Why Aren’t Tax Cuts Discredited?
In a piece asking, Did the stimulus bill fail?, Dave Weigel finds a comparison in the Bush tax cuts:
Did the stimulus do less than President Obama said it would? Absolutely… At his most optimistic, he said the stimulus would be a success if it “created or saved” 4 million jobs. It fell far short of that. But ambitious, expensive bills have fallen short before, and it hasn’t discredited their reasons to exist. George W. Bush’s tax cuts were supposed to balance the budget by 2010. That hasn’t happened, obviously, but tax cuts have not been discredited—in fact, they’re central to the discussion about how to dig out of the recession now. Tax cuts are popular.
Not only do Republicans reject any tax increases in debt ceiling discussions, they’re redefining them down:
Republicans, led by Mr. Cantor, rejected proposals to close loopholes or other tax breaks for owners of corporate jets, oil and gas companies and hedge funds. They said these measures, which would have raised about $130 billion, amounted to tax increases. The administration has also proposed limiting deductions for high wage-earners, which the White House says would raise $290 billion. But there is little support for that in Congress.
Revenue obviously has to be part of the compromise equation.
50 Responses to “Why Aren’t Tax Cuts Discredited?”
Cantor is an idiot. The fact that he holds a leadership position is proof of the lack of young talent in the Republican party.
Obviously, both raising taxes and cutting spending must be on the table.
Tax cuts are discredited – but only to those individuals who are looking at them from an economic perspective.
Those who use them as a political tool don’t care about the actual effects – they are simply happy to twist, befuddle, and fabricate when making the claim that we need more and more.
Tax cuts funded by borrowing don’t make sense. The tax cut (and tax holiday) as a stimulus has also been disproved.
It all boils down to the influence. Whose ox is going to get gored in this round?
I’m not sure the premise is true. I don’t see anyone (and certainly no one around here) advocating further tax cuts. At most, some Republicans are too intransigent about resisting very modest tax increases in the form of closing loopholes that were of questionable justification in the first place.
But when the strawman of “all conservatives want more tax cuts” is constantly raised in response to every criticism of the Democrats’ resistance to spending cuts, it s non-responsive at best. It seems that some people find it mandatory to make the problems with Republicans the EXCLUSIVE topic of ALL conversation. And that kind of giving Democrats a pass doesn’t help promote compromise either.
Anyway, I agree that revenue increases are a vital part of any POLICY solution to the current impasse, but I would argue that partisans on each side (and around here, that means Democrats in particular because of their overwhelming dominance in numbers and volume) need to stop giving their own party a pass as a vital part of the POLITICAL prerequisite to any action on the policy front. Because as long as each part knows they will get a pass from their base, they have no reason to compromise.
I agree both spending cuts and tax increases need to be on the table, but the Weigel article doesn’t do a very good job explaining why, and instead tries to defend a stimulus bill that missed it’s goal by a mile. The title of this post should be “why aren’t tax cuts and increased spending both discredited” since neither seem to work based on the information provided.
Whether each job created by the stimulus cost exactly 185K or 278K misses the point – it’s hard to make a case that it was an efficient use of funds. Better response and messaging from the White House won’t change that. Weigel admits that political losers always say the problem was bad messaging, then claims that this time it’s really true. Well no the problem isn’t bad messaging, the problem is that the program did not meet it’s goals as set out by President Obama.
Obey is wrong that the bill’s Waterloo was the ‘non-existent congressional district’ problem. It’s Waterloo is the continuing high unemployment numbers that are wildly different than what Obama claimed they would be.
Further, if you read the link on the tax cut “discrediting”, one finds the projection of the 2011 budget surplus was based on the CBO’s 2000 baseline budget.
I think we should therefore first write a post discrediting the CBO for failing to factor in all the 9/11 and subsequent war spending in their 2000 budget. You have an argument that the tax cuts should have been reevaluated in light of subsequent spending, but you have no argument the tax cuts per se are discredited by that link.
Come on, we play big league ball here, not Tball.
I posted on this a while back but the legislated spending increases over the CBO baseline of 2001 were more than twice the size of the legislated revenue shortfalls. Funny how that doesn’t ever seem to come up.
“I posted on this a while back but the legislated spending increases over the CBO baseline of 2001 were more than twice the size of the legislated revenue shortfalls.”
Wars ain’t cheap. Neither are terror attacks that devastate the economy.
“Why Aren’t Tax Cuts Discredited?”
Ah, we all know the answer to this one. Those with the most to gain from propping up the upper class on the back of the poor are the ones controlling the message. They’re just doing a better job than the rest of us at the shouting game.
here’s an in formal breakdown of the 2009 stimulus:
1. the 2009 stimulus had 288 billion in tax breaks and incentives, or 37% of the total.
2. it spent 105 billion on medicare, cobra, health information technology, and numerous low-income programs; 13%
3. it spent 100 billion on education with 53 billion of that going to districts to retain teachers, 12%.
4. it spent 82 billion on unemployment payments, food stamps, and temporary welfare payments, 10%.
5. it spent 105 billion on infrastructure, 13%
6. it spent 34 billion on energy efficiency and scientific research, 4%
Items 2-6 all can trace job creation or job retention directly to the projects or programs they supported. At a minimum, they retained state jobs while given the economy a demand base for basic services.
the tax cuts, heralded as the savior of our economy, do not show the job numbers they should if they were effective job producers.
i can demonstrate the numbers for 2-6, where are the tax break job numbers? Oh yeah, the stimulus did not produce the jobs promised…..just about 2/3s of the jobs promised.
Ok, so why should we believe that another round of “stimulus” would be the right type / amount to actually produce the hoped-for jobs? And if it failed again to actually reduce the unemployment RATE (not manipulated made-up numbers about “jobs saved or produced” but actually verifiable effects on the RATE of unemployment), wouldn’t you and Krugman and the rest of the faith-based fiscal community simply insist YET AGAIN that it just wasn’t big enough?
Put another way, aren’t your explanations for why the last round failed theoretically usable for an infinite number of future rounds, regardless of their structure or size?
In short, why should we believe you’re not just making this all up?
the numbers I cited were not made up. tax break job numbers are never cited because they are faith-based and unsupported by the facts.
If a government project for more efficient power lines is proposed for example, are you actually trying to say jobs would not be created? new roads? trains? bridges? sewers?
they don’t get built on tax breaks, and no private company will ever build them on spec.
the bush tax breaks for the upper 2% have been extended at Republican insistence that this is how jobs are created. where are the tax break jobs?
For the 100th time, the number of people here defending tax cuts/tax breaks is ZERO. SO every time you change the subject to talk about the lack of evidence for tax breaks producing jobs, all you do is highlight the fact that you are unable to stick with the ACTUAL subject that is the controversy: whether Democrats can actually PROVE (not just assert) that their proposed policies would produce decreased unemployment rate.
The best I’ve seen is the old “2.4 million jobs created or saved” rhetoric that is based on nothing objective but rather just a series of self-serving guesses about how it MIGHT have been even worse without the “stimulus”. That kind of non-evidence is only persuasive to the people who have some kind of vested partisan interest in trying to promote it. That’s not even close to good enough.
Hemm, what evidence can you give to prove that this next time any “stimulus” would actually get spent on new roads and bridges instead of being primarily directed towards Democratic Party supporters in government unions?
logan
one more time.
the current crisis revolves two ways to address unemployment, Stimulus or Tax breaks. Those are the only two choices out there, so if your not for another stimulus, what exactly are you for? Small animal sacrifice?
I have not gone state to state to get exact numbers for how many state employees, teacher jobs, and project jobs were created or retained. One of the reasons is that Republican states have gone out of their way to hide those numbers for purely political reasons.
If you have problems estimating jobs to projects and fund effectiveness. The last stimulus was incorrectly named such. It served more as a lifeline to states, the unemployed, and the poor. it was an emergency infusion of funds that were critical to several states fiscal viability.
Give me 787 billion in infrastructure projects, and I’ll show you a drop in unemployment and a stronger America to boot.
it sure beats tormenting small furry creatures.
That is a false framing of the issue. The current debate seems to be whether we should cut spending (Republicans) or increase spending (Democrats). I am not aware of any major proposal pending in Congress for cutting taxes. If it exists, it has zero supporters on this site and is therefore useless in responding to the people you are actually talking to.
Republicans argue that cutting spending will cause businesses to reduce their current practice of “hoarding” reserves out of fear of future government mandates and will reduce the per-employee cost of hiring. I think their argument is overstated, but not without merit, especially when I observe the fact that businesses ARE hoarding and the fact that per-employee costs due to government mandates ARE increasing.
So I turn to Democrats to see if they have a better argument. And what I get back from people like you is NOT a good explanation on how spending increases could actually work OR any explanation AT ALL about who’s going to buy another trillions and trillions of new bonds indefinitely in order to prevent any and all cuts to entitlement programs. Instead, all I hear from people like you is repeated, incessant attempts to change the subject back to just bashing Republicans.
That indicates to me that you do not have any answer for my question, which is in itself a reason that I should prefer Republicans’ flawed arguments to you non-existent ones.
” If it exists, it has zero supporters on this site and is therefore useless in responding to the people you are actually talking to.”
Logan, you keep saying this, and it seems purposefully dense. First, there are proposals to lower the corporate tax rate, and there are proposals to bring the tax rates on income back to levels before the Bush tax cuts. You know that that’s what is being discussed.
To your initial point, I do agree that Hemm is (correctly) still trying to talk about jobs, while pretty much everyone in Washington has collectively shrugged their shoulders on the jobs issue and turned it into a revenue vs entitlements argument. I think Hemm is absolutely correct in trying to talk about what is actually important, but you are definitely right that that’s not the argument going on right now.
I am too dense to know whether it is purposeful or not.
For purposes of a discussion that is going on HERE, it would be helpful to restrict responses to what the individuals HERE support instead of trying to force them to defend things that they do not individually support just because someone ELSE supports those things.
But I get it: It is easier to just treat everyone as a partisan stereotype instead of actually having to, you know, THINK.
As for the corporate tax rate, I am mixed on that. It would be great to have an actual argument about what it should be, but that is probably not possible in an environment where the dominant mindset is “drrrrrrrrrr CORPORATIONS ARE EVIL!!!!!!”
Yes there’s some merit to businesses will stop hoarding with more certainty. There is also merit that lack of demand is also causing businesses to sit on their cash
Clearly Congress can correct the first problem by passing a long term package like the one Obama is pushing. Doing a short term fix like is advocated by Boehner will not do much to fix uncertainty. Businesses tend to plan on longer horizons than one year.
The lack of demand can also be addressed in part by Congress. Infrastructure projects will increase demand. Funds to states to pay teachers, fire fighters, police etc also support demand by avoiding layoffs. In the last two months 89k government jobs have been eliminated. Surely you will agree these 89k people will not be creating much demand. Yes I’m assuming the private sector will not be employing these people.
To the discussion on tax cuts. I believe the Ryan plan does suggest some but that is beside the point. The argument is over the Bush tax cuts that fell very short of the stated job creation goals. The discussion should be about allowing them to expire and using the revenue to pay down the Federal debt. I am not aware of anyone suggesting this happen over the near term. I believe they are set to expire at the end of 2012.
Republicans and others need to stop pretending taxes will go up tomorrow just as Democrats need to stop pretending any changes must impact current retirees or those near retirement
“it would be helpful to restrict responses to what the individuals HERE support instead of trying to force them to defend things that they do not individually support just because someone ELSE supports those things”
It will be interesting to see if this strategy of bobbing and weaving will serve you well as a lawyer. You know darn well that when the issue of bringing the tax rates back up to Clinton-era levels was being voted upon, there were many on here who were against it. You also know darn well that every time someone proposes a tax cut for the very wealthy, the argument is made — here and elsewhere — that it is important for the economy because it is the rich people who create jobs. The entire point of the stimulus package was, supposedly, to ease the fact that we had lost so, so many jobs, and people were suffering. The Republicans, and the right leaning people here (yes, here too), argued that there had to be major tax cuts involved, because tax cuts stimulate the economy. You know this, so stop pretending you don’t. In a post about an article about whether or not the stimulus “worked”, it is entirely appropriate to ask about the huge portion of supposedly-stimulating tax cuts that went into that stimulus package. You know this too, so stop pretending you don’t.
Furthermore, Logan, this rule of yours that a thing is only appropriate to discuss if people here are arguing for it is pretty silly too. Talking about public policy — even those parts of policy that may not be advocated here at TMV — should not be off limits. If you are saying that you agree with Hemm that tax cuts don’t create jobs, and there shouldn’t be more tax cuts, why don’t you just say that? Is it really that hard for you to agree that a (gasp!) liberal might have a point on something?
“in an environment where the dominant mindset is “drrrrrrrrrr CORPORATIONS ARE EVIL!!!!!!””
For purposes of a discussion that is going on HERE, it would be helpful to restrict responses to what the individuals HERE support instead of trying to force them to defend things that they do not individually support just because someone ELSE supports those things.
Just sayin’. Your made-up rule, not mine.
Given the oversimplified extremism and absolutism of several of the anti-corporation crowd around here, I think my description is accurate within the confines even of my “made-up rule”. I stand behind it.
And I don’t mind talking about public policy generally, but items that are not advocated by persons who are HERE should not be the sole topic of a response that is specifically directed TO the people here. Unfortunately, such subject-changing is not only common, it is PERVASIVE whenever a progressive commenter is responding to anyone who DARES to criticize progressives.
“Given the oversimplified extremism and absolutism of several of the anti-corporation crowd around here”
I can think of exactly one commenter like this around here. Out of maybe 20 regular commenters.
Also, you are trying to derail. Bob and weave, bob and weave.
Hemm is trying to make a pretty simple, on-topic point. It seems like you might agree with some of it, but your derailing and pretending nobody advocates for lower taxes here on the thread are make it unclear what your position is on any of it.
I can think of 4 without trying very hard.
I stand behind my harsh characterization and position.
I sure as hell hope you’re counting neither myself nor those no longer commenting in that 4. Still, 4/20 is 20%. Overwhelmingly progressive? Huh. Strange math you’ve got.
However, you seem very determined not to address any of the on-topic points being made.
In case you’ve forgotten, the point was that the stimulus money that actually went to jobs actually produced or saved jobs. That which went in tax cuts did not produce or save jobs, or if it did, nobody has quantified that in any way. (I know Hemm strongly dislikes anyone [or, at least, me] trying to clarify his points for him, so Hemm, if this is a poor restatement of your overall point, by all means make any necessary corrections.)
If SteveinCH is on here — what say you to that point? You seem to have a knowledge of the numbers behind most of the conservative points. How ’bout this one?
roro,
Short answer is you can’t do the math the way that you and Hemm want to do it. Stimulus is a system and Keynesianism suggests that tax cuts and spending increases from a baseline have an effect on macro growth.
The entire discussion boils down to two things. How much stimulus was there and what was the average effectiveness of those things. When you or Hemm assert things like “that which went in tax cuts did not produce or save jobs”, you are more or less contradicting every Keynesian macroeconomic model that has ever been created.
Let me try to state a few things clearly
1. The stimulus program was less than 50% of the actual stimulus provided to the economy through lower taxes and higher spending. Automatic stabilizers (not all part of the stimulus program) would also count in the spending side. Economic driven tax receipt reductions would count on the tax side.
2. The stimulus program saved or created jobs. How many jobs is almost impossible to tell. Macroeconomists want to state this number with precision based on the use of historical models while simultaneously arguing that this recession is qualitatively different from past recessions.
3. A better crafted stimulus program would have saved more jobs but how many more is again impossible to know.
4. Additional stimulus or less contraction (whether in the form of higher spending or lower taxes) would save some additional jobs.
Our understanding of the system is far too limited to make the types of precise statements that are being made. The best I can do is that the jobs saved or created by the stimulus we have added to the economy cost between $100,000 and more than a million dollars per year per job. Further stimulus would raise these numbers.
“the point was that the stimulus money that actually went to jobs actually produced or saved jobs.”
Baseless assertions made by a party that would benefit from the assertion being true do not constitute good evidence.
Speaking of rules, how about requiring verifiable data to support statements.
First, it is a verifiable fact that Bush had a net job creation of 1,063,000. Call it paltry, but the simplified statement that Bush tax cuts created no jobs is demonstrably false.
Although, since TMV is in the business of simplified statements, how about this most readily verifiable item related to the stimulus…U3 at 2/09…8.1……at 9/09……9.8. HemmD had his infrastructure spending and there was no decrease in unemployment.
See Steve, I knew you’d be the right person to ask.
“The best I can do is that the jobs saved or created by the stimulus we have added to the economy cost between $100,000 and more than a million dollars per year per job. Further stimulus would raise these numbers.”
So, the question is, where do we get those numbers, how do we know that further stimulus would raise them, and is there a better way to direct any further money given to bring them down? (I’m not actually asking you to solve the world’s problems, I’m just putting the questions for discussion.)
“Baseless assertions made by a party that would benefit from the assertion being true do not constitute good evidence.”
This is so funny, Logan. First, I am a person, not a party. But hey. Second, are you trying to imply that a teacher’s job paid for directly by stimulus money did not create or save a job? I mean, really?
“HemmD had his infrastructure spending and there was no decrease in unemployment.”
Um, wow. Casual, you seem to me like you must be smart,a nd it always baffles how you can simplify to the point of absurdity, as you have done here. Think it through.
logan –
“the point was that the stimulus money that actually went to jobs actually produced or saved jobs.”
Baseless assertions made by a party that would benefit from the assertion being true do not constitute good evidence.”
first off, i’m a party of one, at best.
so you’re saying the 100 billion sent to states specifically earmarked to save teaching jobs is not verifiable. do I have to provide a list of names? how about the names of those that built/repaired bridges here in Missouri, do you need that list too?
like i said, give 787 billion in infrastructure projects, and jobs would be created. I’ll defy your insinuation that such a statement is false only because I agree with it.
As to my statements about tax cuts. These are the “fait accompli” benefits since Bush. No more tax breaks are needed,the wealthy have enjoyed their break for ten years already, and corp taxes are the lowest in terms of GDP in 30 years.
The jet tax breaks and breaks for shipping jobs overseas are just the obvious examples of special deals for special people that I believe you may have problems with too. maybe not.
How about taxing the several trillion in American profits lying in off shore accounts. profits made here but protected from taxers. where can you and i get some of these?
when bush’s taxes were extended for the rich the meme has been that this wealth is where the jobs would come from.
ala paul ryan
““Let’s remember, most of our jobs come from successful small businesses. Two-thirds of our jobs do. You got to remember, businesses pay taxes individually. So when you raise their tax rates to 44.8 percent, which is what the president is proposing, I would just fundamentally disagree. That is going to hurt job creation.””
beside the distortions, exaggeration, and downright deceit in this quote, it does show what is being touted as a jobs solution via the rich. the bush cuts are in effect and unemployment has continued to go up. what is trickling down on us from above is certainly not jobs.
SteveinCH
“The entire discussion boils down to two things. How much stimulus was there and what was the average effectiveness of those things. When you or Hemm assert things like “that which went in tax cuts did not produce or save jobs”, you are more or less contradicting every Keynesian macroeconomic model that has ever been created.”
I know you’ve always seen the 2009 stimulus as Keynesian, but the direct payments to individuals and states doesn’t actually fit that model. 330 billion went to direct aid of the poor, out of work, and the frail. that’s not part of Keynesian markets theory.
330 billion is about half of the stimulus.
the stimulus was misnamed. it was more an emergency tourniquet for a dying economy.
And roro, to your snide wars ain’t cheap at the top. Wars and Medicare part D were less than 25% of the statutory spending increases over the CBO 2001 baseline.
Um, it wasn’t really meant to be snide, and I didn’t mention Medicare. And homeland security spending surely falls into either “wars” or “terrorist attack”, and that was a pretty significant contributor too. And 25% ain’t nothin to sneeze at. But hey, whatever. Take it as you want.
Roro,
I think I posted in a different thread (or maybe in this one) where the numbers come from.
There are two questions, numerator and denominator whether numerator is the “cost” of the stimulus and denominator is the number of jobs saved or created.
For the former, there are two ways of looking at is. One way looks at the actual stimulus program and the other way looks at incremental stimulus (e.g., higher deficits). The range is from $860 billion to about $2.5 trillion.
For the latter, there are literally scads of economic models. The CEA puts the number at between 2.4 and 3.6 million. Zandi and Blinder put it at 2.7 million. Taylor puts it at less than 500,000. Let’s leave Taylor out of the discussion for the moment and stick with the CEA range.
So we have results somewhere between $860/3.6million and divide that by 2.5 years (again trying to be as charitable as possible). That gets you about $100,000 per job year saved or created.
The second option is to take, $2.5 trillion/2.4 million and not divide by 2.5 and that gets you about $1,000,000 per job or $400,000 per job year if you wanted to do that.
So that’s the average effectiveness.
But of course the incremental effectiveness is more important than the average if we are talking about adding more stimulus. Most macro models (not all) predict declining marginal effectiveness as the amount of stimulus expands. This more or less makes sense when you think about it since otherwise you could stimulus spend your way to infinity as long as the multiplier was greater than 1.
So therefore my contention that future spending would be less effective than this $100,000 to $1MM per job year saved or created.
Hope that helps to clarify how I see it.
“are you trying to imply that a teacher’s job paid for directly by stimulus money did not create or save a job?”
Yes. Because that “stimulus” only delays the inevitable my a year or two (as we are seeing now) and unless you are saying that the government will just simply pay for everyone’s employment indefinitely, it does nothing to reduce the overall unemployment RATE at all. What is needed is an expansion in PERMANENT employment prospects in jobs that are SELF-SUSTAINING because they actually produce enough economic activity to justify their existence, not temporary subsidies for discretionary workers based on government borrowing that cannot be sustained indefinitely.
It is bizarre to me that you think the government can just print money, throw it at a state government, call it a “saved job” and not care about what happens when such grossly inefficient and temporary systems run out.
Hemm,
I’m afraid you and I have a very different understanding of Keynes. From my pov, Keynes argues that any deficit constitutes stimulus, whether that deficit is caused by decreasing taxes or increasing spending of any type.
You can have long debates about which forms of increasing deficits are relatively more or less effective but Keynesianism simply says that government should run deficits and surpluses countercyclically.
When you argue that certain forms of increasing deficits are not stimulative, you are in conflict with Keynes. You are free to make that argument but I don’t know a macroeconomist who shares it.
roro,
You and CO are showing the very reason why this debate will never be resolved. The debate depends on a counterfactual, a counterfactual that is unknowable on so many dimensions that it’s impossible to have a reasoned discussion.
On this, I happen to agree with you and not with CO or Logan. Government deficits absolutely have an impact on the macroeconomy, making growth higher than it would otherwise be and increasing employment, at least in the short term.
That said, I also think there has been closer to $2.5 trillion in incremental stimulus as opposed to the $787/$862 that people tend to talk about.
In the end, it’s about how much we should be willing to pay to have someone have a job for a year. I personally think we have spent far too much for the impact achieved.
I’m perfectly willing to accept that a range of different policy choices could produce a different outcome but I’m not sure the fundamental dynamic that it is very expensive to “buy” jobs is going to change.
Logan,
By introducing the question of time into the discussion, you are, in my view, changing the terms of the debate. It is possible to believe both in the short term positive effect and the long-term neutral or negative effect. However, since the stimulus itself isn’t permanent (we hope), neither should the expectation of results be.
The right metric, in my view, is dollars/person-year of employment. By that metric, government intervention in the economy has been very inefficient but it has not had zero impact in the period of time the money was spent.
“Yes.”
Well, Logan, that’s some funky logic you’ve got going on there. That teacher has a job and a salary for the time being, meaning that that teacher is buying things and likely paying for a mortgage and for a family, instead of NOT buying things, NOT going on unemployment or Cobra, NOT letting the mortgage fail, and doing all sorts of other things like, for example, allowing a spouse to finish school or not having extraordinary medical bills due to a lack of health insurance. Meanwhile, local and state governments have been shoring up their systems to be able to pay for the teachers they need. See how that works? It seems bizarre that you don’t understand what having a job this year means to next year.
SteveinCH
I’m merely pointing out that providing minimal support systems such as Cobra payments is not stimulative, it the government’s attempt to staunch the bleeding for those already unemployed. Just as applying a pressure bandage to keep a patient from bleeding out, such action does not fit into any definition of stimulation of that patient.
Prior to the Recession, tax revenues had been gouged out through Republican tax laws and unfunded mandates. When the Recession hit, all the serious supply-side macro-economists had undercut their primary way to stimulate the market, taxes were already at historic lows. Ironically, true stimulus projects like infrastructure were eschewed in favor of the Tea Party’s naive theory that lower taxes on profits not realized will fix the economy. Clearly, the supply-siders saw no problem with a huge influx of funds to those who gambled wrong on Wall Street. That influx did nothing for job creation and did nothing to elevate consumer demand. Consumer demand drives the economy, low demand, low employment.
The government can only provide funding to elevate or maintain low demand for a short while. Our government’s job is not to drive the consumer economic demand. The government does not create private sector jobs except through infrastructure projects like the Hoover dam.
I know you wish to make this stimulus package fit one or another macroeconomic model, but no model fits this particular situation. Tarp was the supply-side stimulus, and the 2009 “stimulus” was purely emergency services to the damaged. 103 billion, 13% was the only Keynesian stimulus out of that package.
All the macroeconomic models seem to work while the economy runs smoothly, but everyone fails against the test of specific contingencies. If that was not so, we’d already have this problem solved using your favorite model.
The other part of deficit reduction is the cuts to defense. It’s been whispered, you have to listen hard, that private negotiations between the two parties has reached an agreement to defense cuts. Really? Numbers please.
At the invasion of Iraq, there was one private contractor for every 100 soldiers in theater. the last number i heard was 130 contractors to each soldier, and this was before the withdrawals. Bombs are cheap, soldier killing electrified showers, schools and hospitals not built but paid for, these are expensive.
It’s what not be negotiated that is the rel problem.
Hemm,
If you’d care to substantiate any of what you wrote, I’d be happy to engage. Otherwise, all I can say is that you are entitled to any opinion you’d like.
To give you one example. Supporting COBRA is stimulative relative to not doing it all other things equal. Imagine two systems that were identical save that one supported COBRA and the other did not. In the latter system, fewer things would be purchased than the former and C+i+G+NX would be lower as a first order effect. There are many second order effects as well but I’m not planning to go into them.
As for the rest, it’s more of the same…assertions backed by neither facts nor logic.
@Hemm
Tarp was the supply-side stimulus, and the 2009 “stimulus” was purely emergency services to the damaged. 103 billion, 13% was the only Keynesian stimulus out of that package.
Hemm you are moving the goalposts here. If you look back at the original report and justification for the stimulus, 90% of the jobs it created or saved were to be private sector. I don’t think you can argue that it succeeded, indeed the main defense for the stimulus seems to have changed over to helping states, civil employees and the disadvantaged.
What you are essentially saying is that the stimulus didn’t do what it supposed to do, but it did do some good things. At it’s base though it is a failed program that fell far short of meeting it’s stated goals.
Steve
As usual, your argument hinges on the definition you choose to employ.
definition of economic stimulus:
http://www.stimuluspackagedetails.com/define.html
“A stimulus, by definition, is an act meant to arouse action.
An economic stimulus, ideally, is an investment designed to jumpstart something – more jobs, more consumer confidence, more investment, more growth.”
Cobra existed prior to the Recession, but due to that recession, normal ongoing payments were drying up, and the economic effects of that program was a downturn in demand through lack of cash by the consumers.
The infusion of funds to arrest that drop was not to create “more jobs, more consumer confidence, more investment, more growth.” The infusion of funds was to arrest deterioration, or as I said, staunch the bleeding.
You wish to argue that arresting deterioration is stimulus, but economic stimulus does not mean that by it’s very definition. If you want to fiddle with the definition enough, you can make bank robbery a stimulus to the economy too because it gives cops work.
Tarp was not a stimulus package, it was a wholesale rescue of a select group of banks.
Cobra was not a stimulus package, it was a wholesale rescue of a select group of unemployed.
Is it your belief that Tarp was a stimulus package?
If not, then neither were the Cobra payments.
DQ
I have argued here repeatedly that the stimulus was mis-characterized as stimulus. That’s why the right consistently hammers it as a bad stimulus bill. You may as well argue that an emergency room visit is a poor kind of preventative care.
We were dropping 750k jobs a month, and a number of states were in danger of default. All but about 150 billion went to saving these entities.
That 150 billion for infrastructure was woefully short for job creation. If you wish to accuse me of moving the goal posts, I suggest you realize we we’re not playing in Stimulus stadium, we were facing a game in the dessert who’s loser would bleach in the sun.
Hemm,
Keynesian economics defines stimulus as government spending in excess of revenue. It doesn’t matter what the money was spent on. Indeed, the famous examples of breaking windows and replacing them or digging holes and filling them in are real examples of what Keynes discussed.
Sustaining a program is more stimulative than cutting it or allowing it to end in the world of macroeconomics. The fact that a random person on a blog has a different definition is, in my opinion, pretty much irrelevant.
As your contention that TARP was not stimulative. Again, you’ll find pretty much every mainstream macroeconomist disagrees with you. Indeed, Zandi and Blinder (two left of center economists) conclude that TARP did a lot more to support growth and jobs saved or created than the fiscal stimulus did.
I understand you have a definition that fits the worldview you desire to have. I’m simply here to tell you that the definition you have chosen is well out of the mainstream of macroeconomic thinking.
In fact, not only are contemporary liberals hypocrites by demanding spending “to stimulate the economy” while also seeking tax increases, but Keynes himself and others wanted tax increases only during booms, and indeed the introduction of withholding during World War II (withholding and thus reduction of incomes) was in great part to de-stimulate the economy, to combat inflation.
Liberal “Keynesians” want overspending and deficits continuously. Some want tax increases at any time, too.
(Then there are the others who are simply low-level envy-taxers.)