Free Markets, Free People


Stimulus spin

This is being pointed to as a validation of the “stimulus” plan:

The oft-criticized stimulus plan boosted the economy in the second quarter by as much as 4.5%, the Congressional Budget Office said on Tuesday.

In a report published the same day as Minority Leader John Boehner’s criticism of President Obama’s economic policy, the CBO said the stimulus law boosted the economy by between 1.7% and 4.5%, lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points and increased the number of people employed by between 1.4 million and 3.3 million.

Of course it boosted the GDP by a sizeable amount.  When you pour almost a trillion dollars out of the government bucket and that is part of the calculation of GDP, then naturally the GDP is going to be “boosted”.

The question is, what good did it do.  Claims of “increasing the number of people employed” is, as is obvious, a guess cranked out by an economic model. 

But look around you.  When what the bucket has dumped out drains away, what do we have?

9.5% unemployment – at least at an official level – 1.5% higher than what was promised if the “stimulus” wasn’t passed.

A stagnant economy. 

Businesses neither expanding nor hiring.

Car sales – down.

Housing sales – way down.

Consumer confidence – in the tank.

Expanded regulation, increased taxation and a war on business.

Policies that have been described as an “economic Katrina.”

So let the left and the media try their best to make this more than it is – the effect on GDP calculation that absurd levels of governmental deficit spending will have.

Take that out and there isn’t much to shout about, is there?

In practice, that means the stimulus plan is the main reason the U.S. economy grew during the second quarter. The Commerce Department estimates the economy grew 2.4% in the second quarter, a figure most economists expect to be sharply revised lower in a report due Friday.

Uh, no, there isn’t.

One last little point:

The CBO also upwardly raised the cost of the stimulus plan to $814 billion from $787 billion.

Nice.

~McQ

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19 Responses to Stimulus spin

  • Paul Otellini, CEO of Intel:

    Unless government policies are altered, he predicted, “the next big thing will not be invented here. Jobs will not be created here.”
    The U.S. legal environment has become so hostile to business, Otellini said, that there is likely to be “an inevitable erosion and shift of wealth, much like we’re seeing today in Europe–this is the bitter truth.”
    Not long ago, Otellini said, “our research centers were without peer. No country was more attractive for start-up capital… We seemed a generation ahead of the rest of the world in information technology. That simply is no longer the case…”

    What the Obami have successfully stimulated is the flight of capital from our nation, and the cancerous growth of fascist economics, where you have the illusion of capitalism, but in reality a government controlled economy where the biggest…and most compliant…players are the chosen winners.

    • http://news.cnet.com/8301-13578_3-20014563-38.html
      Sorry, the link to Otellini’s remarks, and a little more…
      “I think this group does not understand what it takes to create jobs. And I think they’re flummoxed by their experiment in Keynesian economics not working.”
      “They’re in a ‘Do‘ loop right now trying to figure out what the answer is,” Otellini said.
      As a result, he said, “every business in America has a list of more variables than I’ve ever seen in my career.” If variables like capital gains taxes and the R&D tax credit are resolved correctly, jobs will stay here, but if politicians make decisions “the wrong way, people will not invest in the United States. They’ll invest elsewhere.”  [These are what we call "UNCERTAINTIES"]
      Take factories. “I can tell you definitively that it costs $1 billion more per factory for me to build, equip, and operate a semiconductor manufacturing facility in the United States,” Otellini said.
      The rub: Ninety percent of that additional cost of a $4 billion factory is not labor but the cost to comply with taxes and regulations that other nations don’t impose. (Cypress Semiconductor CEO T.J. Rodgers elaborated on this in an interview with CNET, saying the problem is not higher U.S. wages but anti-business laws: “The killer factor in California for a manufacturer to create, say, a thousand blue-collar jobs is a hostile government that doesn’t want you there and demonstrates it in thousands of ways.”)

      • I am hopeful this will be the death knell of Keynesian Economics.  Erb is right when he says that Keynes proposed the government run a surplus during the good times.  But, the politicians have looked upon Keynesian economics as a free lunch.  ‘Stimulus” is just an excuse to spend a lot more money and reward friends.  The economic lultiplier is now substantially less than one.  It was kind of fun watching Romer ignore her own research and expound on the benefits of stimulus vs tax cuts.

        • Keynes wanted cats to bark.  They just don’t do that.  As noted in other areas, the ratchet only clicks one way.  Statists spend money.  They do not savvy saving money.
          But I’m not at all sure there ever was any sound mechanism showing a “multiplier effect”.  If there were one, it would be rational to “stimulate” all the stinking time, and we know that is irrational.

  • From
    http://hindenblog1.blogspot.com/2010/08/burn-real-obama-stimulus.html
    What he was saying is that UNCERTAINTY, which is the Grim Reaper of capital formation, has gone through the roof under the Obami.  Money has no national loyalty, no religion, no ties to geography.  It tends to flow from HIGH RISK to LOW RISK, when returns are anything like equal.  UNCERTAINTY makes reading risks very difficult, which is a risk in itself.
    What this means is that…especially coupled with the VERY high taxes on businesses in the U.S….money, businesses, and jobs are leaving.  They are flowing to LESS HOSTILE places, where the rule of law is more stable and certain.  They won’t be back any time real soon, either.  Not as long as Obama “has the keys”.

  • Even if the Dems don’t want to cut taxes, they could try to de-regulate. I do not mean to strip out all regulations, but determine what is really causing the problems and remove those or amend them to work better. This is the “freebie” they could try. But they won’t because most of them have no business experience, or those that do have experience in regulated areas where their firms were already ensconced and do well.
    I also think having lots of lawyers in power is part of the problem. Lawyers tend to think that a law will fix a problem, when often the unintended consequences are worse than the fix or do nothing but add layers of regulation and bureaucracy. This is not a bash at lawyers, maybe a little at those who go into politics, but its the nature of their business. If they were backhoe operators they would use more backhoes to fix problems.
    For example, the Lacy Act now requires every exporter to the USA to specify in detail what species of wood was used in any wood construction. As if that will catch the guys illegally harvesting teak. Instead it just imposes a cost on everyone else, and the bad guys just lie. But lawyers like paper trails and thus a bureaucracy is formed to manage these forms. I am sure there are many ways to help stop illegal logging in foreign countries (not sure if that’s our problem by itself) that would not involve paperwork for everything made anywhere in the world.

    • I think the biggest problem is that many people and most in government think that no problem is too small for regulation. Sometimes bad things happen no matter how many people stand and look over your shoulder.

    • The old ‘If all you have is a hammer, everything looks like a nail” attitude. Too much specialization and lack of real-world experience.

    • I am for starting a new movement, the 1984 movement, Not the book, but the actual year 1984. The purpose would be to cut business regulations and taxes back to where they were back in 1984, when we still had plenty of government involvement, but not to the toxic levels we have now.

      As I remember that was pretty good year.

  • All those nifty economic theories rely on two words; “ceteris paribus”.

    “ce·ter·is par·i·bus

     (ktr-s pr-bs)
    adv. Abbr. cet. par.
    Whttp://www.thefreedictionary.com/ceteris+paribusith all other factors or things remaining the same.”

    Unfortunately, in the real world ceteris are not paribus. Increased government spending, for example, involves decreased private sector spending. 

    Another quibble I have with the economic and political pundits is their definition of growth, which seems to be increased economic activity of any kind. This is accurate only if you have no concern about next year’s ‘growth’. Today’s consumption uses yesterday’s investment, and there seems to be no interest in investment by these sages. In fact, as noted by R. above, there seems to be a definite dislike of investment among our political class.

  • Lawyers tend to think that a law will fix a problem, when often the unintended consequences are worse…

    Um…  I’m a lawyer.  I think the OPPOSITE is true.
    I’ve said for about three decades that the six most dangerous words in our language are, “There ought to be a law”.
    The law is a sledge hammer.  We often have exquisite scalpels we SHOULD be using…used to use…that are now sitting in the drawer.  That is what happens when you concentrate POWER.  EVERY question becomes a blood-struggle, because coercion is at play.
    But your point is not far off base.  Law schools are warrens of Collectivist dogma.  It isn’t the fact that there lawyers, but the fact that lawyers tend to be doctrinaire Collectivists.

  • I guess somebody forgot to inform the writers at al-AP about how wonderfully effective the stimulus has been:

    Recovery in danger as firms, homebuyers cut back

    The economic recovery appears to be stalling as companies cut back last month on their investments in equipment and machines and Americans bought new homes at the weakest pace in decades…

    O’ course, this will be blamed on eeeeevil corporations who just (damn them!) REFUSE to spend money to hire people.  Just because nobody is buying your products is NO excuse not to increase your work force!!!

    Bah.
    The oft-criticized stimulus plan boosted the economy in the second quarter by as much as 4.5%, the Congressional Budget Office said on Tuesday.
    And in other news, the chocolate ration was increased from 30 g to 20 g today.  At the same time, it was announced by the Ministry of Plenty Commerce Department that the output of boots increase in GDP once again exceeded estimates, prompting nationwide spontaneous and irrepressible demonstrations of gratitude to Big Brother The Dear Golfer.

    / sarc

    The extent to which our betters go to lie to us is starting to really bother me.  I expect spin, half-truths, distortions, and outright lies from politicians, but when the media becomes complicit… We’re in a lot of trouble.

    For example, the Ministry of Plenty’s forecast had estimated the output of boots for the quarter at one-hundred-and-forty-five million pairs. The actual output was given as sixty-two millions. Winston, however, in rewriting the forecast, marked the figure down to fifty-seven millions, so as to allow for the usual claim that the quota had been overfulfilled. In any case, sixty-two millions was no nearer the truth than fifty-seven millions, or than one-hundred-and-forty-five millions. Very likely no boots had been produced at all. Likelier still, nobody knew how many had been produced, much less cared. All one knew was that every quarter astronomical numbers of boots were produced on paper, while perhaps half the population of Oceania went barefoot. And so it was with every class of recorded fact, great or small. Everything faded away into a shadow-world in which, finally, even the date of the year had become uncertain.

    George Orwell
    1984

  • I understand one of the reasons we see less of Biden than we might expect after his announcement of the “Recover-less Summer” campaign is he’s being coached to sing “Tomorrow” from the Broadway hit Annie to explain the Obama economic recovery plan to the country, and he’s having  a little trouble with the tune and some (well, most, actually) of the verses.
    The DNC expects VP Biden will be ready for his big opening on October 1st in the run-up to the November Mid-Term elections even if he has to sing “A spoonful of Sugar” from Mary Poppins instead of “Tomorrow”.

    The original plan as envisioned by White House adviser Rahm Emmanuel was to have Biden build his message around the quote from Colonel Saito in the 1957 movie “Bridge over the River Kwai” -  “Be happy in your work” but at present too many Americans don’t actually have jobs for this quote to provide the proper frame of mind for the general populace.

    • Ah, but you forgot the “Funemployment” meme the Collective tried…very unsuccessfully….
      “Be happy in your not-work…!”  Some trial balloons should never even be inflated…

      • Their original plan involved public service of the nature that the proposed Burma Railway “Bridge over the River Kwai” provided the British POWs in Burma during WWII.  This would meet the goal of encouraging workers  akin to the Hitler Youth projects reminiscent of NAZI Germany in the 30′s who would receive government indoctrination training, shelter and sustenance while repairing America’s infrastructure in the same vein as the renowned public works of the Roosevelt administration in the Depression era.  It was determined after some discussion that perhaps such projects would give people the correct mistaken impression that the country was suffering a depression however, and the plan was scraped in favor of declaring economic political victory, allowing the economy to right itself without further government interference assistance and focusing instead on the moon ponies and hopey change that would accompany the heralded “Recovery Summer”, without resorting to forced conscription of the unemployed. volunteers from the currently idle pool of workers.

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