Here comes the other economic shoe dropping...

[Coito ergo sum]

GENEVA — The U.S. has tumbled further down a global ranking of the world's most competitive economies, landing at fifth place because of its huge deficits and declining public faith in government, a global economic group said Wednesday.

http://www.msnbc.msn.com/id/44423519/ns ... ?GT1=43001

[Schneibster]

[Schneibster]

http://delong.typepad.com/sdj/2011/09/t ... olicy.html

I think Obama should:

Apply a full-court press to the Federal Reserve to get it to target nominal GDP to close the spending gap, for it is fear of risk that nobody will spend to buy what you make and confidence that your purchasing power is safe in cash that is holding back businesses from spending money to hire people.

Apply a full-court press to the Federal Reserve to get it to engage in more quantitative easing--into taking more risk onto its own balance sheet, for it is an unwillingness on the part of Wall Street to hold the risk currently out there that is making it very difficult for a wide range of risky spending projects to get financing.

Quantitative easing does not have to be done by the Fed: the Treasury can use residual TARP authority to take tail risk onto its own books as well, and should be doing so as much as possible.

Expansion does not require that the federal government spend: using Treasury (and Fed!) money to grease the financing of infrastructure and other investments by states would pay enormous dividends.

For the Treasury Secretary to announce that a weak dollar is in America's interest right now would not only boost exports, but it would immediately lead to a shift in monetary policy in Europe toward a much more expansionary profile--which would be good for the world.

None of these is first-best. All of these are likely to do some good. All should be tried.

The advice from the economists looks rather different from the advice from the politicians.

[Pappa]

Schneibster, your repeated baiting of Coito and continued remarks about him being a liar are verging on harassment and as such in breach of our rules. This is a reminder to please play nice.

[Coito ergo sum]

WASHINGTON (Reuters) - The sluggish recovery failed to gain any speed in recent weeks and softened in some areas with factory activity sputtering and retail sales under pressure, the Federal Reserve said on Wednesday.

"Economic activity continued to expand at a modest pace, though some Districts noted mixed or weakening activity," the Fed said in its Beige Book collection of anecdotal reports of economic conditions in the 12 Fed districts.

Growth was modest or slight in five districts through late August, while the remaining seven described activity in terms such as "very subdued" or "more slowly." In the Fed's last Beige Book covering the period into early July, eight regions characterized growth as having slowed.

http://finance.yahoo.com/news/Recovery- ... et=&ccode=

Did the failed strike by Verizon employees help contribute to a massive outburst of economic pessimism? The nice, round, pathetic "0" of net payroll job creation in last Friday's August jobs report added fuel to the argument that the U.S. is headed for another recession — if it's not in one already.
But the jobs report, while awful, wasn't quite as pathetic as it seemed. The 45,000 Verizon workers who went out on strike in early August were counted as job losses, even though they came back on the job in late August. Factoring them in, the private sector created 62,000 jobs in August, not 17,000. That's still terrible, but it does not, in and of itself, suggest an imminent return to recession. You can have economic expansion without jobs growth, but it's extremely rare to have private sector jobs growth without economic expansion.*

http://finance.yahoo.com/blogs/daily-ti ... et=&ccode= So - the author counts striking workers returning to work as "job creation." Nice.

[Schneibster]

Sigh. Told ya.

"He's abusing me!!!"



Is this a discussion forum, or not?

[Schneibster]

I will repeat, the stimulus was 1.5% of GDP, and the amount of money removed from the economy was 6% from stopped housing starts and increased consumer savings alone, four times more.

I posted Paul Krugman's article on it multiple times and have yet to receive a response. Are you going to respond?

[Schneibster]

CBO estimates that ARRA’s
policies had the following effects in the second quarter
of calendar year 2010:
B They raised real (inflation-adjusted) gross domestic
product (GDP) by between 1.7 percent and
4.5 percent,
B Lowered the unemployment rate by between
0.7 percentage points and 1.8 percentage points,
B Increased the number of people employed by between
1.4 million and 3.3 million, and
B Increased the number of full-time-equivalent jobs by
2.0 million to 4.8 million compared with what would
have occurred otherwise (see Table 1). (Increases in
FTE jobs include shifts from part-time to full-time
work or overtime and are thus generally larger than
increases in the number of employed workers).
The effects of ARRA on output are expected to gradually
diminish during the second half of 2010 and beyond.
The effects of ARRA on employment and unemployment
are expected to lag slightly behind the effects on output;
they are expected to wane gradually in 2011 and beyond.

So much for the "failed" stimulus.

Looks like it was too small; about a quarter to half what was required.

Source: http://www.cbo.gov/ftpdocs/117xx/doc117 ... 4-ARRA.pdf

[Schneibster]

From Media Matters: Despite warnings from many economists that stimulus may be too small, network news rarely raised the issue

SUMMARY: A Media Matters review of the ABC, CBS, and NBC evening news programs from January 25 through February 15 found that of the 59 broadcasts that addressed the economic stimulus package and debate in Congress during the three-week period leading up to and immediately following its passage, only three of those broadcasts included discussion of whether that package was big enough, despite statements from many economists that it may not be.

Comments

A Media Matters for America review of the ABC, CBS, and NBC evening news programs from January 25 through February 15 found that of the 59 broadcasts that addressed the economic stimulus package and debate in Congress during the three-week period leading up to and immediately following its passage, only three of those broadcasts -- one on each network -- included discussion of whether that package was big enough, despite statements from many economists that it may not be and may have to be followed by additional measures. Although the size of the stimulus package was referenced during at least 48 of the broadcasts that addressed it -- with anchors and reporters, in many cases, characterizing the bill as "massive," "enormous," or "giant" -- rarely was the concern raised that the package's size may not have been adequate.

That's from 2009. They knew it then. We have somehow forgotten it now? It isn't true any more? What?

[Schneibster]

It seems fashionable these days to label the American Economic Recovery and Reinvestment Act of 2009, more popularly known as the "stimulus program," a failure. The program has come and gone, economic growth continues to disappoint, and unemployment remains at unacceptably high levels, standing today at 9.3 percent — the same level as when the program was initiated. An obvious failure.

However, the only obvious thing about this argument is that it is obviously wrong.

Given the size and nature of the stimulus program, it did what it could — it ended the Great Recession and kept unemployment from rising to double-digit levels. Too small in size and too heavily tilted toward tax cuts rather than direct job-creating spending, it was simply not capable of returning the economy to full employment.

Emphasis mine.

That was published yesterday. We knew it when it was proposed; we knew it when it was passed and signed; we know it now. The statement that the stimulus "failed" is an outright lie; it's propaganda. The stimulus worked; it was too small. And that's not Obama's fault; everybody was calling it "enormous" and "huge" all the time it was being debated. That was a lie too; because at the time economists were telling Obama and the Congress that it was too small. And the evidence they were is in the articles linked in this post and the two preceding.

Source: http://www.heraldtribune.com/article/20 ... /110829890

[Schneibster]

You'll want to have a look at this thread. According to the article linked there,

The numbers in these two charts come from Budget of the United States Government: Historical Tables Fiscal Year 2012. They are just the amounts that the government spent and borrowed, period, Anyone can go look then up. People who claim that Obama "tripled the deficit" are either misled or are trying to mislead.

Emphasis mine.

[Coito ergo sum]

I will repeat, the stimulus was 1.5% of GDP, and the amount of money removed from the economy was 6% from stopped housing starts and increased consumer savings alone, four times more.

I posted Paul Krugman's article on it multiple times and have yet to receive a response. Are you going to respond?

I have commented as I saw fit.

Nobody is claiming the Stimulus plan worked. It obviously didn't, and I was saying it wouldn't work at the time it was proposed. Those who were in favor of it said that it would work and was desperately needed.

I agree that government spending can help the economy. Where I disagree with Krugman is that I think it does matter where the money is spent and how. Flushing it down the toilet, giving it away to fraudulent claims and funding overpriced boondoggles doesn't help. Spending money on viable industries which use and develop natural resources, and which engage in technological development clearly will help the economy. If you "stimulate" (mainly get off the back of) the coal industry, for example, the expansion of that industry could employ hundreds of thousands of people. Similarly, an expansion of nuclear power could do much the same. And, doubling the size of he Space industry could employ high tech and low tech people in large numbers. The ripple effect through the economy is huge. There are many other such industries that could also do well.

I oppose wasting the money. If it's going to go to non-existent recipients, fraudulent programs, boondoggles, pork-barrel projects, and Senator's private airports that barely serve any flights, then I'd prefer not to increase the deficit, or just write checks to individual citizens on a random basis, or that have under a certain net worth/income. Why have the bureaucracy?

If you put a boot on the neck of industry, then that is going to hurt that industry. Regulations have skyrocketed under the Obama Administration and it makes doing business harder and more expensive. Take a look at what has been done to the coal industry and to the utilities that burn coal to generate the electricity that heat homes. "Consumers could see their electricity bills jump an estimated 40 to 60 percent in the next few years." http://articles.chicagotribune.com/2011 ... wer-agency

Pending environmental regulations will make coal-fired generating plants, which produce about half the nation's electricity, more expensive to operate. Many are expected to be shuttered.

So, without a plan to replace that electricity with less expensive options, we're just putting an industry out of business - and as a result putting its employees out of work - and not allowing a reasonable replacement. Wind and Solar can't do it. Nuclear is not being expanded, so the upshot is that the prices will just go up for everyone. Now, if they'd add new reactors to make up for the loss of coal supply, then the price can perhaps be kept low. But, just shutting down the coal industry will reduce supply and then the price of electricity from all remaining sources will go up.

But, from an environmental standpoint, that's what the Administration must want. They are of the opinion, as are most of those that support and voted for this Administration, that we use too much electricity anyway, and a fundamental change in the way we live has to occur to bring us back off of this "unsustainable path." So, the best way to get people to shut off their air conditioners is to make it unduly expensive to operate them. Reduce the demand for electricity by raising the price.

But, the ripple effect is huge - the cost of energy effects everything we do, just about. Groceries are already feeling the cost of deisel fuel increases over the last few years. Inflation among consumer goods like groceries and necessaries - those things which are excluded from the consumer price index - is pretty high. You may have noticed experientially by going to the supermarket and seeing packages get smaller while the price goes up. http://www.usatoday.com/money/industrie ... izes_N.htm -- add 40 to 60% to the cost of electricity, and what do you think will happen to the cost of operating a Publix or Shop Rite or Foodtown or Kroger? For the "little guy" living mostly paycheck to paycheck a $1 a gallon increase in price of fuel matters, and increasing electric bills from $150 a month to $250 a month matters, and when those prices raise the price of weekly groceries from $200 a week for a family to $300 a week, that matters too.

And, you wonder why the "Stimulus" doesn't work? You could add $2 trillion in printed money to the economy, but if you fuck people on the back end by taking it out of their hide in higher energy prices, higher food prices, etc., then they're position hasn't changed.

The cost to the economy of all the anti-industry legislation imposed by the Administration rivaled the amount spent on Stimulus alone. So, the idea was - here, we''ll write checks to people we think should get money, and we'll saddle business and industry with hundreds of billions of dollars of costs. http://www.thegatewaypundit.com/2011/06 ... skyrocket/ and http://www.washingtontimes.com/news/201 ... 1-billion/ and http://www.realclearmarkets.com/article ... gulat.html

a tally of regulatory cost ranges identified by Obama has a high-end total of $105 billion for four rules administered by the Environmental Protection Agency, and another $5 billion for regulations that would be administered by the Department of Transportation. The most expensive regulation on Obama’s list, dealing with health hazards from smog, is estimated to cost the economy between $19 billion and $90 billion.

http://www.realclearpolitics.com/articl ... 11144.html

So, you can add all those costs to your tally of factors showing that the Stimulus was "too small."

The Stimulus, moreover, was the single largest spending bill in American history. We're certainly not going to do another one as big as that, let alone bigger. Obama isn't even going to propose one.

[Coito ergo sum]

And, as expected, unemployment claims went up again and are now up to 414,000 new claims for the week ending September 3:

WASHINGTON (Reuters) - New U.S. jobless claims rose unexpectedly last week, further evidence of a weak labor market just hours before President Barack Obama delivers a major address to Congress on the issue.

Applications for unemployment benefits rose to 414,000 in the week ending September 3 from an upwardly revised 412,000 the prior week, the Labor Department said on Thursday. Wall Street analysts had been looking for a dip to 405,000.

Excluding one week in early August, claims have held above 400,000 since early April. The Labor Department said there was no discernible effect from recent hurricanes and storms on the national figures this week.

http://finance.yahoo.com/news/New-joble ... et=&ccode=

[Coito ergo sum]

CBO estimates that ARRA’s
policies had the following effects in the second quarter
of calendar year 2010:
B They raised real (inflation-adjusted) gross domestic
product (GDP) by between 1.7 percent and
4.5 percent,
B Lowered the unemployment rate by between
0.7 percentage points and 1.8 percentage points,
B Increased the number of people employed by between
1.4 million and 3.3 million, and
B Increased the number of full-time-equivalent jobs by
2.0 million to 4.8 million compared with what would
have occurred otherwise (see Table 1). (Increases in
FTE jobs include shifts from part-time to full-time
work or overtime and are thus generally larger than
increases in the number of employed workers).
The effects of ARRA on output are expected to gradually
diminish during the second half of 2010 and beyond.
The effects of ARRA on employment and unemployment
are expected to lag slightly behind the effects on output;
they are expected to wane gradually in 2011 and beyond.

So much for the "failed" stimulus.

Looks like it was too small; about a quarter to half what was required.

Source: http://www.cbo.gov/ftpdocs/117xx/doc117 ... 4-ARRA.pdf

So, then it failed. If it was too small, and didn't work, then it failed. I guess Obama should have lobbied for a $3.2 trillion Stimulus plan, because - yeah - of course, it makes sense to print money to the point of 22% of the GDP. Any thought of inflation? Any unintended consequences you could see resulting from injecting new money (borrowed) to the tune of 22% of GDP?

That would have increased the national debt from $10.6 trillion to $13.8 trillion, plus the approximately 1.4 trillion it increased anyway - so we'dve been at about $16.2 trillion dollars in debt at the end of 2009. Add to that another 1.4 trillion for 2010, and we're up to $17.6 trillion, and another trillion for 2011 to date and we have about $18.6 trillion in round numbers. That's about 132% of GDP.

Excessive debt in relation to GDP presents high risks of:

1) high inflation
2) the necessity of massive tax increases;
3) killing economic growth due to the unavailability of new money, the higher inflation, and the higher taxes to pay for it.
3) cutting government services and letting people suffer
4) lenders become less willing to lend to the U.S., causing interest rates to go up and making borrowing more expensive for the government.
5) the gov't has to budget for more and more of its revenue to paying interest off the debt.. In the government's case, it's paying money to people who hold government bonds, and not all of them are American, instead of using that money for other purposes, like infrastructure repair, health care, education, jobs programs, etc.

It is plainly not as simple as just borrowing as much money as you can, especially when you look at the fact that $800 billion was by far the largest spending bill in American history, and you're talking about quadrupling it to $3.2 trillion dollars, in one fell swoop.

That kind of thing can only work if future revenues wind up being enough to pay that off and reduce the debt to a small percentage of GDP. If at the same time as you are doing this large scale borrowing you are putting the hammer down on the business and industry that makes and sells things, then there are fewer jobs left for millions of unemployed to go to and the tax revenue generated by each such person will not be added to the government revenues that can help pay down the debt.

[Coito ergo sum]

and unemployment remains at unacceptably high levels, standing today at 9.3 percent — the same level as when the program was initiated. An obvious failure.[

January, 2009 - 7.6% (announced February 1, 2009)

February 10, 2009 - on the stated purpose and projection of preventing unemployment from going above 8%, http://otrans.3cdn.net/ee40602f9a7d8172b8_ozm6bt5oi.pdf the Stimulus plan was passed on February 10.

February, 2009 - 8.1% (announced March 1, 2009)

Today - unemployment 9.1%

An obvious success?