Political Poll

[rowyn]

I've been reading here and there about the economic stimulus bill in Congress, but not very much about it in LJ. Which made me curious what my friends think of it. Hence, a quickie poll!

[Poll #1346426]

Also, if any of you are so inclined, I'd be happy to hear your thoughts in detail. :)

Comments

[terrycloth.livejournal.com]

I don't really know much about the specifics, except that it's full of pork of course. But then, a stimulus bill is essentially a whole bunch of pork on purpose...

So, normally, it's a waste of money, but when the economy actually needs it because private sector spending is contracting (which is a vicious positive feedback cycle) it's probably the right choice.

[level-head.livejournal.com]

The private sector spending is actually not as bad as portrayed. For example, for the entire quarter, the economy was down less than one percent, about half of the drop near the beginning of Ronald Reagan's term.

A number of companies are using the constant drumbeat of doom to cut some "waste" from their own spending -- but they are given cover in this by the general tone of "everything's horrible" that makes up the news.

The news has to be as bad as possible, or the public would not tolerate a trillion-dollar (round numbers) spending increase.

===|==============/ Level Head

Cover

[rowyn]

I was wondering about that, particular with IBM announcing great profits and then doing major layoffs just weeks later. Some of the announced layoffs really feel like "we had a lot of people we thought were dead wood that we wanted to get rid of anyway, and we can use the bad economy as an excuse to do it now".

Re: Cover

[level-head.livejournal.com]

Exactly.

It's a handy excuse, and one that few would doubt -- because of the news presentations.

At least President Obama is doing an excellent job on collecting taxes from deadbeat rich people.

He nominates them for cabinet positions. ];-)

===|==============/ Level Head

Re: Cover

[rowyn]

We all knew he was smart!

Re: Cover

[koogrr.livejournal.com]

I'm sure they're quite happy to use any excuse to activate the wish-list of things they'd like to do to their employees.

[rowyn]

Most of what I've heard about it has been from the WSJ opinion page, which should be taken with a giant grain of salt as they're pretty strongly opposed to government action on the economy in almost every form.

But their analysis is that the bill is mostly:

* a little bit of infrastructure spending (10%?)
* a lot of targeted "tax cuts" for the poor. I put "tax cuts" in quotes because they're tax credits, and many of the people who are eligible for them don't pay income taxes anyway. So it's really more like a weird kind of welfare.
* lots of funding to expand government programs (state and federal) for health care and unemployment benefits.
* lots of funding to the states to cover their budget shortfalls
* some grants to various other government agencies to spend on hiring more people or distribute as grants (like money to the NEA).

The general tenor of it looks much more like "expand government services permanently" than "spend some money right now to get the economy moving".

Which is, you know, fine if you want more government services and don't mind seeing the deficit quadruple permanently and/or taxes increasing by 30% or so across the board to pay for the new services.

Though that cost assumes that none of those actions have a long-term effect on the economy, which is unkind of me when the whole point of the exercise is to have a long-term effect on the economy. If all the spending really does improve things dramatically then the long-term cost gets much lower.

[terrycloth.livejournal.com]

Well, what I've read on it is that the bill's been basically poisoned by amendments which threw in a ton of tax cuts, which do nothing to help the economy in the short run (or at least, did nothing the three times Bush tried it), and cut most of the funding to the states, which is the most necessary and effective part of the bill since it's more efficient to not suddenly abort programs midstream (the alternative) than to try to start up new ones which might not work.

Making any of it permanent would be kind of missing the point, yeah. Supposedly, increasing the deficit right now is on purpose because they're trying to avoid a deflationary trap. The accumulated debt isn't going to suddenly go away once you've managed that feat and would like to avoid inflation again, though. }:/

[level-head.livejournal.com]

The "did nothing" comment surprises me. It created the best economy the planet has ever seen, produced the largest Federal revenues in history, and were only overridden, finally, by the subprime mortgage debacle which the current Congress has vowed to continue.

And note that a big chunk of the decline in spending in 4Q 2008 was because gasoline (a big part of retail sales) was 40% cheaper than the previous year.

===|==============/ Level Head

[terrycloth.livejournal.com]

The economy was crap all through the bush years -- it looked kind of okay for a while (although not stellar unless you seriously cherry-picked your data points), but it turned out all the mitigating factors for the looming badness were made out of fairy dust.

And I'm not sure where you got the 1% figure. I went searching around, and 10% seems to be a more accurate number comparing year-to-year (although I've seen 6%, 13%, etc.)

[level-head.livejournal.com]

GDP declined by about 0.95 percent. This is generally reported as an "annualized" figure, which in the case of a quarter means multiplied by four.

So, the GDP was reported as declining at an annualized rate of about 3.8%. For example:

"WASHINGTON (MarketWatch) -- The U.S. economy contracted at a 3.8% annualized rate in the fourth quarter, Commerce Department data showed Friday"

Larger numbers are tossed around -- but for every larger number that's worse, another number is better, producing the average. For example, services spending was up about 2%.

And "the worst since 1982" means, of course, that 1982 was worse.

===|==============/ Level Head

[rowyn]

Whoa, wait, where'd you find a decline of 10% for GDP? That'd be scary-huge. O.O

[terrycloth.livejournal.com]

I was looking at consumption, not GDP -- private sector spending, not that + investment + government spending + imports-exports.

I found several places that show consumption down 10% -- which puts us at serious risk of a death spiral.

Level head said 'private sector spending isn't bad, 'the economy' is only down 1%' meaning the GDP apparently. I thought he meant private sector spending was only down 1%, which doesn't line up with anything I've seen.

[rowyn]

Oh, okay. That makes sense.

Though American consumption levels really desperately needed to go down. Consumption was so high that the savings rate was negative, which isn't sustainable no matter how you look at it.

[octantis.livejournal.com]

I've heard GDP takes a moment to catch up with current market situations anyway, so as product stacks up on the shelves and doesn't move, orders for product will decline and the GDP will sink in response.

If it works, the debt actually does go away

[rowyn]

The debt issue isn't necessarily as bad as it looks intuitively. If inflation stays low (and it's been about as low as the powers that be want for the last 25 years or so), it doesn't become less important because the money is worth less, true. However, US gov't income is more affected by GDP growth, and GDP growth usually outpaces inflation. In other words: if it really does make the economy improve, we'll make more money and be able to afford to pay back the loan more easily. It's a formula that works for many successful businesses!

...

It's also a formula that puts unsuccessful businesses into bankruptcy proceedings. >:)

don't blame the bill for the deficit skyrocketing

[tahkhleet.livejournal.com]

Bush and Obama and McCain all collaborated on setting in motion the policies that have seen 8.5 _trillion_ dollars added to the debt. The interest on that will wreck absolute chaos in the years to come. at a declared federal only debt of about a trillion or trillion and a half (I forget which) you were paying 22 cents on the federal tax dollar in interest payments. Multiple that by 5 and oops. we have to raise taxes 5% just to make our interest payments....if we shut everything else down. Sowwy.

This isn't about socialists versus free marketers. Its the bipartisan betrayal of the republic.

Note:

[tahkhleet.livejournal.com]

that's 8.5 trillion _before_ the current bill (since it hasn't actually passed yet...)

Ok, i was wrong.

[tahkhleet.livejournal.com]

it includes the bailout bill. But I'm not kidding.
this from the San Fran Chronicle, quoting Bloomberg:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/26/MNVN14C8QR.DTL

[the-gneech.livejournal.com]

I know almost nothing about the specifics of the current bill, so I can't comment on it intelligently. As far as I can make out, the apparatchik has decided that there can and must be this huge thing and no little thing like the will of the people is going to get in the way. As such, I haven't bothered to look at it because it's going to happen no matter what I think about it.

Same reason I don't generally follow weather reports, if that makes sense.

Overall, I'm against Big Brother sticking its paws into anything if it can be avoided; but that's certainly not the current trend of things in the post-9/11 world.

-The Gneech

[rowyn]

Yeah, what political news I get is more out of idle curiousity than any conviction that it matters what I think about it. :/

[seraphimsigrist.livejournal.com]

I think my response would
be along the lines of --how would
I know and again what differnce does
it make what I think about it? we will
all hope it works.
of course it has a downside, pork in it...
snowballing defecit, and yet something is
necessary and this is (with some adjustment
a little one way or the other) what we will
have so lets hope it helps!

in general I am confident that as with other
recessions we will survive. the economy will
recover a bit down the road...

[rowyn]

There's one Russian historian who's been predicting, for many years now, that the US will fall apart, literally, in 2010. Split into five pieces and get annexed by foreign governments.

I'm really not worried that things are going to get *that* bad. And I certainly hope that whatever action Congress takes, it's helpful. :)

[seraphimsigrist.livejournal.com]

but he is an idiot.
or perhaps plagarizing andrei amalrik
the soviet dissident who wrote will the soviet
union last until 1984...it did of course but
also finally broke down somewhat along predicted
lines.
so he is imagining the us suffering a similar
fate. it wont.

I did not vote for this president and another
president might have likely proposed a somewhat
different bill. but also with no guarantee of
immediate success...

one thing I do carp at a little is the president's
use of the dire warning perhaps a bit too much...
it risks to be a bit like crying fire in a theater
something to avoid doing...

but Im sure it will sort itself out and of course
hope not too many will lose jobs and suffer etc
but it is a normal sort of thing isnt it?

[detroitfather.livejournal.com]

we will all hope it works.

I hate to disagree with you, but I hope it doesn't work.

It is like hoping that a wave of burglaries will improve a neighborhood. Of course, I want the neighborhood to do well, but I don't go so far as to say I want the theft (and this is a form of theft) itself to lead to prosperity for the neighborhood.

Such a thing can never work. But, even if it did, the cure would be worse than the disease, so to speak.

[seraphimsigrist.livejournal.com]

I suspect, what is not a bad thing,
that you have a more doctrinaire view
of economics than I. My feeling
is that it does not fully, reality
does not and economics in practice
does not, work the way conservatives say
it should in a precise and complete way.

[jordangreywolf.livejournal.com]

I can sympathize with this. Maybe, just maybe, spending a whole lot of money could result in some sort of short-term gain - a blip on the charts, some positive numbers, whatever it takes for anyone in favor of the plan to claim victory. And maybe we end up paying for it later on in some messy, not-entirely-clear way - something indirect enough that we can't say with absolute certainty that spending a lot of money that we didn't really have was a bad idea after all.

I don't want things to go badly. But I also fear that if things go "well" in the short term as a result of this, things may still go much worse later on.

[jordangreywolf.livejournal.com]

Didn't Japan already try something similar to this? I vaguely recall that it went badly.

In general, I figure that spending money we don't have (conjuring up money from nowhere) is a very bad thing. It makes the existing money worth less. Maybe diverting spending from one place to another could work; who knows?

I am not so strong in my opinion on this as I am on certain other issues, but I am worried that we will end up paying for this - and that even if this IS the cause of later woe, the mechanics of an economy are messy enough and subject to enough interpretation that we'll never know with absolute certainty. (At least, nobody is ever going to 'fess up to being responsible if it goes badly, if there's an alternative explanation in circulation.)

[xthread.livejournal.com]

Didn't Japan already try something similar to this?

No. When Japan's housing bubble bust in the late 80s, their first key objective was to allow the banks to avoid writing the bad assets down on their balance sheets, which would have forced a lot of banks to admit that they were technically insolvent. Our bankers have been howling, asking that they be allowed to do the same thing, but our regulatory agencies have thus far largely failed to give them what they asked for.

I figure that spending money we don't have (conjuring up money from nowhere) is a very bad thing. It makes the existing money worth less.

All money is a promise to perform future work. Money is only worth what people will do for you for it. If the money supply expands by people choosing to take on debt, that does not necessarily make all of the existing money worth less. If the money supply expands simply by the money-creating agents choosing to print it, then that does necessarily make all of the existing money worth less.

'We' will definitely end up paying for this, since the only place that the gov't can recoup the monies that they're spending now will be to tax the populace in the future to pay for those monies. However, what they're trying to accomplish by spending that money now is to time-shift the pain - better to undergo a fair bit of pain over time, in the future, than to undergo so much pain right now that we dislocate large swaths of the populace while the economy restructures.

I'm ok with that trade.

We Need a Placebo -- Just Don't Call It That

[telnar.livejournal.com]

I don't see much in this bill which is likely to help unless it improves confidence. There is about an even mixture of short term spending (some of it through the tax code) and long term spending. The historical evidence that Keynesian stimulus works well is so weak that it's not rediculous to argue that it doesn't exist at all (as long as you have a way to say that World War II doesn't count as stimulus spending in the US).

The reason that I was only as negative as "more harm than good" is that a lot of the reason we got here in the first place is because of 2nd and 3rd order effects of the original problems (in subprime and elsewhere). Those indirect effects can be very sensitive to consumer and investor confidence, so I'll imagine the scene where Tinkerbell was injured in "Peter Pan" and encourage everyone to say "I believe in wasteful government stimulus." :)

Re: We Need a Placebo -- Just Don't Call It That

[xthread.livejournal.com]

I disagree. Right now confidence is shot, but confidence is shot because the actual economic fundamentals suck. The US consumer and US businesses are both massively overleveraged. The US government is, somewhat ironically, much less leveraged than the average consumer. (That's good - if that were not the case, our gov't would be folding, and that would suck a lot more). The only way to reduce the amount of leverage is for the US consumer (and US businesses) to consume a lot less for a while, and pay down a bunch of that debt. However, we're so far out on a limb that if we try to do that all at once, the entire economy will go into a tailspin, which will both draw out the amount of time that it takes to pay down our (collective) debt, and make everyone's standard of living plummet. We'd like to avoid that, if we can.

Separately, the Bush administration and the Greenspan Federal Reserve tried to minimize the depth of the 2001 recession by creating an artificially low cost of borrowing. That caused a massive expansion in housing and construction over the period from 2001 - 2007. Unfortunately, that also means that an awful lot of people who needed to find either different jobs or different places to live or both in 2001 are needing to do that all at once now, instead. Worse yet, because of the artificially low cost of borrowing, more people kept moving in to those careers and locales that they needed to be moving out of in 2001 - so now the number of people who need to be relocated (within the economy and the country) is that much higher than it was in 2001, which means it's going to suck harder for them to shift, and that more people will be affected.

The point of the stimulus is to cushion a bunch of that blow, so that instead of having 15 million people all trying to find new jobs at the same time, we have a few million people all trying to find a job at the same time continually over the next few years. If anything, by slowing the process down, it will increase both the cost, and the number of people affected.

But it won't hurt nearly so much for the individuals affected along the way.
Given how much it would hurt to try and deal with 15 million people all being out of work at the same time, I'm ok with that trade, too.