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Thinking about the stimulus

Business - Image -_1276291070192.jpegDavid Leonhardt marshals some evidence that the stimulus worked much as it was expected to work, and tries to caution people against reading too much into an analysis of one program or another. But I think it's worth talking a bit more theoretically about the sort of confused conversation that's gone on around the American Recovery and Reinvestment Act.

ARRA was a collection of individual programs that all did specific things and that, in the aggregate, were supposed to have a magnified impact on the economy. To understand this, it's useful to think of unemployment insurance. Unemployment insurance is supposed to help the unemployed pay their bills. In the context of ARRA, though, it had a secondary intent: The unemployed would pay their bills and that money would then go to someone else who would spend it and so on, so that your one dollar in unemployment insurance meant more than one dollar in total economic spending.

A lot of arguments about the stimulus get confused about whether they're criticizing the program or the stimulative effect of the program. You might think, for instance, that it was great that the government spent $10 billion on the National Institutes of Health programs but that that spending didn't have enough stimulative bang for their buck. Maybe the money spends slowly, or maybe it went to people who were wealthy enough that they saved it rather than spent it. In that case, the program was good but it wasn't as stimulative as you wanted.

Conversely, you can think that we shouldn't have had $27 billion for highway and bridge construction because that doesn't fit with clean energy goals. But you might also think that the money did a good job getting into the economy, as the builder paid workers and the workers bought coffees and the coffee shop paid rent and so forth. In that case, the program was bad but it was stimulative.

Either way, it would be useful for people to be pretty clear, when they're criticizing the stimulus, about what exactly they're criticizing. It's a lot of programs, all of which can be evaluated both in terms of their worth on their own and in terms of their stimulative impact. You could have a great stimulus full of bad programs or a terrible stimulus full of great long-term investments or, as I think, a pretty good stimulus -- albeit too small -- filled with mostly worthwhile programs. The inclusion of the AMT patch, however, is still galling.

Graph credit: The New York Times

By Ezra Klein  |  June 11, 2010; 5:36 PM ET
Categories:  Economic Policy  
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Next: Reconciliation


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Posted by: f87dsa9fda | June 11, 2010 8:52 PM | Report abuse

Ezra is too congratulatory on the stimulus and its effects. For an economic monetary stimulus to be effective, move aggregate demand and produce a fiscal multiplier, the people have to want to spend the money they marginally receive from others on goods and services at home, and the banks have to loan out money based on reserve requirements.

Neither of these thinks happened quickly as consumer confidence was low throughout the period. And the banks hoarded the money as they awaited other political and regulatory shoes to fall. Also, the expected inflation did not occur because imported goods bled the money out of the U.S.

Maybe we will race ahead of the inflation and slowly see a rising GDP but an awful long time was spent by the President and the Congress, abetted by the media, with political threats against banks and businesses, and that surely did not help in the confidence factor.

Posted by: newssenior | June 11, 2010 9:32 PM | Report abuse


Posted by: wcmillionairre | June 11, 2010 9:41 PM | Report abuse

But where did the money come from? If it came from borrowing, whatever money this stimulus put into the economy has to come out, with interest, in the future from taxpayers. The people that lent the government the money couldn't spend the money, to buy goods or services from us, or lend it to private enterprises.

Excessive debt and leverage increases the fragility of the world economy. The only way out for the great stimulators, Bush II and Obama, with Bernanke at their side, is inflation. It's a dangerous game, but the printing presses are going to be running all night long.

Posted by: staticvars | June 11, 2010 11:29 PM | Report abuse

Why ask what of the stimulus ? when you can ask- why the need for the stimulus ?

I'd start to consider the entire nation state backing the US Dollar - systemic risk - then again - hey - Hans Timmer has only been right two times this year - the third time ? US Treasury loses triple A status -

And what a justified end game playout - that it comes down to ratings.

Eh ?

Tim Miltz

Take what you have gathered from coincidence.

... And it's all over now - Baby Blue.

Posted by: WhenDoesItEndTruman | June 14, 2010 12:19 AM | Report abuse

At the end of the day - the only life worth living can be a community effort.

Money ? ultimately is a community tool- backed by every participant volunteering volition of thought to say- hey - yes, this is worth something.

Technically - at age 42 ? I reason you can not really pocket money - money is really derived in value by a common collective interest - no pun there - in fact, let us leave out interest.

At the end of the day- I would rather invest into a community than some privatized personalized life or afterlife plan - destined for desolation row.

Genetics is a clear and visible entry point for me to understand we are more together than apart, and we do more collectively than apart. NOT that you can do wonders with big buckets of water - leveraging giant rocks over a single stress transfer beam as some have demonstrated in this world - and really- to imagine one person could move a 50 ton rock - with water- and a GOOD choice in the stress transfer beam medium ! heh -

point being - I'm all for what we can do collectively - stimulus ? all in all is cleanup after a SMALL FEW

who exploited the entire system


Housing on the Gulf will stammer the markets in the months to come.

Posted by: WhenDoesItEndTruman | June 14, 2010 12:25 AM | Report abuse

Stimulus is GENERALLY necessary in infantile stages.

If you see it necessary in later life development ?

Clearly - it is not a typically observed epiphenomena in nature.


I'd say something is dying - I can feel it - smell it - please pray be it nationalism !

Amazing how when nationalism disappears ?

Terrorism does too...

Terrorism is as I see it the final shadow of nationalism - the last chance to define against the wind of that which ? is anationalistic - but of COURSE that enables the US CIA to torture- what a load - the LAST attack on nationalism is the A-nationalistic terrorist ? Did ANYONE think this model through ? I see right through it.

Take what you have gathered from coincidence...

... And it's all over now Baby Blue.

Tim Miltz

Posted by: WhenDoesItEndTruman | June 14, 2010 12:29 AM | Report abuse

I observe the teachers across the United States are saying that the stimulus helped out - for a year - but now that it has ended ? short of this new 20 plus billion needed ?

Look out the saints are coming through

And it's all over now Baby Blue -

Whoops- wrong thread and train of thought.

I am amazed at the amounts of money generated by Power Ball lotteries - imagine if we took that 1 billion prize and said - THIS goes to education ?

Oh well- I commend all efforts to push forth 'stimulus' but I critically question WHY stimulus is necessary.

Let us fish upstream on this issue and ask WHY is stimulus necessary ?

Give me time and I'll bring it all back to failed US energy policy -

Forget Hans Timmer of World Bank stating the US failure to announce a firm position at Copenhagen as to green energy - granting the US a competitive place in job markets forthcoming with the top 3 leading industrial nations for green energy, go figure, China, India, and the go figure part - Venezuala - US LOST it's role failing to pave the way post asphalt -

I observe the same character on CNN who wondered how the top Rolling Stones song "Like a Rolling Stone" went ? as he couldn't find anyone in the studio either who knew that tune ? Also pointed out that this oil spill has a silver lining - that we get cheaper asphalt as a result.

Gee- no... GE - no, who owns NBC OR CNN I have to ask ?

No, better, forget the media - who bought Washington in 2000 ?


Oh, I've not even started on completing the ring of causality showing how Western interests in the Middle East have provoked this 'Terror' response.

It's all oil.

Whatever you wish to keep ?

And it's not gold - you better grab it fast.

Tim Miltz

Posted by: WhenDoesItEndTruman | June 14, 2010 12:50 AM | Report abuse

I think at the tribal levels of society ?

VERY small localized governance ?

There is no real 'stimulus' short of a community effort to move forward - as an atomic whole.

What is the force in the US society that equates to what allows double conjugated bonds in chemistry allowing for a multitude of realities materialistically as we have opportunity to afford witness to ?

Money - no, that is dividing.

Genetics ? no that seems to divide ?

Yet ? money truly DOES unite ?

and genetics truly DOES show - hey - not only is SAME SPECIES related? Darwin really showed that ALL life is connected- NOT far from the people who lived here for SOME time with success before immigrants arrived - ,er settlers -

Stimulus if anything is a GOOD thing so long as there is community integrity.

For those that live alone, and have personalized - private afterlife plants ? Stimulus will be viewed as a threat to their isolationistic pursuits and modality in thinking system(s) -

For those that reach for one for all ?

Stimulus is a necessary stepping stone to get out of the muck we ended up post removal of Glass-Steagall.

FACE IT - argument for removal of Glass-Steagall was US couldn't compete in the global economy- instead? US Goldman - others leading the way? TAINTED the global economy.

It is NOT the place to go off on a theory I've been brewing regarding WHY Paulson let Lehman die - it has to do with Lehman holding 90% of global government bonds -Lehman WAS the KEYMAN - the KEYSTONE for the global economy- and I find it strange - seeing Lehman CEO on C-SPAN - he made sense - they HAD 28 billion in assets- they JUST needed access to the liquidity - via the borrowing window - to which Paulson left open to ALL - BUT... Lehman...

Me ? I see that as an attempt to uproot global governments - hey - I could be wrong - oh well- off subject.

Stimulus is fine with me - I view life more collectively - I only play a small part - the play goes on and on - act after act- after act after act- never ending - I say- don't screw the next act !

Tim Miltz

Posted by: WhenDoesItEndTruman | June 14, 2010 1:01 AM | Report abuse

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