Will Obama’s stimulus work fast enough?
Jeannine Aversa and Andrew Taylor, writers for the AP, ask today’s question of the day: “Will Obama’s stimulus work fast enough?”
No. No it won’t.
Jeannine Aversa and Andrew Taylor, writers for the AP, ask today’s question of the day: “Will Obama’s stimulus work fast enough?”
No. No it won’t.
Well ,I hope people are not expecting PE Obama to be sworn in on Jan 20th and by Jan 21st everything is going to be fixed!!!
This man has one hell of a mess to clean up and I think it would be unfair of any of us to expect miracles anytime soon…patience will have to be a virtue I’m afraid.
I have no doubt he has his plans ready to go on day one and he can do nothing more than put them into action and see what happens after that.
We have had 8 years of a disaseterous administration and I think it will take more than a few months or maybe even a few years to see things really start to turn around….so a miracle worker he won’t be but he will make a great President for sure.
I did a post called On the Failure of Economics. It is a reaction to a backlash I’ve sensed and mentioned here in the past … and this article called Paradigm lost at the Boston Globe.
In terms of what to expect from stimulus, this paragraph from the Globe might give caution.
We are not experts …
Emphasis mine.
It’s not a failure but a misunderstanding, including by economists. Economics isn’t a predictive science, it’s a descriptive one, like anthropology.
I remain skeptical of the effects of a stimulus plan because I wonder if it’s not far more likely to be backward looking than forward looking. In 1960 we could expect a new road to have increasing usefulness over the period of the next 40 years. Do we have the same expectations of a new road now?
Road repair isn’t going to employ 3 million people, at least not 3 million of the people we have now. Nor is green technology, at least not while oil is at $40 a barrel. It might displace jobs (with associated deadweight loss) but it won’t create any on net.
Over at my place this morning one of my commenters mused over the new fascination with fascist economics. Linda and Morris Tannehill defined fascism as “a system in which the government leaves nominal ownership of the means of production in the hands of private individuals but exercises control by means of regulatory legislation and reaps most of the profit by means of heavy taxation. In effect, fascism is simply a more subtle form of government ownership than is socialism.”
I think that’s a bit extreme. But I do wonder about the resurgence of failed economic theories of the 1930’s.
Dave, I think one of the biggest problems is that economists can get into a pattern of making predictions without really framing them as such.
Consider the simple example of a stock who’s alpha or beta “is.”
If there was no implicit prediction there, what would be the point?
Everyone wants to extrapolate economic understanding, even when that understanding is tenuous. Taleb was the first I saw to contrast this with the military model of decision-making in the face of uncertainty. Generals don’t argue about what one strategy will work for one opposing battle plan (or they shouldn’t), and yet economists love to work that way. They say “since this is like 19XX or 18XX we should do Y.”
What we need is more “strategy in the face of uncertainty” in our thinking. Diversification perhaps.
BTW, did you notice that after swearing off economic prediction you made a green job prediction? And so it goes. If I were to argue that it would be on the basis of future global warming response, and if “now is better than later” based on now having lower employment and therefore less crowding out than in the up cycle of an economy.
Shorter “green stimulus”: We shouldn’t do anything we aren’t going to do anyway, over the next decade.
Given the fact that Obama is part of a corruption investigation, it is unlikely that he will even be able to attend his inauguration. Fitzgerald will hopefully have him in jail by that point.
Triumph, you really need to get out more and just get over the fact that the Republicans lost!!!
All your wishing and hoping is going to get you nowhere.
It’s not going to work at all so the rate isn’t really an issue.
Well, now, careful, James. Let’s be precise about this thing, OK? I mean, it depends utterly on what you think it will do. Myself, I think it’s gonna work just fine, in tossing this nation into a full depression. Did the last time it was tried, after all….
hmm, i was under the impression that we had been receiving government stimulus the last 3 months. am i missing something? why would stimulus from the obama administration magically be more effective than the trillions that have already been spent?
Jeez ap, don’t you know —- when Obama does it, it will work. when obama drives his car there are no greenhouse emissions, when Obama passes gas it is not methane. As soon as Obama takes office, everything thing that any past president did will turn out differently. He will raise taxes without you feeling the pinch – he will increase health care benefits without raising the cost to anyone; he will save the car companies by simply saying “believe” and “change”. what are you? a nonbeliever?
I suppose a definition of “work” and “fast enough” are required here. Let’s just say that the notion that Obama’s plan could return the country to 2-3% GDP growth in the first half of 2009 is far fetched indeed. By 2010? Hmmm. But since we are talking about a lack of liquidity and confidence in the private sector, the government stepping in and making expenditures in that void is sure to have some effect, even if modest.
A related question is what Obama policies could have adverse effects. A thriving entrepreneurial culture within an environment of relatively free capital and trade flows is the engine of US economic growth. Policies that throttle down this engine would be harmful, indeed. Trade protectionism, higher taxation, unproductive green regulation or wasted dollars on green projects, artificial barriers to necessary economic adjustments (ie supporting dilapidated auto companies) etc would all have these throttling effects.
Let’s hope that Obama has economic advisors that counsel him to maintain his campaigning status: lot’s of meaningless words and little real policy initiative in the populist mold.
BTW – The “smart,” “experienced” and “qualified” VP candidate, Joe Biden, talking doom and gloom is not something I believe is straight out of the ‘How to Get a Nation Through Economic Distress’ handbook. Does Obama own a mouth sized cork, or does their pre-nup allow Biden to continue to be an embarrassment?