Rolling US Economy Into The Shitbin Thread

My argument is that it is the height of sanity to have any program like this vigorously debated in Congress and the hallways of academia before signing off. Oversight is worthless if we have no idea what the possible long term economic consequences are. And again, the past history of Congress is dismal oversight.

^^^ this. the handling of TARP so far has been egregious - little oversight, no direction, frequently counterproductive. i hope obama and his team do better but that doesn't absolve us of responsibility. the more scrutiny and debate the better.

to be simplistic, i simply think that excessive handwringing about it right now is like worrying about water damage to buildings just before the firemen try to put out a three-alarmer that's threatening several city blocks.

i think its worth considering whether whats in the buckets is water or oil

OK sure let's have a "debate", as long as it's not like the climate change "debate" or the creationism-vs-evolution "debate".

http://clusterstock.alleyinsider.com/2009/1/if-government-spending-is-the-solution-why-are-we-in-a-recession

Don how can you take seriously someone who quotes this (from Krugman):

What gets lost in such discussions is the key argument for economic stimulus — namely, that under current conditions, a surge in public spending would employ Americans who would otherwise be unemployed and money that would otherwise be sitting idle, and put both to work producing something useful.

And immediately says this:

See, he's not so much concerned with what those Americans would be doing -- whether they're building bridges or pushing papers

Krugman says it matters - people can be employed to produce something useful, rather than unemployed, producing nothing. Your author says Krugman doesn't mind whether they produce anything useful or not.

It's just flimflammery. Your author doesn't actually have a reply to the obvious answer to his question: "The government wasn't spending money in productive ways."

haven't many of us concluded that our current economic lol shitstorm ISN'T a black swan? in that there were plenty of people as far back as the beginning of this decade who were discussing the real estate bubble, and later on people who were looking cockeyed at the obtuse financing and modeling techniques that allowed it to swell?!?

― Mad Vigorish

In a big enough world, any event will have been predicted in advance by some expert somewhere, no matter how suprising, "paradigm-shattering", etc. And it's a pretty big world. I think it's fair to call the CElolS a black swan because of how suddenly and completely it seems to have shattered the faith of a generation of ideological free-marketeers, and how few of the experts most immediately affected seemed to see it coming.

Anyway, the NYT article is interesting, if way too long & rambly for the information it contains. I'm tempted to agree with the basic argument: In making high-risk decisions of any kind, it's foolish to rely on statistical modeling alone. The more variables involved, the greater the likelihood of artifacting and other modeling errors -- i.e., the greater the likelihood that users are modeling what they already believe (or want to believe), rather than any objective reality that exists outside the closed system of the model and its users. Then there's the pressure to produce results of a reassuring sort, and the difference between research conducted with academic exactitude and scepticism and that done mechanically to satisfy a job or client requirement.

But I'm not sure how much direct blame modeling deserves. It seems like a cog in larger system of certainties and assumptions, some ideological, some quasi-scientific, some merely egocentric.

On top of that, for most of the spending period he's talking about - 2000 to now - the US wasn't in recession. Keynesian deficit spending isn't some all-purpose credo (the way tax cuts are for Republicans and Libertarians) - it's a specific remedy for recession, when other macroeconomic instruments don't work. So comparing 2000 - when the US had a massive surplus and a still-inflating housing bubble - to now, in terms of what the government ought to be doing with its money, is just a little... cuh-razeh ((c Seal))

xpost

Ecce Dumbo

XD

Jeezus Tracer you are obstinate. Why do you have to conflate everything?

- What was the effect of stimulus rising from 30 to 35% of GDP? Would we have been in a recession earlier without this stimulus?
- What effect did stimulus spending have on monetary policy and vice versa?
- Per Krugman, what is useful employment?
- How exactly does massive stimulus change the fundamental problems facing our global economy? And assuming it does, what are the negative effects?
- How long can we continue massive deficit spending and increasing our debt? What is the relevant research on this topic?
- How does massively stimulus affect our ability to confront federal healthcare and SSA obligations?
- What are the greatest long-term economic problems created by massive federal debt?

And please, stop reviving the "massive surplus" in 2000 canard.

more importantly than either of you feeding each other with your hands may be the question of how long the US can maintain its current deficit after it pulls out of iraq and repeals dubya's tax cuts

What was the effect of stimulus rising from 30 to 35% of GDP? Would we have been in a recession earlier without this stimulus?

That wasn't a "stimulus", that was just overall government spending, right?

What effect did stimulus spending have on monetary policy and vice versa?

Again, what stimulus spending are you talking about? The only stimuli I can remember are those checks Bush gave everyone, which they promptly used to pay off their credit cards.

Per Krugman, what is useful employment?

Making something or performing some service that has benefits into the future, I'd imagine.

How exactly does massive stimulus change the fundamental problems facing our global economy?

The fundamental problem for the next couple of years is that money and debt are not moving around. Massive coordinated government spending - the US, UK, and others - will get money and debt circulating, allowing business to take out loans, keeping people employed. Government programs themselves will also directly employ people, reducing the massive strain on state governments who are currently wondering how to deal with the number of unemployment claims.

And assuming it does, what are the negative effects?

This is your case to make.

How does massively stimulus affect our ability to confront federal healthcare and SSA obligations?

Good question. I don't know.

What are the greatest long-term economic problems created by massive federal debt?

Again, you need to enumerate these. I'm not convinced of any of them, especially given the US's position as the global reserve currency. One might be to hand China and India more political power.

And please, stop reviving the "massive surplus" in 2000 canard.

Er alright, I just meant to say that "government spending" isn't automatically Keynesian. If it comes as a direct response to recession, is combined with tax cuts, and is aimed at creating goods or services that have future benefits rather than being sat on, then it is. Your author has conflated the two.

I think it's fair to call the CElolS a black swan because of how suddenly and completely it seems to have shattered the faith of a generation of ideological free-marketeers, and how few of the experts most immediately affected seemed to see it coming.

well yeah, the experts who saw it coming were not immediately affected because it's not hard to dodge a bullet if the bullet is actually an elephant and the elephant is actually being pushed towards you on a cart so slowly it will be five years before it gets to you

so of course the "experts" most immediately effected didn't see it or pretended not to see it, presumably hoping as in Reagan's two terms that the "into the shitbin" moment wouldn't happen until the next chump was sworn in

and proving milton friedman's bullshit to be a bunch of bullshit doesn't make any of this crap a "black swan" either

government spending is basically pretty awesome as long as you don't forget to take back a big chunk a year later in taxes, which is one of the problems with war contracts, and another thing you should be careful to do when spending as a government is not to just hand the keys to an incompetent banker and go to bed, which just happened

there is absolutely no reason to believe at this time that any of obama's spending plans will look, smell or act like dubya's spending plans did, and obama has already announced that he is in favor of sane tax policy

but let's keep whining about shit that hasn't happened like the shit that just happened isn't the fucking problem

who appointed hank paulson? it was bill clinton who appointed him, right?

ned raggett appointed him

was ned raggett also responsible for providing all the kool-aid at the federal reserve meetings

i think we're all forgetting someone in this debate

hstencil

This thread has been locked by an administrator.

was ned raggett also responsible for providing all the kool-aid at the federal reserve meetings

I had to do SOMETHING.

I'm not convinced of any of them, especially given the US's position as the global reserve currency. One might be to hand China and India more political power.

Of course you're not. You're not even curious as to what they might be because it would undermine your ideology. In fact, the vagaries most of your answers suggest a lack of intellectual curiosity. But fine--they were my questions and I'm sure you think I'm partisan in asking them. That wasn't my intention.

To wit, if you think that there are legitimate questions to ask of a massive stimulus program like this, what are they? What concerns do you have?

My main concern is "How the hell am I going to make time to research exactly what's been going wrong with our economy for the past 30 years so that I can ask intelligent questions about this stimulus package?"

you don't have to do that Dan. Just trust that our elected officials to do that for you. They've been reliable in that capacity for the past 30 years.

I had to do SOMETHING.

and all this time, i thought that you appointed the Chief Justice of the U.S. Supreme Court ... o_O

you don't have to do that Dan. Just trust that our elected officials to do that for you. They've been reliable in that capacity for the past 30 years.

uh yeah not so much

I'm certain there are actually good reasons for the stimulus package and, on balance, I am much more for it than against it. It does seem to run completely counter to the way I thought economics in this country is supposed to work, though, and makes me think it's merely postponing an inevitable crash.

well, for starters, the Obama administration can appoint people to key administrative and/or advisory positions that know what they are talking about and are trustworthy. idealistic, perhaps, but that's how it's been done.

frankly, just shitcanning Paulson and his crew -- and making sure that they don't hold another position of authority at any level of government ever again -- would be a good start.

The thing is, there are clearly competing school of economic theory at war here, and someone can be very knowledgeable and trustworthy within their school but still be the absolute wrong person for the job because the parameters of the situation run completely counter to the assumptions that make their economic model work. Furthermore, it could very well be that no one has a good economic model for dealing with the economy as it is today, in which case the appointee's knowledge of current economic theory is only helpful insofar as it supports his/her ability to craft and implement new theory.

on that note, it is really, really hard for me to imagine a future which is anything but bright and bold and fan-fucking-tastic compared to the recent past, just knowing that actual competent people will be filling appointed positions. it also might help that the president-elect does not believe in the laffer curve and that his administration so far does not appear to be a gang of fucks who are explicitly bent on gutting the US government from the inside and handing their buddies blank checks to do whatever they want as long as it has nothing whatsoever to do with domestic infrastructure.

xpost to eisbaer

(there is that, too)

dan, of the two schools that appear to be "at war" in our current conundrum, one has just been massively discredited. the only defense of chicago/friedman ideas at this point is to suggest that they have been hijacked by lunatics, imo.

uh yeah dunno about massively Tombot but if there were ever a time for blindly worshiping Keynes, it's right now.

http://paul.kedrosky.com/archives/2009/01/04/is_financial_hi.html

oh look the guy who calls other posters intellectually lazy decided to respond to one of my posts - the one that's two sentences long!

also, i think that it would be mandatory that anyone running the Obama plan would have to believe in the efficacy of fiscal policy (if not being whole-hog Keynesians) -- the very idea is anathema to friedman's acolytes and that by itself may be sufficient to weed out folks who won't get with the program. and to echo Tombot, having a President who actually doesn't believe that government is per se bad or is just looking to loot the federal fisc a la Tony Soprano is a big leg-up over what we've had the last eight years (or since Reagan, really).

whether the kind of aggressive fiscal policy that Obama et. al. will want to implement will actually WORK is another question altogether.

I don't know why don't we ask eisenhower or ford or nixon what they think of "aggressive fiscal policy"

and we're also stuck with a friedmanite Fed Reserve chairman for another couple of years ;_;

though Bernanke may have shot his short-term wad and it may be a while before he can further fuck shit up.

blah so many xposts.

keynes vs. chicago debates are maybe missing the point. the reason i share tom and jho and others faith in the new admin is because it has been explicitly anti-ideology of any kind. data-driven empiricism is the best way to create policy i think theories are useful only in a very general way.

the questions don is asking are really good ones: what do we want to achieve? is this the best way of achieveing it? even a really well-run stimulus plan will have adverse effects, its more than fair to consider these. like dan i think on balance defict spending is the right thing to do, for now but there are all sorts of caveats attached to that.

okay i've had someone walk into my office three times while i'm typing this. will be glad to annoy with further clarifications when i am less busy

keynes vs. chicago debates are maybe missing the point. the reason i share tom and jho and others faith in the new admin is because it has been explicitly anti-ideology of any kind. data-driven empiricism is the best way to create policy i think theories are useful only in a very general way.

that's true, but the chicago-school types (at least the hardcore friedmanites) eliminate fiscal policy from the get-go in favor of monetary policy. and the Obama plan is largely a Keynesian one.

i think theories are useful only in a very general way

this is my personal mantra

i thought "likes black girls" was your personal mantra

that is my creed

no, that's wrong; that's my epitaph

http://www.serge.org/images/Creed.jpg

NOW we're in the shitbin.

well yeah, the experts who saw it coming were not immediately affected because it's not hard to dodge a bullet if the bullet is actually an elephant and the elephant is actually being pushed towards you on a cart so slowly it will be five years before it gets to you

so of course the "experts" most immediately effected didn't see it or pretended not to see it, presumably hoping as in Reagan's two terms that the "into the shitbin" moment wouldn't happen until the next chump was sworn in

and proving milton friedman's bullshit to be a bunch of bullshit doesn't make any of this crap a "black swan" either

― TOMBOT

Experts I was talking about are/were banks & lending institutions, ratings agencies, brokerage houses, etc. People who not only claim expertise, but who back it up with shit-tons of their own and other people's money. People who pin their careers on their supposed expertise on a daily basis. This crisis happened, in large part, because these people, the people who had the most to lose (and, presumably, the best understanding of what was actually going in the investment economy) were taken unawares.

It's easy, after the fact, to claim that it had to happen. Of course it had to happen. Everyone can see that now. And of course there were voices raised in warning prior to the collapse. But none of that changes the fact that this hit the global financial markets, financial institutions & professionas, and ideological/political financial experts like a bomb. In a few decades' time, we'll look back at this as the moment in which everything changed. And regardless of how many people now claim to have seen it coming since way back, regardless of how much shit we always thought Friedman was full of, were it not a black swan, its effect could not have been so catastrophic.

Your argument seems based on the idea that to say, "almost no one saw this coming," is the same as, "we had no reason to doubt the paradigm under which our governments/markets were operating." But I don't think A is necessarily a product of B.

Don I'm not sure how it ended up being my responsibility to describe your problems with Obama's stimulus proposal. Wasn't it you that said there were big problems with it, and that it has a good chance to fuck us up long-term? Why don't you spell out your reasons for thinking that? I can't have both sides of the debate all by myself.

I won't deny that I have an "ideology" - it's left-wing - but I honestly don't know how to apply it in this situation. For instance, I never thought I'd hear myself say "yay taxcuts!" but it seems to be what the situation calls for. Similarly, I never thought I'd hear myself silently nodding at proposals for handing out vouchers directly to taxpayers, redeemable at businesses but not at banks. I doubt anyone will do that though.

that Lewis-Einhorn NYT piece was so good I almost understood half of it.

Lewis is an almost insidiously good writer.

Don I'm not sure how it ended up being my responsibility to describe your problems with Obama's stimulus proposal. Wasn't it you that said there were big problems with it, and that it has a good chance to fuck us up long-term? Why don't you spell out your reasons for thinking that? I can't have both sides of the debate all by myself.

You're the one who said that the package would be scuttled "on the grounds of bloating the deficit and national debt." I pointed out that deficits/debt are legitimate concerns, which is absolutely true whether it's ideologically based or not. If you're not concerned about a couple of trillion dollars in new government spending being added in the next few years, if you're not concerned about the waste and corruption that will likely follow, if you're not concerned that there will be significant ramifications to fiscal policy in addressing current needs (healthcare/SSA/our military obligations, etc.) or the ramifications to monetary policy, then you're ignoring history and basic economic theory. Our impulse to throw money at shit to solve problems has a horrible track record. We let things get screwed up with TARP; why shouldn't we demand better for something much bigger?

This is a very serious subject, one that demands an honest intellectual discussion from a broad spectrum of economists. Smart people--not you and I--should be vetting this stimulus package very thoroughly.

http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2009/01/05/who_should_get_the_federal_stimulus_funds/

You're the one who said that the package would be scuttled "on the grounds of bloating the deficit and national debt."

Where did I say that?? I mean sure, I guess it's a danger. Obama could cave on key provisions and then the whole thing runs a risk of not working. It's funny how conservatives suddenly get very concerned about the deficit when money is getting spent on people and services that directly benefit people, rather than on corporations. But when giant tax cuts are announced they don't give a shit.

And why on earth do you keep insisting I'm "not concerned" about waste, corruption, etc? I've said we have to insist on stringent oversight, again and again! It's like you're not reading what I'm writing. I agree - Congress can't afford to keep getting bamboozled by Friedmanite technocrats like Bernanke and Paulson! Yes that's part of the recent history between executive appointees and Congress in dealing with this mess. But a more directly relevant historical comparison, which you are apparently happy to ignore, is the WPA and similar programs that were implemented during the New Deal. They had very strong oversight. They worked, and were free of corruption.

i'm more worried about the "blue dog democrats" who will try to scuttle any Obama-led economic recovery package on the grounds of bloating the deficit and national debt. we can debate how much of that comes down to ideology or self-interest.

― Mad Vigorish (Eisbaer), Monday, 5 January 2009 13:34 (Yesterday) Bookmark Suggest Ban Permalink