August 06, 2010
A Sputtering Economy?
The employment situation July release indicated a decrease in overall payroll employment. Does this outcome indicate a sputtering* economy
Definitely, several indicators are signalling a slowing economy. Two protagonists in the debate over the extent of the deceleration are highlighted in today's NYT. In this post, I want to focus on the labor market indicators. First, it's important to differentiate between the headline number and the one excluding temporary workers associated with the decennial Census.
Figure 1: Log nonfarm payroll employment, seasonally adjusted (blue line), private sector employment (red line), private sector aggregate weekly hours index (green line), all seasonally adjusted, normalized to 0 at 2007M12. Gray shaded area indicates recession, assuming trough at 2009Q2. Source: BLS via FRED, NBER and authors calculations.
Private sector employment is rising, albeit anemically, given the depth of the recession. More importantly, aggregate weekly hours in the private sector are still trending upward. That indicator is up 2.2% relative to the 2009M10 trough (for an annualized growth rate of 3.8%, in log terms). Hence, the private sector is still creating jobs, which is an important consideration if one is concerned about the self-sustaining nature of the recovery.
None of this denies the importance of government employment -- including those temporary workers associated with the decennial Census. That additional employment injected additional spending into the economy. More importantly, total government employment is declining. As Figure 2 illustrates, this decline is being driven almost entirely by state and local employment. WSJ RTE documents this trend.
Figure 2: Total government employment, in thousands, seasonally adjusted (blue line), excluding temporary Census workers (red line), state and local government employment including education (green squares). Gray shaded area indicates recession, assuming trough at 2009Q2. Source: BLS via FRED, BLS July 2010 release, NBER and author's calculations.
A regression of the change in total government employment ex.-Census on the change in state and local employment, over the 2008M12-2010M07 period, yields a regression coefficient of 1.07, adj-R2 = 0.79.
So we have continued momentum, albeit of a lackluster sort, in the private sector employment. However, with continued contraction in the state and local government employment, one cannot be assured that the private sector will continue to create jobs. That's why the reluctance of the Congress to approve additional transfers to the states was such a foolhardy one, as I argued a month ago here. It's as if some policymakers want to drive the economy into the ditch. In other words, it's in our power to prevent a sputtering economy from becoming a stagnant or recessionary economy.* Credit to my wife, Laura Schwendinger, who kept on saying this adjective was the most apt description of the economy -- and right now I think she's right!
Posted by Menzie Chinn at August 6, 2010 08:11 AMdigg this | reddit
Completely agree on "sputtering."
The real test will be when the private sector jobs created over 2008-present is greater than the federal government sector for the same time period... "present" being anytime in the future.
Posted by: Bruce Hall at August 6, 2010 12:16 PM
However, with continued contraction in the state and local government employment, one cannot be assured that the private sector will continue to create jobs. That's why the reluctance of the Congress to approve additional transfers to the states was such a foolhardy one...
Welcome to bizarro world! A world in which only private companies need to layoff workers during a recession. A world where the survival of the world's largest economy hinges on the ability of state and local government workers to remain employed.
Let's return to reality. The one where recessions are a time to reduce redundancy, (even in the government), increase efficiency, and prepare for the next expansion.
Government paychecks are written by the taxpayer. Reduce redundancy in government and reduce taxes.
State and local government makes up a little over 10% of the labor force. I think it matters little to our short term recovery if a few thousand state and local workers are laid off over the next year.
Don't get me wrong. Nobody likes to be laid off, or see their friends laid off. However, each and every one of us knows when we sign our contract that when times get tight, we may get laid off. (Tenured faculty exempted! But 2 years of unemployment checks cushion the blow for the rest of us!)
Posted by: tj at August 6, 2010 12:42 PM
And how about the many people who do not get unemployment benefits when they are laid off? Those are, by the way, people who by and large have not had an opportunity to save for a rainy day, enjoy tax free health care and other benefits.
Your use of the exclamation point at the end of the statement about the 'cushion' of unemployment benefits suggests you have no clue about what happens in the real world.
Posted by: michael at August 6, 2010 03:58 PM
tj: Government paychecks are written by the taxpayer.
There's a name for the economic theory that underlies the view that government goods and services are derivative of the private sector and do not add any autonomous value. That theory is called the Labor Theor of Value...and Karl Marx was the last major economist who espoused that view. Alfred Marshall put a stake in the heart of the Labor Theory of Value over a century ago.
Welcome to bizarro world! A world in which only private companies need to layoff workers during a recession.
Public sector employment is supposed to be countercyclical. During the boom times public sector employment is relatively less attractive and governments have a hard time recruiting top notch talent. But during the bad times public sector employment looks pretty good and that's when the envy and bitterness factor starts to come out, as your post pretty clearly demonstrates. Arguing for a procyclical approach to government employment is tantamount to cutting off your nose to spite your face. It's just dumb economics.
each and every one of us knows when we sign our contract that when times get tight, we may get laid off.
But when government sector employees sign their contracts they agree to give up large salaries in exchange for stable employment. In my case this is a pretty substantial concession....most of the people in my office are routinely offered (and sometimes accept) salary increases in the $200K-$300K per year range over and above our current salaries. We generally regard our private sector counterparts as scumballs, but take away the security of a government job and we may soften our views about private sector analysts.
Posted by: 2slugbaits at August 6, 2010 04:54 PM
Believe me, I live in the real world. I grew up in the rural midwest, began working at the minimum wage on a regular basis while in the 10th grade (and worked at less than the minimum wage on summer jobs before that.) I've lived/worked from Long Island to Arkansas. I have close friends with PhD's and some friends with less than a high school education.
I have a comfortable life now, but had to make choices between paying for health insurance or paying my rent when I was younger. (I chose rent/food over health insurance.)
The national debate really boils down to your statement:
And how about the many people who do not get unemployment benefits when they are laid off? Those are, by the way, people who by and large have not had an opportunity to save for a rainy day, enjoy tax free health care and other benefits.
Im my view, the government (taxpayers) can't afford to hold the hand of every person from cradle to grave. However, I recognize there are children born into this world in terrible situations, from inner cities to parts of rural
America to a subsistence level existence in some countries. Government will never solve this problem. We need to solve these problems ourselves. I donate close to 10% of income consisting of food/clothing/material goods/cash. I'm not sure about the numbers, but I think if each of was willing to find a cause(s) and donate 5% to 10% of our time or income then we could solve these problems.
The difference between my view and yours, is that I want to reserve the right and the choice to decide how much of my effort/income to donate, and to choose where it goes. You want the governmet to take that same income and decide which special interest gets a cut before a small fraction ends up where it is most needed.
I don't want to pay more in federal and state tax to pay for a union member's defined benefit, while my retirement account varies with the market. IMO, we should all bear the risk in our retirement accounts, not the taxpayer or employer. But I recognize that we need to make good on current and past pension promises as best we can.
So, your statement is spot on. In my view, we need to come to a consenus on our priorities within the context of a limited federal/state/local government budget. Constraning the federal budget does no good, because it simply shifts the burden onto the states/counties/cities (e.g. recent healthcare legislation).
Arriving at a consensus is exactly why we spend our time debating with one another on this website, (and thanks to Menzie and James for allowing all sides to post their thoughts.)
Posted by: tj at August 6, 2010 05:31 PM
Not only sputtering, but coming from a historic and steep collapse.
Posted by: purple at August 7, 2010 12:06 AM
tj: Herbert Hoover couldn't have said it any better. The problem with that view is that it's not economics; it's a particular kind of virtue politics. The goal of political economy is not to provide an opportunity for all prove their individual moral worth. This isn't a morality play. Life isn't about being a moral test on earth to prove we're deserving of eternal happiness in heaven. Welcome to the 21st century. The point of economics is to maximize welfare, and in particular to maximize material welfare. Today's problem is a weak recovery from a deep recession. You don't solve that problem by urging people to "man up" and show what they're made of. You fix a recession by propping up aggregate demand, and if you're in or near a liquidity trap you prop up aggregate demand through fiscal policy. You do that because private economic actors are too busy being "moral" and saving more so that they can be the kind of rugged individualists that grandpa and Herbert Hoover would be proud of. Good for them, but it's stupid public policy. When the economy goes south and monetary policy is at a zero bound then it's time for the government to step in and soak up all that extra savings from all those rugged individualists. And you don't accomplish that by shedding public sector employees because everyone needs to share in the purging power of economic pain. Other things being equal you increase govt employment during a recession and decrease govt payrolls during the good times. You don't just do that for the sake of protecting government employees; you do that for the sake of attacking the problem of weak aggregate demand, which affects everyone. If you're looking for an opportunity for shared sacrifice, then what better way than deficit spending?
We're not stuck in a weak recovery because Americans aren't moral or independent enough. We have a sputtering recovery because certain GOP politicians are either criminally cynical or criminally stupid about macroeconomics. And voters who allow themselves to be duped by the Ersatz economics coming from the mouths of Boehner & Cantor & Pence & McConnell and Ryan share some of the responsibility for this weak recovery. Instead of urging more self reliance those voters might be better served if they took a couple of macro courses at their local college. Or to borrow an image from Krugman, people didn't become less moral during the Dark Ages, just more ignorant. That's today's problem as well.
Posted by: 2slugbaits at August 7, 2010 07:06 AM
Bye bye kensians. Menzie has been claiming since day 1 the issue was "aggregate demand". Well of course. You can't have demand without a job. Wher is the 1.5 multiplier on transfer payments? Based on the amount, we should be doing well over 5% GDP growth. Even DB economist mentioned that the expiration of govt stimulus would have 1% effect on GDP. That amounts to 140B annually. WAY LESS than the 1.5 predicted.
We need jobs to grow aggregate demand. Private sector jobs. Removing the impediments of Obamacare, the min wage increase and the exploding tax rates flattened. Then private sector will increase. We are all hiring in foreign countries now, not US.
Menzie is fool's gold. Never created 1000 jobs in his life. Keynsian doesn't work.
Posted by: tim kemper at August 7, 2010 07:08 AM
tim kemper Where did you get his 5% GDP growth number coming from a 1.5 multiplier? This is a made up number. Go back and look at Romer & Bernstein's paper where they lay out the predicted fiscal multipliers by quarter and by type (i.e., spending vs tax cuts) and the predicted impact on GDP. You'll find that the actual changes in GDP were remarkably close. Even a casual back-of-the-envelope analysis should have told you that even with a 1.5 multiplier there is no way that a phased-in stimulus of ~$300B/year (i.e, average stimulus over each year being approx $150B/year...(($300B - $0B) / 2 = $150B) would be enough to generate a 5% growth in GDP. We probably need a 5% GDP growth rate in order to bring down unemployment to anything like an acceptable level, but the stimulus simply wasn't large enough to generate that kind of fiscal punch. Next time just do a little quick sanity check on your math before you make wild claims like a 1.5 multiplier supposedely generating 5% GDP growth.
Posted by: 2slugbaits at August 7, 2010 08:44 AM
So how are federal funds financed and spent?
Are the bills saddled with riders & pork?
Did ARRA 2009 fiscal expenditures have a multiple or fractional impact?
Were there competitive bids for ARAA projects?
Are the funds used to plug state & local budget shortfalls?
Are the funds given to NON-productive recipients? i.e., the extension of unemployment benefits, food stamp benefits, etc.
Are the funds used to repair (required maintenance), existing infrastructure? i.e., they are cosmetic, not used for real-investment.
Posted by: flow5 at August 7, 2010 09:24 AM
Ah, 2slugs is about to admit (or at least leaning to a level of understanding) that the stimulus was misdirected by saying this: "there is no way that a phased-in stimulus of ~$300B/year (i.e, average stimulus over each year being approx $150B/year...(($300B - $0B) / 2 = $150B) would be enough to generate a 5% growth in GDP."
Yup! There was NO WAY!!!! Such a politically motivated, misdirected stimulus package was going to have any meaningful POSITIVE effect on the overall economy.
So I ask you, as I have for many months, why? Why was it so poorly constructed, and implemented? Can't blame the Repubs for the structure of this monstrosity.
And finally, why do Dems have no/so little compassion? Why do they not care about quickly alleviating the pain and suffering caused by this recession.
BTW, just how wrongy are the Lib/Dem policies espoused for eight years of Bush administration? Guantanamo? Softer foreign policy, and especially taking the fight to them insteadof building fortress America? Govt oversight of homeland security, more Americans killed here than in eight years? And, can you remember all the hyperbolic commentary re: class warfare,entitlements especially Social Security, illegal immigration/SCHIP, and tax policy? Remember that ole "tax cuts for the rich?"
Just how many more wrongs will it take to understand that your views are just idealistic folly?
Posted by: CoRev at August 7, 2010 10:17 AM
Meh, how's that stimulus package working?
Posted by: vorpal at August 7, 2010 10:37 AM
flow5 You might want to learn the difference between an aggregate demand curve and an aggregate supply curve. Productive investment is great. It pushes out the supply curve and makes the economy more productive over the long run. So I wish there had been a lot more of it as part of the stimulus package; but the Administration caved into stupid GOP demands and so we ended up with 40% of the stimulus being ineffective tax cuts and not nearly enough public infrastructure spending. So productive investment spending would have been great...too bad the GOP balked at it. But the main point of stimulus spending is not to push out the long run aggregate supply curve...that's just a side benefit. The point of stimulus spending is to push out the aggregate demand curve.
CoRev I have been arguing for 18 months that the stimulus was misdirected. I've been pounding the table trying to make that point. Where have you been? The stimulus was too small. The math said we needed about a $1.3T stimulus package and we got half that. The math said that it should have been more spending oriented because the spending multiplier is higher than the tax cut multiplier. The stimulus produced GDP growth that was very close to what was predicted, which was to return the economy to trend growth. It did that. The problem is that we needed to overshoot trend growth, not approach it asymptotically from below.
The answer as to why it was so poorly constructed is obvious. The Democrats only had 59 votes and a few of those votes were from knuckledraggers like Ben Nelson and Mary Landrieu. The GOP simply didn't offer up very many intelligent proposals. Please name a few if you disagree. Or are you one of those who actually thinks Rep. Paul Ryan's "roadmap" makes any economic sense?
As to your other comments, I guess I'm just not following. It's the GOP that has been inciting illegal immigration and doing it for the crassest of political reasons. They're trying to fire up the Tea Party base for strictly short term political advantage. Sen. McCain may have been a brave man 40 years ago, but today he is a pathetic coward.
Posted by: 2slugbaits at August 7, 2010 01:21 PM
2slugs, those dogs do not hunt. Or let me throw the BS flag here. I have never seen you use the term "misdirected", although you have consistently said it was too small.
The stimulus bill was: Misdirected to infrastructure spending. Misdirected to public and not private jobs. Misdirected tax rebates to consumers and not enough to businesses. Misdirected in not enough tax allowances for small businesses. Misdirected in that it was implemented too slowly and too late.
Because of all that misdirection in the stimulus bill and its implementation it has been useless. You claim: "The stimulus produced GDP growth that was very close to what was predicted, which was to return the economy to trend growth." But there is NO EVIDENCE the stimulus had any more effect than doing nothing.
OTH, there is much anecdotal evidence that this administration's policies have delayed recovery and diminished growth.
Posted by: CoRev at August 7, 2010 01:49 PM
This is good! Some of our old favorites are warming up nicely! Go for it, gang! What a bunch of truth seekers!
I blame George Bush. For the Crisis of 1873 and all subsequent. Also for the Holocaust.
Posted by: c thomson at August 7, 2010 01:56 PM
Sputtering? I know what you mean but note those curves going back up or quit falling at the end of graph 1.
Posted by: neil b at August 7, 2010 02:54 PM
CoRev: You seem to have an asymmetric weighting function. You state:
"...there is NO EVIDENCE the stimulus had any more effect than doing nothing.
OTH, there is much anecdotal evidence that this administration's policies have delayed recovery and diminished growth.
There are many anecdotes I could collect up of people hired under ARRA-funded programs. So, none of these anecdotes count for jobs created, as you emphasize by using UPPERCASE LETTERS for "NO EVIDENCE"; but anecdotes count in support of delaying recovery? Hmmm, I'll have to think about the internal consistency of that approach. I do grant you that you do use the same approach over and over again on all sorts of topics you post on here.
neil_b: That's why I put a question mark at the end of the title.
Posted by: Menzie Chinn at August 7, 2010 03:22 PM
CoRev: Where have you been? Do you honestly not recall any of our discussions about the Administration agreeing to GOP demands for more tax cuts and less infrastructure spending? Are you saying you don't remember any of that? The tax cuts were misdirected because you don' get much bang for the buck. Look at the Romer & Bernstein paper...she gave tax cuts a multiplier of less than 1.00. And when the govt pushes out infrastructure spending that is pushing it out to private sector jobs. State and local governments hire private contractors. I would have liked to have seen it spent faster, but slow execution is what you get with tax cuts. You can start tax cuts fast enough, but the effect is very slow because it's driven by the frequency of paydays.
there is NO EVIDENCE the stimulus had any more effect than doing nothing
Really? Hmmmm....most of the professional economic forecasters disagree. Even John McCain's chief economic advisor disagrees. But your standard of evidence is pretty bizarre. If the stimulus produces the predicted GDP growth, then you claim the economy would have done that anyway. In any event, 18 months ago you were not predicting that the economy would return to trend growth. You were on the Eric Cantor bandwagon predicting stagflation.
Posted by: 2slugbaits at August 7, 2010 03:41 PM
c thomson I don't give George Bush credit for much, but I think he does deserve some credit for recognizing impending disaster in September 2008 and agreeing to swallowing hard and accepting the TARP solution. And I give Bush credit for being on the right side of the immigration fight.
Posted by: 2slugbaits at August 7, 2010 03:52 PM
Menzie said: "You seem to have an asymmetric weighting function...." Well, I guess symmetry is a value, but in real life it can have little meaning, unless we are having a philosophical discussion. But, then saying this: "I do grant you that you do use the same approach over and over again on all sorts of topics you post on here." is contradictory.
2slugs said: "If the stimulus produces the predicted GDP growth, then you claim the economy would have done that anyway." Yup! Indeed, it would appear that most recession recover in less time than this one. So, which is a better indicator? Estimates from those who are notorious for being less than accurate, or a historical record?
So lessee, we have a historical record that says we have done better most times, and an comment that that we are right on estimate. so, how does that make my statement incorrect? Show us how this administration had done anything that was better than any other?
BTW, you are now making the claim that the current unemployment was cooked into the stimulus? You said: "Hmmmm....most of the professional economic forecasters disagree. Even John McCain's chief economic advisor disagrees." The experts estimated this? This 9.5% was actually their goal?? Whoda thunk it? Christina Romer?
Posted by: CoRev at August 7, 2010 05:32 PM
CoRev: I apologize for being unclear. What I was trying to say is that you weight te same types of evidence against your position less than you weight the same types of evidence in favor, in all sorts of issue-areas. For instance, you deny the importance of anecdotes that indicate the ARRA created jobs, but then highlight the importance of anecdotes that are consistent with ARRA creating no jobs. It's certainly your perogative to proceed to debate in that fashion, and I think it is my perogative to point out how bizarre it is.
Posted by: Menzie Chinn at August 7, 2010 05:42 PM
Menzie, are you saying I'm biased???? :-)) Who's not?
2slugs, re: Ryan's road map, here's his response to Krugman's/your complaints: http://www.jsonline.com/news/opinion/100160259.html
BTW, where's that Dem road map?
Posted by: CoRev at August 7, 2010 05:50 PM
CoRev: This was a financial recession, not a supply shock recession. Financial recessions last much, much longer. Orders of magnitude longer. There's a new study that looks at the history of financial recessions going back hundreds of years. There was no reason to believe that this recession would have recovered on its own without benefit of government intervention.
As I've said before, it was unfortunate that Romer and Bernstein included a chart showing unemployment topping out at 8 percent if the stimulus plan was adopted because their analysis really didn't make predictions about unemployment per se. The Romer analysis was about the effect of fiscal stimulus on GDP growth and they just assumed a simple response function between GDP growth and employment growth. Their paper was intended for public and pundit consumption, so they had to "dummy it down" by using unemployment rates as a proxy for the GDP output gap. And of course back when they wrote that paper (Dec 2008) no one knew that the unemployment rate was already going to bust through 8 percent no matter what kind of stimulus was passed.
Are you telling me that you found Ryan's response convincing? As Krugman pointed out in his response to Ryan's response, Ryan never really addressed the substance of Krugman's complaint. Ryan's reply amounts to just an earnest lament that he's trying really, really, really, really hard and that he just wishes we could all just get along and try to solve the fiscal problem. And did you really buy his lame story about why the CBO didn't include revenue effects? If you bought that line, then you must be a Fox News viewer. And notice that Ryan didn't object to McConnell and Kyl's claim that deficits due to tax cuts didn't have to be offset. So if Ryan didn't object to that nonsense why should we believe his weasel worded response to Krugman? Ryan was lying about his plan to "fix" Medicare.
You asked where the Democratic road map was. Fair question. For starters, the Democrats have some credibility on this because they actually did balance the budget in the 90s...and contrary to Newt's BS it wasn't the GOP Congress that did most of the heavy lifting; it was the 93/94 Democratic Congress that passed tax hikes and set the stage. It was that Congress that started to cut discretionary spending. The current Democratic roadmap begins with allowing most of the Bush tax cuts to expire. That's a big help. And cutting the DoD budget would also be good. And what about farm subsidies to red states? The Democrats also passed healthcare reform, which CBO estimates will save a $100B over the next decade and a lot more beyond that. Finally, Democrats actually listen to real economists instead of Ben Stein.
Posted by: 2slugbaits at August 7, 2010 06:39 PM
2slugs, you have not defined a Dem road map, but 2lug's version of the Ryan plan. Where's the Dem plan? Where's Krugman's?
You made this point: "There was no reason to believe that this recession would have recovered on its own without benefit of government intervention." But, the stimulus bill has little benefit to pulling us out quickly from any recession. It's not about size, but application, and this one is just off base. Even you have admitted implementation problems.
The bulk of your latest comment is a recognition of how poorly this administration understood the economic conditions. Moreover it appears that you are accepting that there is nothing that can/should have been done differently. I disagree!
BTW, we both know your analysis of the 90s is just plain BS. Just another bubble and a lucky Dem Prez who rode it, and with help from the Repubs. controlled spending. Furthermore, raising taxes during good times is how we solve structural deficits, good economics, remember? Carrying a structural surplus is just the opposite, and we were on the verge of that being the economic conditions. Remember Greenspan's comment?
So, your's, Krugman's and I suspect Menzie's understanding of the 90s and the ensuing 00s are more ideologically driven than historical. The gripes on the early Bush economic policy don't even make good economic sense, unless, of course, you believe in the goodness of Greenspan's predictions of surpluses as far as the eye can see.
Posted by: CoRev at August 7, 2010 07:41 PM
CoRev The recession almost certainly ended in Jun/Jul 2009...exactly when Romer predicted it would end. And she made that prediction in Dec 2008. You were predicting stagflation. You are misunderstanding my gripe about the stimulus bill. It was large enough to stop the freefall and return us to trend growth, but it wasn't large enough to bring down unemployment quickly enough.
you have not defined a Dem road map
What part of allowing the Bush tax cuts to expire did you not understand? What part of lowering Medicare costs by passing healthcare did you not understand? What part of cutting DoD did you not understand? As to the Ryan plan, have you actually read it? I have. Ryan's solution to Medicare is a recycled version of Newt Gingrich's old voucher program. That was Krugman's criticism and Ryan never really denied it; Ryan just said that Krugman was being a meanie for picking on him. And Ryan's plan pretended that the lost revenue from his tax cuts didn't count against balancing the budget. Then Ryan offered up some lame excuse about not being able to ask CBO. That excuse was the equivalent of the dog eating your homework. But it served his purpose because you apparently bought it, and that's all Ryan really cared about anyway. This isn't the first time that Ryan has been caught peddling nonsense. Last week he blew it when he said that if the Fed raised interest rates this would free up money for investment. And then after getting crucified by economists he offered up some doubletalk retraction trying to pretend that he didn't say what he actually said. The sad thing is that he's supposed to be the GOP's bright light. More like a dim bulb.
Intellectually the Administration understood the recession and they understood what had to be done. That's because they are smarter than the GOP clodhoppers. What the Administration lacked was political and negotiating judgment. Obama made the mistake of actually thinking Republicans were serious about offering up ideas. The truth is exactly what Sen. Demint said was the truth...it was all about Waterloo.
raising taxes during good times is how we solve structural deficits, good economics,
This tells me that you still don't understand the difference between structural deficits and cyclical deficits. You run cyclical deficits during the bad times and cyclical surpluses during the good times. You don't try and run structural deficits or surpluses...ever. I think it's funny that when it comes to deficits you deny that they stimulate the economy, but when it comes to surpluses you're all over the power of surpluses as a drag on the economy. I remember Greenspan's comment. I also remember Greenspan's admission that he was wrong. The Bush tax cuts never added up.
Posted by: 2slugbaits at August 7, 2010 09:46 PM
"It's not about size, but application, and this one is just off base."
I'm not sure I get this - how is it not about size? Shouldn't size and the MPC of stimulus hires be *all* that matter?
Posted by: Ed at August 7, 2010 10:15 PM
2slugs, making a point over every day common sense and traditional training is immature. You said: "You don't try and run structural deficits or surpluses...ever." But, still insist that running them "as far as the eye can see" is wrong. Ideology over logic is worth a SHEESH. Correct Menzie?
As for misunderstanding your point. Nope! You've been pushing the same point from early on, but even the unwashed, ignorant masses see the errors in that position.
You still have not defined a Dem road map. throwing a 2slugs selected list out of the universe of Dem legislative positions against the wall is not a road map. It's only a 2slugs position statement. When we review the Dem supporting statements for those legislative initiative we just get more class envy and class warfare, and little economic planning. (Oh, sorry, those are the Dem economic underpinnings.)
Posted by: CoRev at August 8, 2010 04:56 AM
CoRev You said: "You don't try and run structural deficits or surpluses...ever." But, still insist that running them "as far as the eye can see" is wrong. Ideology over logic is worth a SHEESH.
Huh? I think it's pretty clear that you did not understand what I was saying, and I suspect that's because you do not understand the difference between structural and cyclical deficits. Roughly speaking a structural deficit is what is permanently built into a full employment economy. What Bush created was a structural deficit. We ran large deficits even though the economy was operating at full employment. You do not...repeat...do not want to run structural deficits. Ever. And that's why I was critical of Bush's tax cuts that generated structural deficits as far as the eye can see.
So are you saying that allowing most of the Bush tax cuts to expire is not part of the Democratic roadmap? Strange, because I just heard John Boehner and Mike Pence say that it was. Are you saying that cutting DoD spending is not part of the Democratic roadmap? Are you saying that healthcare reform was not part of lowering Medicare costs? Strange, because I seem to recall Nancy Pelosi saying it was.
Posted by: 2slugbaits at August 8, 2010 07:57 AM
CoRev: BTW, here's Krugman picking about Paul Ryan's response.
Posted by: 2slugbaits at August 8, 2010 08:16 AM
2slugs said: "So are you saying that allowing most of the Bush tax cuts to expire is not part of the Democratic roadmap?" No, I'm saying there is no Dem road map that performs the same functions as Ryans'. Your pick list is just that!
I understand deficits, what you are dodging is the comment re: surpluses. I guess you do believe that surpluses "as far as the eye can see" is a good thing.
Quit throwing diversions and discuss the issue. Bush's first tax cut was to correct the "as far as the eye can see". The second and the associated stimulus components was to correct for the recession and 9/11 impacts, just as Obama's stimulus which included tax cuts and rebates has been to correct the impacts of the recession. One worked and one hasn't.
Posted by: CoRev at August 8, 2010 09:08 AM
CoRev: Yes, structural surpluses are bad. Greenspan overstated the permanence of the surpluses...a lot of the projected surpluses were cyclical surpluses, which you should be running. But there probably was a small structural surplus and in the 2001 debates Democrats had no objection to small tax cuts to correct that imbalance. Writing tax rebate checks was a Democratic idea and one that Bush initially opposed, remember? We know that the Bush tax cuts went way beyond any responsible smallbore course correction and introduced large structural deficits. And how do we know that? Because they had to resort to using reconciliation procedures because the CBO showed that even under Team Bush rosy scenario assumptions the structural deficit exploded outside the 10 year window. That's how we got where we are today. And then Bush compounded the error in 2003 with another round of tax cuts. A small tax cut in 2001 had a lot of merit...in fact, I even argued for a slimmed down version. Ask cantab. But given a choice between a small structural surplus and a large structural deficit, I'll take the small surplus everytime.
There is absolutely no evidence that by 2003 there was any significant 9/11 effect. And if there was, that' the kind of thing you finance with tax increases; i.e., you use a balanced budget mulitplier. In any event, a study by the New York Federal Reserve Bank on the economic effects of 9/11 does not support your view.
Posted by: 2slugbaits at August 8, 2010 09:53 AM
Menzie said "It's as if some policymakers want to drive the economy into the ditch. In other words, it's in our power to prevent a sputtering economy from becoming a stagnant or recessionary economy."
Menzie I think you have an exaggerated view of the abilities of our profession.
Posted by: GWG at August 9, 2010 05:38 AM
I've found a needle in your multi-treatise haystack. Public sector employment is supposed to be countercyclical.
As we exit the recession over the next few quarters you and I can both promote public sector job cuts!
2slugs and I on the same side, who woulda thunk it?
I bet corev might even join us in our crusade to cut public sector jobs.
Before you know it, people will be calling you a fiscal conservative!
Posted by: tj at August 9, 2010 08:14 AM
tj is going to pay to rebuild bridges before they fall down out of tj's deep pockets to prevent the Republican I-35W Mississippi bridge austerity in Minneapolis from repeating all around the nation, resulting in Congress passing more $250 million bridge rebuild funding laws. I find Pawlenty's interest in running for president to be funny - is he going to veto the funding to bailout another Republican like Bush bailed him out in December 2007?
Posted by: mulp at August 9, 2010 08:20 PM
Good point mulp. If we convert the public sector defined benefit pensions to the private sector's defined contribution pensions then the savings can be used to repair infrastructure.
Posted by: tj at August 10, 2010 04:44 PM
tj, Great point and don't forget that union jobs have become public sector now with all the subsidies. So sign me up for 2slugs recommendation of a cutting all public sector employment including union employment as we come out of the recession. I propose a 20-25% cut across the board in 2011.
Posted by: Dean at August 11, 2010 09:42 AM
menzie: simple math- 1T stimulus dollars over 2 years=500B per year X 1.5=750B in output growth. Baseline economy =14TX5%=700B
Not difficult math. Do we not have a 14T economy or are you now "pushing on a string" and saying it really was 13.5T when stimulus started. Sure keep moving the starting point.
You can't ignore reality though.
500k jobless claims, economy heading south quickly.This stimulus will provide NO JOBS. People paid down debt or saved money, not spent your "aggregate demand". This is what caused the problem.
Posted by: tim kemper at August 19, 2010 03:44 PM