Krugman: Nobody Could Have Predicted

[ProSense]

Nobody Could Have Predicted

One point I haven’t seen made about the troubles of the US economy is that the timing of recent growth tells you a lot about what was — and what wasn’t — wrong with economic policy.

After all, we had more or less a consensus view about when the stimulus would kick in, and how much effect it would have. Here, for example, was Mark Zandi’s estimate:



Why did the peak impact of growth come in 2009, even though only part of the money had been spent? I explained all that a while back.

And how did things actually turn out? Like this:



It’s not a perfect correspondence, nor would you expect one — other factors, especially inventory swings, were bound to make the timing of actual growth different from that of stimulus. Still, the two pictures support the view that stimulus worked as long as it lasted, boosting the economy — which is the same conclusion Adam Posen drew from Japan’s experience in the 1990s (pdf): Fiscal policy works when it is tried.

more

[RC]

1. If they were actually serous about getting this country back on it's feet,

They would be paying attention to the jobs situation. You know, the living wage jobs that fuel the economic engine. Without those, this country is going down for the count. It was nice while it lasted.

[depakid]

2. Quite a few if us predicted what would happen with an inadequate and ill targeted stimulus

Including Dr. Krugman.

[ProSense]

3. Are you reading the same article and seeing the same charts?

"Still, the two pictures support the view that stimulus worked as long as it lasted, boosting the economy"

If you didn't notice, the charts show post-stimulus reality beat the projections.

09Q1, which was the last few months of Bush's term, was a lot worst than Zandi predicted. From 2009:Q4 through 2010:Q2 the actual numbers beat the projections.

[depakid]

5. You're ignoring economic reality again

very likely because you don't understand macroeconomics.

[ProSense]

8. "very likely because you don't understand macroeconomics."

Explain it, go ahead enlighten me because frankly I don't think you can.

[depakid]

14. Two key things had to be done in an effective stimulus

1. Plug the output gap- i.e. create enough demand through federal government spending (with incredibly low borrowing rates) to make up for the loss of demand among households and various private sector purchasings; and

2. Compensate for the state revenue shortfalls and the consequent anti-stimulatory effects of layoffs and service cuts from reduced expenditures (which in turn cause negative multiplier effects to ripple throughout local communities).

I can't take credit for the metaphor- but it's a descriptive:

There's no use in building half a bridge over a chasm.

Unless one believes Evel Knievel would make it given another run.


---

http://www.ge0ph.com/photos/photooftheday/images/769/500x375.aspx

[ProSense]

9. Also, speaking of reality

more Krugman:

Now, it’s arguable that even in early 2009, when President Obama was at the peak of his popularity, he couldn’t have gotten a bigger plan through the Senate. And he certainly couldn’t pass a supplemental stimulus now. So officials could, with considerable justification, place the onus for the non-recovery on Republican obstructionism. But they’ve chosen, instead, to draw smiley faces on a grim picture, convincing nobody. And the likely result in November — big gains for the obstructionists — will paralyze policy for years to come.

link

[Jakes Progress]

6. Are you ignoring Krugman's many columns

calling for a more robust stimulus, one that wouldn't peter out?

[ProSense]

7. Can you point to a column

in which Krugman states the stimulus didn't work?

Everyone knows it should have been larger.

[Jakes Progress]

15. Goin' on the yellow brick road with Dorothy

Toto, the lion, and the tin man?

Patented PS bs, deflecting with misdirection, ducking the issue, arguing a point not under discussion. I didn't say Krugman said it didn't work. He said it was too little, too late, which the "proof" of your quote below says. The point isn't that the stimulus didn't stave off ruin, it's that it was to timid to do any lasting good. Your posts seem to fall in second category of Washington idiiots - that the stimulus has worked and we don't need to do any more.

Let's try this. Do you think Obama should go to Congress and the American public and make the case for additional stimulus? Or do you believe that he asked for all the stimulus needed the first time? Or do you believe he erred in being too short-sighted in his original goals (Krugman"s position)? Do you think he needs to be more pro-active in asking for more stimulus? Do you think our leader needs to use all of his efforts to try to keep America from dropping into a second recession?

[Kurt_and_Hunter]

21. Define "work"

Of course Krugman said the stimulus would work and did work if you define "work" as making roughly the contributions to GDP growth shown in the first chart.

The purpose of the stimulus was not, however, to add x to GDP in quarter y.

The purpose of a stimulus package was to get unemployment down around 6-7% and restart a steady series of strong GDP growth quarters... y'know, the sorts of things one would associate with recovery.

I believe it was called something like the American Recovery Act.

[ProSense]

10. Here:

Krugman:

Too Little of a Good Thing

The good news is that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, is working just about the way textbook macroeconomics said it would. But that’s also the bad news — because the same textbook analysis says that the stimulus was far too small given the scale of our economic problems. Unless something changes drastically, we’re looking at many years of high unemployment.

<...>

About that good news: not that long ago the U.S. economy was in free fall. Without the recovery act, the free fall would probably have continued, as unemployed workers slashed their spending, cash-strapped state and local governments engaged in mass layoffs, and more.

The stimulus didn’t completely eliminate these effects, but it was enough to break the vicious circle of economic decline. Aid to the unemployed and help for state and local governments were probably the most important factors. If you want to see the recovery act in action, visit a classroom: your local school probably would have had to fire a lot of teachers if the stimulus hadn’t been enacted.

<...>

What I keep hearing from Washington is one of two arguments: either (1) the stimulus has failed, unemployment is still rising, so we shouldn’t do any more, or (2) the stimulus has succeeded, G.D.P. is growing, so we don’t need to do any more. The truth, which is that the stimulus was too little of a good thing — that it helped, but it wasn’t big enough — seems to be too complicated for an era of sound-bite politics.

[Phx_Dem]

18. Is Krugman ignoring his own past columns? These are his words.

"Now, it’s arguable that even in early 2009, when President Obama was at the peak of his popularity, he couldn’t have gotten a bigger plan through the Senate. And he certainly couldn’t pass a supplemental stimulus now. So officials could, with considerable justification, place the onus for the non-recovery on Republican obstructionism. But they’ve chosen, instead, to draw smiley faces on a grim picture, convincing nobody. And the likely result in November — big gains for the obstructionists — will paralyze policy for years to come. "

Anyone who was paying attention knew they couldn't get a bigger stimulus plan. Obama (and we) was fortunate to get as much as he did.

[Honeycombe8]

22. I'll chime in on this point, since I recall a bit about it.

It wasn't just that the stimulus plan was too small. I didn't know, personally, but the consensus among economists at that time, as I recall, was that the stimulus package was too small. Still, I hoped it was enough, as did many others. It could've been, had other things happened. But those other things didn't happen (like housing recovery, banks starting to lend to small businesses, etc.).

The second problem with the stimulus plan was more of a problem: It didn't target jobs enough, and it was filled with pork. It saved some jobs (teacher jobs, I think). That didn't ADD jobs, but it did save some. Its goal was to add some jobs, but really, not a whole lot of jobs, considering we were on the brink the second Great Depression. That's because, as I recall, the bill contained a lot of pork that was required to get Dems to vote for it. Then it had some questionable uses of money that didn't exactly add jobs, but the hope was that the result would be to add jobs.

In other words, I was expecting an FDR jobs stimulus package (directly fund some blue collar work), but we got instead a highly technical, maze-like, give some $ to this state and hope they use it for that, give some $ to this other state and hope they use it for "X," pay off this Senator so he'll vote for the bill, expand the educational department (that will save some jobs), etc., etc. An odd bill.

Still, I hoped it would be enough. It apparently wasn't. I'm sure the WH thought they'd be passing a second stimulus package, but it doesn't look like that's gonna be possible. They passed the Healthcare Reform Act instead.

The tax credit incentives for buying homes, and for buying cars, seemed to work the best.

[bvar22]

27. Tax incentives for "buying homes & cars"...

People who are in the market for homes and cars are not in real trouble.
Even Cash for Clunkers didn't reach the people who NEED it, and will SPEND it.

Want a "stimulus"?
Put the CASH directly into the hands of The POOR, the UNEMPLOYED,The HOMELESS, and those dropping out of the Middle Class.
They will SPEND it.
.
.
.
Which brings us to a deeper Structural Problem.
Money spent at WalMart (or any other Big Box) does not circulate at the local level, stimulating local economies.
It is removed from local economies and sent to the Ownership Class in ONE STEP.

Some serious Trust Busting and Fair Competition legislation that lets Mom & Pop and small Family Farms compete locally with the Big Boxes & Agri-Business on a Level Playing Field NEEDS to be passed and enforced BEFORE Stimulus Cash will do much good.

THAT is how fucked we really are.

When The Working Class & The Poor realize we have more in common with each other than we have in common with the Ruling Class of BOTH Political Parties, "CHANGE" will be possible.
WE outnumber THEM,
but as long as they can successfully FRAME the national dialog as a battle between the Republicans & the "Centrist"(sensible) Democrats, nothing will change.

[bvar22]

25. I disagree with the meme, "Its ALL we could get".

Like HCR, we don't KNOW that, because there was NO real fight.

"Strong and successful presidents (meaning those who get what they want - whether that happens to be good for the country or not) do not accept "the best deal on the table". They take out their carpentry tools and the build the goddam piece of furniture themselves. Strong and successful presidents do not get dictated to by the political environment. They reshape the environment into one that is conducive to their political aspirations."


http://www.commondreams.org/view/2010/07/17

[Scruffy1]

26. I completely agree

I think that the the Republicans simply act as cover for our corporate dems.

[Kurt_and_Hunter]

20. The Zandi chart is isolated effect of the stimulus

We didn't beat or fall short... the real GDP numbers are the stimulus +/- what was going on in the rest of the economy.

[DailyGrind51]

4. NAFTA, CAFTA, GAT, and the WTO will all have to be repealed for jobs to recover!

[Mimosa]

13. Or modified?

If people don't see that they are blind.

I knew this would happen back in the late 80s, early 90s. Clinton continued Bush 43 economic policies. The tech boom was what kept the economy good while most manufacturing was shipped out.

[DailyGrind51]

17. "Down-sized" middle-managers who retrained for tech sector jobs had their jobs "out-sourced"!

Back in the late '80s and early '90s, a lot of middle-tier managers were eliminated in the "lean and mean" drive. These same people were in their 30s and 40s back then and are now in their late 40s and 50s and are being laid off from the tech careers for which they retrained with no where else to go, too old to start over again, and a limited safety net on which to fall back.

[applegrove]

11. I hope Obama is listening the Krugman now. He didn't for a while and what Krugman predicted has come

true on many fronts: he predicted that the stimulus wasn't big enough, he predicted that the GOP would then claim Keynesism and government spending during a recession doesn't work.

[Jakes Progress]

16. The OP thinks Obama should only listen to other people

when other people tell him his is right.

[Skink]

12. Rumsfeld had no trouble packing on the supplementals.

[wisteria]

19. All I know is my patience is wearing thin with Obama's economic plans.

I really think he needs to shake up his economic team. Reading about Bernanke's comments uttered matter of factly, pushing recovery out till next year, I get the impression he doesn't comprehend how his words ring in the ears of the unemployed. I don't see any urgency on his or this administrations part to reevaluate their plans and discuss improvements or other alternatives. There should be some alarm that recovery is not going as first predicted by Bernanke. President Obama needs to reach out to those who are without jobs and reassure them that things are really getting better-I don't see that happening and that makes me wonder if he isn't sure about recovery himself. I know Republican's don't have what it takes to get us out of this mess, but I am disappointed in this Democrat administration for what appears to be a lack of urgency and compassion, and for not reaching out more to reassure a very nervous public.

As Mr. Krugman put it,

"So I’m going to have another cup of coffee, but skip the pie (in the sky)".

[Yavin4]

23. Obama Delegated The Writing of the Stimulus Package to Democrats in Congress

who failed miserably to put together a document that could do two things:

(1) Be large and bold enough to capture the attention of all Americans with things such massive new spending on infrastructure, energy research, and other technology driven research

(2) Be large and bold enough to give a terrific boost to the economy.

To blame Obama for this is flat wrong, and it's getting real tiresome that so many people just do not understand how our political system works. For example, everyone loves to use Bush's legislative "successes" as an example. Yes, if all you want to do is cut taxes on the rich and fight wars, then yes, you can be legislatively successful as well.

[Safetykitten]

24. Krugman, esconced in a upperclass New Jersey suburb is starting to sound like an imbecile.

[paulk]

28. you need to do better than that

just trashing someone without making even an attempt to argue your point reflects more poorly on you than the person you're trashing.