#PANIC RT @fivethirtyeight: Sobering commentary on possibility of double-dip recession by the must-read John Hussman. http://bit.ly/d011ZF
#PANIC RT @fivethirtyeight: Sobering commentary on possibility of double-dip recession by the must-read John Hussman. http://bit.ly/d011ZF
Great, great article. I’d highlight some key quotes, but what’s the point? Those of us who opposed the stimulus and the bailouts are being proven right, and now we’re going to have to enter a period of even more painful austerity than we would have if we had slashed government spending, let Wall Street fix itself, let Fannie and Freddie fail, and cut taxes two years ago.
Let me first say, I was and am against the bail outs and stimulus, but I’m admittedly more of an anarchist than a member of a mainstream political movement (although I don’t believe that’s a bad thing). However, there’s no way to know that the bailouts were a better or worse idea than doing nothing because there’s no way to go back in time and do nothing (or do what AML wanted to do). If we did nothing there would no longer be a General Motors or American auto industry, it would all be foreign owned. I’m in favor of letting bankrupt companies fail and allowing new people and enterpeneurs to fill the void with their new ideas and enterprises, however that may have never happened, it may have happened 20 years from 2008, it may have happened right away (but that is doubtful).
I was and am in favor of allowing AIG and failing banks to go out of business. The entire country would have been in chaos and probably would be in much worse shape today than it is right now. Unemployment would probably be 50%, the scarce credit available today would be totally absent, and what would be worse is that there would be no hope in the short run to restore credit to anyone because every bank would be gone (this would devestate the housing market beyond anything comparable to what it is today). No insurance settlements would be paid. Since everyone else uses the American soldiers as props I will too, none of the injured or KIA would ever receive a dime because AIG has all the military policies, amongst about a billion other policies that would cease to exist or be paid.
I believed that the US economy would collapse again in the short-run after the bailouts, however I’m not so sure now as I watch the Euro overseas. I hadn’t taken into consideration how much chaos there is in that currency because multiple financially unstable countries are reliant on just a couple of legit countries to keep that currency’s value, and if those 2 countries slip in some or any way, the whole currency could be doomed, this instability will now help the dollar. But that’s just one, albeit important, aspect of a much deeper problem.
Failure is good. Failure is right.
AMLTrojan – sadly, too many in the US beleive as does Sandy U that the US auto industry would be no more (apparently not realising that Ford didn’t get any help and is surviving) …
What I see is that our current President and his administration is a mix of the worse parts of Hoover and Carter …
{sigh}
AML Trojan– sadly, too many in the US believe as Alisdair does that “the bailout” was Obama’s idea. They forget that Bush bailed out the banks with a no strings attached $700 Billion gift in November of 2008 and bailed out the Auto Industry with $17.9 Billion, after Congress denied the request, with the option for a government take-over of the companies if they default on paying the money back by March 2009 (after Obama becomes president). Sets up pretty nicely for brain-dead sycophants to label Obama a socialist.
http://www.politico.com/news/stories/1208/16740.html
There’s a narrative and then there’s the truth. Alisdair falls victim to the narrative by forgetting the past. Which is amazing because what we’re dealing with today is the result of just a few years ago.
SU hits on the key point here, to assume that there’s any evidence that stimulus was a bad idea misunderstands things. It could just as much be a validation that there wasn’t enough of a stimulus, something most economists were saying at the time.
Assuming the non-falsifiability of the efficacy of the stimulus is not a tenable position.
Yeah! What he said……….
So Jim, what you’re saying is that Keynesian stimulus only works if you bet the whole house? What a fantastic concept! I’ll try that theory next time I’m playing Texas Hold ‘Em….
SU, I am loathe to absolve Dubya for his part in the bailout fiasco, but concerning the auto industry portion of the bailout, it was clear at the time he was lending just enough money to kick the can down the road so Obama could make the final call on how to proceed with the bankrupty / liquidation of GM and Chrysler. Thus, to lay any of the blame at Dubya’s feet on that one is simply laughable — he was simply avoiding making a decision as a lame duck that would bind his successor one way or the other.
@Joe Mama: I didn’t say it was impossible to create an argument that the stimulus didn’t work, but the argument cannot simply be that things aren’t going well now. That’s ridiculous.
@AMLTrojan: Sorry, I didn’t argue that you need to “bet the whole house.” In fact, that statement makes no sense. What would that entail? There is no house.
Actually, to what Joe Mama said, I can see how what I said could be read the way you interpreted it. I meant to say that generally poor economic news isn’t evidence that it doesn’t work.
Sindy U – actually, I happen to believe that the US Auto market should have been left alone to find its own salvaion (or not) … I happen to believe that the Auto Unions should take all their pension funds and buy whichever of the big three was forced to be sold, and then the Auto Unions shoudl run their newly-bought company the way they keep trying to insist that the company’s real owners should do … if the Auto Unions are so right, they’ll make money hand over fist (and the nasty Capitalists beating down the Workers won’t) – and if they are not right, at least they won’t have been wasting anyone else’s money …
I don’t actually care whose idea the Auto Bailout was … I don’t believe it should have been done …
Now, if Sandy U can actually pay enough attention to what I write, and not to what he projects upon this mythical “Alisdair”, he might have an interesting, even perhaps relevant response …
So one can argue that the stimulus didn’t work, but just not by looking to economic indicators after it was passed (which is precisely what the poor economic news is about) as evidence? Seriously?
Joe Mama, because you’re not an idiot, you surely know that when comparing a factual scenario (the stimulus passed) to a counterfactual scenario (the stimulus did not pass), it isn’t enough to note that the factual scenario is BAD. The question is whether the counterfactual scenario would have been WORSE.
Because I’m not an idiot, I acknowledge the legitimacy of your concern about this thought process: the notion that it makes the stimulus incapable of criticism, since counterfactual scenarios are always somewhat amorphous and hypothetical. However, I suspect that it is possible, with detailed, nuanced, data-rich economic analysis, to arrive at a reasonable hypothesis about what the stimulus has or has not done. In other words, the fact that it isn’t possible to evaluate the stimulus based on absurdly simplistic criteria does NOT mean it’s impossible to evaluate the stimulus, period. It just requires some effort, and expertise. It’s complicated.
What I know for certain — and so do you, if you’re being honest with yourself and me, because, again, you’re not an idiot — is that it is absolutely insane and ridiculous to evaluate the stimulus simply by asking, “What does the economy look like? Bad? Well then, clearly, the stimulus was a lie, we shouldn’t have passed it at all!!!” The analysis has to be MUCH deeper than that. In fact, that isn’t “analysis” at all. It’s a statement of ideological belief passed off as an analysis of economic data. As a belief statement, it’s debatable. As economic analysis, it’s rank bullshit, and you know it.
Brendan, “it’s complicated” is a pretty weak cop-out. None of us here are economists-by-trade who have loads of data at our fingertips, and presumably all of us have day jobs. Thus, from a blog flame perspective, it is sufficient to point to others who have proffered theories and analyses, and make reasonable judgments about who has the better case.
In that regard, there was a distinct, loud minority of economists (mostly of the Hayek-Laffer ilk) who said the Obama stimulus was insane (the bailouts being a subject on which even non-Keynesian economists were greatly divided). They showed — with data — why the so-called multipliers were all wet and based on weak circular logic of congressional researchers. They made the point that government spending might inject a weak, temporary boost, but that it was essentially depressing the long-term health of the economy by artificially pulling demand forward (witness the car and homebuyer credits, and the extreme dropoff in sales after they expired) and shifting capital allocation decisions from the efficiencies of the markets to the dysfunctions of government decision-making — racking up huge government debts in the process that would drive up projections of long-term tax, interest, and inflation rates, and slow the willingness of businesses to invest in the economy.
Clearly, with the benefit of just one year of hindsight, the facts and data being released on an almost daily basis support this viewpoint, and they make the Krugmans of the world (i.e. the ones arguing the problem is the government didn’t spend enough on stimulus) look completely asinine (as if the question of Krugman’s political wisdom — or lack thereof — was still open). You can continue railing against Joe Mama for not providing “detailed, nuanced, data-rich economic analysis, to arrive at a reasonable hypothesis about what the stimulus has or has not done”, but your demand is unreasonable, and “it’s complicated” has nothing to do with it. The facts and data are rolling in, the evidence is mounting, and “it’s complicated” isn’t going to save Obama’s bailout from the ash-heap of history. It has been an abject failure by any measurement.
**Second to last sentence should have read “Obama’s stimulus“, not “Obama’s bailout” — though I believe the sentence to hold true in either case.
I’m not demanding that Joe Mama provide “detailed, nuanced, data-rich economic analysis, to arrive at a reasonable hypothesis about what the stimulus has or has not done.” I’m suggesting that someone with the proper “expertise” could surely do so, and probably already has — and that if Joe Mama wants to make the case against the stimulus, he needs to cite to such an analysis, not merely argue that the stimulus has obviously failed (and not in the Krugman direction of “failed because it was too small,” but rather failed because it was a bad idea from the start) because the economy continues to be weak.
In discussing the fact that “it’s complicated,” I was simply rebutting Joe Mama’s asinine belief that the economic indicators speak for themselves without any further analysis (quite obviously, they don’t). And in referencing the possibility of nuanced, data-rich analysis, I was simply responding pre-emptively to the expected reply from Joe Mama that my insistence on considering counterfactuals creates an impossible standard by which the stimulus can never be deemed a failure. That isn’t true — but any pertinent analysis must at least attempt to compare the real-world situation to the expected situation in a stimulus-free world. In fact, come to think of it, such an analysis really needs to consider at least two counterfactuals, in addition to the actual fact of what occurred:
1) No stimulus (the Joe Mama counterfactual)
2) Stimulus as implemented
3) Larger stimulus (the Krugman counterfactual)
Any “analysis” that doesn’t make any effort to compare and contrast those three scenarios — but instead simply compares #2 to some unstated standard of success, or takes the weakness of the economy as inherent proof positive of the superiority of scenario #1, without further discussion or comparison or analysis — is completely worthless. Period.
Now, you say “there was a distinct, loud minority of economists (mostly of the Hayek-Laffer ilk) who said the Obama stimulus was insane” and predicted all along that “government spending might inject a weak, temporary boost, but that it was essentially depressing the long-term health of the economy by artificially pulling demand forward.” You argue that, because their predictions appear to be coming true, their underlying hypothesis was obviously correct. The problem is, there was also a distinct, loud minority of economists (mostly of the Keynes-Krugman ilk) who said all along that the Obama stimulus was way too small, and, just like the Hayek-Laffer minority, predicted that it would most likely fail, and lead to a double-dip recession. THEIR predictions also appear to be coming true. So whose underlying hypothesis was correct? The Hayekians or the Keynesians? Absent a more detailed analysis of the data, the answer is not self-evident, unless you come into the question with preconceived ideological beliefs that shade your analysis. (Which is precisely why economics drives me crazy — nobody is ever proven right or wrong, seemingly.)
I am very open to the hypothesis you’re advancing, but I’m also very open to the Krugman hypothesis (and ad hominem attacks on Krugman don’t advance the ball at all). I actually probably lean slightly toward your hypothesis, to be honest… but in the end, I just don’t know what the answer is, and as of yet, nobody’s pointed me to any convincing, “detailed, nuanced, data-rich economic analysis” that provides the answer. Neither Joe Mama nor you are under any obligation to do so, obviously. But, by the same token, I’m not obligated to take seriously arguments that boil down to OMG THE ECONOMY IS STILL WEAK, THEREFORE OBAMA SUX, WE NEVER SHOULD HAVE PASSED A STIMULUS, HERBERT HOOVER 4 EVER. Which is basically what passes for “analysis” in some quarters at the moment.
The answer is more cowbell.
P.S. Another way of looking at it: the first rule of making an effective argument is to address the obvious counterarguments, right? Well, the obvious counterarguments to “the economy still sucks, in fact it seems to be double-dipping, that means the stimulus was a bad idea” are:
1) The stimulus was never going to be a quick fix, and we always knew further stimulus might be needed down the line, but the stimulus prevented us from falling into an economic black hole; the alternative would have been far worse. The current economic suckitude is proof that we need more aggressive policymaking NOW to keep the economy afloat — not proof that we were wrong to try and save it in the first place!
…and…
2) The stimulus has failed not because it was too big, but because it was too small. That was clear as soon as it was proposed — the data supported something like a $1.5 trillion stimulus — and, in the months afterward, it became clear that the economy is 4Q 2008 and 1Q 2009 was even WORSE than we’d thought in January & February, so we actually needed something even BIGGER. What was passed was manifestly too small, and as a result, its impact was unsurprisingly temporary and ultimately ineffective.
It seems to me that lefty economists (who believe the stimulus was too small) and righty economists (who believe it was too big / never should’ve passed) are mostly talking past each other, instead of to each other. As such, both are failing this basic test of making a good argument. They aren’t addressing the counterarguments. Instead they’re basically assuming that their audience recognizes the obvious absurdity of the counterarguments, which only a Crazy Krugmanite Keynesian / Hoover-Loving Reaganomics-Addled Moron would ever make.
This is no way to determine the fate of an economy, and perhaps a country.
You’re right AML, my day job mostly precludes me from engaging in Brendan’s flame war (and my computer catches some “trojan-clicker” virus when I navigate to this blog sometimes, so responses from my iPhone are brief).
That said, Brendan’s characterization of my “asinine belief” cannot go unchallenged. Because Brendan is not an idiot, he knows that I really haven’t argued that the economic indicators speak for themselves without any further analysis. Rather, I simply took issue with the claim that economic indicators are not evidence of the stimulus bill’s effects. The hell they aren’t! Not conclusive proof perhaps, for the reasons Brendan points out* … so the data should be properly analyzed, compared, etc. to make an argument about whether the stimulus bill “worked” or not. Fine. But the data is certainly evidence and it’s far from worthless.
* Such complaints about pertinent analyses of counterfactuals also applied to 99.99% of the criticism of the Iraq War, which the Left evaluated simply by asking, “What does Iraq look like? Bad? Well then, clearly, it was a bad idea and we should have left Saddam alone!!!” Brendan is in good company, and may want to rethink his expectations.
P.S. Economic indicators are particularly helpful in evaluating what the WH said the stimulus would do, which doesn’t require an advanced degree.
However, I suspect that it is possible, with detailed, nuanced, data-rich economic analysis,
The same “economic analysis” that is producing “unexpectedly bad” or “worse than expected” economic news every other week?
Not quite, gahrie. Brendan was undoubtedly referring to the economic analysis that the WH relied on for its detailed and nuanced claim that passing the stimulus would help keep the unemployment rate from exceeding at 8%. Of course, when that didn’t pan out it was obviously because OMG!!! CHIMPYMCBUSHITLERHALLIBURTON AND HIS OIL BUDDIES took a bigger dump on the economy than originally thought. I suspect that more than a few of the analyses Brendan dismisses with scare quotes are aimed at the single metric that Obama himself set for the success of the stimulus, which is jobs. Whether the stimulus bill’s failure with respect to the unemployment rate is because it was too small, bound to fail regardless of size, or developed by an incompetent economic team is an open question. What is not in question, however, is that the stimulus failed in this stated goal.
Because I’m not an idiot, I’m sensitive to Brendan’s concern that this is a complicated issue. Here again, there are strong parallels to Iraq. Bush relied on intelligence saying there were WMDs. When none were found, the invasion was called a waste and a failure. It didn’t matter that the issue was really more complicated than that because there were umpteen legal, moral and humanitarian grounds for invading Iraq, or that the resolution passed by Congress authorizing the war had 20+ other stated reasons for ousting Saddam. Bush had made his case to the American people based on one simple rationale: WMDs. He rightly took it on the chin when none were discovered.
That’s the danger of distilling complex issues down to simple soundbites for public consumption — it makes it easy for the public to see when you’re wrong. All the more so when you’re making bold assertions involving professions like intelligence or economics that have so many inherent limitations. Maybe the public isn’t capable of digesting the complexities of such important issues and needs to be sold on policy through dumbed-down talking points, but I’d prefer to see politicians publicly acknowledge these limitations.
Joe Mama, now that you’ve clarified (in comment #19) your stance — which I may well have misunderstood due to my own cursory reading rather than any fault of yours — I have no problem with what you’re saying. Certainly economic indicators, while not the be-all-end-all in the absence of proper context, are by no means irrelevant. And I agree that it’s fair to point out the stimulus failed in its stated goal re: the unemployment rate. I only take issue with “analyses” that go further in such a way as to ignore cogent realities underlying that failure. Simply noting the failure is not itself objectionable.
I happen to believe that the administration’s stated unemployment goal was always a foolishly optimistic one, both politically and substantively — and certainly, beyond any doubt, it was rendered impossible to fulfill