Matthew Yglesias » Time is Not on Our Side

Feb 7th, 2009 at 2:04 pm

Time is Not on Our Side

When you see conservative complaining that the stimulus bill is too expensive and won’t be fast-acting enough, keep in mind that had they not blocked stimulus last year on the grounds that it was too slow and expensive, we probably wouldn’t be in a position today where we need such a large fiscal expansion. The further down the spiral you go, the more aggressive you need to get to reverse the vicious cycle and the bigger the threat that eventual recovery will be accompanied by inflation.

Comments
48

Filed under: Economy, Stimulus,

48 Responses to “Time is Not on Our Side”

dantonj Says:
February 7th, 2009 at 2:30 pm
I call republicans the “Hate America First!” crowd, because everything they do seems designed to either harm the country, its citizens or both.
right Says:
February 7th, 2009 at 2:32 pm
keep in mind that had they not blocked stimulus last year on the grounds that it was too slow and expensive, we probably wouldn’t be in a position today where we need such a large fiscal expansion.

Which is why the 2008 Stimulus avoided the entire problem, right! Stimulus = magical recession cure!
Thomas Says:
February 7th, 2009 at 2:37 pm
There was a stimulus last year. There was a second proposal for stimulus in the fall, but Democrats never passed anything. In any case, there’s no evidence that the current proposal will work, so Matt’s suggestion that a smaller and earlier package would have worked–and not just worked, but worked so well and so quickly its effects would have been clear by now–is just the worst sort of base-stealing. Matt, you don’t know what the fuck you’re talking about, and if you’re just cribbing Brad, well, now he’s passing crap off to you that he’d never publish under his own name.
24AheadDotCom Says:
February 7th, 2009 at 2:44 pm
Here’s an assignment for MattY: contact someone in L.A. city govmt and ask them for the five most worthy projects on this list. Then, get the details and analyze the impacts.

I don’t have the details on any of those, but they all seem pretty worthless to me for the reasons listed.

And, some of those projects would have foreign citizens as the main beneficiaries and would probably employ foreign citizens as well.

If anyone wants to see their city’s wishlist, go here. If you discuss another city’s list, leave a comment at the first link.
Dave L Says:
February 7th, 2009 at 2:52 pm
I see the powerful Know-Nothing brigade has arrived in force.

Thomas – do you air-brush RNC group photos in your day job? Last year’s ’stimulus’ was a $100 bn tax rebate, which was all that the White House and filibustering Republicans would accept. Subsequent studies estimate that 80% of this was saved.

Democratic proposals for a second stimulus went nowhere because the White House and filibustering Republicans made it clear they would kill it. I wish the Dems had tried anyway, and called their bluff, but I doubt that’s your point.

Matt’s main point is that the further down you let the economy spiral the harder it will be to start the engine back up. You, presumably, are from the “purge the whole rotten mess” school, but even you must acknowledge the possibility of a highly-indebted private sector falling into a debt-deflation death spiral. But I suppose that blocking the re-sodding of the Capitol Mall is a greater public policy priority.

If you critics really want to take whacks at Obama, try focusing on something more serious, like protectionism.
JT Says:
February 7th, 2009 at 2:53 pm
Please tell us by which metrics you will judge the success or failure of the “stimulus” bill being shat by the Democrats.
Do you not think it incumbent upon the supporters of the stimulus bill to provide such metrics and to justify billing our children for your pet social engineering?
Or is it going to be “oh but it would have been so much worse” no matter how FUBAR it becomes 12 months from now?
In other words will you provide more accountability than say the Bushit regime?
I do note that Obama has taken up another of W’s ego maniacal deceits, that his election somehow validates whatever his bitty brain conceives.
Do you find this as repulsive as you found W’s?
pseudonymous in nc Says:
February 7th, 2009 at 3:02 pm
When Wacko Kelly hears the phrase ‘brownfield projects’, he assumes that TehMescanMenace is gathering for battle.

and to justify billing our children for your pet social engineering?

You already billed them in triplicate for your McMansion, buster.
Condor Says:
February 7th, 2009 at 3:24 pm
and to justify billing our children for your pet social engineering?

You already billed them in triplicate for your McMansion, buster.

A-f*&cking-men!
Thomas Says:
February 7th, 2009 at 3:25 pm
Dave, last year’s stimulus was 70% larger than you say. Some estimates suggest that much of the money saved, but other estimates, relying on past tax rebates and on new Fed Survey data, suggest that most of it was spent, and rather quickly.

The Pelosi proposal in October was for a $150 billion second round stimulus. The money was meant primarily for aid to states, extension of unemployment, and infrastructure. Unemployment benefits were separately extended, so apparently the argument is that if we’d shoveled more money to states and started the infrastructure process 3 months ago, everything would be fine. You’d have to be a moron to believe that.
JT Says:
February 7th, 2009 at 3:31 pm
You already billed them in triplicate for your McMansion, buster.

Well, no. I live in 900 square feet of prewar industrial space and I don’t own an automobile.
Not that it is relevant to the discussion.

But thanks for affirming my point.
Matt Weiner Says:
February 7th, 2009 at 3:34 pm
apparently the argument is that if we’d shoveled more money to states and started the infrastructure process 3 months ago, everything would be fine.

“we probably wouldn’t be in a position today where we need such a large fiscal expansion” ≠ “we probably wouldn’t be in a position today where we need any fiscal expansion at all”

This has been your remedial English lesson for the day.
kafka Says:
February 7th, 2009 at 3:38 pm
This from Eric Jantzen, the itulip guy, whose predictions have been spot on for the last 10 years:

FROM: http://www.itulip.com/forums/showthread.php?p=62889#post62889

“Next year the fiction will be dispelled that governments can stop debt deflation by means that do not either produce mass unemployment or horrific inflation. As they try and repeatedly fail to meet expectations the Period of False Hope and Uncertainty will give way to the Era of Total Despair, and then we will see a bottom. Lost and wandering the ideological landscape with all of the old beliefs washed out, men go mad and grasp for any explanation but the truth — that the debt must be deflated before recovery can begin ….
Thomas Says:
February 7th, 2009 at 3:42 pm
Clever as always Weiner. Now, would you clarify how identifying infrastructure projects 3 months ago would have meant that it would be clear to us today that there’s no need for a stimulus package that’s 4x the one that Matt suggests would have worked 3 months ago? Really, address the merits. Tell me what the mechanism is. Describe what the process looks like. And tell us what size fiscal stimulus we’d need in those circumstances. Would it only be 3x the one proposed 3 months ago? If that’s the case, there’s no argument for it. What’s the number? And how did you reach it?
no comment Says:
February 7th, 2009 at 4:09 pm
I’m still waiting for an explanation of how exactly passing the bill in December would have made such an enormous difference.
Rich in PA Says:
February 7th, 2009 at 4:09 pm
Billing my children? I’m sure they would rather be prosperous and have to pay a bill, than destitute with no bill.
Sonic Charmer Says:
February 7th, 2009 at 4:39 pm
“The further down the spiral you go, the more aggressive you need to get to reverse the vicious cycle and the bigger the threat that eventual recovery will be accompanied by inflation.”

This is like saying that the longer you avoid going to the witch-doctor, the more drastic the quackery he’s going to have to use on you when you do.

It’s like saying that unless, of course, you have an actual argument for why going to the witch-doctor (”stimulus”) will achieve the end supposedly sought.

Which, of course, Matthew Yglesias does not. For him and most “stimulus” supporters, it’s not even clear that they themselves understand why they’re so much in favor of this mammoth spending bill they (like the rest of us) know very little about.
right Says:
February 7th, 2009 at 4:53 pm
Billing my children? I’m sure they would rather be prosperous and have to pay a bill, than destitute with no bill.

I would think it worth evaluating (a) the dollar difference to your children between “prosperous” and “destitute”, (b) the likelihood of the stimulus package of making a difference between your children being prosperous and destitute, and (c) the size of the bill.

But no one wants to talk about this. Instead it’s “we have to do something.”
right Says:
February 7th, 2009 at 4:54 pm
You already billed them in triplicate for your McMansion, buster.

This has to be the most peculiar rebuttal I’ve ever read on this blog.
Brain-dead facist Says:
February 7th, 2009 at 4:58 pm
Bush deficit spent about a trillion dollars last year. How was that different from the stimulus package (since, as you keep reminding us, it doesn’t matter what it gets spent on, so long as it gets spent)?
Matt Weiner Says:
February 7th, 2009 at 5:50 pm
Thomas, the usual process: If they had financed infrastructure projects, it would’ve employed people, who would’ve been able to spend more money, which would’ve helped businesses, which would’ve been able to employ more people, etc. etc. Not being an economist (any more than you are), I don’t have a way of coming up with an exact number; all I have to say is that $n billion spent last fall would probably have been as effective than some multiple of that right now. See the quotes from economists in this article, particularly McCain advisor Zandi, who advocated for infrastructure spending and state aid, and said that “The economy could spiral even further down if you don’t try to stem that.” Since Zandi said that infrastructure and state aid were approximately four times more effective than corporate tax cuts, so it’s not surprising that the February 2008 tax cuts were ineffective.
Matt Weiner Says:
February 7th, 2009 at 5:57 pm
For those wondering why acting earlier would have made a difference, look at this chart. Recession is a feedback loop; the more people who have lost their jobs, the less they spend, and the more people lose their jobs because they’re losing their customers, and so on and on. If you look at that graph, you can see that that job loss is happening really fast right now. The sooner we spend money in order to put people back to work, the more we can weaken the feedback effect.
MattYoung Says:
February 7th, 2009 at 6:22 pm
“..where we need such a large fiscal expansion. ..”

Fewer and fewer economists believe this as time goes by and 20 year treasury debt has higher interest rates. So, just dilly dally a week or so and 20 year treasuries will have the entire package priced in, and it will not longer be stimulus.
JonF Says:
February 7th, 2009 at 6:23 pm
Re: the more people who have lost their jobs, the less they spend, and the more people lose their jobs because they’re losing their customers, and so on and on

Why doesn’t every recession drag the economy right off a cliff then? At some point some other mechanism must stop the cycle: businesses reach the end of the people they can let go without closing the doors entirely; people still have to spend money on necessities, etc.
Thomas Says:
February 7th, 2009 at 7:30 pm
Matt, the key problem with infrastructure spending is that it can’t happen fast enough to make a difference. Are you saying that if we’d identified the projects 3 months ago, we could spend more on infrastructure? If that’s the case, why didn’t the Obama team identify them in the transition and then fund them now? Or are you instead saying that if we’d passed the bill to fund them 3 months ago, there’d be people at working building, digging, constructing, etc.? Because if that’s your claim, well, it’s not only entirely unsupported by any evidence, it’s moronic. Have you simply not followed the public conversation on this topic over the last few weeks?

Yes, in Zandi’s model tax cuts aren’t as efficient as spending. That’s not evidence that the tax cuts in 2008 were ineffective, nor is it evidence that they’d be ineffective now. It’s evidence that Zandi believes they would be.
Matt Weiner Says:
February 7th, 2009 at 7:53 pm
At some point some other mechanism must stop the cycle: businesses reach the end of the people they can let go without closing the doors entirely; people still have to spend money on necessities, etc.

If I read Brad deLong right, the usual method is: The Fed cuts the rates, or the Fed’s rate cuts take effect. That’s not going to happen this time, because we’re in Ye Olde Liquidity Trap. Which would seem to make it a good idea to come up with some other way of halting the slide.

There may well be some mechanism that might take effect even if the Fed doesn’t act — like, the people who do have money notice that there’s a lot of stuff out there to be cheaply had (at a corporate level, if everyone’s unemployed it’s possible to get good labor cheap), but:
1) that’s deflation, and deflation is a bad scene (see: Japan’s lost decade, Ye Olde Liquidity Trap above)
2) I’m really making this one up, but it’s also possible that these mechanisms might be effective enough to counteract a really bad negative feedback.
3) in 1929 the Fed did nothing and the economy did fall off a cliff
4) that job loss chart sure looks like we’re going off a cliff to me.

(I realize that #3 was a link to World Net Daily, but it’s mostly a speech by Ben Bernanke.)

Again, I’m not an economist, but that’s how I understand it.
Matt Weiner Says:
February 7th, 2009 at 8:03 pm
Whoops, #3 should’ve been “might not be effective enough”

Thomas, aid to states (which was part of the proposed stimulus) would actually have prevented cutbacks and job losses more or less immediately. As for infrastructure, if the stimulus had been passed three months before it would’ve taken effect three months sooner, you may have noticed that Obama can’t “fund these projects now” because obstructionist Republicans are trying to prevent him from engaging in any stimulus spending at all, and your last paragraph seems to express some contempt for Zandi’s model, but I’m not sure why I should disdain the word of a well-respected economist, whose conclusions lie in line with those drawn by other well-respected economists who don’t make elementary errors obvious to intersted laypeople, in favor of the unsupported assertions of an intellectually dishonest, morally depraved, utterly hackish attorney. (That’s you.)
Thomas Says:
February 8th, 2009 at 12:25 am
Matt, how many states have cut back, and how many state employees have lost their jobs? If it were even 10,000 I’d be shocked. Public sector employment has grown over the last few months, as the private sector sheds jobs.

Yes, if the bill had passed three months ago we’d be three months closer to whatever infrastructure spending there would be. But that amount is fixed for the near term, which you would know if you’d been paying attention. And because it is a fixed and small amount for the near term it wouldn’t have the impact that Matt suggests it would.

I didn’t (and don’t) express any contempt for Zandi’s model. But I do have contempt for people who think the model is evidence, rather than–optimistically–the result of evidence. And I find it amusing that you think that Zandi is well-respected but someone like Barro is just making elementary errors that are obvious to interested laypeople. Do you even qualify as an interested layperson? Or are you referring to me there as well?
S.P. Gass Says:
February 8th, 2009 at 8:12 am
President Obama says the stimulus will save or create 3 to 4 million jobs. How will they measure jobs saved?
Matt Weiner Says:
February 8th, 2009 at 10:34 am
Matt, how many states have cut back, and how many state employees have lost their jobs? If it were even 10,000 I’d be shocked.

Pennsylvania has announced a cut of 2600 jobs. That’s one state. It’s also not counting jobs that get eliminated in, say, state university systems due to cutbacks in state aid. And, since I suspect you’re puerile enough to say that those jobs haven’t been lost yet, people who know or suspect that their jobs will be lost cut back consumption too, and that contributes to the downward spiral.

As for Barro, yes, he makes errors that are obvious to interested laypersons.
Matt Weiner Says:
February 8th, 2009 at 10:35 am
Other Nobel economists also can detect Barro’s errors.
Thomas Says:
February 8th, 2009 at 10:44 am
Matt, PA has announced job cuts, but has anyone lost their job? If you did an actual count of PA employees, would the number be lower or higher over the last 3 months? Again, public sector employment has grown over the last 3 months. As for your suggestion that people are forward-looking: how much consumption can we get from a one-time stimulus? If I know that my new construction-of-infrastructure job is a one time appropriation, how much will I spend? Surely not much, and so the stimulus must fail, right?

As for your treatment of Barro: this is how real expertise is treated by the “reality based” community. Krugman, as Barro notes, is not an expert in the subject.
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Time is Not on Our Side

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