10 ms·

There was no stimulus

36 points by chrismealy 16y ago

swaits 16y ago
Well, now I've seen everything!
dnautics 16y ago
I'm not sure why the good doctor isn't worried about inflationary spirals. He talks about deflationary spirals, but here's the situation I see: Economy goes into a depression, so there's stimulus, to give jobs to either government positions or favored private entities. The requisite money printing causes inflation. Inflation causes the cost of living and operating businesses to go up, which either sends jobs overseas (prompting government to inflate more to create a better trade balance) or corporations (esp. small businesses which are more sensitive to price indices and less likely to get stimulus) to close shop. If jobs are lost, government must inflate more to pay for new jobs or create more stimulus. Rinse, wash, repeat. All things being equal, I'd rather have a deflationary spiral, which can have a levelling effect - as inflation erodes saving power - hitting the poor far far harder than the rich.
- lzw 16y ago
  Government spending is not stimulative, because the inflation (or taxation if it is paid for that way) is detrimental to economic growth, as you have pointed out. The fear of deflation, however, is misguided and I think founded on a deception. I'm not sure the deception is intentional or not.... but politicians certainly benefit from it because it allows them to get away with more inflation. Deflation can happen in two ways. The first way is that there simply are no customers out there and so businesses start lowering prices desperately to cut inventory because of inventory carrying cost. In this age of just in time manufacturing, there is less of a risk of this... This is a bad situation and we can call it desperate deflation. But this kind of deflation is due to a serious structural problem in the economy, and it is not solved by monetary inflation. Keynes believed it could be, helped with short periods of monetary inflation, but nobody is actually following keynes prescription (Which calls for the government not running deficits and for the inflation to be absorbed when good times come back, which is effectively monetary deflation in good times.) Anyway, this "Bad deflation" is very rare, and is a symptom of another problem. The other form of deflation is the increasing purchasing power of money. This can happen in a robust economy, in fact it often happens in a robust economy. Imagine a country on the gold standard. The economy is growing well, but gold is coming out of the ground slowly (which it always does) so monetary inflation is low, while GDP growth is high. This means each year a given amount of gold will buy more stuff. Businesses make more profits, even as they lower prices, consumers can buy more for a given amount of gold, and the economy continues to grow, in large part because prices are going down. This is a good thing, and in fact this is the natural state of affairs in a free market, because productivity increases are always being created and technological advances are always being discovered, which means every decade the efficiency of the economy should be going up creating an increase in purchasing power. Governments, on the other hand, operate by promising programs to people in exchange for getting power. These programs are often not well managed because they are not subject to market forces. Further, since government has turnover of less than a decade, there are constantly new faces who want to make a name for themselves with new programs. Goernment thus has a strong incentive to inflate (because taxation is politically dangerous) to pay for these ever increasing new programs (they can't cut old programs because that's as politically dangerous as taxation.) Thus the governments spokesmodels (like Paul Krugman) are always pushing the idea that inflation is good and deflation is dangerous. Though it isn't difficult to see why the opposite is true.
  - CWuestefeld 16y ago
    Thus the governments spokesmodels (like Paul Krugman) are always pushing the idea that inflation is good and deflation is dangerous. I generally agree with you, and yes, Krugman-the-columnist is an ass (as opposed to Krugman-the-economist of days gone by). However, there is something (small) to be said for inflation. Behavior econometrics shows us that in some areas, our economic behavior is not what rationality would suggest. One of these areas is around wages: we expect upward movement of wages, and won't tolerate nominal decreases, even when buying power is increasing so that real wages are increasing. Maintaining a constant low level of inflation allows us to create an illusion that counters the irrational behavior, so that employers are still able to exercise a small degree of control over wages, at least over longer periods.
    - dnautics 16y ago
      (flameshield) So giving employers control over wages is a liberal position? Just as I thought. (/flameshield) I guess, as a libertarian, my position is that irrational behavior is just that. It's going to happen, there's no reason to believe that government is going to be any less irrational than individuals, and on the balance, giving people freedom (to screw up, too) is more important, more sustainable, than imposing order and control over the populace. One thing that opened my eyes was this notion that a lot of what we do is totally a misjudgement of probabilities. If you have a game that 99.9999% of the time makes you a 100% return and .0001% of the time puts gives you a negative 10^1000 fold loss, you can wind up severe sample biasing that leads you to think that you're churning out awesome returns, when the equilibrium position is way bad. Of course, the solution that we as a society seem to have been headed toward is centralization of responsibility and insurance - which, IMO, has the potential to put everyone in the hole - when, instead we should possibly be embracing solutions of insulating risk and decentralizing, personalizing responsibility, combined with, you know, forgiveness. Seems to me like a more sustainable, humanizing way to handle things.
      - CWuestefeld 16y ago
        No flames necessary. I'm also a libertarian, so philosophically I agree with you. I'm also a bit of an armchair economist, and here I was just noting what economic theory tells us. To be sure, Milton Friedman would tell us that not only isn't inflation not fooling anyone, but it also represents a real transfer of funds into the hands of those who manage to first get their hands onto "new" dollars.
- sethg 16y ago
  If you are in debt at fixed (or capped) interest rates, then inflation is good for you, since your income goes up while your monthly payments do not. If you depend on a fixed nominal income, then inflation is bad for you, since the prices of everything around you go up while your income does not. I think poor and lower-middle-class people are more likely to be in the first group than the second.
  - hop 16y ago
    How about the older poor and middle class on fixed incomes. Inflation will destroy their buying power (Though it may make social security less insolvent).
  - dnautics 16y ago
    Wrong. Here is why. Let's say you're poor, and spending 90% of your income on day to day needs. Versus if you're rich, and spending 20% of your income on day to day needs. a 10% inflation (absent corresponding wage inflation - which lags, but I'll omit it to keep things simple, the numbers have been rounded to make the math easy anyways) takes the poor person to 99% day to day and the rich person to 22% day to day. That represents a 90% decrease in ability to save or pay off debt. Versus the rich person who has lost 2.5% ability to save or pay off debt. Now. With a 10% inflation, your real debt burden has gone down 10%. Would you trade a 10% loss of debt burden for a 90% loss of ability to pay off the debt? I would not. Who is it that has promulgated this myth that inflation is good for poor people? I keep hearing it everywhere, and it appalls me that no one has really stopped to think about it.
    - gnaritas 16y ago
      > absent corresponding wage inflation - which lags, but I'll omit it to keep things simple It doesn't just keep things simple, it changes things. You can't leave out wage inflation. Of course inflation is bad if your wages don't keep up, but what if they do? That's the actual question. Inflation also lags, printing money doesn't instantly create inflation, it takes time for the market to adjust to the new circulation.
- jsz0 16y ago
  Perhaps a stupid question but given the deficits created by two wars, the post 9/11 spending spree, unfunded tax cuts, TARP, and the first stimulus package why aren't we already deep into an inflationary spiral today? Is there anything to suggest another $1-2T of government stimulus brings us to a breaking point for inflation?
  - d2viant 16y ago
    It's very simple: People are still willing to lend money to the US government at very low rates because the other areas for investment (i.e. the stock market) are viewed as too risky. Additional government stimulus has little to do with it at this point, that will only come into play when inflation actually hits. When things change and people become more tolerant of risk and less tolerant of low returns, all the government deficits that have been accumulated will become a huge issue. When lenders to the US government start demanding 5%+ on their money, the interest payments on our debt will skyrocket.
  - CWuestefeld 16y ago
    Paying just the interest on the debt takes a significant portion of government revenue, although I don't have citations handy. As that proportion increases (that is, how much of government revenue is spent just on paying for past debt, rather than anything productive), the likelihood of some threshold being crossed increases. But until that point, the government is able to sweep it all under the rug.
forgotAgain 16y ago
There was a time when Mr Krugman was worth a read. That time ended a while ago. Now his writing is a constant stream of attacks on those who disagree with him. This latest is a new low when it comes to seriousness. His current argument is that there has been no recent expansion in federal government spending. His logic is that federal money given to states should not be included in federal spending figures. Too bad the debt holder won't agree.
- protomyth 16y ago
  agreed - I figure the argument should be "Was this paid for with federal taxes or federal borrowing?" - If yes, then it is federal government spending.
- earl 16y ago
  Sadly, no. His argument (very plainly written in the article): there was no stimulus. The exact quote is, "There never was a big expansion of government spending. In fact, that has been the key problem with economic policy in the Obama years: we never had the kind of fiscal expansion that might have created the millions of jobs we need." He then provides details: net government employment has fallen. There haven't been any big infrastructure projects. State spending has fallen severely. Much of the stimulus spending was tax cuts, which probably don't affect employment much and we know well to not have the highest employment multipliers of all possible spending choices. He carefully differentiates between federal and government spending. So, to summarize: you misstate his argument. You misstate the supporting details. Either you can't read or you didn't understand anything he wrote. Who exactly isn't serious?
  - dnautics 16y ago
    When I drive on the highways, I see all these ARRA signs all over the place. Driving cross country last summer from San Diego to DC I ran through no less than 8 cone zones. And again this summer from DC back to San Diego, I drove through about as many (and took a shorter route too). At the university of Maryland, they were building a "center for advanced physics research" using ARRA funds - even though there were two whole wings in the chemistry department that were empty, and we have reached 'peak undergrad' as the demographic trend has the echo-boomer undergraduates receding. Have you driven down 16th street? All of columbia heights is a disaster zone as federal stimulus funds attempt to redo 18th century urban planning. DC is building a trolley? (isn't there a reason why trolleys became obsolete in the mid-20th c?) to service southeast (of course the limousine liberals like krugman would never be caught in southeast DC)... Tearing up pennsylvania avenue in anacostia made delivering food to the homebound poor extremely difficult... on a saturday morning. Oh, I suppose I should disclose that my research job at the University of Maryland was underwritten with ARRA money? I suppose I'm a bit of a hypocrite, then, for taking the job when I was opposed to ARRA, but when I signed on to the job I really did think that the project was funded by the american cancer society, and I felt too obligated to the boss and too much in need of a salary to give it up when I found out the truth. The problem is that Krugman is counting 'stimulus' by number of jobs. Well, the fact of the matter is that the money was spent, leaving it to do its horrible inflationary magic. Throwing money at a solution can either create jobs, or pad the salary of people who already have money. Now, if I were an employer, and got a fat wad of cash to do X, would I really distribute the money to create jobs? Or circle the wagons and give myself and my current employees a pay hike in anticipation of the inflation that's coming down the pike?
solutionyogi 16y ago
I am tired of Krugman's Op-Eds. He keeps telling us that Government should spend more. Spend more on what? Government can pay one set of people to dig holes and another set of people to fill them up. Surely, it would create jobs but is this what we want? We all agree that government needs to create 'productive' jobs otherwise there is no point in spending money. From his article, he notes that state government laid off school teachers (the productive people) when the budget ran tight instead of firing the bureaucrats who shuffle papers. Why does he expect that if Government were to spend more money they would somehow create productive jobs and not more bureaucracies which waste our hard earned money? Reminds me of this quote: "The curious case of economics is to demonstrate to men, what little they know, about what they THINK they can design."
- earl 16y ago
  If you read his columns, he's pretty explicit about what government should spend money on: (1) infrastructure projects, which will both increase employment now (particularly in the construction sector) as well as boost future productivity; (2) the social safety net, so people aren't homeless or starving (the people who receive these payments are also, as a bonus, nearly guaranteed to spend all of the money). Also, you complain about laying off school teachers while retaining bureaucrats. What exactly do you think the ratio is between the two? Because I'm guessing it's a lot higher than you expect, so given the size of the budget deficits, there wasn't a ton of choice.
  - solutionyogi 16y ago
    You want Government to spend on Infrastructure, sure. Get ready to pay through your nose for that infrastructure. I am from NJ and they are trying to build up rail tunnel to connect to NY and here's the cost comparison: "Lotschberg Base Tunnel, world’s longest land tunnel, dug under a mountain at the peak of the world economic boom and completed in 2007; 21.5 miles long, about $4.5 billion (might be 1998 dollars, though); cost per mile: $209 million Gotthard Base Tunnel, when completed in 2017 will become the world’s longest railway tunnel; at least 35.4 miles plus additional tunnels, shafts and passages totaling 94.3 miles, about $10.2 billion; cost per mile: $288 million Channel Tunnel or “Chunnel”, connecting France and England, world’s longest undersea tunnel; 31.4 miles, opened 1994, cost $7.4 billion (might be 1985 dollars and the cost overruns did lead to bankruptcy); cost per mile: $235 million Wushaoling Tunnel, traveling through four regional fault zones; 13 miles long, opened 2006, cost $845 million; cost per mile: $65 million New Jersey-New York Mass Transit/ARC Tunnel, scheduled for completion in 2018; 3.5 miles long, cost $11-14 billion; cost per mile: $3.7 billion (I used $13 billion for this calculation)" From http://blogs.law.harvard.edu/philg/2010/10/08/new-jerseys-canceled-railroad-tunnel-in-perspective/ http://blogs.law.harvard.edu/philg/2010/10/08/new-jerseys-ca... Exactly how many jobs do you think infrastructure jobs will create? And what about all those people who are not in infrastructure sector? What about the school teachers which he keeps talking about? Also, how does increasing social safety net CREATE new jobs? You are simply handing out money.
bugsy 16y ago
Let's not mention the bankster bailouts, clearly they did not happen according to the propaganda rag that is the NYT.
- mquander 16y ago
  Clearly. The reason they weren't mentioned is because nobody makes the claim that the bank bailouts served to generally improve the economy; they were primarily an attempt to loosen up the credit market. They are not a very useful form of "stimulus," and it wouldn't make any sense to judge the efficacy of tax cuts, or that of government spending on jobs, based on the results of TARP.
  - deleted 16y ago
    [deleted]
  - bugsy 16y ago
    They were promoted by both majority parties not as stimulating the economy, but of saving it from otherwise certain collapse. They are also government spending which the NYT article claims hasn't happened. The exact statement in the article is: "Here’s what you need to know: The whole story is a myth. There never was a big expansion of government spending."
lusis 16y ago
So this is the new tactic? The reason it hasn't worked is because we haven't actually DONE it? So where the hell did all my tax dollars go?
- kenjackson 16y ago
  What big tax increase did you see?
  - lusis 16y ago
    I didn't say anything about a tax increase. I said "my tax dollars".
- mquander 16y ago
  Krugman details exactly where he claims most of the stimulus money went. Go read the link.
  - lusis 16y ago
    Actually he never actually DOES from what I can tell. He dances around the issue and makes general claims but never actually says "X% went here. Y% went here". He says things like "spending on safety-net programs, mainly unemployment insurance and Medicaid, has risen" which means squat. Is he implying that the administration misused stimulus funds to instead fund saftey-net programs? The fact of the matter is that the stimulus money went exactly where it was intended. Government works programs and questionable "initiatives" (Unless those signs I see every 10 miles are made up). It just didn't work so the new tactic is to claim "It wasn't enough" or "It wasn't actually spent".
    - mquander 16y ago
      I don't think it's fair to characterize that as the "new tactic." Liberals were complaining that it wasn't enough while and ever since the Recovery Act was passed. Krugman himself was yelling pretty loudly about it, cite: http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/ http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithme... At the time, liberals were advocating a $1-2 trillion stimulus made up primarily of government spending, which is obviously not remotely what we got. Funding safety net programs is not really a "misuse of funds;" it was built into the legislation. (Maybe it's a poor use of funds, but that's Congress's fault more than the White House's.) If you want specifics on how money was distributed, just go to the source: http://www.recovery.gov/ http://www.recovery.gov/ It looks like a bit more than a third of the money allocated actually went toward "contracts, grants, and loans," which is the category that one would expect to be creating jobs.
stevedekorte 16y ago
Then why do a bunch of the road work construction projects around San Francisco have big (an likely expensive) signs saying they were paid for by a federal stimulus program?

36 points by chrismealy 16y ago

Well, now I've seen everything!

I'm not sure why the good doctor isn't worried about inflationary spirals. He talks about deflationary spirals, but here's the situation I see: Economy goes into a depression, so there's stimulus, to give jobs to either government positions or favored private entities. The requisite money printing causes inflation. Inflation causes the cost of living and operating businesses to go up, which either sends jobs overseas (prompting government to inflate more to create a better trade balance) or corporations (esp. small businesses which are more sensitive to price indices and less likely to get stimulus) to close shop. If jobs are lost, government must inflate more to pay for new jobs or create more stimulus. Rinse, wash, repeat. All things being equal, I'd rather have a deflationary spiral, which can have a levelling effect - as inflation erodes saving power - hitting the poor far far harder than the rich.

lzw 16y ago
Government spending is not stimulative, because the inflation (or taxation if it is paid for that way) is detrimental to economic growth, as you have pointed out. The fear of deflation, however, is misguided and I think founded on a deception. I'm not sure the deception is intentional or not.... but politicians certainly benefit from it because it allows them to get away with more inflation. Deflation can happen in two ways. The first way is that there simply are no customers out there and so businesses start lowering prices desperately to cut inventory because of inventory carrying cost. In this age of just in time manufacturing, there is less of a risk of this... This is a bad situation and we can call it desperate deflation. But this kind of deflation is due to a serious structural problem in the economy, and it is not solved by monetary inflation. Keynes believed it could be, helped with short periods of monetary inflation, but nobody is actually following keynes prescription (Which calls for the government not running deficits and for the inflation to be absorbed when good times come back, which is effectively monetary deflation in good times.) Anyway, this "Bad deflation" is very rare, and is a symptom of another problem. The other form of deflation is the increasing purchasing power of money. This can happen in a robust economy, in fact it often happens in a robust economy. Imagine a country on the gold standard. The economy is growing well, but gold is coming out of the ground slowly (which it always does) so monetary inflation is low, while GDP growth is high. This means each year a given amount of gold will buy more stuff. Businesses make more profits, even as they lower prices, consumers can buy more for a given amount of gold, and the economy continues to grow, in large part because prices are going down. This is a good thing, and in fact this is the natural state of affairs in a free market, because productivity increases are always being created and technological advances are always being discovered, which means every decade the efficiency of the economy should be going up creating an increase in purchasing power. Governments, on the other hand, operate by promising programs to people in exchange for getting power. These programs are often not well managed because they are not subject to market forces. Further, since government has turnover of less than a decade, there are constantly new faces who want to make a name for themselves with new programs. Goernment thus has a strong incentive to inflate (because taxation is politically dangerous) to pay for these ever increasing new programs (they can't cut old programs because that's as politically dangerous as taxation.) Thus the governments spokesmodels (like Paul Krugman) are always pushing the idea that inflation is good and deflation is dangerous. Though it isn't difficult to see why the opposite is true.
- CWuestefeld 16y ago
  Thus the governments spokesmodels (like Paul Krugman) are always pushing the idea that inflation is good and deflation is dangerous. I generally agree with you, and yes, Krugman-the-columnist is an ass (as opposed to Krugman-the-economist of days gone by). However, there is something (small) to be said for inflation. Behavior econometrics shows us that in some areas, our economic behavior is not what rationality would suggest. One of these areas is around wages: we expect upward movement of wages, and won't tolerate nominal decreases, even when buying power is increasing so that real wages are increasing. Maintaining a constant low level of inflation allows us to create an illusion that counters the irrational behavior, so that employers are still able to exercise a small degree of control over wages, at least over longer periods.
  - dnautics 16y ago
    (flameshield) So giving employers control over wages is a liberal position? Just as I thought. (/flameshield) I guess, as a libertarian, my position is that irrational behavior is just that. It's going to happen, there's no reason to believe that government is going to be any less irrational than individuals, and on the balance, giving people freedom (to screw up, too) is more important, more sustainable, than imposing order and control over the populace. One thing that opened my eyes was this notion that a lot of what we do is totally a misjudgement of probabilities. If you have a game that 99.9999% of the time makes you a 100% return and .0001% of the time puts gives you a negative 10^1000 fold loss, you can wind up severe sample biasing that leads you to think that you're churning out awesome returns, when the equilibrium position is way bad. Of course, the solution that we as a society seem to have been headed toward is centralization of responsibility and insurance - which, IMO, has the potential to put everyone in the hole - when, instead we should possibly be embracing solutions of insulating risk and decentralizing, personalizing responsibility, combined with, you know, forgiveness. Seems to me like a more sustainable, humanizing way to handle things.
    - CWuestefeld 16y ago
      No flames necessary. I'm also a libertarian, so philosophically I agree with you. I'm also a bit of an armchair economist, and here I was just noting what economic theory tells us. To be sure, Milton Friedman would tell us that not only isn't inflation not fooling anyone, but it also represents a real transfer of funds into the hands of those who manage to first get their hands onto "new" dollars.
sethg 16y ago
If you are in debt at fixed (or capped) interest rates, then inflation is good for you, since your income goes up while your monthly payments do not. If you depend on a fixed nominal income, then inflation is bad for you, since the prices of everything around you go up while your income does not. I think poor and lower-middle-class people are more likely to be in the first group than the second.
- hop 16y ago
  How about the older poor and middle class on fixed incomes. Inflation will destroy their buying power (Though it may make social security less insolvent).
- dnautics 16y ago
  Wrong. Here is why. Let's say you're poor, and spending 90% of your income on day to day needs. Versus if you're rich, and spending 20% of your income on day to day needs. a 10% inflation (absent corresponding wage inflation - which lags, but I'll omit it to keep things simple, the numbers have been rounded to make the math easy anyways) takes the poor person to 99% day to day and the rich person to 22% day to day. That represents a 90% decrease in ability to save or pay off debt. Versus the rich person who has lost 2.5% ability to save or pay off debt. Now. With a 10% inflation, your real debt burden has gone down 10%. Would you trade a 10% loss of debt burden for a 90% loss of ability to pay off the debt? I would not. Who is it that has promulgated this myth that inflation is good for poor people? I keep hearing it everywhere, and it appalls me that no one has really stopped to think about it.
  - gnaritas 16y ago
    > absent corresponding wage inflation - which lags, but I'll omit it to keep things simple It doesn't just keep things simple, it changes things. You can't leave out wage inflation. Of course inflation is bad if your wages don't keep up, but what if they do? That's the actual question. Inflation also lags, printing money doesn't instantly create inflation, it takes time for the market to adjust to the new circulation.
jsz0 16y ago
Perhaps a stupid question but given the deficits created by two wars, the post 9/11 spending spree, unfunded tax cuts, TARP, and the first stimulus package why aren't we already deep into an inflationary spiral today? Is there anything to suggest another $1-2T of government stimulus brings us to a breaking point for inflation?
- d2viant 16y ago
  It's very simple: People are still willing to lend money to the US government at very low rates because the other areas for investment (i.e. the stock market) are viewed as too risky. Additional government stimulus has little to do with it at this point, that will only come into play when inflation actually hits. When things change and people become more tolerant of risk and less tolerant of low returns, all the government deficits that have been accumulated will become a huge issue. When lenders to the US government start demanding 5%+ on their money, the interest payments on our debt will skyrocket.
- CWuestefeld 16y ago
  Paying just the interest on the debt takes a significant portion of government revenue, although I don't have citations handy. As that proportion increases (that is, how much of government revenue is spent just on paying for past debt, rather than anything productive), the likelihood of some threshold being crossed increases. But until that point, the government is able to sweep it all under the rug.

forgotAgain 16y ago

There was a time when Mr Krugman was worth a read. That time ended a while ago. Now his writing is a constant stream of attacks on those who disagree with him. This latest is a new low when it comes to seriousness. His current argument is that there has been no recent expansion in federal government spending. His logic is that federal money given to states should not be included in federal spending figures. Too bad the debt holder won't agree.

protomyth 16y ago
agreed - I figure the argument should be "Was this paid for with federal taxes or federal borrowing?" - If yes, then it is federal government spending.
earl 16y ago
Sadly, no. His argument (very plainly written in the article): there was no stimulus. The exact quote is, "There never was a big expansion of government spending. In fact, that has been the key problem with economic policy in the Obama years: we never had the kind of fiscal expansion that might have created the millions of jobs we need." He then provides details: net government employment has fallen. There haven't been any big infrastructure projects. State spending has fallen severely. Much of the stimulus spending was tax cuts, which probably don't affect employment much and we know well to not have the highest employment multipliers of all possible spending choices. He carefully differentiates between federal and government spending. So, to summarize: you misstate his argument. You misstate the supporting details. Either you can't read or you didn't understand anything he wrote. Who exactly isn't serious?
- dnautics 16y ago
  When I drive on the highways, I see all these ARRA signs all over the place. Driving cross country last summer from San Diego to DC I ran through no less than 8 cone zones. And again this summer from DC back to San Diego, I drove through about as many (and took a shorter route too). At the university of Maryland, they were building a "center for advanced physics research" using ARRA funds - even though there were two whole wings in the chemistry department that were empty, and we have reached 'peak undergrad' as the demographic trend has the echo-boomer undergraduates receding. Have you driven down 16th street? All of columbia heights is a disaster zone as federal stimulus funds attempt to redo 18th century urban planning. DC is building a trolley? (isn't there a reason why trolleys became obsolete in the mid-20th c?) to service southeast (of course the limousine liberals like krugman would never be caught in southeast DC)... Tearing up pennsylvania avenue in anacostia made delivering food to the homebound poor extremely difficult... on a saturday morning. Oh, I suppose I should disclose that my research job at the University of Maryland was underwritten with ARRA money? I suppose I'm a bit of a hypocrite, then, for taking the job when I was opposed to ARRA, but when I signed on to the job I really did think that the project was funded by the american cancer society, and I felt too obligated to the boss and too much in need of a salary to give it up when I found out the truth. The problem is that Krugman is counting 'stimulus' by number of jobs. Well, the fact of the matter is that the money was spent, leaving it to do its horrible inflationary magic. Throwing money at a solution can either create jobs, or pad the salary of people who already have money. Now, if I were an employer, and got a fat wad of cash to do X, would I really distribute the money to create jobs? Or circle the wagons and give myself and my current employees a pay hike in anticipation of the inflation that's coming down the pike?

solutionyogi 16y ago

I am tired of Krugman's Op-Eds. He keeps telling us that Government should spend more. Spend more on what? Government can pay one set of people to dig holes and another set of people to fill them up. Surely, it would create jobs but is this what we want? We all agree that government needs to create 'productive' jobs otherwise there is no point in spending money. From his article, he notes that state government laid off school teachers (the productive people) when the budget ran tight instead of firing the bureaucrats who shuffle papers. Why does he expect that if Government were to spend more money they would somehow create productive jobs and not more bureaucracies which waste our hard earned money? Reminds me of this quote: "The curious case of economics is to demonstrate to men, what little they know, about what they THINK they can design."

earl 16y ago
If you read his columns, he's pretty explicit about what government should spend money on: (1) infrastructure projects, which will both increase employment now (particularly in the construction sector) as well as boost future productivity; (2) the social safety net, so people aren't homeless or starving (the people who receive these payments are also, as a bonus, nearly guaranteed to spend all of the money). Also, you complain about laying off school teachers while retaining bureaucrats. What exactly do you think the ratio is between the two? Because I'm guessing it's a lot higher than you expect, so given the size of the budget deficits, there wasn't a ton of choice.
- solutionyogi 16y ago
  You want Government to spend on Infrastructure, sure. Get ready to pay through your nose for that infrastructure. I am from NJ and they are trying to build up rail tunnel to connect to NY and here's the cost comparison: "Lotschberg Base Tunnel, world’s longest land tunnel, dug under a mountain at the peak of the world economic boom and completed in 2007; 21.5 miles long, about $4.5 billion (might be 1998 dollars, though); cost per mile: $209 million Gotthard Base Tunnel, when completed in 2017 will become the world’s longest railway tunnel; at least 35.4 miles plus additional tunnels, shafts and passages totaling 94.3 miles, about $10.2 billion; cost per mile: $288 million Channel Tunnel or “Chunnel”, connecting France and England, world’s longest undersea tunnel; 31.4 miles, opened 1994, cost $7.4 billion (might be 1985 dollars and the cost overruns did lead to bankruptcy); cost per mile: $235 million Wushaoling Tunnel, traveling through four regional fault zones; 13 miles long, opened 2006, cost $845 million; cost per mile: $65 million New Jersey-New York Mass Transit/ARC Tunnel, scheduled for completion in 2018; 3.5 miles long, cost $11-14 billion; cost per mile: $3.7 billion (I used $13 billion for this calculation)" From http://blogs.law.harvard.edu/philg/2010/10/08/new-jerseys-canceled-railroad-tunnel-in-perspective/ http://blogs.law.harvard.edu/philg/2010/10/08/new-jerseys-ca... Exactly how many jobs do you think infrastructure jobs will create? And what about all those people who are not in infrastructure sector? What about the school teachers which he keeps talking about? Also, how does increasing social safety net CREATE new jobs? You are simply handing out money.

bugsy 16y ago

Let's not mention the bankster bailouts, clearly they did not happen according to the propaganda rag that is the NYT.

mquander 16y ago
Clearly. The reason they weren't mentioned is because nobody makes the claim that the bank bailouts served to generally improve the economy; they were primarily an attempt to loosen up the credit market. They are not a very useful form of "stimulus," and it wouldn't make any sense to judge the efficacy of tax cuts, or that of government spending on jobs, based on the results of TARP.
- deleted 16y ago
  [deleted]
- bugsy 16y ago
  They were promoted by both majority parties not as stimulating the economy, but of saving it from otherwise certain collapse. They are also government spending which the NYT article claims hasn't happened. The exact statement in the article is: "Here’s what you need to know: The whole story is a myth. There never was a big expansion of government spending."

lusis 16y ago

So this is the new tactic? The reason it hasn't worked is because we haven't actually DONE it? So where the hell did all my tax dollars go?

kenjackson 16y ago
What big tax increase did you see?
- lusis 16y ago
  I didn't say anything about a tax increase. I said "my tax dollars".
mquander 16y ago
Krugman details exactly where he claims most of the stimulus money went. Go read the link.
- lusis 16y ago
  Actually he never actually DOES from what I can tell. He dances around the issue and makes general claims but never actually says "X% went here. Y% went here". He says things like "spending on safety-net programs, mainly unemployment insurance and Medicaid, has risen" which means squat. Is he implying that the administration misused stimulus funds to instead fund saftey-net programs? The fact of the matter is that the stimulus money went exactly where it was intended. Government works programs and questionable "initiatives" (Unless those signs I see every 10 miles are made up). It just didn't work so the new tactic is to claim "It wasn't enough" or "It wasn't actually spent".
  - mquander 16y ago
    I don't think it's fair to characterize that as the "new tactic." Liberals were complaining that it wasn't enough while and ever since the Recovery Act was passed. Krugman himself was yelling pretty loudly about it, cite: http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/ http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithme... At the time, liberals were advocating a $1-2 trillion stimulus made up primarily of government spending, which is obviously not remotely what we got. Funding safety net programs is not really a "misuse of funds;" it was built into the legislation. (Maybe it's a poor use of funds, but that's Congress's fault more than the White House's.) If you want specifics on how money was distributed, just go to the source: http://www.recovery.gov/ http://www.recovery.gov/ It looks like a bit more than a third of the money allocated actually went toward "contracts, grants, and loans," which is the category that one would expect to be creating jobs.

stevedekorte 16y ago

Then why do a bunch of the road work construction projects around San Francisco have big (an likely expensive) signs saying they were paid for by a federal stimulus program?