Recession economics
Can I just say one thing? I’m sick of people bashing the president for spending the money that is right now keeping us from a second Great Depression. The government budget isn’t like a household budget. When the economy stinks, you and I tighten our belts and spend less. And that’s exactly why the government has to spend more. If they don’t take up the spending slack, more of us will lose our fucking jobs.
People are out of work, making less money, spending less… putting more people out of work, rinse, repeat. And you want the government to spend less, too? That’s exactly when the government needs to borrow and spend. At least short-term. At least some of us will keep working due to that increased demand.
And I think a lot of Republican politicians know this. Not all of them. Some of them are as dumb as a bag of hammers, but many of them do understand this. But they see political gold in telling the American people that Obama’s stimulus spending is an outrageously wrong thing to be doing at this time, when in fact, it’s precisely the right and necessary thing to do.
They raise the specter of the increasing debt. I worry about that, too. But I just want to say two things. First, the idea that modern Republicans are in any way deficit hawks is ludicrous. Second, it’s wrong to confuse short-term spending to get us out of recession with long-term deficits that threaten our financial well-being. Dick Cheney said “deficits don’t matter.” Bill Clinton ushered in the era of “pay as you go” and ran a surplus instead of a deficit. Those are facts. As much as Democrats like the idea of increasing social spending, they do have a tendency to pay for it. Republicans pay for nothing. They want tax cuts and increased spending and “deficits don’t matter.”
Next time you hear a Republican whining about the debt, ask yourself where he was when Bush implemented his entirely unpaid-for Medicare part D program. Then ask yourself how many more people would be unemployed without Obama’s stimulus spending.
February 4th, 2010
I was not a reader of you back in the pre-recession/pre-9/11 days when surpluses abounded, so I cannot state what your stance was back then on gov spending. But if/when we return to that state, I’ll be awaiting your post calling for government to cut back on spending. Right? By your logic, the time for government to spend if when the population isn’t – therefore it only goes to say that when the economy is humming and flush with activity and money, government needs to cut back.
February 4th, 2010
if/when we return to that state, I’ll be awaiting your post calling for government to cut back on spending. Right?
You mean cease stimulus spending and industry prop-ups? Definitely.
Which I suppose is not the answer you’re looking for. We have different ideas of what baseline spending should be, you and I, even in the most prosperous of times. That hasn’t changed.
February 4th, 2010
That’s such a B.S. answer Scott. Dollars are dollars, no matter how you wish to label them. The invisible hand of the market, and our bond holders (mainly the Chinese), neither know, nor care, if the dollar they hold claim to is being spent on grandpa’s Viagra, a new choo-choo train between Milwaukee and Madison, bullets for Marines, AIG bonuses, or Xerox paper for the 3th floor of the State Department.
It’s total dollars in and total dollars out. You cannot claim on the one hand that spending labeled “stimulus” has some sort of effect on the economy, but on the other hand claim that total government spending mystically ceases to have an effect on the economy when times are prosperous. The magic “baseline” you reference – below which we shall never venture. BUNK! The economic effect exists, or it doesn’t. Take your pick. Can’t have your cake and eat it too.
February 4th, 2010
but on the other hand claim that total government spending mystically ceases to have an effect on the economy when times are prosperous.
I don’t think I’m claiming that at all. What I’m claiming is that there are certain circumstances when it’s necessary to spend way beyond what is usually optimal. Now is one of those times. The Great Depression was another. And when the economy is stronger, it’s time to pull back and return to that optimal level. No matter how great the economy is doing there’s always a level of government spending that’s necessary.
What’s the optimal level? Fuck, I don’t know. But I think it’s probably pretty close to what we were doing 15 years ago plus health care. And I’m sure you disagree. But one thing I’m absolutely sure of is that you don’t think zero government spending is optimal. And you don’t think that 100% government spending is optimal. We’re in agreement on that I’m sure.
February 17th, 2010
This is interesting – I think gov’t spending in a recession is helpful as long as there are clear cut plans to replace the money. However, name a single politician that would actually stick to this plan. Obama’s plan is flat wrong, simply because he has zero plans to make it up.
I agree with your assessment of Bush’s Medicare Part D, along with his spending on education, etc – that’s just a stupid way to try to be bipartisan. A good bipartisan action is Bill Clinton signing welfare reform. I personally think that had an impact on the economy that no one would ever admit – when you return thousands of people back into the workforce, and take off the gov’t teat, that is HUGE.
But I digress. And now, Obama – after watching everything plummet for a year – submits a budget that absolutely blows up our debt. There is a difference between short term recessionary spending, and simply tanking the country. I could understand him claiming that he “inherited” stuff, but those days are fast slipping away.
Also, there is much to be said for cutting spending. Take a look at the first Depression – which happened in 1920. Very few people know anything about it because it was so short-lived. I quote, “the U.S. price level declined by over 40% in 6 months and 56% for the year. The highest decline ever in the whole history of the United States. The gross national product plunged 24 percent. ” Housing values fell 18%. Unemployment was at 12%. Sound familiar?
The solution? It didn’t involve ANY gov’t spending. Harding cut taxes drastically. And get this – careful, you may fall off your chair. The gov’t cut spending almost in HALF over the course of three years. In two years, unemployment fell from 12% to 6.7%.
Most Republicans and Democrats really aren’t this dumb, they just want their pet projects. The one thing that Obama has done right recently is appoint a bipartisan commission to submit ideas to lower the deficit. It won’t have any real impact, but I hope it’ll embarrass some politicians. Do they even have any concept of embarrassment at this point?
Here’s the point. Obama submitted a budget asking for an additional 1.9 trillion in borrowing. If you can defend that, then I give you all the credit in the world. Bush was bad – averaged deficit of 3.4% of GDP. Obama? 7.5%
The political debate is long over at this point. I agree with you that a lot of Republicans are NOT deficit hawks. Actually most politicians are self-serving, clueless losers, including Obama.
February 17th, 2010
There are so many things wrong in your lengthy comment that I don’t even know where to begin. So I think I’ll just limit myself to this link:
http://www.nytimes.com/2010/02/17/business/economy/17leonhardt.html
February 17th, 2010
It’s easy to vaguely insult, and reference an article that has zero links to real numbers, without providing any real refutation. I would love to see ANY links that show how many of these “1.6 million jobs” are NOT government jobs. Honestly, I’d love to see any jobs directly linked to the stimulus. And the comedy increases as the article you pasted references food stamps and unemployment as part of the reason for the stimulus working?
Are you kidding?
I don’t want to hijack your blog, and I’m certain we could go back and forth for days quoting articles.
I’ll use a Democrat statement to make my point: Vice President Joe Biden says “Washington right now is broken” and the country is in “deep trouble” unless it attacks ballooning federal deficits.
This, after a budget submitted with 1.9 trillion in deficit spending? Seriously?
P.S. Time Warner is the most obtuse company I’ve ever had to deal with.