Where is the US economy headed?

Obama's abilities?

Cyclo, the Fed has kept the dollar low to spur exports and stem imports. But now we are seeing the dollar rising dramatically against the Euro as the weaker economies there sink.
Meanwhile, China's exports drop. That is not good in a society that is possibly teetering.
And this week, the OPEC nations (specifically Iran and Saudi Arabia) split on the future of oil production and we have Syria, Yemen and Libya in play politically.

I wasn't sure how long monetary policy was going to keep the Euro stronger than the dollar, because the Euro countries that have borrowed billions are in no position to even pay interest on those bonds.

They play a dangerous game with the exchange rates that will not help us or them.

Do you believe we will be in a better position to pay our debts if the deficit continues its current trajectory?

What I believe is this; the government must spend money now to work on our infrastructure, communication, energy, and transportation. This will create the jobs needed to stop the bleeding we are now experiencing. If nothing is done, our country will bleed to death.

With government spending that will provide jobs to Americans, it will in turn create demand for consumer goods and services.

Creating jobs for the list I made above will in turn provide jobs for those who must provide and support the supplies and equipment to build and maintain the infrastructure, communication, energy, and transportation. Those who gain employment will in turn become the consumers that will create demand for more consumer goods and services.

Tax revenue will increase. Everybody wins.

So, your answer to George is "Yes!"?

How ever you wish to interpret my response.

If a government stimulus program has any chance of being effective, it must provide an increase in demand for the most basic economic equation.

The Obama stimulus program was shanghied by Democratic politicians allowed to engage in an orgy of pork by a President who cannot and refuses to lead.

As a result, billions of taxpayer (and Chinese) dollars were flushed down the toilet with little, if any, positive effect on the economy and, to the extent that the program has resulted in an increase in debt, causing real damage.

The country has no stomach for additional stimulus programs, even if they are called investments. If anyone believes that only Keynesian economics can turn things around then they can blame Obama and the Democrats for taking that tool out of the toolbox.

I hear you!~ Obama can't seem to show any backbone on anything, and it makes me wonder who this guy really is.

If it's not Obama to initiate another stim bill, I don't think we'll get another one, and we'll watch our economy suffer more. With over 25% of homeowners already under water on their mortgage, and banks not being honest about the value of their mortgage holdings, the future doesn't look too bright. It looks like the housing market will continue to suffer with all the attendant businesses related to it. 30 year mortgages are going for about 4.5%, but there aren't many people who qualify for even those rates.

More middle class families are applying for food stamps and assist from nonprofit food banks and shelters. With the higher cost of food and fuel, it doesn't look good for our future.

I wish the dumbmasses that elected this empty suit would have put some effort into finding out who this guy
really was BEFORE they voted for him instead of accepting everything the liberal media told them without question.

The last "stimulus bill" didn't stimulate anything, and the dismal economic performance we are seeing now proves it.. The bill merely delayed resolution of state government spending issues for a year or so through Federal government giveaways with borrowed money. Idle bureaucrats were kept on government payrolls while damn few "shovel ready" projects were started. No lasting boost to private economic activity resulted. Government giveaways to favored constituents with borrowed money are the formula for a Greek disaster. Real stimulus involves stimulating the investment of private capital in new enterprises. Unfortunately, through grotesque complications of the Dodd Frank legislation and Obamacare, and its badly ill conceived and mismanaged energy policy, this administration has done precisely the opposite.

We certainly don't need another "stimulus" bill like that last one. That would simply take us a step closer to the precarious debt situation of European nations you were decrying in another post. We do however need a new administration that will do less harm to our economy through its misguided payoffs to the organized constituents who bankroll it.

Although I disagree with your choice of the word "anything", that's not the point I want to argue right now. I do agree that the stimulus bill achieved very little. The question is, why did it achieve so little?

As soon as president-elect Obama floated the first outlines of his stimulus program, two competing camps of economists argued it wouldn't work. On the left were some Keynesian economist who argued that the program was too small ($700 billion to close a $2000 trillion output gap) and that it relied too much on tax cuts that their recipients wouldn't spend. On the right, economists in the monetarist and new-classical schools argued that stimulus would accomplish nothing in the real economy, but would cause inflation and soaring interest rates instead. (No link, sorry, my online subscription to the Wall Street Journal has expired.)

So, now that the Obama stimulus has disappointed its proponents' expectations, how do we know which camp of skeptics was right? The answer is to look at the differences between their predictions and compare them with reality. If the Keynesians are right and appropriate stimulus has never been tried, we would expect high unemployment, low output, and that's it. If the Monetarists and New Classical economists are right, we should see high unemployment, low output, rising interest rates, and soaring inflation. So, are we seeing interest rates rise? Are we seeing inflation soar?

The answer to both is "no". Short-term interest rates are practically zero. Financial markets expect average real interest rates to remain negative over the next five years. (Look at the yield on inflation-indexed treasuries.) As for inflation, the core Consumer Price Index is 1.3%. Although headline inflation is higher (3.2%), the bulk of the difference comes from energy prices, which are set by international markets, not US policy. In any event, financial markets think this is a fluke. The spread between inflation-indexed treasuries and regular ones predicts that average inflation over the next five years will be 2%---exactly what the Fed says it wants.

In other words, the empirical evidence confirms the Keynesian rationale why the stimulus has disappointed, and contradicts the storyline of Monetarists, New-Classical economists, and conservative politicians. Keynesian stimulus hasn't failed; it has never been tried seriously enough.


I agree. What we need is a $1-trillion-a year program for as many years as it takes for core inflation to tick up to four percent. And we need the stimulus to go into spending increases, not tax cuts.

You wrote, That's your opinion that's not supported by many expert economists. I didn't say anything about duplicating the first stim bill; I outlined what I believe will help our economy. It's somewhat analogous to what happened during WWII when the government went into a huge debt to finance the war that created a pent up demand for consumer goods and services with the money people earned while building the war machines that were needed in fighting two wars. The only difference is that job creation now by the government to work on our infrastructure, communication, transportation, and energy, will build up demand for other consumer goods and services that will multiply in jobs creation.

You're wrong on your assumption that the first stim bill did not help our economy; the turn-around in jobs from GW Bush's destruction of jobs is evident from the turn-around in unemployment when Obama took office.

Also, your assumption that investment by the private community is needed to stimulate jobs hasn't worked since GW Bush's 2001-2002 tax cuts. As a matter of fact, his job creation was the worst since Hoover.

Look up the facts and figures.

Agree with the two above - this is a foolish and unsupportable statement.



Equally foolish and prejudiced statement, and one for which you can provide NO evidence. Just a bunch of muttering about confidence and nebulous ways of blaming the Democrats. Usually followed up with dire warnings about Inflation, which never seem to come true - and yet, those who make the warnings are never discredited. Apparently it doesn't matter that the inflation hawks have been wrong for my entire life.

Are ANY of your positions evidence-based? Ever?

Cycloptichorn

After WWII we had the world's only intact industrial plant and most of it's liquid wealth. The economic growth that followed was the result of those facts, and not the debt we accumulated during the war. There was accumulated demand all over the world and we were virtualy without competitors in filling it. Those conditions no longer exist. On the contrary we have huge external debts - something we didn't have after WWII - and lots of serious economic competitors.

What unemployment turnaround under Obama????? Please explain why the recovery from the 2007 recession is so slow, unlike all the others we have seen.

I'd say that it's because the factors which lead to the recession - a financial crisis predicated upon a massive inflation of asset prices, and a lack of regulation that allowed ALL of our largest banks and trading houses to become absolutely reliant upon these inflated assets - have not been addressed. TARP swept the problems under the rug and neither the Republicans nor the Dems have accepted the fact that our housing and financial systems are completely dysfunctional.

I do think that Obama's election has made this problem worse in many ways - not because of his politics or policies, but because the election of a black guy sent Conservative America completely nuts, and their several-year long freakout has prevented anything meaningful from being done about the problem.

Cycloptichorn

Then I take it you were too young to remember how conservatives went nuts during the Clinton presidency. They accused the Clintons of everything including murder, something they haven't done to Obama so far.

In contrast to you, I do think Obama's timid politics are part of the problem. I don't know whether he could have gotten an appropriate-sized stimulus package in 2009. But the point is that he never asked for one. He always insisted that what he got was all he wanted and needed. Now it turns out that he didn't even get close to what was needed. So now he has no good answer for either of the following questions: Why didn't you ask for what was necessary and risk that the Republicans say "no"? Or, why did you fool yourself about what was needed? One way or the other, Obama's feet are rightly in the fire right now.

I think it's because of who he brought in to advise him. Choosing Geithner, Summers, and Bernake are the biggest disappointments to me in any of the decisions he's made to date.

I agree with most of your analysis, but I don't buy the lack of current inflation as causative at all. The fact is that through QE2 and other actions the Fed has kept interest rates abnormally low - a necessity for a government with a debt at our current level of GDP. In short, I think there are more variables at work in our situation than you are including in your comparison. Do you think a massive "stimulus" with borrowed money would help the Greeks to raise their level of private economic activity and productivity in any lasting way? I don't. How is their situation different from ours?

I certainly agree that the last stimulus enabled us to evade a simultaneous crisis in Federal and State governments, but that merely stretched out the problem - it didn't stimulate any added investment of private capital in the creation of new enterprises that might have a lasting effect on both employment and tax revenues. I fear the the huge body of government regulations , both those issued and many others still pending from Dodd Frank, Obama care and the newly strident EPA & NLRB, as well as a highly misguided energy policy and extraordinary support for outrageous labor union demands like the current action against Boeing, are collectively having a seriously adverse effect on the willingness of companys to invest. I see this in my company every day - we, and our corporate customers, are unable to confidently predict the cost & regulatorey regimes in which we will be functioning and therefore unable to accurately forecast a return on capital. It's a very good way to stifle investment.

Obama Recovery

The ObamaMedia is beside itself right now .. it can’t seem to understand why or how Barack Obama’s economic policies aren’t translating into jobs and growth. This must be the case because they seem to be caught quite off-guard with all of these “unexpected” jobs figures. Unwilling to blame their savior, Barack Obama, they are now trying to come up with other ways to justify this lousy economy.

I know … let’s blame the Republicans!

Take a look at this headline: Are Republicans Intentionally Sabotaging Economy For Political Gain? Can you believe that? The headline doesn’t ask if Democrats are scaring the diapers off old ladies for political gain. Not, it’s the Republicans sabotaging the economy.

Even though the Democrats held the presidency and the Senate since 2009 (the Democrats have held both houses from 2007 until last year), somehow it is all the Republicans’ fault. The Democrats haven’t presented a budget in how many years now? And it’s the Republicans who are sabotaging the economy? I’ve said it since the day Barack Obama was inaugurated .. I hoped that he would become the greatest president this nation has ever seen and that our economy would flourish over the next years. This is because I care about this country that I love more than I care about a Democrat getting credit for ‘saving’ it. Unfortunately that has not turned out to be the case. I now believe based on the decisions that Obama has made as president, that he has a fundamentally different idea of what makes this nation and our economy great. He is a man who believes in a centrally planned economy and bigger government. How is that working out for us?

If the rate of labor force participation in June 2011 were the same as it was in June 2009 (65.7%), the reported unemployment rate would be 11.2% rather than 9.1%. If June 2011 labor force participation were 66.2%, which is where it was when Obama promised that his “stimulus” program would prevent unemployment from exceeding 8.0%, the June 2011 unemployment rate would come in at 11.9%.

Being a leader means taking ownership of your triumphs and your failures, but with the ObamaMedia in tow, Obama isn’t really forced to do that.