make life easier for the average American, because positive savings rate or no, America is still a highly indebted nation.

        1. The deflation and the thrift are the result of the same phenomenon: reducing debt. So it can’t be immaterial to whatever your larger point is.

          1. The last quarter of the 19th century was period of deflation; it was also a period of tremendous economic growth.

            1. Not exactly. It was a period in which prices fell due to improvements in production; the money supply wasn’t contracting.

              -jcr

        2. I don’t presume to know who the “average American” is, nor what is going to make life easier for him or her (does the average American have a gender?). I got fired in 2008 and have not earned steadily since. I am a “victim” of massive and unprecedented inflation, having bought a house in 2006. My 2009 1040 will be a fraction of my 2008. The one thing I have going for me is that right now the few dollars I have buy more than they did last year.

          To say deflation is in of itself bad is as absurd as saying that it’s good. It’s a reflection of market conditions and creates opportunities like any other. It is the natural direction of the economy right now, and heroic efforts to prevent deflation are not victimless: Buyers benefit from deflation, and they get screwed when the game is rigged to prevent prices from falling.

          And don’t tell me the switch to a positive savings rate is immaterial to your larger point. You don’t have a larger point.

          1. Duh: Make that “lasting and unprecedented deflation

            Also, I didn’t mean to sound brusque, despite the generally dickheaded tone of your comment. Sorry about that.

            1. Well the deflation IS the logical outcome of the previous inflation, so you ARE the victim of the lasting and unprecedented inflation. Can’t have downs without ups.

    2. Deflation has nothing to do with prices or wages. Its a measure of money supply not prices of goods.

    3. If one really gets into it, the discussion shouldn’t be over inflation vs deflation, but about government spending.

      Deflation can be good or bad depending on the cause.

  4. In September ’08, Bryan Caplan asked for proposals on ways in which we will know whether the bailout worked. His point was that those who don’t commit to a metric in advance have no right to claim vindication later.

  5. Shouldn’t the war be agaisnt those rich politicians and bankers who make sure the poor remain poor?

    http://next-world-war.blogspot.com

    1. I think the war should be against blog-whoring.

  6. Romer asserts that the $787 billion American Recovery and Reinvestment Act

    *sigh* when are we going to get this right?

    It’s the American Structured Securities Rescue Act for a Prudent Economy.

    1. So. Awesome.

  7. The accomplishment of walking the American economy back from the edge of a second Great Depression is real and deserves to be celebrated. But, it deserves to be celebrated only in the same way that victory in one battle in the midst of a necessary war deserves to be celebrated.
    I scratched my ass on Jan 20th and that is what pulled “the American economy back from the edge of a second Great Depression” but I don’t go bragging about it even though it “deserves to be celebrated only in the same way that victory in one battle in the midst of a necessary war deserves to be”.

    Goddam, the hubris displayed is just fucking mind boggling.

  8. Trying again –

    The accomplishment of walking the American economy back from the edge of a second Great Depression is real and deserves to be celebrated. But, it deserves to be celebrated only in the same way that victory in one battle in the midst of a necessary war deserves to be celebrated.

    I scratched my ass on Jan 20th and that is what pulled “the American economy back from the edge of a second Great Depression” but I don’t go bragging about it even though it “deserves to be celebrated only in the same way that victory in one battle in the midst of a necessary war deserves to be”.

    Goddam, the hubris displayed is just fucking mind boggling.

  9. It doesn’t matter what the survey says; it matters what the truth is.

    That ship sank years ago. I’m going Galt until the country gets back to its senses.

  10. Emperor norton,

    How much have wages declined?

  11. Ronald Reagan was elected in 1980, and we avoided a depression worse than The Great One a mere 30 years later. That is clear cause and effect (*), and we can all thank RR for any good economic news we hear.

    (*) At least as clear as “we elected him and 30 yrs later bad things happened”.

  12. http://www.washingtonexaminer……5112.html#

    Anyone else seen this? The guy is the under secretary of safe and drug free schools. No kidding. That is funny.

    1. OK, that’s pretty messed up…

    2. The only difference between NAMBLA and the Luckiest-Kids-Ever-Organization is that NAMBLA is for gays.

      Be honest guys, if given the opportunity to join NA-W-BLA at age 13 you would have been over joyed.

      And I’m equally sure there are plenty of girls who would have liked to join NAM-G-LA too.

      Kids already fuck each other. The only bad thing that MIGHT result from more intergenerational intercourse would be an increase disease. However this would be reversed by the maturity of the older partners influencing an increase in the use of protection unilaterally. Not to mention the benefits of letting experienced people teach inexperienced people and thus raising the sexual skill level of the entire population (which imho is in a generally dire state).

    3. Also, anyone who thinks that teenagers aren’t ready to make their own decisions about sex doesn’t remember being one.

      It’s true that teens usually aren’t ready to make decisions about marriage or having kids, but those are totally different things.

  13. Fucking proposition 13…

  14. But she is nice looking.

    1. I’d hit it…

      …with a railroad tie. Forty or fifty times.

      And, I’d still copulate with whatever was left.

      Hell, I got a hummer from Kim Jong-Il and it was better than doing Hillary.

  15. The real purpose of this post is Randian: to convince you that whatever State Power does is the wrong thing to do, and to promote the the idea that government should reduce its presence in the private sector to a minimum. Cavanaugh promises to keep cherry picking evidence to support this doctrine.

    1. Shut the fuck up, Edward.

      (I thought I had incif fixed but either I or the squirrel broke my fix)

      1. I’ll see if I can get an update to INCIF out this weekend or next week.

        1. Cool, although I was going to try to get it fixed up during football tomorrow. Unfortunately, my javascript skills suck, so I had to figure out how it worked to begin with.

    2. I thought the standard response to him was “Edward, kill yourself”. Was there a memo?

    3. Oh-wee-oh-wee-oh!

    4. Edward, go kill yourself.

    5. I find it interesting that Objectivism has become the convenient strawman for libertarianism among some groups.

  16. Is it fair to point out that the economy is not Family Feud?

    Might it, instead, be Let’s Make a Deal?

    (Don’t forget that the new version premieres Monday on CBS daytime.)

  17. Well, I guess it’s official. We can dismiss anything that comes out of Romer’s mouth from here on out. I always have to give people the benefit of the doubt when they take a position in government, but Romer has sold out to the Man. She’s a better economist than this, so she knows she’s lying.

  18. “…then othering opposite viewpoints.”

    To other? What the fuck does that mean?

    1. Oh-wee-oh-wee-oh!

      1. Jessie….now, Jerome….

    2. Really? You have no idea what that means?

      Edward, kill yourself.

  19. Ah, so it is Morris Day. I was wondering. I couldn’t come up with a good Morris, otherwise. I really like Greg Morris, what with Mission: Impossible and all, but he didn’t seem a likely candidate.

    1. Jack Morris – Fine pitcher who was the #1 starter on two world series champion teams.

      And Morris the Cat.

      1. And who should be in the Hall of Fame. Most wins in the 80s, I believe.

        1. Nobody remembers me.

      2. Yes, I remember him because those two world series champion teams beat my Braves.

  20. Godamm cherry picking randian fools. Theres no resoning with you. I’m done posting here. Goodbye.

    1. Where da white preview button at?

    2. Edward, kill yourself.

    3. Well, to reason with us, you’d have to be capable of reasoning in the first place. Given that vacuous ad hom and 3rd rate snark are the only things you’ve shown any capacity for, I can see where the obstacles may arise.

  21. Goddamn cherry picking Keynesian fools.

  22. Its simply amazing how these fools can simply lie through their teeth, they’re better than Car Salesmen

  23. I mentioned other Morrises, including the cat, in a nested loop in some other lost thread.

    I forgot Van Morrison.

  24. Actually, the savings rate has gone positive since the start of the crisis.

    The inverse is also true. Most of the people screaming we are running towards a cliff during the run up to the 08′ collapse cited housing values sky rocketing w/o people having any equity and individual savings rates being negative for an extended period of time.

  25. I find it interesting that Objectivism has become the convenient strawman for libertarianism among some groups.

    And it’s almost always a “straw Objectivist” position. Funny, since Rand said enough legitimately controversial things, you’d think people wouldn’t have to make shit up.

    But then, there’s a reason football player practice with tackling dummies instead of a live opposition.

  26. There’s also Morrissey and Jim Morrison

  27. Oh, and Alanis Morissette.

  28. And Barry Morse

    1. now Jerome

      1. Yessssssss

  29. Linking fail.

    IT people need flogging.

  30. Leftist academic lies to promote leftist agenda, film at 11.

    -jcr

  31. Romer’s argument is that the Federal Reserve and the Department of the Treasury succeeded in staving off an even Greater Depression that threatened to engulf the U.S. economy after the collapse of Lehman Brothers.

    Shorter Romer:

    This rock repels tigers.

  32. Christina D. Romer, the Berkeley economist who serves as chairwoman of the Obama administration’s Council of Economic Advisers,

    Not to go all ad hominem on her ass, but if the shoe fits:

    There are two clues right in the intro that everything this person says are going to be for the purpose of justifying whatever the State does.

  33. Kids already fuck each other. The only bad thing that MIGHT result from more intergenerational intercourse would be an increase disease. However this would be reversed by the maturity of the older partners influencing an increase in the use of protection unilaterally. Not to mention the benefits of letting experienced people teach inexperienced people and thus raising the sexual skill level of the entire population (which imho is in a generally dire state).

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  34. We shouldn’t avoid poverty and unemployment problems caused by such kind of wars because the nations who forget them so god forgot them as well.

  35. We shouldn’t avoid poverty and unemployment problems caused by such kind of wars because the nations who forget them so god forgot them as well.

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  36. Kids already fuck each other. The only bad thing that MIGHT result from more intergenerational intercourse would be an increase disease. However this would be reversed by the maturity of the older partners influencing an increase in the use of protection unilaterally. Not to mention the benefits of letting experienced people teach inexperienced people and thus raising the sexual skill level of the entire population (which imho is in a generally dire state). Film

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  38. Even I heard of the pdf “Back from the Brink”.With out war there should be value for life.So,War against US economy should continue..

  39. Yup.I completely agree with author here.US the king of worlds economy is seeing crisis.It has lost its reputation and fame around the world due to its poor economic maintenance.Hope this war will win and US will come back again.

  40. Nice post..Hope US will regain its economic position from its Crisis and shows the world what it is

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  41. a good post.. keep posting… and i wud share on fb…. 🙂

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