Getbig.com: American Bodybuilding, Fitness and Figure
Getbig Main Boards => Politics and Political Issues Board => Topic started by: Soul Crusher on July 12, 2010, 05:52:51 AM
-
July 12, 2010
What If Stimulus Advocates Were (Half) Right?
By Louis Woodhill
www.realclearmarkets.com
________________________ _________________
In "The Job Impact of the American Recovery and Reinvestment Plan" dated January 9, 2009, Christina Romer and Jared Bernstein outlined the rationale for, and the expected results from, President Obama's "stimulus" program. Their report included the now-famous graph that warned that without action, unemployment would rise from 7.4% in December 2008 to 9.0% in mid-2010, after which it would begin to decline.
The graph also predicted that the application of $775 billion in stimulus would limit the jobless rate to a peak of 8.0%, which would be reached in the third quarter of 2009. With stimulus, by mid-2010 the unemployment rate would be at 7.2% and falling.
Congress increased the size of the stimulus program to $787 billion and passed it. We now know the results.
Rather than the predicted 7.2%, the unemployment rate in June 2010 was 9.5%. Worse, labor force participation fell to 64.7%, from the 65.8% level that existed at the time that Romer and Bernstein prepared their report. As a result, total employment in June 2010 (BLS Household Survey) was only 139.1 million, rather than the expected 145.1 million. This represents a shortfall of six million jobs from what the stimulus program was supposed to deliver.
It is obvious now that Romer and Bernstein were spectacularly wrong about what stimulus would produce. But what if they were right about what would have happened without the stimulus? After all, Romer and Bernstein are eminent economists, and it was the stimulus (especially at the scale proposed) that was the new and untested - and therefore unknown - element. Clearly, Romer and Bernstein had a much better foundation upon which to base their forecast of the "base case" than they did for the stimulus case.
If Romer and Bernstein were right about the base case, then, rather than creating jobs, stimulus actually destroyed them. By June 2010, stimulus was supposed to have "created or saved" 2.8 million jobs, on its way to a total of 3.7 million by the end of 2010. However, total employment in June 2010 was actually 3.2 million less than what Romer and Bernstein projected it would have been without stimulus.
It is possible to assess the efficacy of stimulus by looking at the experience of other nations during the current recession, which has been worldwide in scope. Examining twelve nations (Australia, Canada, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Spain, the U.K., and the U.S.), it is possible to compare the percentage change in total employment of each country from the end of 2007 to the end of 2009 with the amount of fiscal stimulus applied. For the purposes of this analysis, the "net stimulus" of each nation is considered to be the sum of its 2008 and 2009 budget deficits minus twice its 2007 deficit, all expressed as a percent of GDP. This approach is designed to show the effectiveness of increasing a country's fiscal deficit as a tool for countering rising unemployment.
The twelve-country comparison suggests that stimulus is actually counterproductive. Ranking the nations in ascending order of net stimulus, the six lowest-stimulus countries applied an average of 5.4 GDP percentage points of net stimulus and saw their total employment decline by an average of 0.6% over the two-year period. In contrast, the six highest-stimulus nations applied an average of 13.7 GDP percentage points of net stimulus while seeing their total jobs go down by an average of 5.21%. The three countries with the highest amount of net stimulus (the U.S., Spain, and Ireland) also had the highest percentage employment losses.
Despite all of the academic work on "multipliers", it is clear that stimulus can never produce an increase in total demand. This is because the Treasury must sell bonds and take money in before the same money can be sent out in the form of government spending or tax rebates. However, it is somewhat surprising how destructive to employment stimulus appears to be. Based upon the evidence, it is reasonable to conclude that Romer and Bernstein were right about the base case in early 2009, and that Obama's stimulus program has reduced total employment by 3.2 million jobs from where it would be right now if we had not passed the stimulus bill.
It makes sense that stimulus (government borrowing and spending) would destroy jobs. Government bonds are bought with investment dollars. If there is no change in incentives to call forth more output, then if the government sells more bonds, other forms of capital must be liquidated in order to buy them. Without tools (capital), workers can produce nothing and their jobs disappear.
According to Recovery.gov, as of June 30, 2010, about 53% of the stimulus funds had been disbursed. This required the sale of an incremental $420 billion in government bonds. Right now, U.S. private non-residential produced assets per private-sector worker are about $160,000. Accordingly, $420 billion in stimulus bond sales could be expected to force the liquidation (or prevent the creation) of 2.6 million average private-sector jobs. However, given the fact that this recession has impacted lower-paid jobs more severely than higher-paid positions, it is plausible that taking $420 billion of capital out of the private sector could account for the entire employment shortfall (3.2 million jobs) from the Romer-Bernstein base case. This would be the case if the average job destroyed by stimulus were supported by $130,000 of private non-residential produced assets.
If this relationship continues to hold, the bond sales required to fund the remaining $367 billion of stimulus could be expected to destroy (or prevent the creation of) an additional 2.8 million jobs between now and the end of 2011. Added to the 3.2 million jobs lost to stimulus already, this implies that total employment at the end of 2011 would be 6.0 million lower than the Romer-Bernstein base case. If this were to occur, and the labor force participation rate were to remain at the depressed level of June 2010, the reported unemployment rate in December, 2011 would be 9.5%, the same as that of June, 2010.
It will be interesting to see how the employment situation plays out if the current economic policies (including stimulus) are allowed to continue for another 18 months.
While the administration, most economists, and the mainstream media still seem to believe in stimulus, opinion polls show that the vast majority of Americans do not believe that stimulus creates jobs. They appear to be right.
Louis Woodhill (louis@woodhill.com), an engineer and software entrepreneur, is on the Leadership Council of the Club for Growth.
________________________ ________________________ ________
Wow. not even 240, Straw, Blacken, DSanny, or KC can spin this turd.
-
Great interview from Ferguson.
Brace for Impact.
http://www.businessinsider.com/niall-ferguson-a-us-fiscal-disaster-is-imminent-and-bernankes-monetary-policy-is-a-disaster-2010-7
-
Only a month to go before 240 has to admit failure on this collosal mess.
-
...along with plenty of excuses to explain, justify, rationalize and/or spin it.
Awe, who knows...
Maybe it'll all sort itself out by then.
;D
-
This article is as spot on as it gets.
240, Straw, Danny, & KC, et al can't spin this mess.
STIM BILL = FAIL
-
So were just supposed to take some other persons "projections" and assume they are fact?
-
This article is as spot on as it gets.
240, Straw, Danny, & KC, et al can't spin this mess.
STIM BILL = FAIL
240 says that if it creates 20% of the jobs they said it would, then it's only an 80% failure. :-X
-
So were just supposed to take some other persons "projections" and assume they are fact?
The projections the author used were from the Obama Admn Straw.
Did you read the article? He used Romers' projections.
-
of course
spending by governmetn never works
you can't print money, put it on tab for taxpayer to pay, and let politicians spend it wisely
never worked in history
all it is is stealing ownership by politicians
same as private citizen counterfeiting
deficiting spending is a tax, and fun part is it gets stuck on next politicians after you
obama is tax n spend idiot and megafailure eocnomically is result, no suprise
same as if he ran a busienss into the ground x10000000
-
240 says that if it creates 20% of the jobs they said it would, then it's only an 80% failure. :-X
That's a very euphemistic spin, and the kind I expect to see from several posters on here when the topic comes up in a few short weeks.
Just seems like a lot of $$ to spend on a 20% (or whatever) success rate.
-
That's a very euphemistic spin, and the kind I expect to see from several posters on here when the topic comes up in a few short weeks.
Just seems like a lot of $$ to spend on a 20% (or whatever) success rate.
Unless 3.5 million jobs appear out of thin air in the next month then it will be a massive failure. It was not marketed as something to keep unemployment at the same level. It was hailed as needed for job creation.
-
That's a very euphemistic spin, and the kind I expect to see from several posters on here when the topic comes up in a few short weeks.
Just seems like a lot of $$ to spend on a 20% (or whatever) success rate.
The problem is that we now have an added Trillion Dollars in debt to carry funding this nonsense with literally nothing to show for it since most of the money is wasted and going to cover payroll for states that failed to -re-adjust in 2008 as they should have. The jobs and re-adjustment that should have occurred in 2008 never happened and now will be forced to happen in 2011, just with an added Trillion in Debt.
I can't believe people don't see the insanity of this nonsense.
-
Unless 3.5 million jobs appear out of thin air in the next month then it will be a massive failure. It was not marketed as something to keep unemployment at the same level. It was hailed as needed for job creation.
If they break even, they’ll label that a success because it “kept things from getting worse.”
I'm telling you right now, BF - you won't see any type of conceding from the left on this no matter how it "officially" turns out.
-
no surprise there, hussein fails at everything!! i am used to it and dont expect alot from this admin except to get screwed over
-
I'm still waiting to see how 240, KC, Danny, Mons, and Blacken spin this turd.
-
Not spinning but i find it funny that we're told to take the predictions of where we would be without the stimulus as true, yet it's proven they were wrong about where we are with it. So if we can't trust them to be right about where we would have been with it, how can we be trust where we would have been without it?
I don't believe the stimulus was a waste at all nor do i believe it made the situation worse. I believe they underestimated the amount of jobs that would be lost without it and overestimated the amount of jobs that would be created with it. It doesn't mean the stimulus wasn't a good thing, just that the predictions were wrong all around.
-
Not spinning but i find it funny that we're told to take the predictions of where we would be without the stimulus as true, yet it's proven they were wrong about where we are with it. So if we can't trust them to be right about where we would have been with it, how can we be trust where we would have been without it?
I don't believe the stimulus was a waste at all nor do i believe it made the situation worse. I believe they underestimated the amount of jobs that would be lost without it and overestimated the amount of jobs that would be created with it. It doesn't mean the stimulus wasn't a good thing, just that the predictions were wrong all around.
No, the author took the projections of Romer herself and applied that the actual results.
STIM BILL = DISASTER
-
No, the author took the projections of Romer herself and applied that the actual results.
STIM BILL = DISASTER
And they were wrong. So how can they be wrong but still get credit so to speak for being right about what would have happened without a stimulus? It makes no sense.
“Policy makers are damned if they do and damned if they don’t. If they take away the monetary and fiscal stimulus too soon – when private demand remains shaky – there is a risk of falling back into recession and deflation. On the other hand, if policy makers maintain the stimulus for too long, runaway fiscal deficits may lead to a sovereign debt crisis.”
Nouriel Roubini
-
The projections the author used were from the Obama Admn Straw.
Did you read the article? He used Romers' projections.
I see no actual proof that the stimulus funds caused jobs to be lost.
All I see is a bunch of conjecture and then someone saying "it's reasonable to conclude"
how about some actual proof rather than just speculation from a member from the Club for Growth.
show me some actual proof the of the claim and I'll be more than happy to consider it
-
Obamas EXACT prediction was that the stimulus would created between 3-4 million jobs 90% of which would be created in the private sector and 10% would go to saving government jobs like teachers.By ANY estimate NONE of that has happened!the stimulus has failed by Obamas own standards.
-
I see no actual proof that the stimulus funds caused jobs to be lost.
All I see is a bunch of conjecture and then someone saying "it's reasonable to conclude"
how about some actual proof rather than just speculation from a member from the Club for Growth.
show me some actual proof the of the claim and I'll be more than happy to consider it
The facts are laid out clearly in the article with the number of people actually on payrolls and the UE figures.
There is no way to spin with collosal failure of Obama, which was the very first thing he did.
ObamaCare will be a failure of similar measure.
-
240 says that if it creates 20% of the jobs they said it would, then it's only an 80% failure. :-X
What clip % of jobs has been created versus what was promised? Thanks!
-
What clip % of jobs has been created versus what was promised? Thanks!
UE is pretty much at the exact same number it was when this stim bill went into effect, so basically zero. I distinctly remember you arguing this point last week when you wanted to change the criteria for judging the stim bill from "Did it create the 3.5 million promised jobs or not?" to "Well, it did keep UE the same." :)
-
UE is pretty much at the exact same number it was when this stim bill went into effect, so basically zero. I distinctly remember you arguing this point last week when you wanted to change the criteria for judging the stim bill from "Did it create the 3.5 million promised jobs or not?" to "Well, it did keep UE the same." :)
I'm being serious here... how many jobs were created by the stim, with link? Thanks!
-
I'm being serious here... how many jobs were created by the stim, with link? Thanks!
What was unemployment at last year? Where is it this year? Thanks!
-
I'm being serious here... how many jobs were created by the stim, with link? Thanks!
Zero. Look at the UE rate.
-
What was unemployment at last year? Where is it this year? Thanks!
Okay. So the Stim bill promised no change in UE, and an addition of X million jobs?
I'll happily declare it a failure, if someone can break down the actual numbers, stated and actual goals. Then, give me the rubric for success, with some precedent.
For example - "Obama promised X million jobs. He created Y millino jobs. He missed W million jobs, a Z% clip. We allow zero slack in the timeline. We allow zero slack for any other reason."
Then, I'd like this rubric for pass/fail to be applied to the Iraq war, and tell me if that was a success/failure. Recall we missed many objectives there, and the ones we did achieve often took 6 more years than intended. Still, if OVERALL it can be a success with timeline of 1000% greater than expected, casualties or whatever cost many times greater than expected - but still a success right? So I'll be using that same elasticity/forgiveness in grading the Stim bill.
See why it's tough? Some ppl would say "Obama promised 5 mil jobs... we only got 4.99 mil jobs.... FAIL!!!" In the same breath, they'll say "It took way more lives and $ and time and we only nailed a % of Iraq goals, but that's a WIN!"
Very inconsistent.
-
Zero. Look at the UE rate.
so if I can demonstrate ONE SINGLE job that has been created by the stim bill, admitted by a republican governor, your entire point here becomes invalid.
-
Okay. So the Stim bill promised no change in UE, and an addition of X million jobs?
I'll happily declare it a failure, if someone can break down the actual numbers, stated and actual goals. Then, give me the rubric for success, with some precedent.
For example - "Obama promised X million jobs. He created Y millino jobs. He missed W million jobs, a Z% clip. We allow zero slack in the timeline. We allow zero slack for any other reason."
Then, I'd like this rubric for pass/fail to be achieved to the Iraq war, and tell me if that was a success/failure. Recall we missed many objectives there, and the ones we did achieve often took 6 more years than intended. Still, if OVERALL it can be a success with timeline of 1000% greater than expected, casualties or whatever cost many times greater than expected - but still a success right? So I'll be using that same elasticity/forgiveness in grading the Stim bill.
See why it's tough? Some ppl would say "Obama promised 5 mil jobs... we only got 4.99 mil jobs.... FAIL!!!" In the same breath, they'll say "It took way more lives and $ and time and we only nailed a % of Iraq goals, but that's a WIN!"
Very inconsistent.
You've got a bit of Obama in you. You're doing quite a good job trying to worm your way out of your blind support for this stim bill. There's no reason to get that technical about it (and you're only doing that to try to deflect from the massive failure that it's been). It can be assessed with one simple question, what was UE 18 months ago and what is it now? If it's the same then it has been a failure as the bill was marketed as a job creator that would bring the UE level down, not something that would keep it the same or make it worse.
What does Iraq have to do with the stim bill? Are you capable of discussing anything Obama does from a standalone position or are you so fucked in the head that you can't make a post on this board without mentioning Bush or Palin and something they've done?
-
First off the article is so rife with LIES and DECEITS that its intent to show failure...FAILS.
Of the 787 Billion stimulus dollars remember that 350 Billion of it disappeared immediately and no one has found it to this day.
Collectively TRILLIONS of dollars have been handed out to bankers and businesses as supposed bailouts and stimulus money, only for the US citizens to have been robbed of this tremendous un-repayable sum.
With 400,000+ thousand people applying for UE every week in america how can there have only been a loss of only a couple million jobs? These loss jobs will NOT come back and many entire companies have closed down reducing the chance of a new person getting a job or a seasoned worker being rehired.
Add to this the fact that the unemployment rate in america is NOT 9.7, but well over 20 to 25 percent.
Without the correct figures and truth being told about what is really going on, no financial analyst can type even a single word let alone give a forecast of what is, was or should/could be so far as america's economy goes.
-
You've got a bit of Obama in you. You're doing quite a good job trying to worm your way out of your blind support for this stim bill. There's no reason to get that technical about it (and you're only doing that to try to deflect from the massive failure that it's been). It can be assessed with one simple question, what was UE 18 months ago and what is it now? If it's the same then it has been a failure as the bill was marketed as a job creator that would bring the UE level down, not something that would keep it the same or make it worse.
What does Iraq have to do with the stim bill? Are you capable of discussing anything Obama does from a standalone position or are you so fucked in the head that you can't make a post on this board without mentioning Bush or Palin and something they've done?
Berz,
You have given no numbers. No X, Y, Z, and W as I requested. No rubric. No measurements, no cutoff points for pass/fail.
I don't see how one could deliver an analysis of a huge complicated financial package without the use of numbers.
Can anyone else present those numbers? I'm ready to call it a fail - if the numbers show it to be a fail.
-
And let us not forget what the original claim was for what the Stimulus Bill was supposed to do. It was changed midway through.
(http://www.factcheck.org/Images/image/2009/Articles/6_16_2009_Making_Sense_Stimulus_Spending/stimulus-vs-unemployment-may-corrected.gif)
And things have deteriorated since the last data point in May.
Stop playing semantical games. The thing was a total failure.
-
So the UE goal was the only rubric for success?
Aside from the absurdity of choosing to use it... let's use it.
He predicted it would bottom out at 9% (by your chart).
It bottomed out at what, 10%?
So he was off his total goal. Despite all the unforeseen world events, yes, he said it would be 9% and it would be 10%.
He was off by 1% of total employment. Or 10% of total unemployment volume, if you want to look at it that way.
So um, can anyone list any war, govt action, or other national objective that achieved 90% of their total goals? iraq was supposed to take 6 months.... we're in year 7 or 8 now? That's 2000% over what we were promised... definitely a failure. Right?
-
So the UE goal was the only rubric for success?
Aside from the absurdity of choosing to use it... let's use it.
He predicted it would bottom out at 9% (by your chart).
It bottomed out at what, 10%?
So he was off his total goal. Despite all the unforeseen world events, yes, he said it would be 9% and it would be 10%.
He was off by 1% of total employment. Or 10% of total unemployment volume, if you want to look at it that way.
So um, can anyone list any war, govt action, or other national objective that achieved 90% of their total goals? iraq was supposed to take 6 months.... we're in year 7 or 8 now? That's 2000% over what we were promised... definitely a failure. Right?
Don't use U.E. if you don't want to. Almost 1 trillion dollars of capital burned up for no gain. The economy isn't improving. The consumer credit contractions, bad Employment reports, bankruptcies, massive drops in housing including new home starts, collapsing tax revenues, bankrupt states and municipalities, contracting labor pool, decrease in consumer spending, poor manufacturing readings and still record amounts of jobless claims prove that point out.
What exactly has this changed? That's the fucking point. All that capital burned up for nothing....and what exactly was gained? Some made up "can't fail" metrics? Moved goal posts?
Really? That's all the ammo you and the Admin have?
Just.... ::)
-
Don't use U.E. if you don't want to. Almost 1 trillion dollars of capital burned up for no gain. The economy isn't improving. The consumer credit contractions, bad Employment reports, bankruptcies, massive drops in housing including new home starts, collapsing tax revenues, bankrupt states and municipalities, contracting labor pool, decrease in consumer spending, poor manufacturing readings and still record amounts of jobless claims prove that point out.
What exactly has this changed? That's the fucking point. All that capital burned up for nothing....and what exactly was gained? Some made up "can't fail" metrics? Moved goal posts?
Really? That's all the ammo you and the Admin have?
Just.... ::)
Was long-term sustainability of the US economy one of the stated goals? If so, then yes, that objective was failed miserably. Yes, long-term, we're fvcked from it, no doubt there.
So now I don't know what rubric we're using.
Using unemployment rate - he predicted 9% and it hit 10%... he's off by a little bit.
Does anyone have link to exact stated goals of the objective - with numbers? I don't think getbiggers would just call a massive financial spending bill a failure without using any numbers to justify this decision - especially when these getbiggers believed Iraq was a WIN despite missing nearly every stated objective for success - by years, trillions, and thousands of lost lives.
-
240 - the promises were clear, Stim Bill had to pass or else UE would rise above 8%. Now, AFTER the stim bill was passed we are at 10%.
That equals fail no matter how you spin it.
Watch this, maybe it makes a little more sense for you.