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What went wrong with stimulus

The original stimulus package should've been bigger. Rep. David Obey, chairman of the House Appropriations Committee, says the Treasury Department originally asked for $1.4 trillion. Sen. Kent Conrad, chairman of the Senate Budget Committee, wanted $1.2 trillion. What we got was a shade under $800 billion, and something more like $700 billion when you took out the AMT patch that was jammed into the package. So we knew it was too small then, and the recession it was designed to fight turned out to be larger than we'd predicted. In the end, we took a soapbox racer to a go-kart track and then realized we were competing against actual cars.

This was a mistake, of course. But the mistake may not just have been the size of the stimulus package. I wonder if it wasn't fed by a belief that there'd be other chances. If all we needed was the $700 billion package, then great. But if unemployment remained high and the recovery had trouble taking hold, surely there would be the votes for further stimulus and relief spending. No one in the political system could possibly look at 10 percent unemployment and walk away from it, right?

Wrong. Ten percent unemployment and a terrible recession ended up discrediting the people trying to do more for the economy, as their previous intervention was deemed a failure. That, in turn, empowered the people attempting to do less for the economy. So rather than a modestly sized stimulus leaving the door open for more stimulus if needed, its modest size was used to discredit the idea of more stimulus when it became needed.

By Ezra Klein  |  July 26, 2010; 9:06 AM ET
Categories:  Stimulus  
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Comments

What we also got were happy Republicans who could gleefully pretend to be outraged, outraged, at such spendthrift behavior.

Posted by: bdballard | July 26, 2010 9:41 AM | Report abuse

And of course, the DFHs who said exactly this at the time were right, as they've been about almost everything else; yet the people who are always wrong about everything are still the ones who are listened to because they're "serious". Some things never change, and won't until the disastrous course this country is on leads to complete collapse. (Or maybe not even then...)

Posted by: labonnes | July 26, 2010 9:55 AM | Report abuse

Paul Krugman said this early last year when the stimulus bill came out of the Senate:

"So the original $800 billion plan was too small, especially because a substantial share consisted of tax cuts that probably would have added little to demand. The plan should have been at least 50% larger."

"The real question now is whether Obama will be able to come back for more once it’s clear that the plan is way inadequate. My guess is no. This is really, really bad."


http://krugman.blogs.nytimes.com/2009/02/07/what-the-centrists-have-wrought/

Posted by: gdcassidy1 | July 26, 2010 10:02 AM | Report abuse

The mistaken [and haughty] "belief that there'd be other chances" is affecting the PPACA, too. Estimates of PPACA cost were deliberately underestimated, perhaps with a similar belief that funds could be siphoned into the program via subsequent bills: now that such tactics have (for the most part) been thwarted, there's a real concern that the PPACA (particularly its high risk pools) might kill rather than save.

When the money runs out (and, interestingly, the PPACA funds will be exhausted before the stimulus funds have been spent), what next? It seems as if doing the logically incorrect thing leads to what is perceived by both sides to be a winnable political battle -- a perverse, self-perpetuating outcome rather than the helpful resolution of a problem.

Posted by: rmgregory | July 26, 2010 10:20 AM | Report abuse

"But if unemployment remained high and the recovery had trouble taking hold, surely there would be the votes for further stimulus and relief spending."

. . . surely there would be a lot of people wanting to vote for more of what apparently didn't work the first time. Is that really the calculus?

That's fundamentally an argument that, since there's no real sign that the stimulus spending is working, it must mean that we need to spend more. Which is a tough argument to make. So, if you're not going to spend enough going in, it's unreasonable to expect everybody else to say: "No results, so far? Well, by all means, keep spending until you get some results. Sounds great!"

Posted by: Kevin_Willis | July 26, 2010 10:28 AM | Report abuse

The notion that being wrong has discredited you strikes me as neither unfair nor unwarranted. If you want to try to argue that the best solution now is to throw twice as much money at a policy that has already failed, it seems that you ought to be able to offer a shred of a reason to believe that it would lead to something other than twice as big a failure. Otherwise, those of us in the reality-based community are just going to have to believe in all of the evidence around us and conclude that the stimulus opponents were right all along.

Posted by: tomtildrum | July 26, 2010 10:29 AM | Report abuse

How do write a post like this without mentioning the filibuster? A substantial majority of the elected representatives of the American people want to do something. A minority who believe that it is in their personal interest to do nothing have the power to prevent anything from being done. This is entirely due to the anti-democratic rules of the US Senate.

Posted by: Bloix | July 26, 2010 10:31 AM | Report abuse

Re the last couple of comments, although Ezra didn't make it clear in this post, but there's no dispute among the CBO, the White House, or private economists that the stimulus is responsible for somewhere around 2% GDP growth and a couple million jobs either created or preserved from destruction. Without it, we'd be looking at either the most anemic "recovery" on record or a continuing depression, and around 11-12 % unemployment. Ezra's point, which I wish he had expressed more forcefully, is that the inadequate stimulus helped stave off an even worse disaster but wasn't enough to relieve what (until recently) we would have regarded as intolerable levels of unemployment.

Posted by: redscott1 | July 26, 2010 10:37 AM | Report abuse

"If you want to try to argue that the best solution now is to throw twice as much money at a policy that has already failed, it seems that you ought to be able to offer a shred of a reason to believe that it would lead to something other than twice as big a failure."

How's about the fact that it didn't fail? Every honest analyst agrees the package did EXACTLY what it was expected to do--saved or created 2-3 million jobs and brought down unemployment.

This is like filling your car with 1/4 tank of gas even though your buddy warns you that you need a full tank to get to the next station. Then you run out of gas and get stuck in the desert. When your buddy shows up with a gas truck, you say: "No way, don't you dare fill up this gas tank! I filled it 1/4 of the way before, and look where that got me!"

Posted by: theorajones1 | July 26, 2010 10:50 AM | Report abuse

As I've written plenty of times before, I think the bigger issue is that had the AMT provision been excluded, the stimulus could have contained another $150 billion in aid to states, had COBRA cover a greater percentage of premiums for health insurance, and the bill would still have been shy of $1 trillion. Such a package during the first two years would have a very, very similar impact to a $1.2 trillion or $1.4 trillion package, where the difference would have been made up in longer term spending. Still, by my calculations (using the multipliers and Okun's law), the unemployment rate at best would have been 7.5% -- probably 8% -- right now. So that's still a tremendous amount of pain for a lot people, although far, far less than today.

Posted by: moronjim | July 26, 2010 10:54 AM | Report abuse

To be sure, while Treasury and Paul Krugman were apparently both correct that the stimulus would be too small, Krugman was worried that the amount would do nothing to halt the recession which turned out to be incorrect.

In some sense this was a damned-if-you-do-damned-if-you-don't situation as if the stimulus really did prevent as huge a spike in unemployment as happened then the population really would be in open revolt over the deficit; everyone would run around saying "What the hell did you spend all that money for? We're doing fine and now you've mortgated our children's future!!!"

Posted by: reader44 | July 26, 2010 10:59 AM | Report abuse

@Kevin: "since there's no real sign that the stimulus spending is working,"

I fail to see what type of evidence could be more incontrovertible than the monthly BLS chart 2:
http://www.bls.gov/news.release/pdf/empsit.pdf

@moronjim:

what do your calculations say the unemployment rate should be right now given the stimulus package that actually did pass? or are your numbers just relative?

Posted by: eggnogfool | July 26, 2010 11:10 AM | Report abuse

The federal budget deficit for 2010 & 2011 is expected to exceed $1.4 trillion each year.

http://www.washingtonpost.com/wp-dyn/content/article/2010/07/23/AR2010072304101.html

Since the definition of deficit is spending with borrowed money, doesn't this qualify as a $1.4 trillion stimulus?

Posted by: jnc4p | July 26, 2010 11:16 AM | Report abuse

"Since the definition of deficit is spending with borrowed money, doesn't this qualify as a $1.4 trillion stimulus?"

Your argument supports the $1.4 trillion qualifying as 'deficit', which no one disagrees with.

In an alternate world where you had posted something that made some kind of sense (probably along the lines of arguing that the current budget should qualify as stimulus),

the point would have already been rebutted; the current deficits are largely the result of revenue fall (with the topical exception of small portions of the stimulus package), and revenue losses (e.g., tax cuts) do very little to stimulate the economy.

Posted by: eggnogfool | July 26, 2010 11:27 AM | Report abuse

It's quite true that the stimulus has created or saved jobs (mostly in the public sector). The larger question is whether or not it has fulfilled it's Keynesian purpose of "priming the pump" for private sector growth through the "multiplier effect" of government spending to create a self sustaining recovery.

It's also hard to win an argument when you produce an unemployment chart associated with your policy proposal that turns out to be completely wrong and then fail to provide a clear explanation of why you were wrong and how you have fixed the analysis that lead you to be wrong in the first place. (see also: Bush & WMD's)

Obama's economic team is still making the argument that we are on the right track and the economy is recovering, not that they screwed up the first time (see Krugman & Obey) in not asking for more. Although in fairness, I think Biden has gone off the reservation a few times on this and told the truth.

One thing this does show is whether or not Keynesian economics can ever work in the real political world, regardless of the theory. A Democratic President and the largest Democratic majorities in a generation during a financial crisis would seem to be the perfect set of circumstances for proper implementation of Keynesian economics, and they still fell short.

I find the commentary that Ezra posted the other day to be an alternative worth pursuing:

http://nationalaffairs.com/publications/detail/crisis-economics

Posted by: jnc4p | July 26, 2010 11:30 AM | Report abuse

"It's also hard to win an argument when you produce an unemployment chart associated with your policy proposal that turns out to be completely wrong and then fail to provide a clear explanation of why you were wrong and how you have fixed the analysis that lead you to be wrong in the first place. (see also: Bush & WMD's)"

First, the numbers on the chart have pegged the historically comparable unemployment rate about perfectly all along,

second, they did clearly explain the error sources (largely outdated economic numbers) in their projections and have been very open about their process.

Posted by: eggnogfool | July 26, 2010 11:49 AM | Report abuse

@eggnogfool: "I fail to see what type of evidence could be more incontrovertible than the monthly BLS chart 2:"

If you find that sufficiently compelling, then that's great. I don't think the GOP has any political obligation to be swayed, given that unemployment is still higher than before the stimulus package was passed. And the general public is still going to live in a mostly visceral, anecdotal world. The mom-and-pop restaurant down the street that closed, that new little strip mall that has had a dozen stores open, then close one by one. The lower paycheck, the lower sales at the company . . .

A stimulus that is inadequate to do anything except produce a result that is "not as bad as it could have been" will be a stimulus that can't be pointed to, when looking for votes for the creation of additional stimulus.

And, that being said, all the good things and HCR aside, if the Obama admin and the Democrats had put that effort towards a second stimulus, we'd have it.

Politically, they made their bed. Now, they must lay in it.

Posted by: Kevin_Willis | July 26, 2010 11:49 AM | Report abuse

"A stimulus that is inadequate to do anything except produce a result that is "not as bad as it could have been" will be a stimulus that can't be pointed to, when looking for votes for the creation of additional stimulus."

So we should have re-inflated the bubble and had another fun cyclical crash because it would have had short-term political uposide?

Posted by: eggnogfool | July 26, 2010 12:08 PM | Report abuse

@eggnogfool: "So we should have re-inflated the bubble and had another fun cyclical crash because it would have had short-term political uposide?"

Nope, just face the facts that if you wanted a bigger stimulus, it should have been all in the first episode, instead of waiting for the sequels.

Myself, I'm not convinced that any form of stimulus wouldn't suffer from diminishing returns. You cannot just stimulate away the repercussions of the dot-com boom and the housing market bubble and the banking bailouts and the takeover of GM and Chrysler and so on and so forth. Any such policy can potentially help or hinder, but it's not like waving a magic wand. Throwing money at problems in larger amounts won't automagically fix everything all perfect.

Posted by: Kevin_Willis | July 26, 2010 12:14 PM | Report abuse

So, Ezra, basically you're saying that the stimulus needed to be approximately twice as big. But what where your expectations for twice as much input? Were you expecting a linear response, i.e., twice as much benefit to the economy?

The problem with that is that whether or not there was any benefit to the economy seems to be a non-falsifiable proposition. The best the administration's talking points have come up with are "It would have been worse." I kinda believe that, but I'm not sure that it would have been worse enough to justify blowing a trillion-buck hole in the national debt.

So maybe you're thinking that the response would have been non-linear? That, maybe if we'd ponied up double the money, we would have crossed some threshold and gotten 10x the benefit? It's certainly possible, but I sure haven't heard of anybody providing even an iota of theory that that would be the case. And there's simply no way of knowing whether that would have had a non-linear inflationary affect as well, or whether it would have eroded confidence in the bond market, or produced some other unforeseen consequence.

I'm a little puzzled that it never entered your head that the problem simply might not have been solvable. Maybe in 30 years we'll have the economic technology to fix macroeconomic conditions. Today, not so much.

Posted by: theradicalmoderate | July 26, 2010 12:41 PM | Report abuse

"Myself, I'm not convinced that any form of stimulus wouldn't suffer from diminishing returns. You cannot just stimulate away the repercussions of the dot-com boom and the housing market bubble and the banking bailouts and the takeover of GM and Chrysler and so on and so forth."

I guess my issue is that it appears that a contraction was necessary for our economy; and the ideal policy prescription was one that (A) prevented unnecessary over-contraction (B) kept key institutions (banks, domestic auto industry) afloat during hard times (C) limited the 'suffering' on the unemployed (who bear the brunt of any contraction) by extending health and income benefits far beyond usual extents.

So while "hey, it could have been worse!" isn't very impressive, can you honestly argue it could have been significantly better?

20/20 hindsight, the homebuyers tax credit was a waste, and there should have been better planning for how the unemployment extensions end. but other than that...?

Posted by: eggnogfool | July 26, 2010 12:45 PM | Report abuse

I think Ezra is generally right above. Rahm & the political team believed they couldn't get a number over a trillion thru Congress (accurately I think) and shot for the $800 billion mark. I imagine that they thought we can get more late if we need it. What killed that possibility though was health care. My fellow liberals don't like to point this out but the nearly year long legislative slugfest over the Affordable Care Act totally jammed up the system. By the time it was over, it was far too late to get more stimulus thru Congress just like it was too late to get cap & trade. Passing the Affordable Care Act had serious consequences and we are going to have to live with them.

Posted by: unitas19 | July 26, 2010 1:21 PM | Report abuse

@unitas19:
" By the time it was over, it was far too late to get more stimulus thru Congress just like it was too late to get cap & trade."

They would have had no problem with cap/trade if not for the oil spill. It's been an issue of votes, not time.

Posted by: eggnogfool | July 26, 2010 1:47 PM | Report abuse

You're right, Ezra. And this is EXACTLY what Paul Krugman predicted would happen. He predicted it at the time the stimulus was being formulated. And no one listened to him. He must feel like Cassandra. This is the guy who should be Treasury Secretary.

Posted by: mmpd | July 26, 2010 1:58 PM | Report abuse

"Since the definition of deficit is spending with borrowed money..."

That's not the definition of stimulus. If the government had a $700 billion surplus, and then spent all of that to stimulate the economy, leaving a balanced budget, it would have been just as much a "stimulus" as spending with borrowed money.

People confuse the concept of budget deficits and stimulus all the time, but they are unrelated. Stimulus funds don't care where they came from, they do the same job either way.

Posted by: Patrick_M | July 26, 2010 2:14 PM | Report abuse

The stimulus would've failed even more miserably if not for Bernanke's Quantitative Sleazing. Interest rates would've shot through the roof.

The Fed monetized the deficit directly through QE and by lending short to banks to buy up the long-term debt.

Posted by: leshoro | July 26, 2010 2:54 PM | Report abuse

What if we stopped paying interest on bank reserves?

The real reason we don't need stimulus is we were already trying fiscal stimulus / deficit spending for 8 years before the recession even hit! We're already overstimulated, and need to bring costs down, not add another interest payment onto the cost of everything the people's government buys.

Posted by: staticvars | July 26, 2010 2:57 PM | Report abuse

@eggnogfool: "So while 'hey, it could have been worse!' isn't very impressive, can you honestly argue it could have been significantly better?"

Not really, all other things remaining equal. I think obviously things could have been better had certain depression-era regulations remained in place (ala, Glass-Steagall which, irrespective of what some might think of it, would have helped prevent some the troubles we've seen) and if regulatory bodies had been doing their jobs, if ratings agencies had been doing their jobs, if there had been capital requirements in place at banks and so on . . . I think different behaviors in the 20 years pre-2008 could have made a big difference. But there was no magic bullet of stimulus that was going to just make 20 years of bad decisions and a self-immolating financial sector just go away.

Posted by: Kevin_Willis | July 26, 2010 3:22 PM | Report abuse

Klein:

"The original stimulus package should've been bigger. Rep. David Obey...says the Treasury Department originally asked for $1.4 trillion. Sen. Kent Conrad...wanted $1.2 trillion."

Doesn't matter. Whatever was going to be asked for was never going to be enough. Because for liberals like Klein, and Krugman, and Obey, and Conrad, and Pelosi, and Reid, and Obama, and Geithner, and every other jerk who voted for this, no amount would ever have been enough because it was always going to be the failure it was. It's just that now, there's proof it is a failure, so there are the liberals whining that it should have been more.

"Ten percent unemployment and a terrible recession ended up discrediting the people trying to do more for the economy,..."

That is a lie. The scum who put together and passed Porkulus had no intention of doing anything for the economy, because Porkulus was meant to take dollars from the people, as opposed to the dollars of those in government (like John Kerry), for every crackpot scheme on the leftist wish list.

Maybe Klein needs to put the Journolist back together so they can provide him with better arguments than the ones he's giving. Plus, they could return to their regular scheduled programming, like calling conservatives racist and engaging in Trig Trutherism.

Posted by: steve_tsouloufis | July 26, 2010 5:57 PM | Report abuse

I had misgivings from the start about the adequacy of the stimulus not because of the size of it (who knows? not me), but because of the nature of it.

It was too drawn out, too many layers/levels for it to filter through in the public sector, too much association with various interests and causes and pet projects. What about: "we need to have private citizens spending more money, so let's have them stop paying income taxes for a while and let them buy the goods and services they need and want"?

Cut the owed taxes in half for 2 years. Cut them out altogether for a year. And reduce the amount withheld from paychecks accordingly. Don't you think we would have seen some businesses able to stay afloat, some adding people, some actually having larger profits to pay corporate tax on?

I mean, was the stimulus intended to "do wonderful things in the long term" or was the stimulus intended to jolt the economy back to life so prosperity could return and then we could afford to "do wonderful things" via government spending. I have my reservations about the government EVER being able to do wonderful things, but I would like for us to be able to afford an attempt at that down the road. I look now at what's coming "down the road" and I am required by logic to focus on the "down" rather than on the road.

Temporary, urgent, direct --- I think those are terms associated with any true and legit emphasis on "recovery via stimulus". But that ain't what we got.

Posted by: TerryOtt | July 26, 2010 7:17 PM | Report abuse

Obama deserves to be thoroughly chastised for his lukewarm, tepid effort in fighting unemployment. He seems too worried about reaching out to conservatives and not so worried about the battlers that voted him in with great hope. He is taking heed of those who espouse the failed theories and ideas that got the US economy into this big mess. What a dissapointment! Obama should be ashamed of himself. The times could not have been more ripe for real change. But he has squandered the political advantage he once held to do something meaningful. Ezra's right. The president should have been far more agressive in fighting unemployment. But instead he was too scared of the wingnuts and the campaign contributors to do anything worthwhile on this front. You are kidding Obama! In trying to be the president of "cool", you have become the president of nothing.

Posted by: simmmo | July 26, 2010 9:00 PM | Report abuse

First, the so-called "stimulus" did nothing to address the actual problem that has, over the past 30 years or so, led to our current economic problem; the systematic depression of wages in this country. We've lost a critical mass of good paying, working class jobs for the masses. That was the fuel of our economy. Now gone, thanks to 30+ years of traitorous trade policy changes bought and paid for by corporations in order to fire their well paid American workers in favor of slave wages off shore. We've gutted the American economy in search of higher profits through reduced labor costs, a short-term benefit resulting in catastrophic destruction of our economy.

The problem is UNDERemployment, not UNemployment. More minimum wage jobs does nothing. Even theoretic 100% employment would change nothing right now, because if you can't earn enough at your job to be able to consume more than the very basics (many don't even do that now) then where is the demand going to come from? This handout of money does nothing to create demand on any significant level. It was no more beneficial than bailing buckets of water on the Titanic.

Worse yet, it's robbing Peter to pay Peter. Money borrowed from future taxpayers to create a few short term payrolls, that the very short term workers will have to pay back in taxes. And when the funds run out, so do these jobs. It does nothing to counter the reason for our economic collapse.

The only thing that can possibly change our situation is rising wages (triple the minimum wage today and watch our economy take off like a rocket), in conjunction with sane trade policy that supports good wages for a majority of working class people. Since that clearly isn't on the horizon, our economy will go nowhere other than down down down, and we ain't seen noth'n yet.

Posted by: cufford | July 26, 2010 9:56 PM | Report abuse

So why aren't we using the rest of the stimulus NOW? Sure blame the Republicans--it's true they are unmitigated obstructionist @&&3&! On the other hand, it's time to stop taking the moral highground and start knocking some heads and plow things through like Republicans do when they're in charge. It's time to take the offensive and win the PR war against the evil liars. You know Fox is going to lie and that the MSM is going to bobble-head Fox's meme without doing any analysis or interpretation, so you might as well do it and hope a little truth shines through all the spin. A job and money in one's wallet makes people think a lot more critically.

Posted by: wd1214 | July 26, 2010 10:04 PM | Report abuse

Well Ezra, Capt. DA Obama certainly thought that the stimulus was sufficient, per his comments, as did Sgt. SA Biden. And certainly their actions following the stimulus in orchestrating a cheerleading squad to manufacture imaginary statistics to prove it was "working" only 4 months after being passed to this very day - you do remember "Recovery Summer"?

Oh and let's not forget that he spent far more political capital, time and demagoguery arguing for his health care proposal for the next 12 months than he did fighting for more stimulus dollars.

So now that the failure of throwing $700 billion dollars at the pent up greed of democratic donors, pork filled bureaucracies and unions has abysmally failed, it is somehow that there was not enough waste of taxpayer money? Funny, because Capt. DA Obama never tried to get anymore.

Posted by: NelsonMuntz | July 26, 2010 10:15 PM | Report abuse

Obama was a new President in an extraordinary situation. It still is. The scenario you outline is likely. One should not discount the factors of uncertainty--nothing like this had happened since the 1930s--and caution, trepidation. The Dems. were newly empowered, and likely not ready to try to push too hard. If 1.4 trillion would have done what was needed, then they got it half right with 7-800 billion. Half right turns out to be wrong for definitive recovery; we can expect high unemployment for years; and no one will be in power after November, 2010. So, politically, the country will stagnate, at the very time that we need effective action. We'll see then what a restive and suffering population will do in 2012.

Posted by: jstevend | July 26, 2010 10:18 PM | Report abuse

"The Problem With Staving Off A Great Depression
...is that about half the people will conclude that since there isn't another great depression (so far), that this means that one wasn't going to happen.

"Using the same presumptions, many will decide that the depth of the recession we've had proves the stimulus (the $787 billion American Recovery and Reinvestment Act, or ARRA) didn't work...."

http://findingourdream.blogspot.com/2010/04/problem-with-staving-off-great.html

Posted by: HalHorvath | July 26, 2010 11:16 PM | Report abuse

Hey, you guys are the ones who promised less than 8% unemployment in return for your promiscuous funding of every daft project that local pols couldn't sell to their own constituents. Nobody forced you to misdirect billions of dollars to overpaid, unproductive state public employee unions only to see them suck it up and return to the trough in no time.

It was blindingly, glaringly, patently obvious that the "stimulus package" was one big giant flush. That you actually believe there would be other chances when the one you people were given was so manifestly frittered away, I can only attribute to an incredible level of obtuseness or chutzpah or both.

Posted by: bgmma50 | July 26, 2010 11:24 PM | Report abuse

Well I predicted the failure of Obama's "stimulus package" too. Not because of its size, but because of its content. Repairing bridges and other infrastructure IS NOT stimulus. Why? Because the bridge existed before the reconstruction, AND the bridge, or other infrastructure will exist after reconstruction, and that's it. All you're getting out of the expenditure is the Multiplier Effect. Please allow me to explain to both you, Mr. Klein, and the president, exactly what "stimulus" is.

Stimulus is an activity or expenditure by the government that encourages (or "stimulates,") other private enterprises to invest additional money.

An example of non-stimulus is the bridge example given above. An example of a true stimulus project would be, for example, the government building a road to a previously inaccessible beach. Once the road is built others are "stimulated" to build gas stations, restaurants, and markets, etc., to service the tourists who would come. Homes and apartment houses to accommodate the workers in these various industries would shortly follow. Finally condominiums, golf courses, and other resort and recreational facilities, would also be "stimulated" to be built.

I hope this post helps you learn a little bit about economics, as well as to learn how little the Obama administration knows about economics.

You should stick to writing about things you actually know something about, like cooking

Posted by: SteveWeston | July 27, 2010 12:23 AM | Report abuse

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Posted by: brownhall24 | July 27, 2010 1:26 AM | Report abuse

The people need to remember as they are concerned with slow stimulous response, that the repubs wanted Obama to fail, so they could get reelected. Even if it means immense suffering for some. Do you really want to vote for the people who made this such a struggle? They even delayed unemployment payments to make people anggry and stifle economic growth, all the while promoting extending tax cuts to the richest 3% of people. Repubs are not friends of the average american. Its time we all realized that

Posted by: jimbobkalina | July 27, 2010 4:52 AM | Report abuse

To guess at anything the party of NO does is a waste of time. Your use of logic rationalizes their behavior. Why is it conservatives (real conservatives) in the Financial Times call the GOP wrong and here in the US even the liberal wonks can't? More nihilism? The WaPo is like the kid who wants to be cool-get out in front and tell it like it is.Do we have to wait for Krugman or a Nancy Pelosi speech that doesn't even get any coverage? While people are literally starving from lack of unemployment benefits (still haven't rec'd the checks!) the left analyzes the GOP. They're wrong. Stop analyzing & watching the clowns. I think I'm more ashamed of the left "elites" not getting it than the right obstruction. COME ON!! Wake the WH up, would you please? Go to a job fair and talk to some people. Where is the economic policy that has been used in EVERY OTHER recession??!!!! Did any Republican President EVER cut off unemployment? Refuse to create jobs? Kill a TANF jobs program that has created literally 1000s of jobs? Cut 2 million off health insurance? Are these just "little people" to the WaPo too? Geithner should be canned and so should Emanuel. They're getting it wrong over and over and over. The country doesn't want to follow Bernie Sanders but isn't it time Ezra you talk to some folks without jobs like the 99ers? Get out of the rarefied air of Washington for a couple minutes. Shift what you're about-let's get away from the 3D Chess Game and proving how clever you are and cover the story--long term unemployment !!! The Worst since they started measuring!!

Posted by: dupagemom | July 27, 2010 8:29 AM | Report abuse

Is Steve Weston unaware that much of the infrastructure repair business is carried out by private contractors who will be stimulated to invest additional money in equipment and personnel in order to meet their contractual demands? Supplies for said repairs are purchased and that stimulates the manufacture of re-bar and concrete etc. I am watching this happen just a few hundred yards from my residence. Private contractors are working for the County replacing an old iron one lane bridge with a modern two lane structure. The money from paychecks and purchase orders will flow outward to the economy at large and stimulate it. HE should learn a little more before he lectures us on our lack of economic sophistication.

Posted by: shiboleth | July 27, 2010 8:50 AM | Report abuse

Why is it that so many who oppose stimulus spending refuse to understand the concept of "not enough stimulus", but instead insist that failure of the stimulus is evidence of misguided policy? Real life is full of examples where accepted solutions require a minimum threshold to be effective. Ever put out a fire with water? [of course you have!]. If I tried to put out a house fire with a bucket of water, would you be entitled to conclude that things have changed, applying water is no longer effective at putting out house fires? Of course not. In fact, firemen would be able to tell you in advance that one bucket of water was not enough. Just as economists were telling us before the stimulus that the $700 billion stimulus was not large enough!

Posted by: tgoodness1 | July 27, 2010 10:30 AM | Report abuse

The number of comments that no more government money should be spent because clearly the first inadequate stimulus did not work shows the irrationality of those opposed to government intervention in the economy. Every economist who was pushing for increased spending warned that the stimulus was too small and would not be sufficient to bring down unemployment to the levels before the financial hurricane struck. Most were also aware of the number of idiots out there who would immediately blame the stimulus plan for the weak recovery and make it impossible to ask for more. None of the critics bother to show any logical argument to show why unemployment would not have hit 15% or higher without the stimulus (never mind going down). The argument against additional stimulus is like saying a damn does not work because half a damn still leads to flooding.

Posted by: serban1 | July 27, 2010 2:22 PM | Report abuse

This is key: "I wonder if it wasn't fed by a belief that there'd be other chances [to pass another stimulus package]." Indeed, wasn't this the Obama mantra throughout his many exercises in bi-partisanship and compromise: "Let's get what we can now and we can always come back for more later." We heard this on health care, on the stimulus, on financial reform, on nearly everything.

In the end it looks like that was really a bad strategy. Some, like Paul Krugman, knew we needed more and couldn't wait, but the administration and its various arms including Organizing for America were trumpeting the President's compromise now for small reforms and come back later and fix it if it doesn't work or isn't big enough strategy, and comparing it with the bogeyman of anything is better than nothing.

In the end what we got may have been better than nothing, but only slightly.

The problem with half measures is they generally fail, and the anti-government types love it when half measures fail because it gives them plenty of fodder for their and seems to substantiate their "government can't do anything right" claims.

It happened when LBJ tried to end poverty and it is happening again under Obama. It seems impossible to have both guns and butter and for whatever reason in the post-war years Democrats have too often been stuck with war, except for Clinton who seemed to be mostly against butter.

Posted by: Prakosh | July 27, 2010 3:38 PM | Report abuse

As I just said:

"The problem with half measures is they generally fail, and the anti-government types love it when half measures fail because it gives them plenty of fodder for their and seems to substantiate their "government can't do anything right" claims."

And here we have it, right on cue:

Posted by: steve_tsouloufis

" 'The original stimulus package should've been bigger. Rep. David Obey...says the Treasury Department originally asked for $1.4 trillion. Sen. Kent Conrad...wanted $1.2 trillion.'

"Doesn't matter. Whatever was going to be asked for was never going to be enough. Because for liberals like Klein, and Krugman, and Obey, and Conrad, and Pelosi, and Reid, and Obama, and Geithner, and every other jerk who voted for this, no amount would ever have been enough because it was always going to be the failure it was. It's just that now, there's proof it is a failure, so there are the liberals whining that it should have been more."

See, half measures fail and then we get this mantra about the government and liberals blah, blah, blah.

This push and pull from the right has been going on since Roosevelt tried to end the Great Depression. For Republicans the only cause worthy of unprecedented and unlimited spending, the kind of spending that actually works to economic depressions is war spending, and that is why Roosevelt couldn't spend us out of the recession until the beginning of WWII, it was only then that the level of spending necessary could be wrung out of what was a conservative Congress.

We just saw the same thing again. We have trillions for war but for the homeland, not so much!

Posted by: Prakosh | July 27, 2010 3:49 PM | Report abuse

***"If you want to try to argue that the best solution now is to throw twice as much money at a policy that has already failed, it seems that you ought to be able to offer a shred of a reason to believe that it would lead to something other than twice as big a failure."

How's about the fact that it didn't fail? Every honest analyst agrees the package did EXACTLY what it was expected to do--saved or created 2-3 million jobs and brought down unemployment.

This is like filling your car with 1/4 tank of gas even though your buddy warns you that you need a full tank to get to the next station. Then you run out of gas and get stuck in the desert. When your buddy shows up with a gas truck, you say: "No way, don't you dare fill up this gas tank! I filled it 1/4 of the way before, and look where that got me!"***

Note to WH staff writers: Use this analogy! It's a winner.

Posted by: gwollberg | July 27, 2010 4:17 PM | Report abuse

Posted by: gwollberg:

Note to WH staff writers: Use this [empty gas tank] analogy! It's a winner.

___________________________

For this or any other argument to be "a winner" the other side has to be willing to listen and not be resisting because they want the economy to tank so that they can say "government can't do anything right" and you can't "spend yourself out of a recession." The mistake Obama made was believing that the Republicans wanted what was best for the country. Thee didn't. They knew that Obama's success was their failure, so their only strategy was to give him nothing that he wanted.

In a crisis action is critical, lack of action means failure--going slow and obstructing is a strategy for failure. In a two party system if the party in power fails the voters are more likely to vote for the other party. The Republicans may be stupid and they may have no solutions, but they have at least figured that out. They knew if they denied the president most of what he sought, they would ultimately cripple the programs and they could then run on against that record of failure. And that is what is happening.

And the press for some reason hasn't done a very good job of trumpeting his successes. When Reagan took office things were nearly as bad, he did almost nothing and things got marginally better, I think the unemployment rate feel from the high eights to the high sevens. But the press was all agog over Ronnie and they American people came to believe that his policies were working, even though after the election the unemployment rate rebounded to the mid eights again.

Obama really hasn't been so lucky. He misjudged the Republicans willingness to work with him for the good of the nation and he hasn't done nearly enough to trumpet his successes. The country will be the worse for this oversight.

And if the Republicans take over Congress they will cripple Obama in ways that we haven't seen at any time in our history. There won't be another black president for another 100 years.

Posted by: Prakosh | July 27, 2010 4:49 PM | Report abuse

Did Ezra say the stimulus was too small back then?

Posted by: kingsbridge77 | July 27, 2010 9:16 PM | Report abuse

"Otherwise, those of us in the reality-based community are just going to have to believe in all of the evidence around us and conclude that the stimulus opponents were right all along."

Hahaha. I see what you're doing there. How droll.

I bet that when you've got a chicken in the oven and find out the temperature's set to 200F, you switch the heat off and put it back in the fridge before eating it. Then blame someone else for spending the next week on the toilet.

Posted by: pseudonymousinnc | July 28, 2010 12:59 AM | Report abuse

STIMULATING PRIVATE SECTOR JOBS GROWTH WITH STIMULUS

The appropriateness of the stimulus package was not its size but whether it addressed the changing U.S. economic structure. The stimulus package is inherently short-term, annualized spending based on budgetary dollars that supported consumption and ‘shovel-ready projects.’

The essential problem that the stimulus package did not explicitly address was long term investment and jobs creation. With the economy laden with short-term liquidity that banks were unready to lend to the brick and mortar economic sectors and a super-sized financial sector, topped up with offers of financial capital to selected large sized banks and financial institutions, the long term jobs creation process was left adrift to market forces.

A re-direction of the annualized budgetary stimulus should be converted to a multi-year incentive regime that would challenge the U.S. private sector to increase domestic investment and improve the quality of real economic growth in the direction of domestic jobs creation.

The U.S. consumption between 2006 and 2009 leveled off to a stable 70 percent of the value of goods and produced, the GDP. This inherent stability of the U.S. economy was not fully utilized to provide a sustained effort to invest and increase domestic jobs creation. The level of domestic investment to GDP declined from 17 percent to 12 percent in the 2006-2009 period. A vigorous challenge to domestic and foreign firms to invest on the mainland of these United States and market abroad would make the stimulus more effective in supporting the U.S. job creation process.

In terms of how the U.S manufacturing sector responds to incentive, my book ‘U.S. Export Incentives and Investment Behavior’ discovered that when the investment tax regimes were strong, real investment spending accelerated. During 1952-61 investment spending increased at the rate of 1.5 percent per annum. During 1962-80, real investment spending accelerated to 6.1 percent. The average corporate tax rates declined by 5.4 and 14.4 percent respectively, over the two periods.

The condition for jobs creation to take place on the mainland and marketing abroad would require a two-pronged approach to invite the private sector to create jobs in those areas that were found responsive to fiscal stimulus, such as plant and equipment, transportation equipment, scientific instruments, pharmaceuticals and some non-durable goods industries.

First, existing regulations should steer the economy to become competitive in those industries that the U.S. has a comparative advantage and which responds well to fiscal stimulus, such as the investment tax credit and its accelerated depreciation components.

The second aspect of the stimulus should redirect its subsidy-elements to long-term investment incentives that would raise the level of investment at least to its 2006 level by challenging the private sector to grow the economy.

Posted by: GangaRamdas | July 28, 2010 11:16 AM | Report abuse

I have my reservations about the government EVER being able to do wonderful things, but I would like for us to be able to afford an attempt at that down the road.

Posted by: TerryOtt | July 26, 2010 7:17 PM | Report abuse

How ironic, TerryOtt, that you post this comment on a website on the Internet, which was created by the government.

Posted by: ML777 | July 28, 2010 12:20 PM | Report abuse

Shiboleth,

What you describe in your post, in economic parlance is referred to as "The Multiplier Effect." (You can look it up on Wikipedia.) This provides some "stimulus," however it does not provide the maximum bang for the buck. The essence of economics is indeed to get the greatest amount of good out of any expenditure. The stimulus program as realized is not providing a basis for private industry to invest. Tim G. said as much in his recent interview.

I'm glad you're receiving some direct benefits of the stimulus program. The essence of Ezera's post is that the "stimulus" isn't working to lift the US out of a low growth rate and high unemployment. In a way, your response to my post is a response to Ezera, contridicting his claim that the stimulus wasn't big enough.

Posted by: SteveWeston | July 29, 2010 12:04 AM | Report abuse

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