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eaglewingz08
14 years ago
Things may be going to hell in a handbasket but can we be sure that if McCain was in office things would not be the same or worse? Plus we’d have the press calling McCain McHoover and other epithets. While McCain’s plan would have been much narrower, would we be hearing from the democraps if we got the same or only slightly better numbers, that if only they had passed the Obama plan (or the democrap plan) we would have had full employment and thus McCain Palin have destroyed the economy with their reckless plans?
@eaglewingz08 asked: “Things may be going to hell in a handbasket but can we be sure that if McCain was in office things would not be the same or worse?”
Yes.
If McCain were in office I can say with 100% certainty we would never have passed such monstrous stimulus bills. And the power grab that Obama has put on the automotive and financial sectors would have been much less severe.
What a shame that all of our friends who promised McCain was such a smart choice in the GOP primaries because he had the best shot at winning were WRONG.
Neo
14 years ago
The chart should be titled … “Up, Up and Away”
bbartlog
14 years ago
One thing you should remember about this is that you don’t have to wait for the unemployment data to come in to treat a chart like this as a bald-faced lie. Nobody can model the economy out to five years with any accuracy whatever; as soon as someone produces a chart like this, they should be regarded either as propagandists or else hopelessly deluded (or both).
trizzlor
14 years ago
There’s a raging fire and the chief on scene announces “We need 8 firetrucks rather than the 6 I had original predicted”. Mike’s response: “Look! All that water you’ve been pouring on the fire has made it worse”.
As for the 3 million jobs, even the WSJ had step in and challenge the GOP spin.
bbart: Nobody can model the economy out to five years with any accuracy whatever; as soon as someone produces a chart like this, they should be regarded either as propagandists or else hopelessly deluded (or both).
Which is why Romer has a gig with Obama… chairing the WH Council of Economic Advisors. I believe “deluded” is a resume requirement to work there.
Speaking of Romer etal. There’s a “created” job(s). As a matter of fact, Obama has created massive government jobs, holding one of the largest WH and czar staffs in history. I suppose he’s counting those.
Then, of course, as the WSJ article points out, most of the “saved” jobs are government jobs, about to go into the tank.
“You’re going to see things start to really change in the second hundred days,” Biden told a business roundtable at Pace University’s Lubin School of Business. “You’re going to see this thing begin to move.”
The comment was a clear response to critics who charge that stimulus cash is flowing too slowly out of the government pipeline. To date, only about $126 billion out of $787 billion has been obligated, and far less has actually been spent.
Now correct me if I’m wrong, but just how does “far less than” $126 billion create or save many jobs? And how much of at “far less than” $126 bil was wasted? According, again, to Gaffer Joe,
Biden also conceded that some waste was all but inevitable, and he warned consumers to be on the lookout for stimulus cons.
“There are these scam artists out there sending people applications,” Biden said. “And we know some of this money is going to be wasted.”
This, of course, would be about the same time Obama’s mouthpieces were crowing in delight about all those jobs that stimulus money that hasn’t been spent has saved.
My… that’s more than the stimulus money that hasn’t been spent….
Yeah. That stimulus that hasn’t been spent has done wonders, all right. Let’s see… how much was the interest on the spending? Anyone want to do the math on the taxpayer cash “almost” injection, less the interest we pay and the lost income revenue? uh hum
Math is, apparently, a lost art for law school grads.
We find that the stimulus is a complicated, ongoing effort and data collection is just getting started. The Obama administration does not provide a solid accounting for either the jobs “created” or “saved.” Yes, there is anecdotal evidence that jobs are being saved, such as the 25 police recruits in Columbus, Ohio, in an example cited by Obama. But the 150,000 figure sounds specific and verifiable when actually it’s the administration’s best guess for a relatively small snapshot in time. Because it’s not much better than a guess presented as a fact, we rate his statement Barely True.
But you know the story… repeat it often enough and the gullible O’faithful, with their veins filled with prozac, starting chanting it as fact.
bbartlog
14 years ago
There’s a raging fire and the chief on scene announces “We need 8 firetrucks rather than the 6 I had original predicted”. Mike’s response: “Look! All that water you’ve been pouring on the fire has made it worse”.
Problem with your analogy is that there is not actually consensus on the correct course of action; that is, not everyone is a Keynesian. At the very least, there are two competing economic models:
– the Keynesian ‘demand destruction’ model, which argues for massive stimulus as a way of unseizing the economy
– the Austrian ‘misallocation’ model, which argues that our problems are a result of misapplied resources (for example, residential overbuilding) and that the economic pain is necessary to force people and capital to move in to more productive activity
There are others. But the point is, if someone on the Keynesian side makes a specific prediction about what their policy will achieve (as with the unemployment figures here), and reality diverges wildly from their prediction, it has to be considered an indictment of the theory.
@trizzlor: Yours is annother not so subtle variation of BLAME BUSH.
Well you know something Trizz? This is OBAMA”S DEPRESSSION!
That’s right pal.
He got everything he asked Congress for and on his timetable.
All those trillions in new spending and it hasn’t done a damn thing just like we warned.
You can keep playing your little games if you want, but it won’t help the MILLIONS who are unemployed BECAUSE OF OBAMA’S INCOMPETENCE!
trizzlor
14 years ago
@MataHarley: The fact that the math has not been done doesn’t really swing the argument one way or the other. There’s no evidence that current stimulus spending would be doing more good had it been implemented as a tax-cut; and considering a third of the package was actual tax-cuts, it’s not clear if that money would have gotten to us yet either. More importantly, however, is determining how beneficial such spending is over the course of the next few quarters – is surging money back into the economy via tax-cuts better than a more gradual stimulus investment in the long-term?
if someone on the Keynesian side makes a specific prediction about what their policy will achieve (as with the unemployment figures here), and reality diverges wildly from their prediction, it has to be considered an indictment of the theory
Or it can be an indictment of the prediction metrics, which have always been inaccurate, and which were presented with the explicit caveat (omitted from this chart): “…there is considerable uncertainty in our estimates: both the impact of the package on GDP and the relationship between higher GDP and job creation are hard to estimate precisely.”
triz, I believe you’ve made my point in your first sentence or two. Fact is, Obama’s stimulus had little to do with what would be an economy correcting itself… despite government intervention. What the big Zero and admin is doing is claiming credit for a natural rightening after a capsize by stating that his spending was the cure.
However, IMHO, you have an incorrect jumping point after your first sentences.
More importantly, however, is determining how beneficial such spending is over the course of the next few quarters – is surging money back into the economy via tax-cuts better than a more gradual stimulus investment in the long-term?
Too simplistic of thought. Point is, you need the tax cuts, but you also need a cut in spending. The spoiled elite in Congress do not know how to pull in their belts.
And again, you are ignoring the cost of that “surging money” that Congress is blowing out the door. It outweighs the long term benefits. No getting ahead until you clear just the monthly interest on all this stuff, ya know. That’s like saying you spent $1000 on your credit card, and made $300 bucks income… my what a good boy are you.
Obama is betting that the spending will boost the income and they’ll race the interest and inflation… so he’ busy planning on spending more with health care. By the time he puts cap and trade into place, the financial mallet will have fallen.
The increase on the national debt will lead to dollar devaluation and inflation, that will be controlled with rate increases. Increase the rates, and watch the housing market ring out a new death knell. Rates are already on a fast rise just this past month.
Ponder this…. a $200K mortgage at 5.8% is about $1172 monthly payment. That same payment is $1755 at 10%. I’d say that knocks a lot of people out of the buyer pool….
And if they pull a increase as they did in the 80s and shoot up to say 18%, that $200K mortgage now carries a payment of $3014. The housing prices haven’t fallen all that much, nor is the O’admin inclined to allow them to. But 18% + loan rates will do that for him… in short order. We will once again be a’wash in short sales and foreclosures, and the housing market will remain in “pause” mode since no one will be able to afford to buy, or sell. (most sellers also turn into buyers for a replacement home)
Pray tell, what do those with a nominal $200K mortgage on a standard ranch home do today when they want to sell a few years downline and the rates are so high only one of the filthy, evil “rich” folk that Obama’s making pay for the rest of the country’s welfare can afford to buy it? And how about those that want to refi just to do home improvements?
Suggestion… buy now, lock yourself into a low 30 year rate, and be prepared to stay put for a decade until we can straighten out the big Zero’s piss poor math, short sightedness, his overspending and plans to crash the economy. It’s looking damn ugly on the horizon. And I rarely place much faith in my dusty, old crystal ball, but this is looking pretty obvious.
Oh yes… but of course Mike is taking advantage of an inflammatory headline… he does so love to get the goat of the liberal denizens here. Works well, don’t you think?
considering a third of the package was actual tax-cuts
Yeah man, that extra $13 a week is just plowing our economy out of the recession. But hey, they expanded the EITC and we know that will help the economy. People with EITC are known for creating jobs and expanding capital.
“The only way to even get the MSM to do their jobs and take a look is to pressure them by claiming Worst Scandal Eveh, even if we don’t all necessarily buy that. But we have to claim that in order to spur any sort of media interest whatsoever.“
That is exactly right. Unless the media is forced to deal with an Obama failure, they will ignore it. Hard to report when you’re too busy bowing before the messiah.
Aluceo
14 years ago
HOW THE STIMULUS PLAN HAS BEEN WORKING ALREADY AND WHY IT IS BOUND TO GATHER PACE
The stimulus plan in of itself has halted the dramatic plunge in business and consumer confidence with the very likely threat of an economic depression earlier in the year, and businesses and consumers taking a less weary and more upbeat attitude to the future. Maybe more than anything else this will be the most significant impact of the stimulus package in the long-run enabling a spectacular recovery from the real possibility of depression before its passage. Businesses and consumers have become more and more confident that spending from the stimulus in the upcoming months will provide a solid environment for economic activity thus encouraging investment, reducing the pace of job losses and encouraging consumer spending. In other words, the stimulus package has avoided “a cycle of economic downturn to depression” and is now about to engender “a cycle of economic upturn to recovery”.
The stimulus package cash handouts and other social initiatives have played no minor part in lessening the burdens on individuals of the economic downturn and the consequent increase in the number of people unemployed thus palliating the effects with regards to mortgage, health coverage and consumer spending.
The stimulus package has halted the lost of jobs in the areas of education and other state level services and enabled States to avoid budget bankruptcy (caused by the fall in revenues due to the economic downturn) with the result of avoiding indirect job losses in the private sector as well.
The stimulus package is bound to lead the way for new jobs creation to be followed suit by direct private sector investments with the consequence of increasing spending in the economy and accelerating economic recovery. It should be noted that jobs created by the stimulus will have a multiplier effect in the creation of jobs by private enterprises.
Perhaps more fundamental for long-term economic recovery, given the areas of investment of the stimulus package (infrastructure, energy and green jobs, education. etc.), it is the type of government investment required for renewing long-term economic growth. As was the case with FDR’s New Deal in the 1930s and Eisenhower building of interstate highways and investment in the sciences in the 1950s, the stimulus package is bound to restructure the foundation of the US economy within which private enterprise will thrive.
The fundamental element in the criticisms levied against the stimulus package that it will increase the US deficit is the total disregard by most critics of what would have happened without the stimulus with respect to avoiding the real threat of a depression, raising business and consumer confidence and restructuring the economy. Thus providing a good foundation for real growth in the long-run (boostered by the Stimulus and led by private enterprise) with economic growth by itself and healthcare reform allowing for deficit reduction in the long-run.
While the Stimulus Package has often come under this one-sided criticism of increasing the US deficit, such an argument can only be credible to the extent that it elicits how the results mentioned above which have been obtained (and are to be obtained) by the Stimulus Package could have been attained otherwise. Most critics of the stimulus package seem to think that this economy which was at the very brink of collapse simply avoided a depression by some miracle and that by the same token recovery is bound to occur by magic. To the extent that their arguments fail to answer these fundamental facts about avoiding a depression and beginning a recovery, to that extent, such arguments can hardly be considered credible.
Actually, the initial impact of the stimulus for private enterprise and consumer confidence has been “anticipatory” in that it arrested a situation where the trend of business and consumer confidence was heading the economy to a depression. That is why the statistics point to the fact that business and consumer confidence stop plunging after the stimulus plan was passed and the stock market has been “going north” since then. It is the anticipation of the impact of the stimulus plan that has stabilized business and consumer confidence, heading off the real prospect of a depression. In other words, the stimulus package first impact was to act as the brakes for an economy that was heading to a depression disaster.
http://www.rususa.com/money/finance.asp See link above for the effect of the stimulus plan on the stock market immediately after its passage in mid-February 2009: the NASDAQ, Dow Jones and S & P 500 have made a dramatic U-turn upward since March 2009.
The reason for the high job losses is very simple. Those jobs were going to be lost anyway as business and consumer confidence entered a vicious cycle to depression following the failure of the financial system – these job losses arose out of lack of confidence in the financial system. Actually, the stimulus role at the onset more than any immediate spending in the economy itself has been to provide assurance to consumers and businesses that government will spend in the economy thereby upholding consumer and business confidence and avoiding the real prospect of a depression. So the stimulus first role has been “anticipatory” in forestalling a depression.
Believe it or not, it is not out of the question that without the stimulus plan we might have been talking now about the loss of not 1.6 million jobs but 5 or 6 million jobs at the trend at which consumer and business confidence went on falling before its passage. See link on the rise of consumer confidence since the stimulus plan was passed in mid-February 2009. http://www.market-harmonics.com/free-charts/sentiment/consumer_confidence.htm
Actually, the word “stimulus” here can be misleading in that it underemphasizes the effect of the stimulus in arresting a grave and downward spiral of the economy and rather draw focus mainly on creation of jobs which is the second and yet to fully come dimension of its impact.
Let’s imagine that the stimulus plan was to be suspended now. What will happen is that the anticipation consumers and business had about its boosting effect on the economy will die out, and this of itself will create uncertainty and may well lead to a new downward spiral. The Stimulus has a double effect with respect to recovery and job creation. Perhaps the lesser acknowledged effect is the confidence created in the economy for private enterprise and consumer consumption. In fact, this indirect effect will be the strongest push for economic recovery and job creation. Then there is the direct effect of the Stimulus Package spending and its multiplier effect given the areas of expenditure (education, infrastructure, green jobs, etc.)
While critics are pointing to the fact that unemployment is already at 9.4 percent compared to the prediction of 8.8 percent for 2010 made by the Administration, many forget that Economics like Meteorology or Earthquake Prediction for that matter is “no Physics or Maths”. What ultimately matters is the bigger picture and trends. Going by the job loss figures for March, April and May (652000, 504000 and 345000 respectively) the argument made by the administration definitely holds. In fact, the Fed, the Treasury as well as other institutions involved in the prediction of economic data tend to revise their figures quite often. What matters is the trend and bigger picture.
The Stimulus is rather like a project but in this instance a massive and complex national project. A project can be broken down in two broad categories: design and execution. At the design stage (the first few months of the Stimulus), everything is being organised and put in place administratively with relatively little being carried out. The upcoming months will be the period when the massive spending and investments will be executed at an exponential rate. In fact, 1 billion dollar is already being allocated each day for Stimulus projects.
In layman’s terms, the Stimulus is needed for the simple reason that with the failure of the financial system, businesses and consumers were less willing (uncertainty) and less able (banks failures and failure to provide credit) to produce and spend in the economy implying that companies sold less goods and services than usual and so the companies had to lay out workers who in turn bought less and so the cycle goes (and this might just as well have led to a depression).
What the stimulus is meant to do, and is doing, is to incite and give businesses and consumers the confidence to keep on producing and spending respectively for the upcoming spending in the economy it is to generate exponentially. Initially by giving tax breaks, benefits, spending to maintain teaching and social services jobs and then spending on stimulus projects contracts given to companies which are then encouraged not to lay off workers. All these with the consequent multiplier effect in the economy.
Companies and consumers effectively bought to this idea once the Stimulus bill was enacted and kept on producing and consuming respectively in anticipation that upcoming Stimulus spending will maintain a stable economic environment from which recovery is possible. Hence the reason why the stock market and consumer and business confidence started rising. This effort was accompanied by the bank bailout and efforts to provide credit to consumers and companies.
It is effectively because the Stimulus Package is real, a commitment of 789 billion dollars by the US government for real economic projects, that consumers and businesses bought to the scheme and started acting in a positive manner in anticipation of its positive impact in the upcoming months (the Stimulus Package direct impact should enter in full force by the fourth quarter). In fact, many economists have even argued that the amount provided for the Stimulus should have been much more higher.
As a final note, I’ll argue that irrespective of party creed, it will seem to me that the criticism levied against the Stimulus is much more of a “political vogue” (and has nothing to do with “realistic” economics) naïvely taken up by the media which tend to operate on the basis of “two sides to any story” (not a criticism though). The milestone which any such critical arguments has to overcome is to answer the question: how could a depression be avoided and a recovery started following the failure of the financial system?
Things may be going to hell in a handbasket but can we be sure that if McCain was in office things would not be the same or worse? Plus we’d have the press calling McCain McHoover and other epithets. While McCain’s plan would have been much narrower, would we be hearing from the democraps if we got the same or only slightly better numbers, that if only they had passed the Obama plan (or the democrap plan) we would have had full employment and thus McCain Palin have destroyed the economy with their reckless plans?
@eaglewingz08 asked: “Things may be going to hell in a handbasket but can we be sure that if McCain was in office things would not be the same or worse?”
Yes.
If McCain were in office I can say with 100% certainty we would never have passed such monstrous stimulus bills. And the power grab that Obama has put on the automotive and financial sectors would have been much less severe.
What a shame that all of our friends who promised McCain was such a smart choice in the GOP primaries because he had the best shot at winning were WRONG.
The chart should be titled … “Up, Up and Away”
One thing you should remember about this is that you don’t have to wait for the unemployment data to come in to treat a chart like this as a bald-faced lie. Nobody can model the economy out to five years with any accuracy whatever; as soon as someone produces a chart like this, they should be regarded either as propagandists or else hopelessly deluded (or both).
There’s a raging fire and the chief on scene announces “We need 8 firetrucks rather than the 6 I had original predicted”. Mike’s response: “Look! All that water you’ve been pouring on the fire has made it worse”.
As for the 3 million jobs, even the WSJ had step in and challenge the GOP spin.
Which is why Romer has a gig with Obama… chairing the WH Council of Economic Advisors. I believe “deluded” is a resume requirement to work there.
Speaking of Romer etal. There’s a “created” job(s). As a matter of fact, Obama has created massive government jobs, holding one of the largest WH and czar staffs in history. I suppose he’s counting those.
Then, of course, as the WSJ article points out, most of the “saved” jobs are government jobs, about to go into the tank.
Fact is, the stimulus has little to do with private sectors jobs overall. As gaffe-master, Joe Biden, pointed out just five days ago…
Now correct me if I’m wrong, but just how does “far less than” $126 billion create or save many jobs? And how much of at “far less than” $126 bil was wasted? According, again, to Gaffer Joe,
This, of course, would be about the same time Obama’s mouthpieces were crowing in delight about all those jobs that stimulus money that hasn’t been spent has saved.
And then, of course, there’s the problem of reduced incomes and the effect of no earnings meaning not so much contribution to the IRS revenue coffers. In fact, April of this year alone is down $138 bil from April of last year.
My… that’s more than the stimulus money that hasn’t been spent….
Yeah. That stimulus that hasn’t been spent has done wonders, all right. Let’s see… how much was the interest on the spending? Anyone want to do the math on the taxpayer cash “almost” injection, less the interest we pay and the lost income revenue? uh hum
Math is, apparently, a lost art for law school grads.
BTW, note that even even the liberal leaning Politifact from the St. Pete Times calls this Obama claim of already saving/creating 150,000 jobs so far is rated as “Barely True”.
But you know the story… repeat it often enough and the gullible O’faithful, with their veins filled with prozac, starting chanting it as fact.
There’s a raging fire and the chief on scene announces “We need 8 firetrucks rather than the 6 I had original predicted”. Mike’s response: “Look! All that water you’ve been pouring on the fire has made it worse”.
Problem with your analogy is that there is not actually consensus on the correct course of action; that is, not everyone is a Keynesian. At the very least, there are two competing economic models:
– the Keynesian ‘demand destruction’ model, which argues for massive stimulus as a way of unseizing the economy
– the Austrian ‘misallocation’ model, which argues that our problems are a result of misapplied resources (for example, residential overbuilding) and that the economic pain is necessary to force people and capital to move in to more productive activity
There are others. But the point is, if someone on the Keynesian side makes a specific prediction about what their policy will achieve (as with the unemployment figures here), and reality diverges wildly from their prediction, it has to be considered an indictment of the theory.
@trizzlor: Yours is annother not so subtle variation of BLAME BUSH.
Well you know something Trizz? This is OBAMA”S DEPRESSSION!
That’s right pal.
He got everything he asked Congress for and on his timetable.
All those trillions in new spending and it hasn’t done a damn thing just like we warned.
You can keep playing your little games if you want, but it won’t help the MILLIONS who are unemployed BECAUSE OF OBAMA’S INCOMPETENCE!
@MataHarley: The fact that the math has not been done doesn’t really swing the argument one way or the other. There’s no evidence that current stimulus spending would be doing more good had it been implemented as a tax-cut; and considering a third of the package was actual tax-cuts, it’s not clear if that money would have gotten to us yet either. More importantly, however, is determining how beneficial such spending is over the course of the next few quarters – is surging money back into the economy via tax-cuts better than a more gradual stimulus investment in the long-term?
Or it can be an indictment of the prediction metrics, which have always been inaccurate, and which were presented with the explicit caveat (omitted from this chart): “…there is considerable uncertainty in our estimates: both the impact of the package on GDP and the relationship between higher GDP and job creation are hard to estimate precisely.”
To present a chart such as this one, taken from three initial data-points and overlayed on a five year prediction (mind you, long term prediction in-accuracy crosses party lines, as the Bush numbers were similarly wrong), and then proclaim “Obamanomics Creating MORE Unemployment” is nothing short of propaganda. Of course, the point of this post isn’t about accurately assessing the stimulus, it’s about building an opposition narrative, regardless of how true it actually is. As Ace admitted recently, “The only way to even get the MSM to do their jobs and take a look is to pressure them by claiming Worst Scandal Eveh, even if we don’t all necessarily buy that. But we have to claim that in order to spur any sort of media interest whatsoever.“
triz, I believe you’ve made my point in your first sentence or two. Fact is, Obama’s stimulus had little to do with what would be an economy correcting itself… despite government intervention. What the big Zero and admin is doing is claiming credit for a natural rightening after a capsize by stating that his spending was the cure.
However, IMHO, you have an incorrect jumping point after your first sentences.
Too simplistic of thought. Point is, you need the tax cuts, but you also need a cut in spending. The spoiled elite in Congress do not know how to pull in their belts.
And again, you are ignoring the cost of that “surging money” that Congress is blowing out the door. It outweighs the long term benefits. No getting ahead until you clear just the monthly interest on all this stuff, ya know. That’s like saying you spent $1000 on your credit card, and made $300 bucks income… my what a good boy are you.
Obama is betting that the spending will boost the income and they’ll race the interest and inflation… so he’ busy planning on spending more with health care. By the time he puts cap and trade into place, the financial mallet will have fallen.
The increase on the national debt will lead to dollar devaluation and inflation, that will be controlled with rate increases. Increase the rates, and watch the housing market ring out a new death knell. Rates are already on a fast rise just this past month.
Ponder this…. a $200K mortgage at 5.8% is about $1172 monthly payment. That same payment is $1755 at 10%. I’d say that knocks a lot of people out of the buyer pool….
And if they pull a increase as they did in the 80s and shoot up to say 18%, that $200K mortgage now carries a payment of $3014. The housing prices haven’t fallen all that much, nor is the O’admin inclined to allow them to. But 18% + loan rates will do that for him… in short order. We will once again be a’wash in short sales and foreclosures, and the housing market will remain in “pause” mode since no one will be able to afford to buy, or sell. (most sellers also turn into buyers for a replacement home)
Pray tell, what do those with a nominal $200K mortgage on a standard ranch home do today when they want to sell a few years downline and the rates are so high only one of the filthy, evil “rich” folk that Obama’s making pay for the rest of the country’s welfare can afford to buy it? And how about those that want to refi just to do home improvements?
Suggestion… buy now, lock yourself into a low 30 year rate, and be prepared to stay put for a decade until we can straighten out the big Zero’s piss poor math, short sightedness, his overspending and plans to crash the economy. It’s looking damn ugly on the horizon. And I rarely place much faith in my dusty, old crystal ball, but this is looking pretty obvious.
Oh yes… but of course Mike is taking advantage of an inflammatory headline… he does so love to get the goat of the liberal denizens here. Works well, don’t you think?
@ trizzlor
Yeah man, that extra $13 a week is just plowing our economy out of the recession. But hey, they expanded the EITC and we know that will help the economy. People with EITC are known for creating jobs and expanding capital.
That is exactly right. Unless the media is forced to deal with an Obama failure, they will ignore it. Hard to report when you’re too busy bowing before the messiah.
HOW THE STIMULUS PLAN HAS BEEN WORKING ALREADY AND WHY IT IS BOUND TO GATHER PACE
The stimulus plan in of itself has halted the dramatic plunge in business and consumer confidence with the very likely threat of an economic depression earlier in the year, and businesses and consumers taking a less weary and more upbeat attitude to the future. Maybe more than anything else this will be the most significant impact of the stimulus package in the long-run enabling a spectacular recovery from the real possibility of depression before its passage. Businesses and consumers have become more and more confident that spending from the stimulus in the upcoming months will provide a solid environment for economic activity thus encouraging investment, reducing the pace of job losses and encouraging consumer spending. In other words, the stimulus package has avoided “a cycle of economic downturn to depression” and is now about to engender “a cycle of economic upturn to recovery”.
The stimulus package cash handouts and other social initiatives have played no minor part in lessening the burdens on individuals of the economic downturn and the consequent increase in the number of people unemployed thus palliating the effects with regards to mortgage, health coverage and consumer spending.
The stimulus package has halted the lost of jobs in the areas of education and other state level services and enabled States to avoid budget bankruptcy (caused by the fall in revenues due to the economic downturn) with the result of avoiding indirect job losses in the private sector as well.
The stimulus package is bound to lead the way for new jobs creation to be followed suit by direct private sector investments with the consequence of increasing spending in the economy and accelerating economic recovery. It should be noted that jobs created by the stimulus will have a multiplier effect in the creation of jobs by private enterprises.
Perhaps more fundamental for long-term economic recovery, given the areas of investment of the stimulus package (infrastructure, energy and green jobs, education. etc.), it is the type of government investment required for renewing long-term economic growth. As was the case with FDR’s New Deal in the 1930s and Eisenhower building of interstate highways and investment in the sciences in the 1950s, the stimulus package is bound to restructure the foundation of the US economy within which private enterprise will thrive.
The fundamental element in the criticisms levied against the stimulus package that it will increase the US deficit is the total disregard by most critics of what would have happened without the stimulus with respect to avoiding the real threat of a depression, raising business and consumer confidence and restructuring the economy. Thus providing a good foundation for real growth in the long-run (boostered by the Stimulus and led by private enterprise) with economic growth by itself and healthcare reform allowing for deficit reduction in the long-run.
While the Stimulus Package has often come under this one-sided criticism of increasing the US deficit, such an argument can only be credible to the extent that it elicits how the results mentioned above which have been obtained (and are to be obtained) by the Stimulus Package could have been attained otherwise. Most critics of the stimulus package seem to think that this economy which was at the very brink of collapse simply avoided a depression by some miracle and that by the same token recovery is bound to occur by magic. To the extent that their arguments fail to answer these fundamental facts about avoiding a depression and beginning a recovery, to that extent, such arguments can hardly be considered credible.
Actually, the initial impact of the stimulus for private enterprise and consumer confidence has been “anticipatory” in that it arrested a situation where the trend of business and consumer confidence was heading the economy to a depression. That is why the statistics point to the fact that business and consumer confidence stop plunging after the stimulus plan was passed and the stock market has been “going north” since then. It is the anticipation of the impact of the stimulus plan that has stabilized business and consumer confidence, heading off the real prospect of a depression. In other words, the stimulus package first impact was to act as the brakes for an economy that was heading to a depression disaster.
http://www.rususa.com/money/finance.asp See link above for the effect of the stimulus plan on the stock market immediately after its passage in mid-February 2009: the NASDAQ, Dow Jones and S & P 500 have made a dramatic U-turn upward since March 2009.
The reason for the high job losses is very simple. Those jobs were going to be lost anyway as business and consumer confidence entered a vicious cycle to depression following the failure of the financial system – these job losses arose out of lack of confidence in the financial system. Actually, the stimulus role at the onset more than any immediate spending in the economy itself has been to provide assurance to consumers and businesses that government will spend in the economy thereby upholding consumer and business confidence and avoiding the real prospect of a depression. So the stimulus first role has been “anticipatory” in forestalling a depression.
Believe it or not, it is not out of the question that without the stimulus plan we might have been talking now about the loss of not 1.6 million jobs but 5 or 6 million jobs at the trend at which consumer and business confidence went on falling before its passage. See link on the rise of consumer confidence since the stimulus plan was passed in mid-February 2009.
http://www.market-harmonics.com/free-charts/sentiment/consumer_confidence.htm
Actually, the word “stimulus” here can be misleading in that it underemphasizes the effect of the stimulus in arresting a grave and downward spiral of the economy and rather draw focus mainly on creation of jobs which is the second and yet to fully come dimension of its impact.
Let’s imagine that the stimulus plan was to be suspended now. What will happen is that the anticipation consumers and business had about its boosting effect on the economy will die out, and this of itself will create uncertainty and may well lead to a new downward spiral. The Stimulus has a double effect with respect to recovery and job creation. Perhaps the lesser acknowledged effect is the confidence created in the economy for private enterprise and consumer consumption. In fact, this indirect effect will be the strongest push for economic recovery and job creation. Then there is the direct effect of the Stimulus Package spending and its multiplier effect given the areas of expenditure (education, infrastructure, green jobs, etc.)
While critics are pointing to the fact that unemployment is already at 9.4 percent compared to the prediction of 8.8 percent for 2010 made by the Administration, many forget that Economics like Meteorology or Earthquake Prediction for that matter is “no Physics or Maths”. What ultimately matters is the bigger picture and trends. Going by the job loss figures for March, April and May (652000, 504000 and 345000 respectively) the argument made by the administration definitely holds. In fact, the Fed, the Treasury as well as other institutions involved in the prediction of economic data tend to revise their figures quite often. What matters is the trend and bigger picture.
The Stimulus is rather like a project but in this instance a massive and complex national project. A project can be broken down in two broad categories: design and execution. At the design stage (the first few months of the Stimulus), everything is being organised and put in place administratively with relatively little being carried out. The upcoming months will be the period when the massive spending and investments will be executed at an exponential rate. In fact, 1 billion dollar is already being allocated each day for Stimulus projects.
In layman’s terms, the Stimulus is needed for the simple reason that with the failure of the financial system, businesses and consumers were less willing (uncertainty) and less able (banks failures and failure to provide credit) to produce and spend in the economy implying that companies sold less goods and services than usual and so the companies had to lay out workers who in turn bought less and so the cycle goes (and this might just as well have led to a depression).
What the stimulus is meant to do, and is doing, is to incite and give businesses and consumers the confidence to keep on producing and spending respectively for the upcoming spending in the economy it is to generate exponentially. Initially by giving tax breaks, benefits, spending to maintain teaching and social services jobs and then spending on stimulus projects contracts given to companies which are then encouraged not to lay off workers. All these with the consequent multiplier effect in the economy.
Companies and consumers effectively bought to this idea once the Stimulus bill was enacted and kept on producing and consuming respectively in anticipation that upcoming Stimulus spending will maintain a stable economic environment from which recovery is possible. Hence the reason why the stock market and consumer and business confidence started rising. This effort was accompanied by the bank bailout and efforts to provide credit to consumers and companies.
It is effectively because the Stimulus Package is real, a commitment of 789 billion dollars by the US government for real economic projects, that consumers and businesses bought to the scheme and started acting in a positive manner in anticipation of its positive impact in the upcoming months (the Stimulus Package direct impact should enter in full force by the fourth quarter). In fact, many economists have even argued that the amount provided for the Stimulus should have been much more higher.
As a final note, I’ll argue that irrespective of party creed, it will seem to me that the criticism levied against the Stimulus is much more of a “political vogue” (and has nothing to do with “realistic” economics) naïvely taken up by the media which tend to operate on the basis of “two sides to any story” (not a criticism though). The milestone which any such critical arguments has to overcome is to answer the question: how could a depression be avoided and a recovery started following the failure of the financial system?
@Aluceo: Thank you for that cut and paste job of talking points from the Democrat party.
But it doesn’t alter the FACT that Obama’s economic projections are hopelessly flawed and we can’t believe a word he says.