The US Economy and Current Financial Crisis

[Big Ol' Smitty 0]

200 Economists who don't agree with Obama's claim that Government has to fix the economy

 

Someone should tell them that Obama closed the debate on this already.

 

What’s been left unsaid is that the economists brought together by Cato do, in fact, represent a minority view of recession economics. Also left unsaid is that many of the economists that Rep. Pence, Sen. Wicker, and other Republicans have cited do not favor the House or Senate Republicans’ stimulus plans, or even the amendments that Senate Republicans were able to pass last week.

 

On Monday, a selection of the Cato letter economists from across the country were asked by TWI to analyze the Republican Study Committee’s Economic Recovery and Middle-Class Tax Relief Act, which failed in the House, and the $15,000 tax credit for homeowners, which was added to the stimulus via an amendment by Sen. Johnny Isakson (R-Ga.). Their opinions ranged from outright enthusiasm to, more often, head-shaking skepticism.

Burton Abrams, an economics professor at the University of Delaware, disagreed with the entire premise of the Republicans solutions. “It’s not clear to me that any kind of tax or spending is the right response,” Abrams said. “Sometimes, nothing is the best policy.”

 

Abrams fretted that one Republican proposal, a capital gains tax holiday, would simply apply downward pressure on stocks. Another RSC idea, a one percent, across-the-board cut in non-defense discretionary spending, struck Abrams as poorly timed. “To do that in the midst of a major downturn would be a mistake,” he said. “But again, I’m not sure any immediate reaction is a good reaction.”

 

Few of the economists said they liked the biggest Republican legislative success of the stimulus debate, the homeowner tax credit. In the words of Howard Baejter Jr., a professor at Towson University in Maryland, it was “more goddamned social engineering through the tax code.” Jeff Miron, a professor at Harvard University, called the proposal “completely insane,” as it’s “counter-productive to have, as our goal, propping up housing prices. It will end up costing us more down the line if avoid letting them fall to appropriate values right now.”

 

Baejter argued in favor of the across-the-board spending cuts, with the caveat that it “seems like a paltry amount in the right direction.” An effective spending cut, according to Baejter, would be “10 or 15 times larger than that.”

Several of the economists who’d signed the Cato letter disagreed with an RSC proposal to slash the corporate tax rate from 35 percent to 25 percent, though they did not disagree with the concept. “In my opinion it should go further,” said Lee Ohanian, a professor at the University of California, Los Angeles. “Over the last thirty to forty years people in the economics profession have concluded that taxing corporations is not good idea. The rate most people arrive at, for an appropriate level of taxation, is close to zero.”

 

Lee Adkins, a professor of economics at Oklahoma State University, held the opposite view of the stimulus. “[Policy makers are] acting like this is the worst thing ever to happen to the country,” he said, talking down spending and tax cuts both.

 

“This is just not that bad yet. The best thing they could do right now is nothing.” John Dobra, a professor at the University of Nevada, Reno and fellow at the free market Nevada Policy Research Institute, argued that the economic crisis had been “overblown” and had not yet reached even the levels of the 1981-1982 downtown. “Capitalism is about creative destruction,” said Dobra, “and you can’t just prop up people who make bad decisions.”

 

Miron held an opinion rather rare among the economists who signed the Cato letter. While he opposed the stimulus package, he did not worry that it would “particularly impede” an economic recovery. “I think we’ll get out in six to 12 months with or without a stimulus. There’s the matter of all the debt that this creates, but if we recover, the impact to the debt and the deficit will go away.”

 

One of the Cato letter economists endorsed all of the GOP’s ideas for an alternative stimulus. “I like all the proposals,” said Peter Lewin, a professor at the University of Texas at Dallas.

 

On Monday, Republicans in the House Conference Committee did not respond to any of these economists’ comments. But the lack of robust support for Republican stimulus proposals complicates GOP efforts to push back when President Obama says, as he did last night in his first prime time press conference, that “most economists, almost unanimously” agree with Keynsian spending as a way of preventing a deeper recession.

 

“If the Republicans were in charge they’d be doing the same thing,” said Adkins, the Oklahoma State University professor. “The money would just be going to different districts.”

 

http://washingtonindependent.com/29671/cato-letter

 

[Big Ol' Smitty 0]

...no current or former member of the President’s Council of Economic Advisers–Democrat or Republican, living or dead, sane or insane–has signed up for the

• of economists opposed to the stimulus package.

 

http://delong.typepad.com/sdj/2009/01/stup...ty-alivetm.html

 

[At Home 0]

Well like I said it isn't over till its over....Just saw on TV that both house and senate are back in behind close doors over this.

 

http://www.nytimes.com/2009/02/12/us/polit...tml?_r=1&hp

 

It's $30 billion less this time.

[MarvinisaLunatic 0]

200 Economists who don't agree with Obama's claim that Government has to fix the economy

 

Someone should tell them that Obama closed the debate on this already.

 

What's been left unsaid is that the economists brought together by Cato do, in fact, represent a minority view of recession economics. Also left unsaid is that many of the economists that Rep. Pence, Sen. Wicker, and other Republicans have cited do not favor the House or Senate Republicans' stimulus plans, or even the amendments that Senate Republicans were able to pass last week.

 

On Monday, a selection of the Cato letter economists from across the country were asked by TWI to analyze the Republican Study Committee's Economic Recovery and Middle-Class Tax Relief Act, which failed in the House, and the $15,000 tax credit for homeowners, which was added to the stimulus via an amendment by Sen. Johnny Isakson (R-Ga.). Their opinions ranged from outright enthusiasm to, more often, head-shaking skepticism.

Burton Abrams, an economics professor at the University of Delaware, disagreed with the entire premise of the Republicans solutions. "It's not clear to me that any kind of tax or spending is the right response," Abrams said. "Sometimes, nothing is the best policy."

 

Abrams fretted that one Republican proposal, a capital gains tax holiday, would simply apply downward pressure on stocks. Another RSC idea, a one percent, across-the-board cut in non-defense discretionary spending, struck Abrams as poorly timed. "To do that in the midst of a major downturn would be a mistake," he said. "But again, I'm not sure any immediate reaction is a good reaction."

 

Few of the economists said they liked the biggest Republican legislative success of the stimulus debate, the homeowner tax credit. In the words of Howard Baejter Jr., a professor at Towson University in Maryland, it was "more goddamned social engineering through the tax code." Jeff Miron, a professor at Harvard University, called the proposal "completely insane," as it's "counter-productive to have, as our goal, propping up housing prices. It will end up costing us more down the line if avoid letting them fall to appropriate values right now."

 

Baejter argued in favor of the across-the-board spending cuts, with the caveat that it "seems like a paltry amount in the right direction." An effective spending cut, according to Baejter, would be "10 or 15 times larger than that."

Several of the economists who'd signed the Cato letter disagreed with an RSC proposal to slash the corporate tax rate from 35 percent to 25 percent, though they did not disagree with the concept. "In my opinion it should go further," said Lee Ohanian, a professor at the University of California, Los Angeles. "Over the last thirty to forty years people in the economics profession have concluded that taxing corporations is not good idea. The rate most people arrive at, for an appropriate level of taxation, is close to zero."

 

Lee Adkins, a professor of economics at Oklahoma State University, held the opposite view of the stimulus. "[Policy makers are] acting like this is the worst thing ever to happen to the country," he said, talking down spending and tax cuts both.

 

"This is just not that bad yet. The best thing they could do right now is nothing." John Dobra, a professor at the University of Nevada, Reno and fellow at the free market Nevada Policy Research Institute, argued that the economic crisis had been "overblown" and had not yet reached even the levels of the 1981-1982 downtown. "Capitalism is about creative destruction," said Dobra, "and you can't just prop up people who make bad decisions."

 

Miron held an opinion rather rare among the economists who signed the Cato letter. While he opposed the stimulus package, he did not worry that it would "particularly impede" an economic recovery. "I think we'll get out in six to 12 months with or without a stimulus. There's the matter of all the debt that this creates, but if we recover, the impact to the debt and the deficit will go away."

 

One of the Cato letter economists endorsed all of the GOP's ideas for an alternative stimulus. "I like all the proposals," said Peter Lewin, a professor at the University of Texas at Dallas.

 

On Monday, Republicans in the House Conference Committee did not respond to any of these economists' comments. But the lack of robust support for Republican stimulus proposals complicates GOP efforts to push back when President Obama says, as he did last night in his first prime time press conference, that "most economists, almost unanimously" agree with Keynsian spending as a way of preventing a deeper recession.

 

"If the Republicans were in charge they'd be doing the same thing," said Adkins, the Oklahoma State University professor. "The money would just be going to different districts."

 

http://washingtonindependent.com/29671/cato-letter

 

 

I like how several people in that article say that it would be better to do nothing. The idea that the GOVERNMENT HAS TO DO SOMETHING RIGHT THIS VERY SECOND TO SAVE THE COUNTRY is an overblown, bs excuse to plow through pork spending that they otherwise couldn't get passed under the impression that its going to create jobs and stimulate the economy and make things better. This is the same thing they were saying back in the fall when they ABSOLUTELY HAD TO PASS THE BAILOUT BILL RIGHT THIS VERY MINUTE OR ELSE..and we saw how that turned out..the money was wasted and the banks need even more money a few measly months later.

 

I just hope they loaded up all the pork they could get in for the next 3 1/2 years because I really want to see them come begging for more money again to save the economy again, hopefully a few more people will look em straight in the eye and laugh.

 

 

[Big Ol' Smitty 0]

Yes, some said we should do nothing. But the Hoover approach is, as the article states, a minority view among both economists and the public.

[Big Ol' Smitty 0]

BTW, the spending in the stimulus is not, by definition, pork barrel. Pork barrel spending doesn't mean "spending I don't like."

[SuperJerk 0]

Most Republican members of Congress are just ignoramuses that recite whatever talking point their corporate masters feed them, encouraged by the paid propagandists that dominate AM radio.

 

Exhibit A:

“When (President Franklin) Roosevelt did this, he put our country into a Great Depression. He tried to borrow and spend, he tried to use the Keynesian approach, and our country ended up in a Great Depression. That’s just history.” — Congressman Steve Austria (R-Ohio)

http://harpers.org/archive/2009/02/hbc-90004383

 

This is what we are dealing with, folks.

[At Home 0]

I like how several people in that article say that it would be better to do nothing. The idea that the GOVERNMENT HAS TO DO SOMETHING RIGHT THIS VERY SECOND TO SAVE THE COUNTRY is an overblown, bs excuse to plow through pork spending that they otherwise couldn't get passed under the impression that its going to create jobs and stimulate the economy and make things better. This is the same thing they were saying back in the fall when they ABSOLUTELY HAD TO PASS THE BAILOUT BILL RIGHT THIS VERY MINUTE OR ELSE..and we saw how that turned out..the money was wasted and the banks need even more money a few measly months later.

 

I just hope they loaded up all the pork they could get in for the next 3 1/2 years because I really want to see them come begging for more money again to save the economy again, hopefully a few more people will look em straight in the eye and laugh.

 

You really have no idea. None at all.

[MarvinisaLunatic 0]

Yes, some said we should do nothing. But the Hoover approach is, as the article states, a minority view among both economists and the public.

Interesting article about the almost "depression of 1920"

 

Harding inherited the mess, in particular the post-World War I depression – almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933, that FDR inherited and prolonged. Richard K. Vedder and Lowell E. Gallaway, in their book Out of Work (1993), noted that the magnitude of the 1920 depression "exceeded that for the Great Depression of the following decade for several quarters." The estimated gross national product plunged 24% from $91.5 billion in 1920 to $69.6 billion in 1921. The number of unemployed people jumped from 2.1 million in 1920 to 4.9 million in 1921.

..

One of Harding’s campaign slogans was "less government in business," and it served him well. Harding embraced the advice of Treasury Secretary Andrew Mellon and called for tax cuts in his first message to Congress, April 12, 1921. The highest taxes, on corporate revenues and "excess" profits, were to be cut. Personal income taxes were to be left as is, with a top rate of 8% of incomes above $4,000. Harding recognized the crucial importance of encouraging investment essential for growth and jobs, something that FDR never did.

..

Harding’s Budget and Accounting Act of 1921 provided a unified federal budget for the first time in American history. The act established (1) the Bureau of the Budget with a budget director responsible to the president, and (2) the General Accounting Office to help cut wasteful spending.

In the fall of 1921, Harding’s Secretary of Commerce Herbert Hoover prompted him to call a Conference on Unemployment. Hoover wanted government intervention in the economy, which as president he was to pursue when he faced the Great Depression a decade later, but Harding would have none of it. Good thing, since Hoover’s policies were to prolong the Great Depression. Harding said, "There will be depression after inflation, just as surely as the tides ebb and flow." Harding insisted that relief measures were a local responsibility.

..

Federal spending was cut from $6.3 billion in 1920 to $5 billion in 1921 and $3.2 billion in 1922. Federal taxes were cut from $6.6 billion in 1920 to $5.5 billion in 1921 and $4 billion in 1922. Harding’s policies started a trend. The low point for federal taxes was reached in 1924. For federal spending, in 1925. The federal government paid off debt, which had been $24.2 billion in 1920, and it continued to decline until 1930.

..

With Harding’s tax cuts, spending cuts and relatively non-interventionist economic policy, the gross national product rebounded to $74.1 billion in 1922. The number of unemployed fell to 2.8 million – a reported 6.7% of the labor force – in 1922. So, just a year and a half after Harding became president, the Roaring 20s were underway! The unemployment rate continued to decline, reaching a low of 1.8% in 1926 – an extraordinary feat. Since then, the unemployment rate has been lower only once in wartime (1944), and never in peacetime.

 

 

 

 

and yes, this was mentioned by Glenn yesterday. Its pretty fun to find out something I never learned about in school. Hell, I think we completely passed over Harding's presidency since it was so short.

 

 

[Big Ol' Smitty 0]

I think I'm gonna leave this to Jerk.

[SuperJerk 0]

Its pretty fun to find out something I never learned about in school. Hell, I think we completely passed over Harding's presidency since it was so short.

That's because history classes usually don't spend time on things that didn't happen.

 

Whoever wrote the piece apparently has the clairvoyance to not only predict what would have happened had Harding not implemented his policies, but can also draw conclusive conclusions from incomplete economic data (the modern means of measuring economic trends hadn't been developed yet) from over 80 years ago.

 

The truth is that government spending as a percentage of GDP was too tiny in 1921 to have any real impact on the economy. Government spending had already declined following the end of World War I, and the post-war recession following World War I was most probably ended by a post-war business cycle, and the post hoc reasoning the author uses that the Harding economic policies caused the roaring 1920s (which we learned later weren't so great for farmers or long term growth). This whole article is one big reactionary fantasy about how the 1920s were this huge laissez-faire utopia that only ended because big government exploded onto the scene in 1929 (which, from a cause and effect standpoint, is an obvious paradox since so-called big government was a reaction to the Depression).

 

Don't get me started on how wrong Harding's foreign policy ideas (the author calls them "non-interventionist", but was really the standard isolationism that was common up until World War II) were.

Edited February 12, 2009 by SuperJerk

[At Home 0]

Let us not forget that many of the studies on unemployment and such in the FDR years, get ready for this, does not count those employed by the government as employed, they are counted as unemployed.

 

The truth is that government spending as a percentage of GDP was too tiny in 1921 to have any real impact on the economy. The post-war recession following World War I was most probably ended by a post-war business cycle,

The recession after WWI was not "probably" a post-war business cycle, it was a post-war business cycle after the crest, during the switch from a wartime to peacetime economy.

 

and the post hoc reasoning the author uses that the Harding economic policies caused the roaring 1920s (which we learned later weren't so great for farmers or long term growth).

Big understatement here. The farming sector collapsed.

 

 

[Big Ol' Smitty 0]

Harding was good at nailing bitches, though.

[At Home 0]

Yes

[SuperJerk 0]

Let us not forget that many of the studies on unemployment and such in the FDR years, get ready for this, does not count those employed by the government as employed, they are counted as unemployed.

I went in and added an allusion to this in a re-edit of my post. We don't measure things the same way today as we did back then, so the author is really over-stating the conclusiveness of his evidence.

 

The truth is that government spending as a percentage of GDP was too tiny in 1921 to have any real impact on the economy. The post-war recession following World War I was most probably ended by a post-war business cycle,

The recession after WWI was not "probably" a post-war business cycle, it was a post-war business cycle after the crest, during the switch from a wartime to peacetime economy.

 

and the post hoc reasoning the author uses that the Harding economic policies caused the roaring 1920s (which we learned later weren't so great for farmers or long term growth).

Big understatement here. The farming sector collapsed.

Well, I was trying to be cordial, but yeah...you're right.

 

 

And for the last 80 years, conservatives have been struggling to find a way to blame government expansion for the Great Depression, as to not invalidate the argument for laissez-faire capitalism. Like I said, to blame government expansion for the Great Depression is a cause-effect paradox that ignore simple facts like when the Great Depression began and when the New Deal started.

[NoCalMike 0]

Wasn't FDR talked out of taking action for the first 2 or 3 years of his Presidency by the Republican opposition, which had bad results, and it is those 2-3 years that Republicans often like to point to as some type of "proof" that FDR's policies did some type of harm.

 

It is very silly that the minute Obama gets sworn in, the entire right-wing radio brigade is trying to rewrite history when it comes to FDR and now they can't stop slobbering over themselves trying to out "we're turning to socialism" each other.

 

30 years of Reaganomics got us into the current situation, yet Republicans are still banging the same drum over and over.

[Big Ol' Smitty 0]

NCM, you're a little mixed up on FDR there.

[MarvinisaLunatic 0]

Just wait til people hear that the government's spending 800 billion dollars and all you get out of it is a lousy $13 a week from June to December due to the Work Tax Credit. By that time, gas will be back to $3.50 to $4 a gallon and that little bit of money ends up going straight into most people's gas tanks...AWW.

 

 

 

 

[At Home 0]

Just wait til people hear that the Republicans cost the economy 600,000 jobs because they wanted to cut out $86 billion in spending, a large portion of it to states. By that time, you would have resorted to cannibalism..AWW.

[MarvinisaLunatic 0]

Just wait til people hear that the Republicans cost the economy 600,000 jobs because they wanted to cut out $86 billion in spending, a large portion of it to states. By that time, you would have resorted to cannibalism..AWW.

Not creating 600,000 jobs at a cost of over $140,000 per job? Wow, Im sure people will be crying a river over that one.

[At Home 0]

Just wait til people hear that the Republicans cost the economy 600,000 jobs because they wanted to cut out $86 billion in spending, a large portion of it to states. By that time, you would have resorted to cannibalism..AWW.

Not creating 600,000 jobs at a cost of over $140,000 per job? Wow, Im sure people will be crying a river over that one.

 

Despite the fact that those 600,000 would've had a large impact on GDP, on top of the future planning components of the money cut out that would've critically help states to not go into the red, as well as benefitted education and all sorts of other miscellaneous projects to help drive up GDP? Yes, I'm sure there are a lot of people crying over that one. At least 600,000.

[At Home 0]

I guess kind of old news, but the Senate version of the stimulus saves 12-15% fewer jobs than the House version. That would be 430,000-538,000 jobs.

[SuperJerk 0]

Sen. Bernie Sanders rips on Milton Friendman: http://inthesetimes.com/article/4193/the_failed_prophet

[NoCalMike 0]

Sen. Bernie Sanders rips on Milton Friendman: http://inthesetimes.com/article/4193/the_failed_prophet

 

Bernie Sanders is a guest on Thom Hartmann's radio show every friday. I wish there were more like him in the government.

[At Home 0]

This is one of two editor's picks on the comments from Paul Krugman's latest article.

 

Keynesian economic policy usually calls for deficit spending, and that is basically what Nobel Laureate Krugman advocates. The idea is that government spending can increase the overall demand for goods and services.

 

The error in this instance is that we already have a strong demand for goods and services. The problem is that we satisfy that demand by importing way more than we export.

 

Therefore, the solution is to put high tariffs on imported goods and services. This will also lead to lower trade deficits, and thus less foreign borrowing.

 

Let's go back to protectionism and mercantilism!

[EricMM 0]

That stood out to me as well.

 

Sigh.

[SuperJerk 0]

Wait...what?

 

What the fuck did they mean when they said "foriegn borrowing" and what does it have to do with the trade deficit?

 

It reminds me of people who think that the American government financing deficit spending by taking out a giant loan at the First Bank of China or something.

[MarvinisaLunatic 0]

Wait...what?

 

What the fuck did they mean when they said "foriegn borrowing" and what does it have to do with the trade deficit?

 

It reminds me of people who think that the American government financing deficit spending by taking out a giant loan at the First Bank of China or something.

 

Nah, we're just running the printing presses 24/7.

[BruiserKC 0]

Something tells me that this whole thing will spell of fuzzy math part Deux. Let's say this package is designed to create 3 million new jobs. And instead the package ends up taking away 2 million jobs. People will say if it wasn't for this package that we would have lost 5 million. Plus, when you have an unapologetic liberal in Jim Cramer claiming he can see no silver lining with this whole thing, something tells me we'll be going through this again in 6 months to a year. Especially when it doesn't deal with one of the biggest reasons for the slowdown of the economy, which is the housing market going in the toilet and foreclosures skyrocketing.

 

[At Home 0]

That's why we devised a whole other plan for that. Just google Giethner. Also, watch the video that I posted up there a little while ago from the two guys at MSNBC. They want to take virtually of the risk out of the system.

 

I wouldn't be surprised if we saw this again in six months. We should be doing those six months right now and actually having a stimulus package that stimulates our economy to make up the $2.9 trillion that it won't be producing. We're turning Japanese--our stimulus package is probably going to allow us to avoid the worst, but it's not stimulating like it should be. The package should have been bigger, 50% bigger. I certainly hope we don't have to see the Japanese reality, that it takes years and years and years to try to kick start the economy when the initial bolt was shot.