Economics

Reason.tv: Why The Stimulus Isn't Working—Q&A with economist Richard McKenzie

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It's been a year since Congress passed a stimulus bill that will eventually dole out $787 billion in taxpayer money to lucky recipients across the country.

In California, stimulus money has been used to pay the salaries of cops, provide rental assistance to residents of Santa Monica, and subsidize homeowners who weatherize their homes. Were those good investments?

The University of California at Irvine was awarded $42 million in stimulus money to fund different research projects and, in one case, $2 million to "stimulate student interest in mathematics and computer science." Was that a good use of scarce public dollars?

To learn more, Reason.tv's Paul Feine spoke with UC-Irvine economist Richard McKenzie who, a year ago, predicted that the stimulus package wouldn't work.

McKenzie is the author of Why Popcorn Costs So Much at the Movies: And other Pricing Puzzles.

Shot by Paul Feine and Alex Manning; edited by Paul Feine.

Approximately 7.30 minutes.

Go to Reason.tv for downloadable iPod, HD, and audio versions.

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And check out Reason Saves Cleveland With Drew Carey: How to fix the "Mistake on The Lake" and other once-great American cities, an original six-part documentary series.

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  1. The guy was interesting, but it was hard to pay attention with all the young hotties strolling by.

    Wait, that sounded like a complaint. It totally wasn’t.

    1. Funny, I was thinking the same damn thing. But his last point is kind of depressing. Sure, in the long run Keynes is going to be proven wrong. But as Keynes himself pointed out, in the long run we’re all dead.

  2. The reason it’s not working is because it was just a bunch of payouts and paybacks for political favors and revenge against the republicans and George Bush.

    1. There’s some truth to that, but an extra lane in a highway that ten people use each day is just as bad as a bridge to nowhere.

    2. well worth the read.I found it very informative as I have been researching a lot lately on practical matters such as you talk about pariuri online

  3. So why does popcorn cost so much at the movies? I’m too lazy (and don’t quite care enough) to read the book.

    1. You like hotties 🙂 ?

  4. Whaddya mean the stimulus “isn’t working”?

    Yeah, just like “cash for clunkers” didn’t spark a sustained recovery in auto sales. Oh, wait….

  5. The stimulus is achieving its intended goals like a charm. As near as I can tell, those goals were:

    (1) Moving the goalposts on the baseline for federal spending.

    (2) Keeping the reliable Dem voters in state governments from getting laid off.

    (3) Giving Our Masters in the Dem establishment an unthinkably huge slush fund.

    Did I miss anything?

    1. + 10
      RC you nailed it.

      Another Reason article stating the obvious. Wouldn’t offering an action plan how to counteract or make sure this doesn’t happen again be a better angle for an article?

      Anyone who has run so much as a lemonade stand knows why the stimulus is not working as sold. As Rick pointed out it was never designed to.

  6. You know what utterly pisses me off – there have been a handful of cognisant people saying all along that the stimulus will not and can not work and will only make things worse. This is being borne out as we speak. And just like with the housing bubble collapse you will have a bunch of imbeciles scratching there heads and saying no one could have anticipated how things fell apart. The people who recognized this – the Austrian School people – will continue to be marginalized and it will be claimed to be a fluke that they got it right because, after all, no one could possibly have foreseen it. Look for things to begin to go truly sour by the fall of this year.

  7. GDP grew at over 5% lat quarter…you people are clueless! The economy is kicking ass! My insurance company is expecting record profits next year, My Goldman Sachs shares are up 300%! My Lockheed Martin has had a huge bounce! The poor are finally getting the healthcare they need! The US is doing AWESOME! Thank You Obama!

    1. Are you serious? The economy did grow last quarter, but we borrowed 10% of GDP to get one quarter of 5.9% growth. Tell me how long that can go on. Should we borrow 20% of GDP to get 10%?

      GS is basically even over two years. C is down 80% and BAC is down 50%. LMT is down 20%.

      If the poor are actually getting health care, you will be paying for it. It is not free nor is the government just picking up gold off the streets to pay for it. You might have quite a different opinion on health care when your premium goes up 30-50%. But, until then go ahead a revel in your misunderstandings.

    2. And of course now the government is now having to pay higher yields than corporate bonds which has not happened in about 30 years. One of the reasons Moody’s and S&P are considering lowering the US bond ratings http://www.bloomberg.com/apps/…..eBnitz7nU.

  8. Stimulus worked?
    Let see it was supposed to stop the unemplyment number at ~8% we hit what 10.2%? Just look at the numbers O has given he claimed what 1M jobs “saved”. So spending 787 Billon or assuming an average income of 55,000.00 we spent 13M jobs worth of taxpayer money to “create or save” 1M jobs. Even if he were right, and we all know the jobs figure he throws out is BS, what kind of efficiency is that? Economic Genius!

  9. Any firm that is too big to fail is a threat to liberty: it can hold the Nation hostage for ransom by not being efficient and failing. It has no incentive to be efficient if there is no downside to failure. Nothing is too big to fail and anyone saying so is a threat to your liberty via the political process. Let big firms fail us, so their market space is opened up to competition. Because nothing is too big to fail.

    Not Goldman. Not Citi. Not the Federal Reserve. Not the United States. Not China.

    The sun will finally fail the solar system.

    None are beyond failure, yet with our liberty we can address those that do fail, and finally find ways to ensure our greatest success over time. You can’t do that propping up failures.

  10. I think that some of using the stimulus to create jobs is taking the same strategy that Roosevelt used in the New Deal. He wanted to support people’s income so that that an economic downturn would not give managers excessive power vis-a-vis a desperate workforce.

    1. Matt, the problem with that is is it kept unemployment levels excessively high compared to what would have happened if the did not have to pay a high wage to the few. It is the same now, they are propping up the salaries of public sector workers and letting the private markets fail. They spend $870,000 per mortgage modification for homes that average $170,000 and of course 40% of the modifications have already re-defaulted and estimates are that up to 70% will eventually default on their loans a second time.

  11. Wouldn’t the Libertarian be saying to himself, “whose money is it an what right does the Federal government have to it?”

    Instead Reason gets bogged down in the minutia. Opining on the small stuff while missing the big picture slapping them upside the head.

    It’s not their money to begin with. That’s where the focus needs to be and what the action plan developed around.

    Only then will there be free minds and free markets.

  12. The good professor is correct in some ways and very wrong in others. Yes, it would probably have been better to let financial wizards drown in their own dirty tricks rather than hand them wealth from the people; it has been known for a very long time that politicians who think they can play among captains of financial piracy are on a par with happily confident college students gambling against calculating casino pros.

    Where Professor McKenzie goes off course is with his remarks about unfunded health care insurance. Yes, there is a big bill associated with Medicare from birth for all citizens, including dental. The point he avoided so cleverly is that the investment in healthy citizens earns greater national wealth than the payout made, in other words, the marginal productivity increase from healthy people is far more than than the cost of universal medicare for all citizens.

    1. Your assuming that forcing people to buy shit from insurance companies will increase the average health.

      That is a stupid assumption.

      It is more likely that insurance companies will now raise prices on their captives(us). How was the supply of health care expanded by this bill ? it wasn’t, therefore prices aren’t gonna fall.

  13. Stimulus spending has never worked, but the media and the history professors say that it has: http://historyhalf.com/the-roosevelt-stimulus/

  14. Where Professor McKenzie goes off course is with his remarks about unfunded health care insurance. Yes, there is a big bill thomas saboassociated with Medicare from birth for all citizens, including dental. The point he avoided so cleverly is that the investment in healthy citizens earns greater national wealth than the payout made, in other words, the marginal productivity increase from healthy people is far more than than the cost of universal medicare for all citizens.????

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  18. I felt more complicated as I am listening him…is there any simple thoughts about these? just asking…have understand the discussion though… 🙂

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  20. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on…the Bible’s books were written by people with very different mindsets…in order to really get the Books of the Bible, you have to cultivate such a mindset, it’s literally a labyrinth, that’s no joke.

  21. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on…the Bible’s books were written by people with very different mindsets…in order to really get the Books of the Bible, you have to cultivate such a mindset, it’s literally a labyrinth, that’s no joke.

  22. My only point is that if you take the Bible straight, as I’m sure many of Reasons readers do, you will see a lot of the Old Testament stuff as absolutely insane. Even some cursory knowledge of Hebrew and doing some mathematics and logic will tell you that you really won’t get the full deal by just doing regular skill english reading for those books. In other words, there’s more to the books of the Bible than most will ever grasp. I’m not concerned that Mr. Crumb will go to hell or anything crazy like that! It’s just that he, like many types of religionists, seems to take it literally, take it straight…the Bible’s books were not written by straight laced divinity students in 3 piece suits who white wash religious beliefs as if God made them with clothes on…the Bible’s books were written by people with very different mindsets…in order to really get the Books of the Bible, you have to cultivate such a mindset, it’s literally a labyrinth, that’s no joke.

  23. Also when a Libertarian stalwart like Reason damn near avoids the whole conversation the week leading up to Obamacare one has to wonder if they are in for the fight or determined to watch the Titanic go down while playing the violin.

  24. Even if you go on his website, it’s still just a a ten minute discussion. The interview with Jim Cramer simply amounted to Jim sputtering something every couple of minutes while John wagged his finger at him the whole time. I’ve never seen him have an intelligent discussion with anybody, and he only talks to people that he knows he can bully into a corner. Usually idiots, yes, but it’s still dispicable. I don’t watch him that often, but it is people like him that make me wretch. The fact that people go around saying “He slammed so and so” in that “debate” pisses me off. John’s not directly responsible for that, but he certainly plays his audience to get that effect.

  25. Well said. Tucker is despicable, Crossfire became despicable (despite the presence of supposed “heavyweights” like Novack and Carville), and Jon Stewart is a comedian who has never proclaimed himself to be anything else. Just because certain people here don’t understand how satire works doesn’t change that fact. The fact that The Daily Show has gained some cultural traction doesn’t change that.

  26. “The size of the lie is a definite factor in causing it to be believed, for the vast masses of the nation are in the depths of their hearts more easily deceived than they are consciously and intentionally bad. The primitive simplicity of their minds renders them a more easy prey to a big lie than a small one, for they themselves often tell little lies but would be ashamed to tell a big one.”

  27. Even if you go on his website, it’s still just a a ten minute discussion. The interview with Jim Cramer simply amounted to Jim sputtering something every couple of minutes while John wagged his finger at him the whole time. I’ve never seen him have an intelligent discussion with anybody, and he only talks to people that he knows he can bully into a corner. Usually idiots, yes, but it’s still dispicable. I don’t watch him that often, but it is people like him that make me wretch. The fact that people go around saying “He slammed so and so” in that “debate” pisses me off. John’s not directly responsible for that, but he certainly plays his audience to get that effect.

  28. The good professor is correct in some ways and very wrong in others. Yes, it would probably have been better to let financial wizards drown in their own dirty tricks rather than hand them wealth from the people; it has been known for a very long time that politicians who think they can play among captains of financial piracy are on a par with happily confident college students gambling against calculating casino pros.

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  47. Just like with the housing bubble collapse you will have a bunch of imbeciles scratching there heads and saying no one could have anticipated how things fell apart. If the poor are actually getting health care, you will be paying for it. It is not free nor is the government just picking up gold off the streets to pay for it. You might have quite a different opinion on health care when your premium goes up 30-50%.

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