Stimulus one year later (posted by DT)

Here's some correspondence with a conservative email buddy. I asked him what he thought of stimulus spending, now that the CBO has declared that it worked to keep us out of a much deeper hole. He is unconvinced:

This is classic economics, in that it is impossible to know definitively what the null hypothesis result is. What would the state be if everything else were held constant? What if a different policy were followed? I personally can't answer these questions. I have generally found that economists that supported the stimulus think that it worked, while those who did not support it think that it failed.

I remember asking you a long while back what you would take as proof that the stimulus did not work. You said that probably you would look at a country who followed a different policy to compare results. So, I think you should take a look at Germany, or at Canada. Both of these countries followed policies that involved controlling government spending - they are doing much better than we are. There are of course lots of variables that are different, so if you want to believe the stimulus worked, you'll discount these examples.

I think you should also look at what the President and his economists were saying prior to the stimulus. Without the stimulus, unemployment would rise to 9%, with the stimulus, unemployment would stay at 8% and then drop. Obama established he exact criteria by which he should be measured.

Me? I think that the overall policies following by the current administration - massive government spending, anti-business rhetoric, tax increases or the threat of tax increases, increased regulation, etc. have created a climate that is damaging the economy in a big way. This is the worst recovery from a recession ever. Unemployment is the highest in our lifetimes, with no sign that it will go down in a meaningful way for a long time. Obama owns these results, even if the recession started before he took office.

Oviously I disagree:

Of course counterfactuals are impossible in economics; but we have to go on the data we have. I've read some commentators who say that because we can't scientifically measure the effects, we should therefore not do stimulus, but of course that's absurd since any course of action can be criticized on that count, including inaction.

I think there are a few stances one could take on the stimulus:
It was a complete failure, the "multiplier" effect is 1, and we've gotten nothing from it except debt
Stimulus worked to boost production and increased GDP, but the effect wasn't enough to justify the debt incurred (i.e. it accepts Keynes theoretically but still isn't convinced). This argument could also encapsulate the Moral Hazard issue- moral hazard problem is too big to justify the temporary economic benefit.
Stimulus was a success, and without it things would have been much worse. It was worth the debt incurred.
Germany is an interesting comparison, but I don't think it can be looked at without seeing it as a part of the larger European Union, which makes economic decisions as a whole. I would see Germany as analogous to the Northeast Corridor, as the most educated and advanced part of the European economy. Like us here in the northeast, Germany has lower unemployment than southern Europe, which also didn't do much stimulus (as part of the same EU). Like the less developed parts of the US, southern Europe was hurt badly by this recession and isn't recovering well at all.

But I accept your point that we're all set in our preconceptions.

The President's economic team blundered badly in predicting an 8% top unemployment rate, but that speaks to their poor crystal-ball reading, and doesn't say anything about effects of stimulus. After all, unemployment went past 8% long before significant stimulus was in place.

As for your final point, it's true that the Democrats own the recovery (though not the Crash). I think they blundered in not doing enough stimulus (many on the economic team argued for stimulus well north of $1 trillion, and it ended up being $700 billion), but of course now we're into more counterfactuals.

The continued poor economy will hurt Dems at the polls, as it should. You think it's because they're pursuing the wrong policies, and I think it's because they didn't have the courage of their convictions. Either way it's their fault though.

The nice thing about an undivided government (like 2009-2010, and of course 2001-2007) is that we can hold the majority responsible for their record. If the GOP takes one or both houses of congress, things get much murkier.

More Explication on the ADL (posted by DT)

I've had some discussions with friends recently about the "Ground Zero Mosque" controversy, and find myself quite firmly in the minority among my liberal and Jewish cohort. I want to explain a bit about what really gets me ginned up here:

The Anti Defamation League statement (read it here- it's short: http://www.adl.org/PresRele/CvlRt_32/5820_32.htm) is not a racist diatribe. It gives respect to the US Constitution and accepts that Muslims can build their community center wherever they wish. But it concludes that the building of the center is "not right" because it "will cause some victims more pain". OK, so the statement has some balance.

But here's the thing: the ADL is not a disinterested observer. This isn't like talking at a cocktail party about your opinion. The ADL's mission is to combat prejudice. At the top of their website is a line that says, in full: "To Stop the defamation of the Jewish people... to secure justice and fair treatment to all". Now if the American Psychological Association released a statement talking about the damage to victims of trauma, that would be one thing- their mission is about healing people. The ADL's mission is about justice ...for all. It's an organization dedicated to this one thing. When the ADL stands against Muslim Americans in this kind of matter, the organization forfeits its credibility in advocating for Jews. It becomes just another interest group advocating for Jews. It has to base its arguments on what's fair to Jews, but can't speak with credibility about universal themes of freedom and justice. If Abe Foxman wants to give money as a private citizen to an organization that opposes the Park51 project, he can do so, but as Director of the ADL such a stance just doesn't fit the mission.

I'm still seething about this. Why aren't more of us?

Worship of the Captains of Industry (posted by DT)

I'm a social worker, and proud of the work I do with people who are in psychiatric distress. I've worked a great deal with people at the bottom of the food chain during my career. Now when I used to tell people what I did, the most common response from those not in the field was something like "Oh, that's so noble!". It can feel a bit patronizing, actually, but it feels good too that people appreciate and value the work I do.

But in the past few years I think something has changed in America. It used to be that social workers, teachers, and police were, if not high-status in most ways, at least seen as people who sacrificed something of themselves for the good of society. Meanwhile, those in the business world were seen as people more out for themselves- not greedy bastards or anything, but also not noble do-gooders.

But now, as the works of Ayn Rand have swept the Right, the new Heroes are the captains of industry. They provide the jobs for the rest of us. They pay the taxes that support society (at least for now, until the Right gets its way on tax reform). They take the rest of us, the meek and helpless proletarians, on their shoulders and bequeath in their magnanimity the jobs that will allow us to maintain our bare existence.

Now I always thought that the executives and the successful enterpreneurs were pretty well compensated for their hard work and risk-taking. Our capitalist system rewards these winners with mountains of money; in fact the mountains have grown considerably over the past 10 years in comparison to the rest of us. The Center on Budget and Policy Priorities reports that "two-thirds of the nation's total income gains from 2002 to 2007 flowed to the top 1 percent of U.S. households, and that top 1 percent held a larger share of income in 2007 than at any time since 1928..."

So I don't think one can argue that the winners are being disrespected by the market. But on top of the fact that the rules of the game are continuing to tilt further and further in the direction of the Haves, I also have to endure pundits telling me that I should be thanking the Captains on bended knee for allowing me to eat their scraps. And this after 2007-2008, when the creme de la creme of the Overclass at Goldman Sachs and AIG destroyed the economy along with five million jobs that look like they're not coming back for many years. I'm supposed to thank these thieves?

Look, I believe in capitalism. To paraphrase Churchill, capitalism is a terrible way to run an economy, and the only thing worse is Everything Else. We do need the Captains of Industry. But they need us too. And they're not sacrificing themselves for us- they're just doing what they've always done, which is try to make as much money as they can, however they can.

You don't get brownie points for that in my book. Your bank statement will just have to be enough.

UPDATE: Here's a Youtube of Sarah Pailin talking with a woman who is criticizing her for quitting the governorship of Alaska. The part that strikes me and many others is the look she gives her daughter when the woman they are talking with tells them that she is a teacher:

http://www.youtube.com/watch?v=uKflKzmfRCw&feature=player_embedded

Maybe my faithful readers think I'm reading too much into a look, but look for yourselves and decide (at the 1:10 mark)

UPDATE 2: My friend the Gun Toting Liberal has a related post up here: http://guntotingliberal.blogspot.com/2010/08/capitalism-say-it-soft-and-its-almost.html with which I totally agree. I thought I'd bring my massive traffic his way.

The ADL & Mosques near Ground Zero (posted by DT)

I have to second what Peter Beinert says here http://www.thedailybeast.com/blogs-and-stories/2010-08-02/the-anti-defamation-leagues-ground-zero-mosque-hypocrisy/full/ about the controversy over the Muslim organization looking to build a mosque two blocks from the World Trade Center site. Today the mosque plans cleared a hurdle when the New York Landmarks Commission refused to designate the building a landmark http://www.google.com/hostednews/ap/article/ALeqM5gieR_gNwrCUCH2jR03xjTCoEp4qgD9HC9S7G0

Now I would expect Sarah Pailin, Bill O'Reilly, Sean Hannity, and the neandrathal Right to blow their stacks with outrage over the placement of the mosque, and sure enough they have. But this week I find it shocking that the Anti-Defamation League has lent its considerable weight to the cause of religious bigotry. The ADL is a Jewish organization, but it has always fought for religious freedom and racial equality for all throughout its history. Joining forces with bigots is a true shande, and a sick perversion of its mission.

As usual, Jon Stewart hits the absurdity of this issue perfectly http://www.thedailyshow.com/watch/wed-july-7-2010/wish-you-weren-t-here

The Auto Industry Bailout Revisited (posted by DT)

I see that President Obama was in Michigan recently touting the bailout of the automotive industry that was so controversial last year. In fact many pundits thought it was crazy for the US government to bail out an industry that was still going down and could not be saved. I can't brag about any prescience here either- I worried that the US taxpayer would take a huge bath on this particular policy (whereas the financial industry bailout always looked more solid, as the Fed changed policies and basically made it impossible for big banks not to make gobs of money so they could recapitalize).

Well now Obama is bragging about how the auto industry has managed to right itself. The big automakers are now making a profit. http://voices.washingtonpost.com/ezra-klein/2010/07/can_obama_make_success_popular.html
This isn't getting any play at all in the news, but this is a major success story. Without federal intervention, the Big 3 automakers (or at least two of them) were about to go under, destroying the economy of the midwest.

It would be nice to see Democrats use these sorts of success stories to move the public narrative about stimulus and bailouts. The US government, using our tax dollars that are gained through taxes and borrowing, managed to save the auto industry, ultimately at little to no cost. I wonder if we'll see that point made on Fox News?