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Think for yourself

Originally published at BunkBlog. You can comment here or there.

The CBO analysis of the stimulus is available online. If you really want to know what the impact of the stimulus may be, read it for yourself. Don’t believe whatever talking heads say. Especially don’t believe what they said last week, before the analysis had been released. Lying bastards. It’s true that the CBO says much of the money won’t be spent in federal fiscal year 2009. If you think about it for a few seconds, you’d realize this is blatantly obvious. FY 2009 started in October, so it’ll be about one-third over before the bill becomes law. Then, it still takes time for things to get moving. The “quick” moves won’t be able to add money to the economy until April, half-way into the fiscal year. A multi-year stimulus which has a lower impact in a 6-month “year” than in the following 12-month year?  SHOCKING! A quote from the NY Times seems to be aghast that it may take a few months to a year to get some construction projects moving. Yeah, well…have you seen how long it takes to complete or even plan major construction projects? Boston could tell you.

One thing the CBO won’t tell you, quite explicitly denoted on the front page of their report, is what return on investment we can expect for each provision, or the bill as a whole.  No matter what Marie Cocco says, the CBO doesn’t make those predictions. But, most economists agree that tax cuts (while nice and I’ll take any money the government sees fit to give back to me) are not as effective as you might think.  Turns out, most of us actually save some of that money when we get it, rather than immediately spend every dime.  One typical comment:

“People are going to spend 30, 40 cents on the dollar, so the multiplier is going to be low,” said Adam S. Posen, deputy director of the Peterson Institute of International Economics.

Comments

( 5 comments — Leave a comment )
(Deleted comment)
andysocial
Jan. 30th, 2009 04:53 pm (UTC)
"Shouldn't be" is hardly a measure of how things work in the real world. We've got decades of empirical evidence that seems to support the idea that, no matter how much it pains my libertarian soul, direct spending works (for certain definitions of "works") to buoy the economy. I can't help but wonder, from my position of relative ignorance, if this results in short-term and somewhat artifical and unsustainable economic assumptions.
theonides
Jan. 30th, 2009 05:17 pm (UTC)
No more "unsustainable" than the bubble that is currently deflating. :)
theonides
Jan. 30th, 2009 04:47 pm (UTC)
Economists = failures at psychology.

Of course it's going to take time to get construction projects started. Have you seen the weather around here?? Unless they are buying the northern cities snow plows, they have to wait for a couple months just so they can see the ground they plan to build on.

The other thing people forget is that economists are talking about the "downturn" to last well past 2010. It may only be beginning to recover then.

Me, I'm going with the Nobel Prize winner of the Republican talking heads. Krugman thinks we need a lot more money.
andysocial
Jan. 30th, 2009 04:55 pm (UTC)
If only Krugman were on the side of "spend more" I'd agree with Buff and others who say that's not enough expertise. When no fewer than five Nobel Prize-winning economists say "spend more" and not one Nobel winner is publicly advocating "spend less" the case is a bit easier to see.

I'm no expert, so I have to assume experts know what they're talking about, especially when so many of them agree with each other. Of course, they could all be wrong. In which case, we may as well just make random guesses at economic policy. Oh, wait, we did that for 8 years.
theonides
Jan. 30th, 2009 05:15 pm (UTC)
Krugman is also an expert on the last Depression, and he's been a vocal critic of Bush, but you're right, he's hardly alone in thinking this.

I've actually been trying to research the economic principles more, and been somewhat stymied. Into econ books are all Adam Smith crazy, and you do really find good discussions of what's going on until you get to graduate courses, and books that are around $300 apiece. It's very frustrating. But I can tell you that between George Bush and Herbert Hoover, Adam Smith has proven to be a theoretical failure.
( 5 comments — Leave a comment )