# Economic Stimulus

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Lots of people seem to opposed to government spending (and economic stimulus), these days ... decisions based on ignorance, most likely.

So, I'm wondering.. What would have happened if the government took the republican approach?

What was John McCain's proposal to fix the weak economy? (I could not find this on Google)

If there was no government stimulus (spending) ....

Would the economy be worse off than it is now?

Would the DOW be the same?

How can the growing national debt negatively effect the USA/economy? Will it?

Thanks.

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Lack of stimulus we would have had another depression... almost certainly. We are at the zero lower bound already (essentially, rates are as low as they can go, so we can't reduce rates further to encourage growth), so the government stimulus was a last resort.

It has helped stop the nose dive. We actually need more stimulus to have a real impact on unemployment. Calculations suggest that we need 5 straight years of roughly 7% growth just to bring unemployment down to around 5-6% again. That's a LOT of growth, and we simply can't do it without more stimulus.

Debt is bad... in the long-term, but in the short-term, it essentially is good... and helps grow the macro-economy. In short, it will cost us less long term to have debt now and grow jobs than it will to reduce debt now too early (like they did in 1937, resulting in another negative turn of the economy) and accept the resulting job loss. Essentially, more jobs equals more growth and more money, so we can pay off the debt quicker and without as much long-term harm.

The dollar will be weakened, and we need to be cautious about that, but at least it will make our exports more attractive and hence help our economy. The downside is that it also means our purchasing power on imports is weakened, but the exports will outweigh the loss on import ability. We should be okay for the time being. As long as the world doesn't lose confidence in the dollar (which will happen QUICKLY and over-night once/if it does happen... it won't be gradual), we're better off running a temporary debt rather than letting unemployment continue to climb and accepting the resulting long-term harm.

That's my take, anyway.

World industrial production in the Great Depression and now:

Basically, we started out with a year that matched the Great Depression, but have since pulled back a bit from the edge of the abyss, and that is a DIRECT result of the stimulus. The problem is that political will in the US was too weak to do enough. We should have done more and gone bigger... like China... who is eating our lunch in pretty much every sector right now, and positioning themselves very well for long-term growth and sustainability... especially in terms of green energy.

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So, I'm wondering.. What would have happened if the government took the republican approach?

I thought the government was...G.W. Bush decided the best way to fix the problem was with bailouts. Obama endorsed this and added his own bailouts.

What was John McCain's proposal to fix the weak economy? (I could not find this on Google)

I don't recall him addressing the issue...probably because pointing this out would have been worse for his campaign than ignoring the issue.

If there was no government stimulus (spending) ....

Would the economy be worse off than it is now?

considering we have only spent about 20% of the stimulus, I honestly don't think it would be much worse. I think the DOW would be similar.

How can the growing national debt negatively effect the USA/economy? Will it?

Thanks.

At some point it will obviously result in either much higher interest rates due to a lack of capital (as it all goes to service this debt), or it will result in inflation due to "printing" of money in an attempt to provide capital. The extent and timing of these events is very uncertain however.

Disclaimer: I'm not an economist, so the above is my thoughts only and could well be wrong.

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considering we have only spent about 20% of the stimulus, I honestly don't think it would be much worse.

It's actually closer to half.

http://www.recovery.gov/Pages/home.aspx

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It's actually closer to half.

http://www.recovery.gov/Pages/home.aspx

Your own source (under overview of funding) indicates that $207.3B of the$787B has been paid. By my math, that is 26%.

Edit: I also note that 640,329 jobs "saved" divided by the expenditure of $207.3 billion results in a cost of$323,740 per job "saved". I guess it is debatable if the jobs saved is worth this cost, but why not just give the unemployed $100k instead? ##### Link to comment ##### Share on other sites I included contracts for which money has been ear-marked/set aside. The guarantee of spending for specific purposes is generally considered as money already "out the door" or money already spent when dealing with financial data and budgets (at least, that's how it's done in my world... money guaranteed for something is no longer available, and hence already spent). It sounds like you were referring only to dollars physically delivered, so your number is nearly correct in that sense (although, still under-representative, and does not take into account the psychological/economic gain resulting from the confidence and change in business decisions which comes from a guarantee of spending). Sorry for not being more clear with my point. Merged post follows: Consecutive posts merged why not just give the unemployed$100k instead?

Then you'd be treating the symptoms, not the root cause. The spending was about more than merely saving jobs in the immediate term... it was about stimulating longer term growth and markets, hence creating higher levels of job growth for many years to come. Giving people a bunch of cash won't have the same stimulus effect as investing money into specific projects which cascade their effects throughout the economy.

Edited by iNow
Consecutive posts merged.
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I included contracts for which money has been ear-marked/set aside. The guarantee of spending for specific purposes is generally taken as the money already "out the door" when dealing with financial data and budgets.

It sounds like you were referring only to dollars delivered, so your number is correct in that sense. Sorry for not being more clear.

I see your point. But then, the companies with these contracts might not proceed with the construction projects (or whatever) until they get paid. Or they may start when they get paid a small deposit. They may have been paid, but have not started the work (which will expand the M3 money supply). Or they may start right away...it is difficult to determine how much economic benefit has been gained for this reason alone. And government contracts can cause more problems for the economy, as an example, we've seen problems with the "cash for clunkers" program in that some car dealers sold cars, but still haven't (or maybe they have by now) gotten paid.

This is a difficult thing to determine and even economists differ greatly in their opinions.

I'm not sure whether or not I agree with your assessment of a long-term jobs vs. short term cash payout. You may be right.

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Well, I'm peeved because I'm going to be one of the people stuck with paying the bill, and I'm particularly peeved about who the bailout money went to. And I'm not convinced that the bailouts were necessary, especially in the long term as it sends a very clear message as to how we deal with risky behavior that results in losses.

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Well, I'm peeved because I'm going to be one of the people stuck with paying the bill, and I'm particularly peeved about who the bailout money went to. And I'm not convinced that the bailouts were necessary, especially in the long term as it sends a very clear message as to how we deal with risky behavior that results in losses.

Bailout (TARP) != Stimulus (ARRA)

Please don't conflate the two. Thanks.

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Well, I'm peeved because I'm going to be one of the people stuck with paying the bill, and I'm particularly peeved about who the bailout money went to. And I'm not convinced that the bailouts were necessary, especially in the long term as it sends a very clear message as to how we deal with risky behavior that results in losses.

I think the white house will sooner or later lay the smack down on the execs and folks responsible for screwing up the economy (irresponsible bankers)... But their first priority was to stabilize the economy, which they've done for the most part, imo.

Edited by gre
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• 3 months later...

It's really too bad that facts don't tend to change people's preferred narrative. Either way, speaking of facts, the below is somewhat telling as pertains to the thread title...

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That's a great chart. Thanks, I will use that on some conservative Obama-bashing forums!

Speaking of people not wanting to let facts change their "preferred narrative", do you have one showing employment from 2001 to 2007, when Democrats were constantly pounding the podium about jobs lost, but they were actually recovering? This was a particular point of contention during the 2004 election cycle, if memory serves.

Of course, the more intelligent criticisms from the left at that time focused more on the increase in part-time employment and the issue of a "fair wage". Oddly, those issues seem to receive less attention today, and I've been wondering why the right hasn't been at least drilling for oil on the subject of part-time employment and the numbers of jobless 'who just give up'. The right seems to do better than the left at populist rabble-rousing, but not as well at intelligent criticism.

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Speaking of people not wanting to let facts change their "preferred narrative", do you have one showing employment from 2001 to 2007, when Democrats were constantly pounding the podium about jobs lost, but they were actually recovering?

This one seems to offer some perspective:

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Some more charts, courtesy NYTimes:

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The problem here is that job loss is leveling (let's hope the 400,000+ losses just reported are an outlier!), while production is rising.

The problem with increasing production with stagnant job growth or loss (jumped 31,000 last report to 473,000) are clear indicators of a jobless recovery. Essentially we are seeing a return of output due to increased efficiency in the same way that early profit signals on 2009 were driven largely by payroll cuts.

To make matters worse, the drop in unemployment from 10.0 to 9.7 is mostly illusory as little of no new employment was created.

The Unemployment figures don't count all people out of work, but rather those who are out of work and actively seeking employment. They do not count part time "involuntary part-time" workers (those seeking full time employment but unable to find it), "marginally attached" (those who worked at some point in 12 months but have not sought employment in the month prior to survey), and "discouraged workers" (able bodied people who were actively seeking employment but have stopped without finding a job).

Those numbers that are not counted also total in the millions (from bls.gov):

"involuntary part-time workers" - 8.3 million (a decrease from 9.2 million)

"Marginally Attached" - 1.5 million

"Discouraged" - 1.1 million

Total unaccounted in Unemployment Percentage: 10.9 million workers.

This relates directly to another troubling figure that is not covered in DOW averages or GDP.. mortgage delinquency. The total of actual unemployed persons have been eating through their cash reserves for the last year, and where the first wave of foreclosures were primarily the mortgage holders that didn't plan, there is another round of defaults brewing for people that actually DID save, and do all the right things, but simply couldn't save for prolonged joblessness.

So as joblessness bottoms out, mortgage deliquency rates continue to remain high as the full force of unemployed, marginally employed, and discouraged workers run out of means to service their debts:

This is leading to another credit crisis or even more debt that the US will be unable to service, eventually.

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Jryan, did you copy that from a 2003 post at MoveOn.org, and just change the dates? Just kidding, I know you didn't. It always amazes me to see arguments shift from one set of political opponents to the other. For a moment I thought I was going to read about "a living wage" in there.

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The problem here is that job loss is leveling (let's hope the 400,000+ losses just reported are an outlier!), while production is rising.

The problem with increasing production with stagnant job growth or loss (jumped 31,000 last report to 473,000) are clear indicators of a jobless recovery.

You say that as if the post-stimulus progression in reducing job losses is a bad thing.

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Jryan, did you copy that from a 2003 post at MoveOn.org, and just change the dates? Just kidding, I know you didn't. It always amazes me to see arguments shift from one set of political opponents to the other. For a moment I thought I was going to read about "a living wage" in there.

I agree with your point. Here is one similar nearly all liberals complained so heavily about the deficits under Bush. Many of the neo-conservative economists defended Bush and deficit spending. Now the liberals defend Obama for deficit spending (although I think Obama's spending: Stimulus is much better than Bush's spending: War and tax cuts for the rich). But you are right Pangloss the party positions often change after new elections.

I personally do not see the problem with deficit spending. Inflation will happen with time, that is just a fact. It really seems blown out of proportion.

As for the stimulus' effect on my community? We'll my uncle and cousin got hired to help repave many of our roads here in New Mexico because of stimulus money. We really needed the road fixes too. It started about six months ago I would guess, since then they have repaved five major roads, and several other smaller roads. I know that might be anecdotal, but that is actual evidence of the stimulus money helping my community directly.

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You say that as if the post-stimulus progression in reducing job losses is a bad thing.

No, I say that as if there is no way to quantify real jobs saved, so claiming it is simply wishful thinking. It gets even tougher when the data that is gathered is vastly overstated.

But even the overstated jobs created by the stimulus is a paltry 30,000 when the unemployed number close to 20,000,000.

Merged post follows:

Consecutive posts merged
Jryan, did you copy that from a 2003 post at MoveOn.org, and just change the dates? Just kidding, I know you didn't. It always amazes me to see arguments shift from one set of political opponents to the other. For a moment I thought I was going to read about "a living wage" in there.

Ah, but see, in 2003 we didn't have the delinquencies that we do today... nor the total unemployment (here is the BLS report from August 2003).

I think if Obama suddenly stabilized the mortgage situation and dropped unemployment to 2003 levels many people, including me, would be ecstatic.

And speaking of time machines, it sure would have been nice if Bush could have gotten this bill through congress. Barney Frank's comments towards the end of that article are... unfortunate.

Edited by jryan
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I personally do not see the problem with deficit spending. Inflation will happen with time, that is just a fact. It really seems blown out of proportion.

As for the stimulus' effect on my community? We'll my uncle and cousin got hired to help repave many of our roads here in New Mexico because of stimulus money. We really needed the road fixes too. It started about six months ago I would guess, since then they have repaved five major roads, and several other smaller roads. I know that might be anecdotal, but that is actual evidence of the stimulus money helping my community directly.

I agree completely. I support the stimulus plan, though I have had a number of different concerns about it. I would love to see a new Civilian Conservation Corps, dedicated to repairing the nation's infrastructure. (How about having them build us a new high speed rail network at a rock-bottom price, and with a work force that's grateful for the task? What is the down side here?)

But the spending has to be put under control. The very notion that we can have a budget that exceeds income by 50% is mind-boggling and defies basic fiscal common sense. I don't believe we can sustain that even for the short-term projections they're talking about (10-20 years), and I have dire misgivings about projections that show things just sort of automatically becoming balanced at some magical time down the road (when current politicians are conveniently out of office).

It needs to be fixed. I don't think this country has a single higher priority. Not terrorism. Not foreign wars. Not health care. Not unemployment. Not hunger. We don't get to fix the other problems if we don't fix this one.

Merged post follows:

Consecutive posts merged
Barney Frank's comments towards the end of that article are... unfortunate.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis' date=''' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'' [/quote']

Rofl, nice find there.

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