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Aug 28, 2011

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Bill Yaner

NO doubt about it. Politicians and journalists have all been guilty (as Kristoff pleads) to putting the desperate and increasingly hopeless plight of the jobless on the back burner while obsessing on the Tea Party driven priority of deficit.

I believe this has moved beyond an issue of economics to an issue of morality.

One man's opinion.

Andrew Brod

Drop the ball? Did we ever pick it up?

In fact, does Kristof pick it up here? After chiding Obama for speaking "too meekly" about creating jobs, he suggests a series of jobs programs that can only be described as meek. And when he says "there are no quick fixes to joblessness," you know he still hasn't freed himself from the conservative mental straightjacket on this issue.

Yet there is a reasonably quick fix. A comprehensive public-works program started in 2009 would have been quick enough to have paid huge dividends by now. Our fixation on "shovel-ready" projects two years ago belied a belief--among both liberals and conservatives--that the recession would be short and the recovery from it vibrant.

But okay, we didn't do it in 2009. However, even now in 2011, with 9% unemployment stretching into the future as far as the eye can see, it's not too late to get started. There's Jared Bernstein's FAST concept. There's the physical infrastructure to which the American Society of Civil Engineers assigns a grade of D. Let's fix the place up and generate the jobs that the private sector (bless its heart) isn't creating.

Not only would a bold plan be good economic policy, but it might be good politics for Obama. Ruy Teixeira argues that the public holds contradictory views: against government debt but for jobs programs:

Even in the middle of the Great Depression (1935), 70 percent of the American public told Gallup that now was the time to balance the budget and start reducing the national debt. But that distinctly non-Keynesian sentiment coexisted with sky high support for a raft of New Deal spending programs like Social Security—in fact, three quarters of the public wanted to see that program expanded.

As I've noted, FDR ignored the latter bit of public opinion and paid attention to the former. He started reducing the national debt after the 1936 election. Unfortunately, the private sector wasn't ready for the hand-off, and the result was a return to recession in 1937. Will we learn from the past? Or will we continue to be meek about jobs?

Andrew Brod

I agree with Ed's characterization of the "made men." They haven't been focusing on the wrong issue because they're evil. They just have on blinders: blinders of relative affluence. When one has financial assets, one is naturally more likely to be attuned to concerns over inflation, interest rates, and deficits (even though in the current liquidity trap, deficits aren't having scary effects on either inflation or interest rates).

But most of us don't hold much in the way of financial assets. Most of us are living, if not paycheck to paycheck, then with a relatively small financial cushion. For those people, job security and job creation are more important than the bogeyman of rentiers.

For example, Dean Baker makes the following claim in a different context, but it's relevant here:

While less than one quarter of the population owns more than $25,000 in stock (including indirect investments though mutual funds and 401(k)s), virtually all the people involved in national economic debates fall into this category.

Andrew Brod

Kristof links to this piece about the media's coverage of deficits vs. unemployment. It's worth a direct link. Be sure to scroll down to the graph.

Bill Yaner

Very well stated, Andrew! What if we were to throw ourselves against joblessness the way Americans have attacked so many challenges before? Kristoff did indeed offer up only a meek set of measures when
instead we need to start believing in ourselves again.

Meno

Following up on Andrew's National Journal link, does anyone think perhaps the president, et al, made a political miscalculation in tackling deficits in order to mute the talk of jobs? Wouldn't be the first misstep. One only need look back to the one-two punch of Cap and Trade and Healthcare out of the gates in 2009 to see that this admin is tone deaf.

I like the idea of FAST, but much like stimulus, the money would probably be weighted to urban cities and large states. I guess that is fair, but we in the south, especially in our rural counties, could sure use some fast track attention.

Many of our state's counties are at a breaking point in terms of debt service for school and other building construction. For every one Guilford, Wake, Meck, Forsyth, New Hanover, Durham and Buncombe counties there are 10 starving rural counties with incredible infrastructure needs.

But the question remains to be answered if the administration could get a modern WPA through Congress or past the naysayers on Fox News and on talk, I mean hate, radio.

Andrew Brod

Was it really tone-deaf of Obama to pursue a policy that was one of his Republican rival's key environmental policy proposals in 2008? Yep, McCain favored Cap and Trade. In fact, C&T was first implemented by a Republican president and its market mechanism had long appealed to Republicans who cared about the environment (while turning off the more liberal Democrats).

Well, maybe it was. Maybe Obama should have known that anything--anything!--he favored would be opposed as though The End of Freedom by Republicans in Congress. He got C&T through the House but the Senate's newly established de facto 60-vote supermajority requirement was the death knell for that program. I suppose McCain would have voted against it had it come up for a vote in the Senate.

As for "Obamacare," please note that it passed. So I presume the alleged tone-deafness on that bill was because it sucked the administration's energy away from jobs. It might have, but I also think it was reasonable to pivot away from jobs while we saw what the stimulus could do. To be sure, there were prominent voices saying a priori that the stimulus was too small, but once the shouting was over, it was reasonable to let it play out.

However, Obama could have taken up the cause of jobs again in 2010, and he did not. He could have done so in 2011 but he has not (so far). We'll see what he proposes doing in 2012. Maybe his faltering reelection prospects will spur some action.

Andrew Brod

Put differently, this administration's tone-deafness was precisely because it subordinated jobs programs to concerns about government debt. The most authoritative recent studies show that the stimulus did create or save jobs, and while the administration's claims are at the top end of the range estimated by (non-hack) economists, its claims aren't crazy-high. But more was needed and more was not forthcoming, because the Obama folks believed the Repubs and the WaPo editorial page that Americans cared more about other stuff.

Ed Cone

Personal financial security plays some part in the tone-deafness, but it's not the whole answer, and plenty of people with jobs and some assets seem to understand the problem.

It's also an insular culture -- remember, unemployment among those with a college degree or higher is just over 4%, and until quite recently the stock market had been doing quite nicely. Everyone they knew seemed fine, so to a lot of these folks, the job stats were just numbers on a page.

What's odd to me is their shortsightedness. You don't have to be an economic seer to understand that the employment and housing markets will ultimately undermine the fortunes of the made men, too.

bubba

(sigh)

The solutions for problems caused by statism is NOT more statism. It's been tried, and it has failed.

Yet that's the only solutions the "experts" posting here seem to believe in.

How many more times do they need to be proven wrong before we just flat out ignore them?

Meno

Andrew: While C&T may have passed the House, as one who watched the vote unfold on CSPAN, my center right senses were tingling. A month later when health care began to move was when the Tea Party gained its permanent footing and began to influence the GOP toward a more intransigent stance. We don't have to rehash the last two years, but as one who did not support the president and could barely pull the lever for McCain, what I am saying, and what many pundits have since written, is that middle America, the heartland, never embraced either program.

So, yes, I do believe it was a political miscalculation to come out of the gate with those back to back. It alienated a sizable chunk of the middle which Obama has yet to reclaim.

His dim prospects in 2012 may cause him to become bolder and lay all his cards on the table for a jobs or infrastructure program that gets the country moving. But going back to my Hoover comparison from the other day, we have been gridlocked, as you put it with the "End of Freedom" Congress, since those days.

I'm not saying my opinion is better than anyone's, just offering my own analysis of recent political history and its consequences.

On a side note, since corporate profits are at a 60 year high of 14 percent of national income pre-tax maybe the "private sector" can get together and improve the economy. It's not like they don't have all the money. Roubini said today that corporate America's 17 percent post-tax profit margin is the highest ever recorded.

Brother can you spare a dime?

Billy Jones

Bubba wrote: "(sigh)

The solutions for problems caused by statism is NOT more statism. It's been tried, and it has failed.

Yet that's the only solutions the "experts" posting here seem to believe in.

How many more times do they need to be proven wrong before we just flat out ignore them?"

And your solution would be?

Andrew Brod

We actually haven't tried "statism." Government employment is lower than it was at the beginning of the Great Recession. Government spending has grown but has done so significantly more slowly than during the previous expansion. Any statist growth we've seen at the federal level has just offset reductions at the state and local levels. All in all, the data contradict the mythology of the Right: government hasn't exploded in size, which would seem to be a necessary condition for statism.

Or maybe the fear is of a new kind of statism that involves smaller government.

Steve Harrison

Bubba, it wasn't "statism" that brought the world's economy to its knees, it was criminally negligent deregulation which produced new and dubious financial products and funding streams.

Speaking of trying, failing, and being proven wrong, efforts to deregulate should be somewhere near the top of that list. But about the only thing that invisible hand does well is make people forget their previous mistakes.

Preston Earle

Andrew wrote "Government employment is lower than it was at the beginning of the Great Recession. Government spending has grown but has done so significantly more slowly than during the previous expansion. Any statist growth we've seen at the federal level has just offset reductions at the state and local levels. All in all, the data contradict the mythology of the Right: government hasn't exploded in size, which would seem to be a necessary condition for statism."
--------------
By what measure hasn't the government grown since 1930. That assertion astonishes me.

Andrew Brod

I said Great Recession, not Great Depression. The Great Recession is the most recent recession, which started in December 2007 or January 2008 (depending on how one interprets the business cycle).

Ed Cone

-1 for reading comprehension, Preston.

Ed Cone

+1 for canonical reference, Preston.

MojoNixon

There goes Bubs, Bubba, Bobby, Robert, Thing 1, and Thing 2 with that "we" stuff again.

Sideshow Wonder has never once proffered a solution to the jobs issue, besides the tired, no-basis-in-reality supply-side argument.

Lex

[[it wasn't "statism" that brought the world's economy to its knees, it was criminally negligent deregulation which produced new and dubious financial products and funding streams.]]

Add to that behavior that wasn't just criminally negligent but flatly criminal, including but not limited to securities fraud and conspiracy. And the amount in question, although unlikely ever to be fully known, likely was world-historical.

polifrog

How about some unmitigated myth?...

Yet there is a reasonably quick fix. A comprehensive public-works program started in 2009 would have been quick enough to have paid huge dividends by now. Our fixation on "shovel-ready" projects two years ago belied a belief--among both liberals and conservatives--that the recession would be short and the recovery from it vibrant.

Your myth is our suffering.

It does not work this way, as history has made clear many times. At no point have such "quick fixes" lead to boom. Instead they have lead to bust each time they have been employed. The recession of 1937 following Hoover and FDR's attempts, the recession of 1945 following WWII, the Japanese perma-recession, and again today.

Employment for employment's sake is and will always be fruitless as it diverts capital from areas of potential organic employment to the seeding of jobs in the non-fertile soil of inflation riddled economies and in the process further our battle against much needed deflation.

And your solution would be?
Induced deflation.
Andrew Brod

It is intellectual chutzpah to warn about "diverting capital from areas of potential organic employment" when there has been no such thing for over 3 years now. I mean, really: we're waiting.

Yep, still nothing.

And denigrating "employment for employment's sake" is one of the most callous things I've ever read, and the surest sign that you're completely out of touch with the problems of actual people. Many of them would love a job, even if merely "for employment's sake."

MojoNixon

It's also stupid (or intellectually dishonest).

The recession of 1945? The biggest war ever fought had just ended -- of course there was going to be a slackening in government spending. Thank goodness there was a decrease in aggregate demand at that point. That was proof of victory.

The Japanese recession was caused by asset bubbles -- it was not caused by government stimulus.

At least get your history right if you are going to use it to justify your dogma.

Ed Cone

Yeah, Frog consistently confuses attempts to ameliorate the impacts of a terrible economy with attempts to make everything perfect forever.

Nobody thinks intervention to help people now means the economy will never again go into recession, so it hardly seems worth the trouble of responding, again, to that argument.

polifrog

Ed Cone:

Nobody thinks intervention to help people now means the economy will never again go into recession, so it hardly seems worth the trouble of responding, again, to that argument.

as opposed to Andrew Brod:

Yet there is a reasonably quick fix. A comprehensive public-works program started in 2009 would have been quick enough to have paid huge dividends by now.

Additionally, I do not believe "intervention to help people now means the economy will never again go into recession". I never said that nor have I ever argued such.

I have argued that such actions (public-works/stimulus) should produce the economic expansion it was claimed they would produce. There is nothing wrong in pointing out that these stimulative actions have produced no measurable economic gain and have, in fact, produced measurable failure. History (1937, 1945, Japan, the US) has proven my contention repeatedly by showing such intervention is not followed by boom, but rather by bust.

In the case of Japan, Mojo is correct when stating

The Japanese recession was caused by asset bubbles -- it was not caused by government stimulus.
The recession began as a result of a deflating asset bubble(s) and not as a result of government stimulus. It is intellectually dishonest, however, to ignore the length of the recession and the cause for that length. The fact is that Japan's economy was never able to properly correct due to massive government stimulus intervention. Japan suffers from good intentions...

It does not help Japan that individuals continue to claim a moral high-ground amid what is now a generation that has never known anything but Japan in recession. Both the individuals and the solutions they foisted onto Japan deserve ridicule if not for the intellectual dishonesty they employ (Mojonixon), then for the solutions that have enslaved Japan to twenty years of recession. Employment for employment's sake, otherwise known as good intentions failed... Andrew Brod:

And denigrating "employment for employment's sake" is one of the most callous things I've ever read, and the surest sign that you're completely out of touch with the problems of actual people. Many of them would love a job, even if merely "for employment's sake."

Callous is ignoring recession for the sake of jobs. Callous is ignoring the repeated historical examples of misery that has resulted from one's good intentions. Callous is arguing for repeating a known failure in one's own nation. Callous is ignoring a generation of recession when that recession is the result of one's misplaced moral high-ground.

I am not callous, however, if I am being accused of the callous love of nation and humanity, then so be it. Economic growth only follows the pain of economic contraction, while stagnancy and recession follows the amelioration of that pain.

I do not believe the three of you, Ed, Andrew, and Mojo, are callous individuals but I believe that all of you for various reasons have sheathed yourselves in the same callous theory and have disassociated yourselves from the long term misery that results.

Thomas

Ed's right, it isn't worth the trouble. But here goes...

'Additionally, I do not believe "intervention to help people now means the economy will never again go into recession". I never said that nor have I ever argued such.'

He wasn't saying you believe this. He was saying you argue against remedies proposed by others as if they are saying this. Hint...they aren't.

Also...

"as opposed to Andrew Brod"

Placed between statements that are not the least bit contradictory.

Andrew Brod

"Ignoring recession for the sake of jobs."

That's a new one.

Andrew Brod

Thomas, I'm opposed to Andrew Brod.

And Epimenides.

Billy Jones

And callous will be ignoring a couple hundred thousand military men and women who return home to find the American Dream they fought for will never be theirs to enjoy.

polifrog
And callous will be ignoring a couple hundred thousand military men and women who return home to find the American Dream they fought for will never be theirs to enjoy.

Allow me to complete your thought,

as a result of clobbering our economy with short-term Brodian solutions...

Billy Jones

Polifrog, "as a result of clobbering our economy with short-term Brodian solutions..."

You're full of shit!

Andrew Brod

No, no, it's my fault. I did it. I ignored the recession for the sake of jobs. I diverted capital from areas of nonexistent organic employment.

polifrog

Thomas:

He wasn't saying you believe this. He was saying you argue against remedies proposed by others as if they are saying this. Hint...they aren't.

No I do not.

Others claim their remedies will result in growth, and "prime the pump" for growth, or as Andrew said:

Yet there is a reasonably quick fix. A comprehensive public-works program started in 2009 would have been quick enough to have paid huge dividends by now.

Assuming any of this had resulted in growth beyond that which is the direct result of stimulus ... boom, I'd pat each of you on the back and you could include me among your ranks.

Additionally had your solutions resulted in economic growth and expansion beyond that which was the direct result of stimulus...boom, and then fallen back into recession I'd pat each of you on the back and you could include me among your ranks. I recognize economic cycles are a fact and that they follow boom whether or not that boom was created by stimulus.

However, the result has repeatedly been the opposite. Stimulus results not in expansion beyond that which is the direct result of stimulus. Stimulus begets not boom, but permarecession at best and depression at worst.

bubba

"There goes Bubs, Bubba, Bobby, Robert, Thing 1, and Thing 2 with that "we" stuff again."

Have you learned how to spell my name right yet, scumbag?

Andrew Brod

"Stimulus results not in expansion beyond that which is the direct result of stimulus."

What you don't understand... well, among all that you don't understand is the fact that this is actually okay in an economy of severe underutilization.

bubba

"Stimulus results not in expansion beyond that which is the direct result of stimulus. Stimulus begets not boom, but permarecession at best and depression at worst."

Do you remember how they recently tried to claim that jobs and growth weren't being created because "demand wasn't there"?

How does artificial "stimulus" like government infrastructure spending create "demand"? It doesn't, unless you intend to foster such a program on a continuing, unending basis, with ever-increasing amounts of projects and spending.

Sounds like that's their plan, doesn't it?

polifrog

Thomas and Brod are correct to pounce on my comment:


Ed Cone:

Nobody thinks intervention to help people now means the economy will never again go into recession, so it hardly seems worth the trouble of responding, again, to that argument.

as opposed to Andrew Brod:

Yet there is a reasonably quick fix. A comprehensive public-works program started in 2009 would have been quick enough to have paid huge dividends by now.Ed Cone:


I intended for it to read:

Ed Cone:

Yeah, Frog consistently confuses attempts to ameliorate the impacts of a terrible economy with attempts to make everything perfect forever.

as opposed to Andrew Brod:

Yet there is a reasonably quick fix. A comprehensive public-works program started in 2009 would have been quick enough to have paid huge dividends by now.Ed Cone:

In which Brod calls for a fix as opposed to Ed who claims the goal is a much less measurable "amelioration".

Ed is on the right track in the sense of defense.

Andrew Brod

Bubs asks: "How does artificial 'stimulus' like government infrastructure spending create 'demand'?"

By hiring people to build and repair the roads and bridges and whatnot. Hiring them means paying them wages. Then the workers go out and spend their wages, thereby creating a demand for those products. And because the workers weren't previously employed, the demand is new demand.

C'mon, this really isn't that hard.

polifrog

Dr. Brod:

I diverted capital from areas of nonexistent organic employment.

"Nonexistent organic employment"?

Are you wondering into the argument that there is no organic employment beyond that stimulated by government?

I doubt you go there, but if so, you are wrong.

polifrog

Dr. Brod:

By hiring people to build and repair the roads and bridges and whatnot. Hiring them means paying them wages. Then the workers go out and spend their wages, thereby creating a demand for those products. And because the workers weren't previously employed, the demand is new demand.

C'mon, this really isn't that hard.

Allow me to finish your thought:

And when the stimulus is removed the "jobs" evaporate as does the "demand" and no organic growth results.

As you said previously:

...what we saw in the 1930s is that fiscal stimulus worked while it was tried, and didn't work when it was pulled back.

Of course, the stimulus fiasco of the 1930's gave us no organic growth and ultimately resulted in the recession of 1937.

bubba

"C'mon, this really isn't that hard."

Apparently, it's only hard for you:

"In fact, the Congressional Budget Office, the Congressional Research Service, and the Government Accountability Office have all concluded that such spending has at best a marginal impact on employment, and may even yield a net loss in jobs."

...and:

"In short, a variety of studies using very different methodologies suggest that infrastructure spending is not an unemployment solution, and may even make the situation worse. So it should have come as little surprise, nearly a year after the president passed his stimulus package, that 'a surge in spending on roads and bridges has had no effect on local unemployment and only barely helped the beleaguered construction industry,' as the Associated Press reported."

Like virtually every "solution" you've proposed, your infrastructure deal is a lousy proposition.


MojoNixon

"Have you learned how to spell my name right yet, scumbag?"

But out of respect for Ed, his blog, and general civility, I would have had much, much fun with this one.

bubba

"But out of respect for Ed, his blog, and general civility, I would have had much, much fun with this one."

Yeah, right.

That's the exact response I'd expect fro such a low-life loudmouth of no redeeming value.

polifrog

Bubba:

How does artificial "stimulus" like government infrastructure spending create "demand"? It doesn't, unless you intend to foster such a program on a continuing, unending basis, with ever-increasing amounts of projects and spending.

Sounds like that's their plan, doesn't it?

This fits very well with Andrew's

...what we saw in the 1930s is that fiscal stimulus worked while it was tried, and didn't work when it was pulled back.

As we know Andrew is very fond of commenting that stimulus was a failure of too little for too short a period of time, that if only we had stimulated the economy more then (in the thirties) and today events would have unfolded more positively.

Andrew Brod

As always, Bubba can make an argument only by copying and pasting from a conservative blogger. And surprise, surprise, this conservative blogger doesn't like infrastructure spending. Fortunately, one of Bubba's great services to the rest of us is that his links always provide the key to show how wrong he is.

The three organizations all found the results Bubba's conservative blogger claims. But those results don't apply to the situation at hand because they were all obtained in a different time. Each one is based on one trade-off or another (e.g. foregone spending on other programs, crowding-out effects in financial markets) that any fair-minded person would realize doesn't apply to a severely underutilized economy like the one we're in now. Trade-offs like this disappear when there's a great deal of slack or when we're in a liquidity trap.

For example, the Heritage Foundation (motto: mathematica est difficilis) says that every $1 billion spent on infrastructure is $1 billion less spent on something else. That by itself doesn't imply that the USDOT result it doesn't like isn't true, but let's let that slide for now. The point is that Heritage's claim would be potentially valid in economically healthy 2004 or 2007, but not in depression-era 2009 or 2011.

Heritage notes sarcastically that "the only way that $1 billion of new highway spending can create 47,576 new jobs is if the $1 billion appears out of nowhere as if it were manna from heaven." Well, that's basically what deficit spending does at a time like this.

So yeah, infrastructure spending is not a panacea that spews jobs at all times and at all points in the business cycle. I agree with that. But that's all these studies show. In contrast, we're at about a very specific point in a very unusual business cycle. We need specific analyses instead of generalities.

Ironically, the Heritage "analysis" condemns the USDOT calculation because it's done "in the abstract," whereas Heritage claims to address economic impacts "in the real world." But the real world Heritage imagines is not the real world that's relevant now.

Once again, thank you, Bubba.

Andrew Brod

A way to visualize this is the following. A trade-off in economics is like pulling on a taut rope: you can only use more on your end by pulling it away from the person on the other end. But here in the Second Depression, that rope isn't taut. It's lying on the ground in a jumble. You can use one end of the rope without changing things for the person at the other end.

bubba

In other words, Andykins is "right", everyone else (CBO,CRS, GAO) is "wrong".

Andykins always gets to set the best framework favorable to support his unsupportable world view, but lay said fault at the feet of those whose information contradicts his version of "The Way It Ought to Be". Too bad said framework makes no difference in the information presented.

How you can ignore certain facts that don't fit your particular talking point, while using them to illustrate something they clearly are not is amazing, Andykins. Do they teach you that in "Academic Arrogance 501"these days?

Infrastructure "stimulus" does not create jobs, whether you or your fellow fools like it or not.

Andrew Brod

No, CBO and CRS and GAO aren't wrong. Their work is generally quite good, and I have no reason to believe the studies cited here are exceptions. But their results are derived from a series of "taut-rope" scenarios that simply don't apply in our current "limp-rope" reality. The issue isn't the results, but how they're interpreted and applied. The researchers at those agencies understand this but clearly you don't. So yeah, someone's wrong.

bubba

Let's be perfectly clear about the essence of all this, something that Andykins refuses to accept:

Infrastructure "stimulus" does not create jobs, whether Andykins or his fellow fools like it or not.

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