Will is a very handsome guy and, as you can see, very patient as well. In this picture he’s in costume for a project my wife was doing.

His head is cut off a bit but I liked his expression in this picture.

Will is my personal therapy dog (at least that’s the way he sees it) and takes very good care of me. Every night at bed time he refuses to go upstairs until I do and waits stair by stair as a I climb.

Question 1: What was the peak-to-trough decline in real GDP during the Great Depression of the 1930s?

Question 2: What was the peak-to-trough declinein real GDP during the Great Recession 2007-2009?

Question 3: What explains the difference between the two economic downturns?

Question 4: What policy prescription would be most effective in spurring recovery under the present circumstances?

Please related your answer in Question #4 to your other three answers.

Take a close look at Mish Shedlock’s extensive analysis of employment and unemployment from 2008 through the present. The big winners: healthcare, finance and insurance, mining and oil, education, government. The big losers: practically everything else but especially construction, manufacturing, retail and wholesale which account among them for a loss of nearly 7 million jobs.

In my view increases in healthcare, education, and government are a disaster. They are the cars, the rest of the economy is the engine pulling them. We’ve already got far too much load for the towing capacity.

And under the circumstances increased hiring in finance and insurance is a scandal and an outrage.

Or, more accurately, living outside the United States changes Americans’ views of the intelligence of people who speak English with a variety of different accents. Note that Americans who’ve lived outside the country’s perception of those speaking with an English accent is sharply lower while their perception of those speaking with a Middle Eastern accent is sharply higher. Of course, the limitation on this finding is that it tells us nothing about what their perceptions were before they lived abroad. It may merely mean that they had these views or were predisposed to have them before they lived abroad.

From the very interesting blog Separated by a Common Language. Hat tip: Tyler Cowen.

How is it that two, presumably knowledgeable people can read the same article and have such dramatically different reactions? Bryan Kaplan characterizes a post by Ezra Klein as his “best ever”:

Here’s the best Ezra Klein post ever. And here’s the best sentence of the best Ezra Klein post ever…

while Yves Smith moans “Ezra Klein should stick to being wrong about health care”:

A recent post by Ezra Klein, “What ‘Inside Job’ got wrong,” manages the impressive feat of being spectacularly off base, rhetorically dishonest, and embarrassingly revealing of the lack of a moral compass all at once.

Since being off base is a major part of Klein’s brand, I suppose one should not be surprised; those who’ve had the good fortune to have limited contact with his output can read Jon Walker’s “Ezra Klein: Insurance Exchanges Don’t Work and Must be Expanded Dramatically,” or Physicians for a National Health Care Program’s “Does Ezra Klein really think ‘managed care didn’t kill anyone’?” for two of many examples.

I’m going to shred this piece in some detail, first, because it will be entertaining, and second, I hope that it will encourage readers to take a cold, bloodyminded look at the excuses made for malfeasance in our elites.

Now those two takes aren’t necessarily in conflict (depending on what you think of Ezra Klein’s work), rather like the wisecrack about the guy who moved from Missouri to Arkansas and raised the average IQ of both states. Howev er, I think the sense of the two observations is that Bryan thinks the post is good while Yves thinks it’s horrible.

I’m more on Yves’s side on this than Bryan’s both in substance and in my view of Ezra Klein’s work. I this his posts are characteristic of a cadre of young, prominent bloggers (whom journalist/blogger Mickey Kaus mocks as “juiceboxers”) whose every written output looks more than anything else like a writing sample produced for a job interview with the current or a future Democratic administration.

Note, too, that this is a main criticism of the two links cited by Yves: positions taken are more kowtows to prevailing Democratic wisdom or brickbats hurled at Republicans than closely-held beliefs or defensible policy positions.

It certainly seems to be a formula for success, whether in the blogosphere or mainstream journalism.

Barry Ritholtz has a post on some strategies for stimulating the U. S. economy that I think is worthy of your attention. Here are the measures that he proposes:

1. Greencard for Buying a home
2. Corporate Tax-Free Repatriation
3. One Year Payroll Tax Holiday
4. Pure Science R&D Program for Alternative Energy
5. Roads, Bridges, Tunnels
6. Electrical Grid Refurbishment
7. Airports, Ports

Some of these I agree with, some I’m skeptical about. So, for example, I think there are problems with #1 due to how it interacts with other aspects of our immigration law, specifically the emphasis on family reunification. You can buy a home for thousands (not tens of thousands) or even hundreds of dollars. I doubt that cobbling together a small amount of money, buying a teardown, getting your green card, and then using that to bootstrap the green cards of your relatives is what Barry has in mind. I guess the devil of this proposal would be in the details.

I think that #2, #3, and #6 are all worthy ideas. However, while we’re at it why not just abolish FICA and fund Social Security directly from general revenues?

IMO the results of #5 and #7 (at least from an employment standpoint) are likely to be disappointing. Contracts are let to a very small number of approved vendors for whom failure to deliver on time is more damaging than delivering in the shortest amount of time would be. They’re a lot more likely to space projects out so that they can execute them with the personnel they’ve got than they are to hire more people so they can bring them in ahead of schedule.

I think there’s a serious policy issue here, too. Vehicle miles driven have decreased in recent years. There is some evidence that the capacity we’ll need over the productive lives of our roads will actually be significantly smaller than was expected. As a matter of policy should we be encouraging or discouraging increased vehicle miles?

Should we really be paying to refurbish airports from general revenues (and borrowing)? Or does it make better sense to impose higher landing fees and use the proceeds to refurbish airports? I’m not sure this particular form of redistribution really makes sense from a policy standpoint.

As to #4, I think it’s a good idea but it’s one that needs bipartisan support, commitment, phasing in, and careful management if it is to be effective. I’m not sure any of those things is credible right now let alone all of them. And however worthwhile it might be we’re certainly not going to employ 8 million people doing alternative energy research. It’s a long term project not a “jump start”.

But that’s the title of Barry Ritholtz’s post: “Jump Starting the U.S. Economy” and that brings us around to the title of my post. Does the economy really need jump-starting? Or is the battery unable to hold a charge, the alternator broken, and the gas tank nearing empty?

That’s not just a flip response. The solutions that one proposes depends on how one thinks of the problem. I think our problem is more one of the battery being unable to hold a charge rather than needing a jump-start. We can’t just run down to Sears for a new battery for the U. S. economy.

Bill Gross, CEO of bond giant PIMCO, has published a sobering assessment of U. S. economic, educational, and trade policy:

It is becoming obvious that the 2012 election will be fought on a battlefield of job creation. A 9.1% official unemployment rate, and a number nearly double that when discouraged and part-time workers are included in the rolls, portend an angry and disillusioned electorate, which will include millions of jobless college graduates ill-trained to compete in the global marketplace. Over the past 10 years under both Democratic and Republican administrations, only 1.8 million jobs have been created while the available labor force has grown by over 15 million. It is clear, however, that neither party has an awareness of the why or the wherefores of how to put America back to work again. Few economic advisors from either party ever mention structural long-term disconnects in employment – a recognition that cyclical influences will no longer dominate the U.S. labor market. Manufacturing and goods exports have ceded enormous ground to China and other developing labor markets, as America’s reliance on services and high tech innovation has exposed gaping holes in an historically successful model. Almost any industry dominated or significantly connected to finance and financial leverage has hit the canvas and stayed down in the aftermath of Lehman 2008. Housing construction, real estate brokerage, banking and consumer retail employment will likely never come back to levels dominated by our prior decade’s excessive leverage and its abuse leading to overconsumption. Because of that focus, a “shovel-ready,” vigorous manufacturing sector is not there to pick up the slack.

I have some quibbles with this assessment. So, for example, I think that some of his admiration of German industrial policy is misplaced and he doesn’t credit German labor policy enough, e.g. Germany doesn’t have nearly the degree of at will hiring and firing that we have here in the States. The “factory in a box” capability that German companies have developed has served them well while China was tooling up to be the consumer goods supplier to the world. The Chinese authorities won’t tolerate importing that kind of capability forever, will develop their own capabilities in that area, and, inevitably, Germany’s greater source of exports to China will dry up. It’s already happening. It will be interesting to see what happens to the German economy as their trade surplus with China vanishes.

I think that trade and immigration policies must conform to actual needs and realities rather than some ideological view. The reality is that we have millions of unemployed unskilled or semi-skilled people here in the U. S. already and wages for unskilled and semi-skilled workers have been stagnant or falling for decades, a sure sign of flagging demand. Our immigration policy wih respect to Mexico should reflect that reality; sadly, it does not.

I continue to believe that China poses a unique challenge for American economic policy. I trace many of our economic woes to three events, all involving China: China’s 1979 abandoning of its official policy of autarky, China’s pegging of the yuan to the dollar in 1993, and the admission of China to the WTO in 2001. I think that these actions eroded manufacturing jobs in the U. S., increased our imports from China to the detriment of American-made goods, and drove money into housing construction with the results that we see around us today. Our trade policy with respect to China should reflect the unique challenges that China presents; it does not.

I’m skeptical of short-term stimulus spending for reasons I’ve repeated endlessly around here. That doesn’t translate into my believing that the federal government should have no role. As I have said before I don’t think the real question at hand is the dichotomy between doing more and doing less but the greater challenge of doing differently, something for which incumbents of either party are distinctively unqualified not to mention unwilling.

I’ve also mentioned that I favor federal involvement in mass engineering programs. I continue to believe that the track record on those has been pretty good. Much better than its track record on basic science or job creation but, unfortunately, such programs don’t curry favor with any major voting bloc and are a very hard sell, particularly with the bipartisan support that such programs require.

Here’s Mr. Gross’s peroration:

Those who advocate that job creation rests on corporate tax reform (lower taxes) or a return to deregulation of the private economy always fail to address dominant structural headwinds which cannot be dismissed: 1) Labor is much more attractively priced over there than here, and 2) U.S. employment based on asset price appreciation/finance as opposed to manufacturing can no longer be sustained. The “golden” days are over, and it’s time our school and jobs “daze” comes to an end to be replaced by programs that do more than mimic failed establishment policies favoring Wall as opposed to Main Street.

Alan Blinder soldiers bravely on in an op-ed in the Wall Street Journal, claiming victories for the stimulus package of 2009 that only the most stalwart continue to defend:

For example, the large fiscal stimulus enacted in 2009 was not “paid for.” Yet it has been claimed that it created essentially no jobs. Really? With spending under the Recovery Act exceeding $600 billion (and tax cuts exceeding $200 billion), that would be quite a trick. How in the world could all that spending, accompanied by tax cuts, fail to raise employment? In fact, according to Congressional Budget Office estimates, the stimulus’s effect on employment in 2010 was at least 1.3 million net new jobs, and perhaps as many as 3.3 million

The CBO estimates he cites did no counting, measuring, or other forms of empirical assessment. They merely plugged the same numbers back into the same models that had been used to determine how large the stimulus should be and came up with the same answer. Quod erat demonstrandum!

In answer to Dr. Blinder’s question, yes, it is possible for the federal government to spend much, much more and for it to have a far smaller impact on employment than expected if the level of net spending doesn’t increase as much as projected. So if, for example, in response to the increased federal spending individuals and state and local government respond by lowering their levels of borrowing and spending, the additional federal spending will not produce the results that the models predict. There’s at least one empirical study that found that was exactly what happened.

I don’t reject the theory of Keynesian stimulus. I just think that in practice the impossibility of coordination among the various levels of government renders it significantly less effective than it otherwise might be and that the actual, visible evidence of that is all around us.

When I read this story on ancient graffiti in Israel this snippet leapt out at me:

One says, “Take courage, Holy Parents of Pharcitae, udes adonitas — no one is immortal.” Stern explains that the dead who are being brought into the catacombs shouldn’t feel that they are weak just because they’ve passed on.

She reads aloud the other inscription: “Good luck on your resurrection.”

“Of course, resurrection is not in the Jewish tradition,” says Emma Maayan Fanar, a professor of Byzantine art at the University of Haifa, who has teamed up with Stern. “It’s very uncommon.”

This is either remarkably ignorant or remarkably slanted. Resurrection is not in the rabbinic tradition but the “Jewish tradition” precedes the rabbinic tradition, the graffiti they’re talking about are contemporaneous with the rise of the rabbinic tradition, and there’s plenty of resurrection in the pre-rabbinic Jewish tradition in the non-canonical pseudepigrapha.

My point here is that I think it’s pretty peculiar to equate the tradition as it exists today with the tradition as it was a couple of thousand years ago.

Update

Jim Davila of PaleoJudaica and Joseph Lauer both pick up on the same thing that I did:

Perhaps it’s uncommon in Jewish graffiti of the period; I don’t know. But it is certainly a widespread idea in Jewish literature of the Hellenistic and Roman periods.