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In most of these links he argues, true to form, that a certain stimulus proposal wasn't big enough. But nowhere did he actually say how big he thought it should

In most of these links he argues, true to form, that a certain stimulus proposal wasn't big enough. But nowhere did he actually say how big he thought it should be. The closest he came was in your first link, in which he demonstrated how one might theoretically calculate an adequate stimulus size. Yet this calculation depends on first choosing a value for the Okun's Law coefficient, and nowhere did he say what he thinks it would be. He just picked an "optimistic" value for the sake of demonstration. This single ambiguity easily gives him a few hundred billion dollars in wiggle room.

mikeyouse 14y ago
From the first article: Let’s be generous and assume that the overall multiplier on tax cuts is 1. Then the per-year effect of the plan on GDP is 150 x 1 + 240 x 1.5 = $510 billion. Since it takes $300 billion to reduce the unemployment rate by 1 percentage point, this is shaving 1.7 points off what unemployment would otherwise have been. Finally, compare this with the economic outlook. “Full employment” clearly means an unemployment rate near 5 — the CBO says 5.2 for the NAIRU, which seems high to me. Unemployment is currently about 7 percent, and heading much higher; Obama himself says that absent stimulus it could go into double digits. Suppose that we’re looking at an economy that, absent stimulus, would have an average unemployment rate of 9 percent over the next two years; this plan would cut that to 7.3 percent, which would be a help but could easily be spun by critics as a failure. The math is obvious... if the economy was going to 9% unemployment without stimulus (which we now know was too optimistic), with the same composition of tax cuts : spending, $1T would be called for. Since we peaked at 10% unemployment, even with ~1T in stimulus (which should've had a ~4% impact on the rate), with this math, $2.25T could've been about right. The CBO looked back at real output / unemployment and made the following estimates.[1] - http://www.usnews.com/dbimages/master/29996/GR_120620_gdprecoveryact1.jpg http://www.usnews.com/dbimages/master/29996/GR_120620_gdprec... Which shows the impact of the ARRA. So it seems that between 2-3% reduction in peak unemployment with ~1T. So again, something like $2.5T would've been close. The point all along is that too little stimulus is far more damaging than too much, and with unemployment still above 7.5% five years later, that point seems to have some evidence. [1] http://www.cbo.gov/sites/default/files/cbofiles/attachments/ARRA_One-Col.pdf http://www.cbo.gov/sites/default/files/cbofiles/attachments/...
- kevinskii 14y ago
  You're missing the point. Yes, the math is obvious. The correct coefficients to use are not, and those are what make all the difference.

mikeyouse 14y ago

From the first article: Let’s be generous and assume that the overall multiplier on tax cuts is 1. Then the per-year effect of the plan on GDP is 150 x 1 + 240 x 1.5 = $510 billion. Since it takes $300 billion to reduce the unemployment rate by 1 percentage point, this is shaving 1.7 points off what unemployment would otherwise have been. Finally, compare this with the economic outlook. “Full employment” clearly means an unemployment rate near 5 — the CBO says 5.2 for the NAIRU, which seems high to me. Unemployment is currently about 7 percent, and heading much higher; Obama himself says that absent stimulus it could go into double digits. Suppose that we’re looking at an economy that, absent stimulus, would have an average unemployment rate of 9 percent over the next two years; this plan would cut that to 7.3 percent, which would be a help but could easily be spun by critics as a failure. The math is obvious... if the economy was going to 9% unemployment without stimulus (which we now know was too optimistic), with the same composition of tax cuts : spending, $1T would be called for. Since we peaked at 10% unemployment, even with ~1T in stimulus (which should've had a ~4% impact on the rate), with this math, $2.25T could've been about right. The CBO looked back at real output / unemployment and made the following estimates.[1] - http://www.usnews.com/dbimages/master/29996/GR_120620_gdprecoveryact1.jpg http://www.usnews.com/dbimages/master/29996/GR_120620_gdprec... Which shows the impact of the ARRA. So it seems that between 2-3% reduction in peak unemployment with ~1T. So again, something like $2.5T would've been close. The point all along is that too little stimulus is far more damaging than too much, and with unemployment still above 7.5% five years later, that point seems to have some evidence. [1] http://www.cbo.gov/sites/default/files/cbofiles/attachments/ARRA_One-Col.pdf http://www.cbo.gov/sites/default/files/cbofiles/attachments/...

kevinskii 14y ago
You're missing the point. Yes, the math is obvious. The correct coefficients to use are not, and those are what make all the difference.