Network News

X My Profile
View More Activity
Posted at 6:47 AM ET, 03/ 1/2011

Wonkbook: GOP spending cuts would cost 700,000 jobs

By Ezra Klein

For most of 2009 and all of 2010, all Republicans asked Democrats was, "Where are the jobs?" Every Democratic bill got the prefix "job killing," as in "the job-killing health-care bill." Every address by Minority Leader John Boehner asked why jobs hadn't come roaring back since the passage of the stimulus. It wasn't always good economics -- the attack on the health-care law relied on a strategic bit on confusion about the difference between the supply of jobs and the supply of labor, for instance -- but it was very good politics.

But now Republicans control the House, and the question is getting turned around on them. Goldman Sachs and Mark Zandi both predict their spending cuts will have a sharp and brutal impact on job creation and economic growth (John Taylor, it should be noted, disagrees). Across the pond, England's sluggish, shrinking economy isn't giving advocates of austerity much support for their proposals. And the GOP's plans don't even have the benefit of consistency: their efforts to cut taxes and repeal the health-reform law would add vastly more to the deficit than their proposed spending cuts would remove.

In 2010, the key Republican argument was that Democrats were more interested in longtime ideological objectives like health-care reform than in jobs. Increasingly, Republicans are making themselves open to a similar charge: they're more interested in pursuing longtime ideological objectives like tax cuts and attacking government and repealing or undermining Obama's legislation than they are in creating jobs and reducing the deficit.

Top Stories

The GOP budget plan would cost 700,000 jobs, reports Lori Montgomery: "A Republican plan to sharply cut federal spending this year would destroy 700,000 jobs through 2012, according to an independent economic analysis set for release Monday. The report, by Moody's Analytics chief economist Mark Zandi, offers fresh ammunition to Democrats seeking block the Republican plan, which would terminate dozens of programs and slash federal appropriations by $61 billion over the next seven months. Zandi, an architect of the 2009 stimulus package who has advised both political parties, predicts that the GOP package would reduce economic growth by 0.5 percentage points this year, and by 0.2 percentage points in 2012, resulting in 700,000 fewer jobs by the end of next year."

Nancy Pelosi is critical of the stopgap spending deal, report Erik Wasson and Mike Lillis: "Congressional Democrats on Monday struggled to find a unified voice on funding the government as Republicans filled the message vacuum. House Minority Leader Nancy Pelosi (D-Calif.) criticized a Republican spending bill that Senate Majority Leader Harry Reid (D-Nev.) appeared to embrace late last week. The split in the Democratic Party was seen as a blow to the conventional wisdom that a government shutdown would be averted this week. Many political observers still anticipate that a two-week spending bill will clear the House and Senate by this weekend, though there will likely be some bumps along the way.
House Republicans introduced their stopgap measure on Friday, and in a move that surprised some Democrats, Reid’s office indicated support for it."

The White House wants a one-month stopgap, reports David Rogers: "Showing the first signs of coming off the sideline, the White House made a late bid Monday to extend the life of a stopgap government funding bill to a full month and thereby allow more time for the administration to become engaged in the House-Senate talks. The House is slated to vote Tuesday on a two week extension of the current continuing resolution due to expire this Friday, Mar. 4. The administration would instead like that to run a full 30 days, and this triggered a meeting Monday evening between Speaker John Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-Nev.) in the senator’s offices...Boehner would say only that he was sticking with the two-week time frame of the bill filed last Friday by the House Appropriations Committee."

Obama supports giving states the ability to experiment with different health plans, report Amy Goldstein and Dan Balz: "President Obama sought to defuse criticism of the new health-care overhaul Monday by saying he is willing to give states an earlier opportunity to opt out of certain key requirements - but only if they can find their own ways to accomplish the law's goals...If Congress approves the plan, states could gain exemption by 2014 rather than 2017 from some central and controversial elements of the law: that most Americans carry health insurance, that many employers offer their workers coverage, and that states create insurance marketplaces to help individuals and small businesses buy health plans that meet federal rules."

Ukelele cover interlude: Amanda Palmer does "Idioteque" by Radiohead.

Got tips, additions, or comments? E-mail me.

Want Wonkbook delivered to your inbox or mobile device? Subscribe!

Still to come: The public supports collective-bargaining but is more mixed on unions; the administration is trying to prevent a court ruling from blocking health care reform's implementation; John Boehner takes aim at net neutrality; offshore drilling is started up again; and a baby who really loves ripped paper.

Economy

The NYT polls labor unions: "As labor battles erupt in state capitals around the nation, a majority of Americans say they oppose efforts to weaken the collective bargaining rights of public employee unions and are also against cutting the pay or benefits of public workers to reduce state budget deficits, according to the latest New York Times/CBS News poll. Labor unions are not exactly popular, though: A third of those surveyed viewed them favorably, a quarter viewed them unfavorably, and the rest said they were either undecided or had not heard enough about them."

Teacher's unions are the key to organized labor's revival, writes Ezra Klein: "State budgets are in worse shape than Charlie Sheen. With federal aid running out and local economies still struggling, the next few years will require deep cuts in spending. And where do states spend much of their money? On education - which is to say, on teachers. The prospect of firing tens of thousands of teachers is bad enough. But, as a chilling report from the New Teacher Project explains, about 40 percent of the nation's teachers work in states where their contracts don't allow administrators to take performance into account when making layoffs. That is to say, they cannot try to lay off the bad teachers while saving the good ones. Instead, they're forced to use the 'last-hired-first-fired' mechanism. The newest teachers get the pink slip, no matter how good they are. This will turn a crisis into a catastrophe. And let's be clear, it's the fault of the teachers unions."

Obama's trade agenda is stalled, reports Sewell Chan: "President Obama has made expanding exports a centerpiece of his plan for accelerating the economic recovery, but in recent weeks, his trade agenda has nearly ground to a halt amid partisan feuding. Although the White House renegotiated a pivotal free-trade agreement with South Korea in December, scoring rare bipartisan praise, House Republican leaders have refused to allow the deal to move forward. They want the administration to make progress first on similar accords with Colombia and Panama that face stiff opposition from labor unions and liberal Democrats. To add to the pressure on the administration, House Republicans in February blocked a big expansion of trade adjustment assistance -- which provides cash, training, relocation, job search and other benefits to workers displaced by globalization -- from being renewed."

Women still face a wage gap: http://on.wsj.com/iiA1GV

Higher food and energy prices are blunting the tax cut extension's impact, reports Ylan Mui: "Rising food and energy prices ate away at the extra money workers received in January from a reduction in the payroll tax, according to government data released Monday, stalling the momentum in consumer spending. The Obama administration had hoped to prop up the country's economic recovery through a wide-ranging tax-cut package passed late last year. One of the key components of the program is a 2 percent cut in the amount that workers must pay toward Social Security in 2011 - which the White House had hoped would encourage consumers to spend more. The tax cut saved workers roughly $66.3 billion and helped boost incomes by 1 percent in January compared with the previous month, the government data show. But much of the increase went toward paying for more expensive food and fuel."

Ben Bernanke will soon face a grilling on inflation before Congress: http://on.wsj.com/fD1kMr

Cuts should favor the young over the old, writes David Brooks: "Trim from the old to invest in the young. We should adjust pension promises and reduce the amount of money spent on health care during the last months of life so we can preserve programs for those who are growing and learning the most. So far, this principle is being trampled. Seniors vote. Taxpayers revolt. Public employees occupy capitol buildings to protect their bargaining power for future benefits negotiations. As a result, seniors are being protected while children are getting pummeled. If you look across the country, you see education financing getting sliced -- often in the most thoughtless and destructive ways. The future has no union."

Workers should organize as businesses have, writes Bob Herbert: http://nyti.ms/fUYOvT

Economic models like Goldman Sachs' and Mark Zandi's are inaccurate, writes John Taylor: "The analysis in this Goldman-Sachs report is based on the same type of 'large multiplier' theory that predicted that the stimulus package of 2009 would stimulate economic growth. Research by me and my colleague John Cogan finds that more up-to-date theories, which bring important incentive and expectations effects into account, show far smaller multipliers...Moreover, by following the stimulus money, we found that in actuality the stimulus package of 2009 had no material positive effect on economic growth or employment...The old-style Keynesian approach used by Zandi has many of the same flaws that are found in the Goldman Sachs approach."

"I wish I liked anything as much as kids like bubbles" interlude: A baby laughs hysterically at ripped paper.

Health Care

The Obama administration is pressing an anti-health care reform judge to allow implementation, reports Jennifer Haberkorn: "The Obama administration on Monday defended its request that Judge Roger Vinson clarify his January ruling striking down the health care overhaul, arguing that the states and public have too much confusion otherwise. 'Clarification is appropriate so that defendants know how to proceed in this litigation and in implementing the Act, and to dispel the confusion of the public and many plaintiff states regarding their rights and obligations going forward,' the Department of Justice wrote in a reply memo sent to the judge late Monday. Vinson said he would reply 'promptly' once the DOJ sent in the response. The case was brought by 26 states in U.S. district court in Florida."

Many Republicans rule out Medicare and Medicaid cuts: http://politi.co/gdqydq

Domestic Policy

A new GAO report showcases billions in bloat, reports Damian Paletta: "The U.S. government has 15 different agencies overseeing food-safety laws, more than 20 separate programs to help the homeless and 80 programs for economic development. These are a few of the findings in a massive study of overlapping and duplicative programs that cost taxpayers billions of dollars each year, according to the Government Accountability Office. A report from the nonpartisan GAO, to be released Tuesday, compiles a list of redundant and potentially ineffective federal programs, and it could serve as a template for lawmakers in both parties as they move to cut federal spending and consolidate programs to reduce the deficit. Sen. Tom Coburn (R., Okla.), who pushed for the report, estimated it identifies between $100 billion and $200 billion in duplicative spending."

The House is preparing a "resolution of disapproval" of net neutrality: http://politi.co/fIkFVI

John Boehner attacked net neutrality in a speech, reports Hayley Tsukayama: "The speaker...came out swinging against the FCC and net neutrality, promising to fight a government takeover of the Internet. He echoed the assertion of Republican colleague Marsha Blackburn (R-Tenn.) that net neutrality is a version of the Fairness Doctrine for the online era. 'Now, you know the old saying: ‘If you can’t beat ’em, join ’em.’ Well in Washington, it’s more like, ‘If you can’t beat ’em, tax ’em and regulate ’em' Boehner said in his speech. 'So, some members of Congress and the federal bureaucracy are still trying to reinstate - and even expand - the Fairness Doctrine. To them, it’s fair to silence ideas and voices they don’t agree with, and use the tools of government to do it.'"

Bulk-buying could cut state and local deficits considerably, writes David Yarkin: http://nyti.ms/gDpaH1

States are considering moving to 401(k)-style pensions, reports Jeannette Neumann: "Policy makers across the country are considering scrapping guaranteed retirement benefits for public workers in favor of 401(k)-like plans. In pursuing the switch, some state and local governments hope to shift more responsibility and risk--as well as potential reward--to employees. But some are discovering that closing down a pension plan can carry hefty costs. Many say 401(k)-style plans can yield meaningful cost savings over time if employer contributions are substantially reduced from what they were, and relieve governments of the obligation to make guaranteed payouts. Yet shorter-term pain can result from such a switch."

Classical music and beer interlude: Vittorio Monti's Czardas played on beer bottles.

Energy

The Obama administration has opened up offshore drilling again, reports Darren Goode: "The Obama administration Monday announced the first permit allowing for new production in deep waters in the Gulf of Mexico since last year's BP spill. The Bureau of Ocean Energy Management, Regulation and Enforcement granted Noble Energy's application for a permit roughly 70 miles off the coast of Venice, La. The approval comes more than 10 months since the April 20 explosion of the Deepwater Horizon rig that killed 11 workers and dumped 205 million gallons of crude oil into the Gulf over three months. Gulf state lawmakers and the oil industry have blasted the administration for installing a 'de facto' drilling ban long after the BP leak was plugged."

Northeast Senators want Florida's high-speed rail money, reports Felicia Sonmez: "Ten senators from northeastern states requested Monday that $2.4 billion in funding for high-speed rail rejected by Florida Gov. Rick Scott (R) be redirected to rail projects in their states. Democratic Sens. Tom Carper (Del.), Richard Blumenthal (Conn.), Ben Cardin (Md.), Chris Coons (Del.), Kirsten Gillibrand (N.Y.), John Kerry (Mass.), Frank Lautenberg (N.J.), Bob Menendez (N.J.) and Barbara Mikulski (Md.) as well as Independent Sen. Joe Lieberman (Conn.) made the request in a letter to Transportation Secretary Ray LaHood. 'With its large population and high economic activity, the Northeast Corridor is well-positioned to lead the nation into the future of high-speed rail transportation,' the senators wrote."

Warren Buffett is betting on rail, writes Annie Lowrey: http://slate.me/g3d7b6

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams.

By Ezra Klein  | March 1, 2011; 6:47 AM ET
Categories:  Wonkbook  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Reconciliation
Next: Column: How unions can be more than a legacy institution

Comments

What? No comment on yesterday's Wall Street Journal article by John E. Calfee: "The Massachusetts Health-Reform Mess"?

Emergency room visits continue to rise, and most are "unnecessary". Unions balking the state exchanges. And fraud! While insurance premium rises continue to outpace the rest of the country.

And Price Controls! Luscious.

Posted by: msoja | March 1, 2011 7:58 AM | Report abuse

"Republicans are making themselves open to a similar charge: they're more interested in pursuing longtime ideological objectives like tax cuts and attacking government and repealing or undermining Obama's legislation than they are in creating jobs and reducing the deficit"

Wait! You forgot making abortion and birth control unobtainable. Those are important in any jobs creation program.

Posted by: ciocia1 | March 1, 2011 8:13 AM | Report abuse

John Taylor's claims his economic model takes into consideration "incentives and expectations of future policy" and these models support his claim that a 60 billion spending cut is going to create jobs. According to the latest budget numbers, federal spending decreased in 2010. In 2009, federal spending was 3,517,677 (25% of GDP). In 2010, federal spending was 3,456,213 (23.8% of GDP). That's 61 billion and where is the evidence is helped the economy in any way? Did anyone even notice spending fell in 2010? Was it reported any where? People don't care about the deficit and if they are as concerned as Taylor claims, then the Dec tax cut is a job killer since it added 900 billion to the deficit over 2 years.

Posted by: JIMMYJONES | March 1, 2011 8:25 AM | Report abuse

You have a bizarrely mechanistic view of economics. Increased government spending means increased growth. Decreased government spending means decreased growth. Case closed.

It's actually much - MUCH - more complicated than that.

Posted by: ostap666 | March 1, 2011 8:29 AM | Report abuse

Serious question here:

Who is John Taylor and why do I care what he thinks?

I looked at his website and as far as I can tell he's a small peanuts, party line, right wing economist, who's only contribution to this discussion is writing a blog entry that says "I disagree but I have no evidence."

If that's the case, breaking news: a conservative economist disagrees! Doesn't seem noteworthy to me.

But if I'm underestimating his "street cred" someone let me know.

Posted by: world_dictator | March 1, 2011 8:30 AM | Report abuse

It's almost like Republicans LIKE high unemployment, they just can't come out and say it.

Unless of course they have gone so far to the right that they are no longer the party of business but the party of the rent-seekers.

Mike Konczal: "..the truth is that big business doesn’t want full employment...In a time of full employment, workers have more bargaining power. They can demand higher wages and better work environments. The threat of being fired means less to them, which decreases the power of bosses and employers.'

"Today, employers have taken advantage of the high unemployment rate to start radically changing the terms of the labor contract. From screening potential employees on their credit scores and Facebook profiles, to demanding more temporary, unstable and risky work contracts, there’s a subtle but important shift occurring in the power between employers and employees. Employers benefit from employees working harder to keep their jobs, and since demand is weak, there’s no pressure to hire."
http://www.thedaily.com/page/2011/02/26/022611-opinions-oped-employment-konczal-1-2/

This is the natural result of an agenda driven by fear above all else.

Government of the rent-seekers, by the rent-seekers and for the rent-seekers.

Posted by: BobFred | March 1, 2011 8:58 AM | Report abuse

Ezra,

If you are going to link to David Brooks telling us that the youth should be protected in government programs and the oldsters should give it up for the good of the country -- shouldn't you also link to his op-ed neighbor's recent (2 weeks ago) posting, entitled 'Eat the Young'?

Krugman's post has the benefit of being accurate on policy grounds and is backed by more than just the emotional 'austerity is good' reasoning.

nytimes.com/2011/02/14/opinion/14krugman.html

Posted by: grooft | March 1, 2011 9:11 AM | Report abuse

"I looked at his website and as far as I can tell he's a small peanuts, party line, right wing economist, who's only contribution to this discussion is writing a blog entry that says "I disagree but I have no evidence."

He's a Stanford economist and he has made seminal contributions to monetary economics, particularly in the development of what is now known as the Taylor rule.

Go check out his CV, and let me know if you still think he is "small peanuts".

http://www.stanford.edu/~johntayl/cv/TaylorCV-Feb-7-2011.pdf

Of course, he's a biased right wing economist, just as Paul Krugman is a biased left wing economist. You don't necessarily have to agree with Taylor, but you should at least consider his views carefully before you dismiss them.

Posted by: justin84 | March 1, 2011 9:28 AM | Report abuse

"Many Republicans rule out Medicare and Medicaid cuts"

Surprise! Team Pepsi really isn't much different than Team Coke.

Posted by: justin84 | March 1, 2011 9:35 AM | Report abuse

The amount of money grubbing going on...so sick!

Posted by: staticvars | March 1, 2011 9:53 AM | Report abuse

"Higher food and energy prices are blunting the tax cut extension's impact, reports Ylan Mui: "

"Ben Bernanke will soon face a grilling on inflation before Congress"

There's no such thing as inflation remember? It's all a mirage!


Posted by: johnmarshall5446 | March 1, 2011 9:54 AM | Report abuse

these "educated guesses" that are all over the map of what the effect of the cuts are don't seem to take into account the effect of having to borrow LESS money from others and the positive effect on our net cash flow. Currently we must borrow $140 billion a week (from CSPAN this morning) to meet our obligations. if our debt wasn't annually 1.5 TRILLION then maybe we wouldn't need to make these cuts but it is.

Posted by: visionbrkr | March 1, 2011 10:00 AM | Report abuse

Taylor's certainly not a random blogger,

but the criticism is the same for all the crappy freshwater "I wish economics worked like this" models:

if they added any predictive value relative to the Keynesian models, the big investing houses would be all over them. This is a point of fact that is obvious to any competent economist.

Posted by: eggnogfool | March 1, 2011 10:01 AM | Report abuse

Emergency room visits continue to rise, and most are "unnecessary".

Holy cow batman.

People are actually getting needed health care too.

Now they just have to figure out how to stop those thieving drs and hospitals from ripping off everyone.

Posted by: lauren2010 | March 1, 2011 10:02 AM | Report abuse

Inflation? What inflation? The top 2 percent can still afford food and gasoline.

Posted by: harold3 | March 1, 2011 10:18 AM | Report abuse

Charlie Sheen is a whacko

I think he lost too may brain cells smoking things

Posted by: lauren2010 | March 1, 2011 10:25 AM | Report abuse

The WSJ article about emergency room visitations in Massachusetts throws around same vague information.

Visits described as "unnecessary" generally refer to legitimate illness or injury that could have been treated by a primary physician if one had been available. Unfortunately, we have a decline in the number of primary physicians, many are not accepting new patients, and (for those who do) it is often difficult to obtain an appointment on short notice. Many who are unable to leave work during the day have difficulty finding a primary care doctor who take appointments during off-prime hours.

The need for more primary care doctors is one that the nation needs to address, and it is one that can't be solved within just a couple of years.

The most common indicator of whether a person will frequently visit an emergency room is not their insurance status. 87.9% of frequent users are persons who suffer chronic illnesses and disabilities. As our demographics see a growing number of seniors, these visits can be expected to continue to rise.

Emergency room utilization has grown steadily over the years. Health care reform will mitigate that growth, but removing the financial necessity of the uninsured seeking treatment for routine conditions at emergency rooms is just one component.

If we can provide easier access to primary care, that will do much to reduce the numbers of people in ER waiting rooms too. To portray the fact that the growth of emergency room use has not been halted as some sort of failure of health reform is simplistic and misleading.

For more on actual survey results:

http://www.rwjf.org/pr/product.jsp?id=48929

http://www.boston.com/news/local/massachusetts/articles/2010/07/04/emergency_room_visits_grow_in_mass/

Posted by: Patrick_M | March 1, 2011 10:42 AM | Report abuse

I just read that yet another yacht full of imbeciles, this time from Denmark was captured by pirates off Somalia. Unfortunately there were two teenagers on board. Hopefully, they were adopted so the moronic DNA was not passed on by the parents.

Posted by: johnmarshall5446 | March 1, 2011 10:49 AM | Report abuse

"if they added any predictive value relative to the Keynesian models, the big investing houses would be all over them."

The Keynesian models have no predictive power either. Professional forecasters expected 2% growth in 2008 and 2009, and we ended up with 0% and -2.6%. That forecast was made in May 2008. That's a miss of roughly $1 trillion of real GDP. The professionals called for positive growth in both 2008 and 2009, six months into the biggest recession of their lives.

http://www.reuters.com/article/2008/05/10/us-usa-economy-outlook-bluechip-idUSN0934234920080510

The same thing happened in May 2001, per Bruce Bartlett, in which 70% or so of forecasters didn't expect a recession in 2001, several months into an ongoing recession.

http://old.nationalreview.com/nrof_bartlett/bartlett200402160839.asp

"This is a point of fact that is obvious to any competent economist."

Competent economists will admit that one cannot accurately and consistently forecast marcoeconomic variables. Heck, economists often cannot get the present or near-past correct, let alone the future.

The big investment houses use Keynesian models for marketing reasons because they sound scientific. Claiming "we have no idea how the economy will perform" isn't a strong selling point, particularly when everyone else claims that they can accurate forecast the economy's performance.

Posted by: justin84 | March 1, 2011 11:00 AM | Report abuse

I didn't say the Keynesian models were perfect, just significantly better than the others. And I agree that lots of forecasters did a terrible job, my point is just that the investment houses, using Keynesian models, did much better than average.

http://www.telegraph.co.uk/finance/markets/2819582/Goldman-warns-of-a-substantial-US-recession.html

The Great Recession did point to two pretty significant limitations to the models. Mark Zandi's 2008 projection, for example, was explained by saying that once the initial stimulus flopped, a second big stimulus would be right behind because it was an election year, and it would prevent a major recession. In fact, the expected 'big stimulus' didn't get signed until february 2009 (at which point the recession ended). The Keynesian models cannot predict what happens on the Hill, and people should be aware of that.

Second, more resolvably, models in use in 2008 didn't have a robust handle on the effect of interconnectivity of highly leveraged financial organizations would have on the economy during a major downturn.

Posted by: eggnogfool | March 1, 2011 12:18 PM | Report abuse

"(CNBC)Bernanke, . . . said the Fed expects inflation to remain low and that long-term inflation expectations appear contained, both according to market indicators and surveys of consumers.

"The most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation," Bernanke said. However, he warned that if expectations of future inflation were to build, the Fed may need to act. "We will continue to monitor these developments closely and are prepared to respond as necessary to best support the ongoing recovery in a context of price stability," he said.

SEE ALSO

"(CNN) The newspaper said the family had been well aware of the risk of pirates in the waters off Somalia, where dozens of ships and their crews have been taken hostage in recent years.

It reported that as they left the Maldives, the family wrote in their blog, "We have updated our disaster plan, made a pirate plan of who does what if we are attacked, and every day we send details of our position to the armed forces."


I never realized that so many people in the world had an emergency response plan that relied on the use of Lost Boys, pixie dust, and a sexually ambiguous sword fighter named Peter!

Posted by: johnmarshall5446 | March 1, 2011 12:25 PM | Report abuse

"I didn't say the Keynesian models were perfect, just significantly better than the others."

They aren't better than any other model.

Regular Americans in a poll outperformed economists using Keynesian models in November 2007.

54% of Americans believed the economy would enter a recession (remember that the Blue Chip expectation was still positive growth 6 months later).

Majorities correctly forecasted gas prices, food prices, health care costs, unemployment, interest rates (taking into account credit spreads) and house prices.

http://www.gallup.com/poll/103108/americans-predict-recession-price-increases.aspx

"And I agree that lots of forecasters did a terrible job, my point is just that the investment houses, using Keynesian models, did much better than average."

Austrians generally saw the collapse coming as well, despite using a quite different model of the economy. Does that validate Austrian economic theory too?

Even the best investment banks didn't get it exactly right. Take Goldman. Goldman, while successfully calling a recession, expected a 2 to 3 quarter recession, mild by historical comparison. They expected the recovery to begin in 2008Q4. Oops.

http://www.denverpost.com/business/ci_7922419?source=pkg

For that matter, most of the biggest investment houses are now history. If they had models predicting a severe recession, and had confidence in those models, 2008 might have turned out a bit different - at least for Lehman, Bear and Merrill.

Posted by: justin84 | March 1, 2011 1:13 PM | Report abuse

EZRA, Looking forward to your next post presenting a balanced economic view.
WORLD DICTATOR, is this guy "small peanuts", too?

In Boost for Republican plan, Fed Chief Says Cuts Won't Derail Recovery
By Vicki Needham, The Hill, 03/01/11 10:56 AM ET

Federal Reserve Chairman Ben Bernanke says a plan from House Republicans to cut $61 billion in spending this year would not harm economic growth.

The GOP's proposed spending cuts, passed as part of a continuing resolution, would probably reduce "growth on the margins" and lower gross domestic product by only one- or two-tenths of a percent, Bernanke told the Senate Banking Committee.

The Fed chairman's estimate contrasts with recent reports from Goldman Sachs and Moody's Analytics that predicted economic harm from a $61 billion spending reduction.

The Goldman Sachs report released last week predicted that the Republican spending cuts would slow growth by as much as 2 percentage points in the second and third quarters of this year. Senate Democrats pounced on the analysis to argue that Republicans were trying to "drag our economy back into a recession."

But Bernanke said that analysis is off the mark.

"Two percent [reduction in growth] is enormous and would be based on $300 billion in cuts," Bernanke told the panel in his semiannual report to Congress. "Sixty billion to $100 billion isn't sufficient to create that kind of effect."

Although Bernanke didn't provide a projection of possible jobs losses from the spending bill, he said the proposed spending cuts aren't likely to lead to the 700,000 job losses predicted by Moody's Analytics chief economist Mark Zandi.

RELATED ARTICLESEconomist: House $61B cut would cost 700K jobs
He reiterated previous statements that, while the debt and deficits are major issues for the nation, Congress needs to tackle the issue of long-term budget imbalances.

"Sixty billion won't have much impact on the long run," he said. "Congress needs to address the budget deficit over a 5- to 10-year window."

Bernanke said he would like to see the nation's structural budget deficit reduced by 2 to 3 percentage points in the next decade. . . .

Posted by: Sigma60 | March 1, 2011 5:05 PM | Report abuse

I would like to add my 2.5 cents to this.

On growing the economy and creating jobs, I had previously sent the following to the White House, Pelosi, Reed and Biden - but I knew that none of them may actually see the content.
Here is what I believe may help those who need work and at the same time boosting the economy and improving the American infrastructure.

My email title at the time:
Jobs in 2010 & Beyond - Boosting the Economy

Hello and good day everyone (Pres. Obama, VP Biden, Speaker Pelosi, Sen. Reid).
And to note, I currently am working in a profession that I do like and as such, am not concerned for myself but for others in this country.

To be quick:
"Why not ramp up the "Civilian Conservation Corps," and
--- Broaden their scope,
--- To perform more work in this country,
--- To allow for more people to become gainfully employed and lastly,
--- To acquire new, meaningful skills.

After doing a quick search, I see the CCC still exists but their role is limited.

This country is in dire need of infrastructure work; highways, roads, dams/levees/dikes, underground pipes (sewers/water/electrical/telephonic) - all of these could be jump-started by your offices.

And yes, there will be the inevitable up front spending commitments but the payoff would be tremendous in terms of our citizens finally gaining some kind of satisfaction and regaining their pride of working again.

That was it, good luck to you all,
Patrick MSIA MBA

************* End of copied content from my email. *****************

We have to do something to revitalize this country and bring our standards up again. If not something like this, then what??
I think this might help get America back on track, don't you?

Bringing jobs back into the US will pay off - again or should....

Posted by: gudguy1 | March 1, 2011 6:04 PM | Report abuse

Marsha Blackburn Voted FOR:
Omnibus Appropriations, Special Education, Global AIDS Initiative, Job Training, Unemployment Benefits, Labor-HHS-Education Appropriations, Agriculture Appropriations, FY2004 Foreign Operations Appropriations, U.S.-Singapore Trade, U.S.-Chile Trade, Supplemental Spending for Iraq & Afghanistan, Flood Insurance Reauthorization , Prescription Drug Benefit, Child Nutrition Programs, Surface Transportation, Job Training and Worker Services, Agriculture Appropriations, Foreign Aid, Debt Limit Increase, Fiscal 2005 Omnibus Appropriations, Vocational/Technical Training, Supplemental Appropriations, UN “Reforms.” Patriot Act Reauthorization, CAFTA, Katrina Hurricane-relief Appropriations, Head Start Funding, Line-item Rescission, Oman Trade Agreement, Military Tribunals, Electronic Surveillance, Head Start Funding, COPS Funding, Funding the REAL ID Act (National ID), Foreign Intelligence Surveillance, Thought Crimes “Violent Radicalization and Homegrown Terrorism Prevention Act, Peru Free Trade Agreement, Economic Stimulus, Farm Bill (Veto Override), Warrantless Searches, Employee Verification Program, Body Imaging Screening, Patriot Act extention.

Marsha Blackburn Voted AGAINST:
Ban on UN Contributions, eliminate Millennium Challenge Account, WTO Withdrawal, UN Dues Decrease, Defunding the NAIS, Iran Military Operations defunding Iraq Troop Withdrawal, congress authorization of Iran Military Operations, Withdrawing U.S. Soldiers from Afghanistan.

Marsha Blackburn is my Congressman.
See her “blatantly unconstitutional” votes at :
http://mickeywhite.blogspot.com/2009/09/tn-congressman-marsha-blackburn-votes.html
Mickey

Posted by: mickey1956 | March 1, 2011 6:14 PM | Report abuse

I to sent e-mail to the Democratic Leadership as well as the Minority Republicans.

My was more simplistic:

Cut all foreign aid.
Cut Unemployment Benefits for 2 years.
Cut Welfare and Aid Programs for 2 years.
Cut all US AID and Government Commitments for 2010 & 2011.
Freeze all regulation for Building and Permits for Industry for 2 years.
All government spending is relegated to:
Infrastructure
Drilling within US and possesions
Building Nukes
Upgrading Utility Transmission System
Builing Refineries
Building DeSalienation Plants
Moving Welfare and Unemploymed to these projects.
Cease Itaq/Afganhistan wars begin pulling those troops to our borders to control drug trafficking.
Notify the rest of the world of our 5 year plan to close all military bases world wide unless they need to rent our military and only then we will fight a limited devastating war.

GET THE GOVERNMENT OUT OF THE BUSINESS OF CREATING PARASITIC SOCITY!

Posted by: gboettner | March 2, 2011 9:17 AM | Report abuse

I'll tell ya, both parties are playing games. Just how is it that the GAO can find 200 billion in duplicate programs and fraud, while these cronies in Washington can't see any of it? Both parties should be jumping at this. The Dems get to keep their spending to promote job growth, and the GOP don't have to gut the country to continue funding their crony friends in the Military Industrial Complex welfare program. Unless they're stealing the money and the duplicate programs are just a cover. This better not get swept under the rug. I for one what to see where all of this money has been going.

Posted by: HemiHead66 | March 4, 2011 7:16 PM | Report abuse

Post a Comment

We encourage users to analyze, comment on and even challenge washingtonpost.com's articles, blogs, reviews and multimedia features.

User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions.




characters remaining

 
 
RSS Feed
Subscribe to The Post

© 2011 The Washington Post Company