"Cure for failed stimulus -- Spend more" says Zandi

Forums: Politics, U S-Politics, Us-Politics, Deficit Spending, Stimulus
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This was written by the same guy who Obama relied on so heavily when making projections about the promise of the stimulus back in late 2008 and jan 2009.

Not sure what economic indicators he's looking at now when he states "The plan is performing about as expected.." especially when unemployment is a full 2% points higher than he projected in Jan. In fact, the current rate is 1.5% points higher than he projected for the unemployment rate if Congress had done nothing.

At least the guy is willing to draw a line in the sand for when results should be clearly visible. What's frightening though is that he's not willing to call it quits if his own forecast fails. Instead he suggests more stimulus...isn't that the classic definition of insanity i.e. doing the same thing and expecting different results/

Perhaps Congress should try something different if things aren't better by the end of the summer....maybe a tax cut?

source

Moodys wrote:

U.S. Fiscal Stimulus Revisited
By Mark Zandi in West Chester
June 22, 2009

The stimulus that became law in February should reach its point of maximum economic benefit this summer.

Most of the benefit so far comes from checks to state and local governments and expanded unemployment insurance benefits to workers.

The plan is performing about as expected, but policymakers should be prepared to do more if the economy flags.

The moment of truth is at hand for the U.S. fiscal stimulus plan. The stimulus that became law in February should reach its point of maximum economic benefit this summer. If the plan is working, retailing will improve soon, and businesses should respond by curtailing layoffs measurably. Early results suggest the stimulus is performing close to expectations, but policymakers should be prepared to provide more help to the economy if things don't work as expected in coming months.

<<<Snip>>>

Accounting for these lags, the maximum contribution from the stimulus should occur in the second and third quarters of this year, when it will add more than 3 percentage points to annualized real GDP. This suggests that if policymakers had not been able to pass a stimulus plan, real GDP would have declined nearly 6% in the second quarter and by more than 3% in the third. With the stimulus, GDP is expected to fall close to 3% in the second quarter and rise a bit in the third. The contribution of stimulus to growth fades quickly, adding just over 1 percentage point to annualized growth in the fourth quarter of this year and the first quarter of 2010 and actually detracting from GDP growth by the second half of 2010. The impact on jobs and unemployment is also significant, as the stimulus results in approximately 2.5 million more jobs by the end of 2010 than would have been the case without it, and leaves the unemployment rate almost 2 percentage points lower.
<<<SNIPPED a bunch of excuses why this isn't going as fast as the Mr. Zandi and Obama Administration had projected>>>>

But the most important sign of whether the stimulus is working is if job losses slow substantially in coming months. Monthly employment losses have already slowed from close to 700,000 in the first quarter to 500,000 in the second quarter. The stimulus plan will be on track if the job losses moderate further to near 300,000 in the third quarter, 100,000 in the fourth, and cease altogether by next summer.

<<<SNIP>>>

Policymakers should thus be quietly preparing another round of fiscal stimulus for early 2010...

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@slkshock7,

A tax cut is the same as more spending.

2 Replies

@engineer,

engineer wrote:

A tax cut is the same as more spending.

what a silly comment, more spending is more spending while a tax cut is more spending on someone else's accounts payable.

0 Replies

@slkshock7,

Well spending more ended the 1930s " downturn" the program was name WW2 and both produced a debt of more then one year total GNP and a decade or more of the best economic growth we had ever seen.

Spending a hell of a lot can and had work in our history not only WW2 but the civil war period.

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@BillRM,

Well, bombing foundational elements of European and Asian economies e.g. factories, ports, depots, etc., to allow American economic success by filling the void is certainly an option, but I think a bit of a hard-sell.

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@BillRM,

BillRM wrote:

Spending a hell of a lot can and had work in our history not only WW2 but the civil war period.

This is typical historical stupidity. By 1862, the Federal government was spending about $2,000,000 per day on the war. That does not even approach the scale of the spending for World War II. But more than that, it is indicative of ignorance because the economic prosperity of the United States (and of Canada, which became independent in 1867) in the post-Civil War period was a product of increased immigration which was channelled either directly or indirectly (by the displacement of already resident citizens) into land opened up in the Great Plains and on the Pacific coasts. All of those new immigrants needed to be fed, clothed and housed, and provided the tools to take up their new enterprises, and the manufacturing interests of the East, and in particular of the Northeast and the middle Atlantic regions stepped in to fill the gap by expanding production and creating new vested interests (chiefly through railroads) to exploit the new markets. The only military component which aided the process were the Indian Wars on the Great Plains in the 1870s. But even without the Indian Wars, the process would have thrived.

As usual, you display the depth of your historical ignorance rather than the clever point of view which you seem to think you have.

1 Reply

@Setanta,

Sorry giving a figure in dollars not in total GNP percent is worthless when we are talking about over a hundred years time frame!!!!!

Two millions a day in 1860s is not the same as two millions a day in the 1940s!

Shame on you!

1 Reply

@slkshock7,

slkshock7 wrote:

Perhaps Congress should try something different if things aren't better by the end of the summer....maybe a tax cut?

They better do something different and fast because Obamanomics is quickly destroying this country.

0 Replies

@BillRM,

The Federal government was spending more than $2,000,000 an hour hour in the 1940s, so the comparison remains valid. The scale of Federal spending in World War Two exceeded the scale of the spending in the Civil War by orders of magnitude. During the American Civil War, there was no Tennessee Valley Authority (essential to the Manhattan Project in the beginning, by the way), there was no Social Security Administration, there were no labor unions and no Commerce Department or Labor Department. There was no army air force, there was no submarine service in the United States Navy, the total of United States Marines in 1862 could be measured in thousands while in the Second World War, by 1943 there more than a quarter of a million Marines on service at any given time. The total of the armed forces of the United States in 1862 was one and one half million, which included all the services as well as all members of state militias. The total of all branches of service in the Second World War was 15,000,000, and the population of the United States in 1942 was not tens times greater than it was in 1862. In fact the total population of the United States at the time of my birth, after the Second World War was not ten times that of the United States in 1862.

But you have avoided the point altogether, which is that Federal spending in the American Civil War was not responsible for the economic prosperity of the United States in the years following the war.

Shame on you.

0 Replies

@engineer,

engineer wrote:

A tax cut is the same as more spending.

Is it? Perhaps the level of spending would be the same, but much more of the spending would be from the private sector investing, purchasing, building, manufacturing, employing, and growing the economy instead of piling up more public debt. The government does not and has not ever grown an economy. Government policies, however, can enable the private sector to do so.

If the government reined in spending and targeted efforts at empowering and providing incentive for private business to take the risk to prosper again, we would see improvements within weeks. It is absurd to continue a policy that has never prospered the nation and continue to avoid all the policies that have done that in the past.

2 Replies

@Foxfyre,

The main problem with your thesis is that Republican tax cuts are not accompanied by commensurate reductions in Federal spending, nor has anyone ever shown that they lead to increased corporate spending or private investment.

1 Reply

@Setanta,

Setanta wrote:

... not accompanied by commensurate reductions in Federal spending ...

Liberal democrats had the best opportunity to reduce Federal spending they have had in decades and they blew it.

Obamanomics has done nothing but dramatically increase federal spending, increase the size of government
and now they are going to raise taxes across the board leaving the citizens with change that they can hardly live on.

Shame on liberal democrats and republicans that support them.

0 Replies

Statements from authority from someone whose stock in trade is flinging turds at those with whom he disagrees count for little . . .

1 Reply

@Setanta,

Obamabots are flinging turds at those with whom they disagree and it's ruining the country.

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I can see that there is no further reason to read your posts, as you don't contribute anything substantive to the discussion. As FM put it in another thread, you speak in bumper stickers.

1 Reply

@Foxfyre,

Foxfyre wrote:

engineer wrote:

A tax cut is the same as more spending.

Is it? Perhaps the level of spending would be the same, but much more of the spending would be from the private sector investing, purchasing, building, manufacturing, employing, and growing the economy instead of piling up more public debt. The government does not and has not ever grown an economy. Government policies, however, can enable the private sector to do so.

If the government reined in spending and targeted efforts at empowering and providing incentive for private business to take the risk to prosper again, we would see improvements within weeks. It is absurd to continue a policy that has never prospered the nation and continue to avoid all the policies that have done that in the past.

Yes, tax cuts are the same as increased spending. The overall spending level increases. If the government (who is already borrowing money like mad) were to grant a tax cut, it would have to borrow more money to do it. That's the stimulative power of tax cuts - deficit spending. You say that it is absurd to continue a policy that has never prospered the nation before, but government borrowing and using deficit spending in an economic crisis is exactly what Roosevelt and Reagan did. As for today, if the government is going to borrow more money, I'd rather they use it to repair infrastructure since providing infrastructure is a government function. If it really wanted to borrow to give money to citizens, I'd prefer it give it to those who are newly out of work and seeking jobs so that they do not default on their loans (creating havoc in housing markets) and allow their health insurance to lapse (adding burden to the government supported sector of the medical industry.) The last thing I think the government should do would be to indiscriminately give a check to every household in the US. I have enough junk made in other countries already. Their economies have been stimulated enough.

2 Replies

@Setanta,

Bumper stickers = Advanced liberal communication

0 Replies

@engineer,

engineer wrote:

Yes, tax cuts are the same as increased spending.

Tax cuts = Increased spending by citizens thus stimulating the economy.
Increased spending by citizens = Increased Federal tax revenues.
Increased Federal tax revenues = Increased Federal spending without stimulating the economy.

0 Replies

@engineer,

engineer wrote:

Foxfyre wrote:

engineer wrote:

A tax cut is the same as more spending.

Is it? Perhaps the level of spending would be the same, but much more of the spending would be from the private sector investing, purchasing, building, manufacturing, employing, and growing the economy instead of piling up more public debt. The government does not and has not ever grown an economy. Government policies, however, can enable the private sector to do so.

If the government reined in spending and targeted efforts at empowering and providing incentive for private business to take the risk to prosper again, we would see improvements within weeks. It is absurd to continue a policy that has never prospered the nation and continue to avoid all the policies that have done that in the past.

Yes, tax cuts are the same as increased spending. The overall spending level increases. If the government (who is already borrowing money like mad) were to grant a tax cut, it would have to borrow more money to do it. That's the stimulative power of tax cuts - deficit spending. You say that it is absurd to continue a policy that has never prospered the nation before, but government borrowing and using deficit spending in an economic crisis is exactly what Roosevelt and Reagan did. As for today, if the government is going to borrow more money, I'd rather they use it to repair infrastructure since providing infrastructure is a government function. If it really wanted to borrow to give money to citizens, I'd prefer it give it to those who are newly out of work and seeking jobs so that they do not default on their loans (creating havoc in housing markets) and allow their health insurance to lapse (adding burden to the government supported sector of the medical industry.) The last thing I think the government should do would be to indiscriminately give a check to every household in the US. I have enough junk made in other countries already. Their economies have been stimulated enough.

I think we have a material difference in opinion on government spending. Roosevelt, dealing with the Great Depression, indeed attempted to spend us back into prosperity but with limited and/or negative success. This was well discussed and well documented on the conservatism thread but so many pages back it would take a lot of time to retrieve all that and, pressed for time to day, I don't want to research it right now. But the bottom line was that history shows that Roosevelt's policies had little or no effect on the economic situation and it was, in fact, WWII that began pulling us out of the mess we were in at that time.

Reagan inherited high unemployment, double digit interest rates, unsustainable inflation, and unacceptable unemployment. An initial tax increase did little to stem the blood letting or bring about improvement--his subsequent tax cuts did. Yes he implemented a high rate of deficit spending, mostly on defense, to rebuild a military that Carter had ransacked and to keep at bay a Soviet Union that was the only serious threat to the USA at that time. A number of economists have also concurred that defense spending is the best economic stimulus. This was most recently affirmed by Martin Feldstein, Reagan's economic advisor who said something to the effect that the long range stimulus package currently progress was a mistake. It should have focused all the spending in 2009 and early 2010 and sharply tapered off after that. The focus should have been more on military spending and temporary tax credits for such things as home improvement and buying automobiles for everybody that would have put many tens of thousands of Americans back to work immediately that would have been followed by hundreds of thousands.

The government will not be able to spend us rich. If it must increase deficit spending, however, to deal with an economic crisis, it should be in the form of tax cuts and other incentives that allow the private sector to dig in and get it done. Doling out one time checks to the citizens or paying off your supporters and cronies or limited government projects simply can't do it. H2O is also right that letting the people use their own money will put people back to work faster and that will generate more tax revenues for the treasury to help offset the deficit spending.

1 Reply

The Reagan legacy was George H W "read my lips" Bush.

1 Reply

"Cure for failed stimulus -- Spend more" says Zandi

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