Mish catalogs the stimulus measures that have been tried over the last couple of years by the Bush and Obama Administrations:
Is there any kind of stimulus the US did not try in the last 10 years?
- We had 1% interest rates from Greenspan fueling housing.
- We had wars from Bush and Obama fueling defense industry employment.
- We had two rounds of Quantitative easing from the Fed.
- We had cash-for-clunkers.
- We had two housing tax credit packages.
- We had an $800 billion stimulus package from Congress for “shovel-ready” projects.
- We had stimulus kickbacks to states.
- We had HAMP (Home Affordable Mortgage Program).
- We had bank bailouts out the wazoo to stimulate lending.
- We had Small Business lending programs.
- We had central bank liquidity swaps.
- We had Maiden Lane, Maiden Lane II, and Maiden Lane III
- We had Single Tranche Repurchase agreements
- We had the Citi Asset Guarantee
- We had TALF, TARP, TAF, CPFF, TSLF, MMIFF, TLGP, AMLF, PPIP, and PDCF
- We had so many programs the Fed must have run out of letters because they were not given an acronym.
I’ll answer Mish’s question. The only form of stimulus we haven’t tried over the last four years is, ironically, the form explicitly endorsed by Keynes—direct government employment.
What should be counted as stimulus when reckoning the effects of fiscal and monetary stimulus? Right now the federal government is borrowing and spending well over a trillion dollars more annually than it’s taken in, roughly 10% of GDP.
Well, it looks like I will have a full-time government job soon, so count me as an orthodox Keynsian I guess.
Congratulations, Andy. Full-time is good.
“We had an $800 billion stimulus package from Congress for “shovel-ready†projects.”
More accurate to say we had $600 billion stimulus package, etc, and $200 billion in tax cuts. Right?
Dave,
Thanks!
Sam,
Now that you mention it, I recall that aid to the states was a big part of the stimulus package as well. However, even if money for “shovel-ready” projects was much less than $800 billion, it’s pretty apparent that very few of the projects were actually “shovel ready” and, in many cases, the money sat around unused for a long time. It’s not clear at all that $800 billion truly spent on infrastructure could have been spent in a timely manner without a lot of waste and graft and corruption.
Throwing money at a problem usually isn’t a good solution and it seems that’s been the basis of policy – throw money at various half-measures and assume they will “stimulate” the economy. “Aggregate demand” seems to be the liberal version of “trickle down” economics in that regard.
We also have not tries reducing dead weight loss through dramatic reductions in regulation and non-defense discretionary spending.
Gah! “Tried.” Proofreading is my friend.
I have never thought that the stimulus would put this economy back on track. Its purpose as far as I was concerned was to stop the free fall we were in. The revisions have shown that the early recession was very bad, so I think it was the right thing to do. However, I don’t think part time Keynesianism works very well. We should have been working down our debt when the economy was going well, but the supply siders took over and ran up debt instead.
Steve
“I have never thought that the stimulus would put this economy back on track. Its purpose as far as I was concerned was to stop the free fall we were in”
That’s what I suggested the other day at OTB. A stimulus’s primary function is to keep the ship from sinking, not to reestablish the status quo ante — no matter what its supporters and detractors say about it.
steve and sam, I believe the purpose of the stimulus is to reduce unemployment. The economy goes into a recession first, and unemployment trails. The government’s ability to engage in deficit spending (at near zero percent interest) moderates the harm of unemployment and thus hopefully will indirectly improve the recovery, but I think unemployment is the central focus of a stimulus (which I think is Dave’s point).
Sam: “not to reestablish the status quo ante” I think the problem is with the size of the national economy the federal government has limited capabilities to spend without essentially pushing into areas which have had their bubble burst. I don’t think the purpose is to reestablish the status quo ante, the opportunities create that effect.
Is it too late to say Sofia Vergara?
http://www.sofiavergara.com/ For those who don’t watch Modern Family.
“Is it too late to say Sofia Vergara?”
You bastard. You beat me to it.
Maybe, the rhetoric certainly never matched this. I would argue that one of the reasons we are in the anemic recovery is precisely because of the stimulus that was enacted. It has left much of what brought about the recession in the first place still in the economy. Yeah, maybe no stimulus would have been worse, even far worse. But leaving zombie banks in place, bailing out industries that were dying out anyways, and trying to prop up markets that needed a correction may very well prolong the pain.
Basically we’ve left intact all the things that lead us into this mess, and now we are looking at economic growth that is about to take us into another recession…with unemployment already at 9.2%.
Steve V –
“I have never thought that the stimulus would put this economy back on track. Its purpose as far as I was concerned was to stop the free fall we were in.”
This is the so called “fall back position.” Similar to “I didn’t say hope and change tomorrow.”
We see this in failed hiring decisions. Yes, we make mistakes. “I didn’t know how bad.” “Its tougher than I thought.” “Nothing can be done.” “The weather was bad.” Reynolds hates the business analogies, but this is just organizational stuff – when we get the right guy, things start to happen – quickly. And no excuses are made.
“Basically we’ve left intact all the things that lead us into this mess, and now we are looking at economic growth that is about to take us into another recession…with unemployment already at 9.2%.”
Obama shot his wad on fantasy policy. Now what, hope and……..prayer?
This is the so called “fall back position.†Similar to “I didn’t say hope and change tomorrow.â€
Yep, and he’s had 929 tomorrows since being sworn in, and we’re going backwards again. Hell, I’m pretty sure we’re still negative on jobs just during the recovery.
“This is the so called “fall back position.â€
The true left, like Krugman, Thoma and DeLong still believe that a bigger stimulus would have put us back on track. My position has been that I was willing to support it because I thought it would provide for a softer landing. I think that I have been pretty consistent in claiming that I think it will take a long time to recover. I have citing the debt load of consumers, the government and the real estate inventory as to why this is likely.
What I have supported, where I am sure we disagree, is that it probably did work to accomplish what I though it would. It did increase GDP and kept unemployment from being worse. The recession was much worse than we originally thought.
Steve