US economy needs more stimulus, Stiglitz says

[JohnWxy]

http://www.hurriyetdailynews.com/n.php?n=us-economy-needs-more-stimulus-stiglitz-says-2010-08-06

Nobel Prize-winning economist Joseph Stiglitz said the U.S. economy faces an “anemic recovery” and the government will need to enact another round of “better designed” stimulus measures.

The Obama administration took “a big gamble and it doesn’t look like it’s paying off,” Stiglitz told Bloomberg TV in an interview in Sydney on Thursday. “The recovery is so weak that it is not strong enough to generate new jobs for the new entrants in the labor force, let alone to find jobs for the 15 million Americans who would like a job and can’t get one.”

The ex-World Bank chief economist spoke as Mohamed A. El- Erian, chief executive officer at Pacific Investment Management Co., estimated the possibility of deflation and a double-dip recession in America at 25 percent
~~
~~
“It’s absolutely clear that you need a second round of stimulus,” Stiglitz said. “It needs to be better designed. It needs to be focused more on returns on investment, education, infrastructure, technology. And if you do those kinds of high-powered investments, the long-term national debt will be actually lower and the growth in the future will be higher.
(more)

[notesdev]

1. Drunk needs more whiskey

Howabout trying an alternate tactic to stimulate the economy, say, by actually enforcing the law which would create a stable business environment worth investing in, rather than letting any pool of capital be eligible to be stolen by the banking system?

Or alternatively throwing the garbage "free trade" deals which have eviscerated manufacturing out the window?

Or maybe by sending back all the wage-undercutting labor that has been dumped here?

You've got to be real dull to simultaneously believe that a trillion dollars in stimulus didn't pay off, and that more stimulus is going to do the trick. It didn't pay off because it was paid for by debt, and an excess of debt is the overwhelming problem in the economy dragging us down in the first place.

We are dangerously close to the point where we lock ourselves into near-zero interest rates - which destroys savings, including pensions - as we have so much debt that any rise in interest rates would cause payments on the debt to consume the entire amount of taxes collected by the federal government.

[Cassandra]

2. The excess of debt is not what is dragging us down.

There is not enough money circulating in the productive sector of the economy. Too much of the stimulus went to tax cuts to those who didn't need them to spend. Too much money is in the hands of those who gamble rather than invest in actual productive activity (starting a business to manufacture something rather than buying stock of a large company).
I'll go along with you about outsourcing, H1-Bs and "free trade" deals.

[notesdev]

5. Debt sure is the problem

Calculate what percentage of the federal budget goes to paying interest on the national debt at current interest rates. Now recalculate what the interest payment is at 5% interest rates.

Any more debt than we have is going to lock us into zero interest rates.

But doing that blows up every pension fund that exists. Today pensions are betting on 8% returns to stay solvent (which is a ridiculously high expectation when 10-year T-bills are at 2.5%). Pensions NEED a higher interest rate of all the retirement savings of this country are going to be decimated.

By taking on more debt we are forcing a choice between them - do we want pensions solvent, or the federal government solvent? We can't have both once the national debt gets high enough!

[JohnWxy]

3. anybody who say's the stimulus didn't work is out of there fucking mind. I'll take rational thought

over fundamentalist, simplistic religion any day.

simple slogans please simple minds. They don't describe reality.

[notesdev]

4. You just posted an article that says exactly that

so... is Stiglitz correct or not correct when he says the stimulus didn't pay off?

[northernlights]

6. it didn't pay off because it wasn't designed properly....

you left out a critical half of what he wrote.

The stimulus was too much pushing on a string, not enough real stimulus.

[JohnWxy]

8. Stiglitz being an intelligent man always said the stimulus was TOO SMALL - identifiying tax cuts as

NOT STIMULATIVE

read this:

Joseph Stiglitz: "It's going to be bad, very bad"
----------------------------------------------------------------------------------------------------------------------------------------------------------
Q: The American government has committed over a trillion dollars to save the banks and $789 billion to boost the economy. Do you think this is too little?

Stiglitz: I do. More than $700 billion sounds like a lot, but it's not. On the one hand, a large part of the money will first be given out next year, which is too late. On the other, a third of it is drained away by tax cuts. They don't really stimulate consumption, because people will save the majority of that money. I fear that the effect of the American economic stimulus plan won't be even half as big as expected.
------------------------------------------------------------------------------------------------------------------------------------------------------------



THe reason it didn't work as well as was hoped (by some, many knew it wasn't enough including C. Romer) was, 1) it was too small. and 2) one third was turned into tax cuts to get Republicans to not filibuster it. That is in part what Stiglitz is referring to when he says not designed right - it included taxcuts.

[Tiras De Carne Seca]

13. The real number is likely much higher than $700B by the way

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9240915

[JohnWxy]

14. The article referred to at link is nonsense. He uses different limits for defining costs

"•Present value cost of lost interest income to US retirees and other savers due to government's zero interest rate policy = $2 trillion."............ this is not a cost to the U.S. Government. THe article he referred to in NYT was talking about the Cost to the Government and therefore to us taxpayers. (By the way, any debt instuments in retirees pensions or 401K's would go up in value as interest rates went down. So in the intermediate term, the retirees gained, for any debt instruments in their retirement accounts. However, the Credit catastrophe (not caused by the TARP) caused Common Stock values to tank --- that did cost retirees pension plans and everyone's 401k's to drop significantly in value. __JW





"Cost of future bad loans created since 2008 by Fannnie, Freddie and FHA by continuing to lend aggressively into declining real estate markets = $300 billion." .. "Cost of FUTURE bad loans".... Do I really have to comment on this???__JW


Also, he is rolling TARP into the ARRA. Somthing which the NYT article did not do as they were focusing on the Troubled Asset Relief Program. You have to define limits to what you are talkiing about. Talbot wants to talk about costs to the economy -- that is a different discussion. Certainly, one of value, but much bigger in scope than the NYT article was discussing.

NOW, at any rate, that does not contradict the point being made by article in OP. And again, TARP is not a part of the ARRA (the stimulus). Keeping the banks from collapsing is not to be considered part of the economic stimulus.

[Tiras De Carne Seca]

7. Wow.....

Did you read the article you posted?

[JohnWxy]

9. here read this, then maybe you'll understand Stiglitz better

http://www.salon.com/news/feature/2009/04/03/stiglitz

Question: The American government has committed over a trillion dollars to save the banks and $789 billion to boost the economy. Do you think this is too little?

Stiglitz: I do. More than $700 billion sounds like a lot, but it's not. On the one hand, a large part of the money will first be given out next year, which is too late. On the other, a third of it is drained away by tax cuts. They don't really stimulate consumption, because people will save the majority of that money. I fear that the effect of the American economic stimulus plan won't be even half as big as expected.

[Tiras De Carne Seca]

10. So in other words,

the first stimulus didn't work.

[JohnWxy]

16. You were trying to say Stiglitz did not think "stimulus" per se works. I showed that is NOT what he

.... was saying. He said the stimulus didn't do enough BECAUSE it wasn't big enough, and could have been designed better )i.e. without those TAX-cuts which, in a depression, are NOT stimulative).

[Tiras De Carne Seca]

20. No, I was saying it did not work. I don't care what Stiglitz says.

We need to see a dramatic shift in economic policy not more of the same hoping to get a better result each time we do it.

[JohnWxy]

30. I know you don't care what Stigliltz, Krugman, Reich, Zandi, Blinder say. who are they, just

knowledgeable, trained experts in economics. To you, faith in some bumper sticker slogan is more important than actually studying a problem to come up with the real world solution.

Saying economic stimulus is not what we need now is utter nonsense. Republicans only assert that because they want to make matters worse. So they can go to the uninformed electorate (thank you M$M) and say: "Look how the Democrats messed up the economy! Let us have a try at it."

... even though the Republican policies of deregulation and refusing to regulate (Bush administration went to cuort to stop 50 states Attorney's General from reining in predatory lenders using consumer protection laws see Predatory Lenders Partner in Crime). Phil Gramm slipped in the http://motherjones.com/politics/2008/05/foreclosure-phil">Commodities Futures Modernization Act as a rider to the Omnibus Funding bill in the last few days of the Clinton administration. THis is the law that made Credit Default Swaps legal AND UNREGULATED.

Credit Default Swaps lit a fire under subprime lending because the Wall Street banks told institutional investors that they (CDSs) would protect them from loss!! The Bankers apparently believed this as they told the SEC they didn't need the old Debt to Equity required margin of 12 to 1. They told the SEC to let them go to Debt to Equity of 34 to 1!! THey thought CDSs made them immune to loss too. so they bought bundled mortgages of unknown risk (they thought holding CDSs for these investments meant they didn't need to worry about default losses because the CDSs would pay off and cover there losses!.

When the CDOs (bundled high risk (i.e. subprime loans) mortgages started going south and the CDSs couldn't be paid off by AIG, the banks were leveraged so far out that they would have gone belly up themselves without the taxpayers bailing them out.

THe bailout and the stimulus was NOT AN OPTION FOR OBAMA. HE HAD TO DO IT OR WATCH THE WORLD GO INTO A WORSE DEPRESSION THAN WE SAW IN THE 1930's. The ARRA and the TARP were MADE NECESSARY BECAUSE OF HAIR BRAINED ECONOMIC THEORIES SUCH AS 'THE MARKET WILL POLICE ITSELF' ...that's why THE SITUATION WE ARE IN IS CALLED THE REPUBLICAN DYSTOPIA. THIS WAS A CATASTROPHIC FAILURE OF FREE MARKET, SUPPLY SIDE, TRICKLE DOWN ... SO-CALLED ECONOMIC THEORY.

...which the Democrats had to clean up.

[Tiras De Carne Seca]

33. Tell you what slick, lets revisit this post in one year.

We'll see if the economy has improved or not. You say it has been cleaned up. I say the down turn is just starting. No amount of blind optimism is going to change the fact that our so called "economic experts" have been wrong every step of the way. Remember how "no one could have seen this coming" and how "unexpected" all of the bad news has been over the last two years? Remember how housing wasn't in a bubble until it was? Remember how we weren't in recession until we all of the sudden were?

See you in a year friend.

[BootinUp]

17. Studies show it kept us from unemployment in the mid-teens. nt

[Tiras De Carne Seca]

18. No..... tweaking the statistics kept us from unemployment in the mid-teens

[BootinUp]

19. I was hoping you would challenge that

so I could post more info. Seriously, I suggest you read Paul Krugman for the best economic analysis available.

http://www.nytimes.com/2010/07/28/business/economy/28bailout.html

In Study, 2 Economists Say Intervention Helped Avert a 2nd Depression
Now, two leading economists wielding complex quantitative models say that assertion can be empirically proved.

In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration’s fiscal stimulus program, the nation’s gross domestic product would be about 6.5 percent lower this year.



http://www.wltx.com/news/story.aspx?storyid=95910
http://www.economy.com/mark-zandi/


But to estimate the answers to such questions, economists rely on models based on historical relationships between various policies and real-world results. Earlier this month, Zandi and co-author Alan Blinder, former vice chairman of the Federal Reserve, released the most detailed assessment of the government's efforts to combat the so-called Great Recession. Neither economist is regarded as a partisan firebrand. Zandi, for example, backed John McCain in the 2008 presidential campaign and has advised members of both parties.

Their conclusion: The fiscal stimulus created 2.7 million jobs and added $460 billion to gross domestic product. Unemployment would be 11% today if the stimulus hadn't been passed and 16.5% if neither the fiscal stimulus nor the banks' rescue had been enacted, according to Zandi and Blinder. "It's pretty hard to deny that it had a measurable impact," Zandi said.

As of Aug. 13, almost 64% of the program's original $787 billion had been spent. (The Congressional Budget Office, which is among those concluding that the program had a broadly positive economic result, currently projects the Recovery Act's total cost to be $814 billion. Including an earlier Bush administration tax rebate and some unrelated programs, total stimulus spending will reach about $1 trillion over several years.)

Stimulus outlays first topped $100 billion in the third quarter of 2009, which is when the economy resumed growing after the recession that started in 2007. Likewise, personal consumption spending began to increase in the third quarter after four consecutive quarterly declines. To Zandi, those facts buttress his model's conclusion that the program resuscitated a moribund economy.

[Tiras De Carne Seca]

22. Its a little early to use the word "Avert". We don't know how this is going

to turn out yet. I would use the word "delayed". Unless your and Krugman's crystal ball is working better than mine.

[BootinUp]

23. Are you even going to read anything before your knee pops up? nt

[Tiras De Carne Seca]

25. Can you prove without a doubt that it is no longer a possibility then?

[BootinUp]

29. We are looking at a Japanese style "lost decade"

at this point. Because the stimulus was not large enough and because people are arguing it does not work.

See the following:
Spock with a beard

[JohnWxy]

21. Can you back that up with explicit proof - that Unemployment rate has been redefined since the

beginning of the REPUBLICAN DYSTOPIA?

CBO Report Finds Up to 3.3 Million People Owe Their Jobs to the Recovery Act

A new Congressional Budget Office (CBO) report estimates that the American Recovery and Reinvestment Act (ARRA) increased the number of people employed by between 1.4 million and 3.3 million jobs as of June. In other words, between 1.4 million and 3.3 million people employed in June owed their jobs to the Recovery Act. This estimate, by Congress’ non-partisan economic and budget analysts, is more comprehensive than the 749,000 jobs that ARRA recipients reported in late July, CBO explains.

~~
~~

ARRA Also Boosted Worker Hours, CBO Finds

In addition to saving and creating jobs, ARRA has increased the number of hours worked, CBO has concluded. That is, without ARRA, many full-time workers would have been reduced to part-time status and fewer would have worked overtime. The combination of the increase in jobs and the increase in hours means that ARRA boosted the number of full-time-equivalent jobs by between 2.0 million and 4.8 million as of June, the report estimates. CBO finds that this figure is peaking at up to 5.2 million full-time-equivalent jobs in the current quarter.

Among ARRA’s most effective provisions for saving and creating jobs, according to CBO’s estimates, are direct purchases of goods and services by the federal government, transfer payments to states (such as extra Medicaid funding), and transfer payments to individuals (such as increased food stamp benefits and additional weeks of unemployment benefits). CBO’s estimates indicate that tax cuts are less effective job producers, and tax cuts for higher-income people and corporations have very low bang for the buck.
(more)

[Tiras De Carne Seca]

24. We were also lied to about the Gulf Oil Gusher too.

But you go on believing what you want. All I know is that 23 of the last 24 jobless claims reports have been revised up quietly after the initial report. But no one is trying to deceive the masses are they?

[JohnWxy]

31. you'll have to provide a source/link for your claim, preferably from Dept Labor site.

really, this isn't some Dick Armey site. We need documentation.

THis still doesn't show that Stiglitz, Reich, BLinder, Zandi, Krugman are wrong about the need for stimulus and it's effectiveness .. IF BIG ENOUGH.

[Tiras De Carne Seca]

32. Now, if my point is that the govt stats aren't

accurate why would I use a govt site as proof? How about this article:
http://articles.moneycentral.msn.com/learn-how-to-invest/The-real-unemployment-rate.aspx

[JohnWxy]

26. Economists agree: Stimulus created nearly 3 million jobs

http://www.usatoday.com/money/economy/2010-08-30-stimulus30_CV_N.htm

By David J. Lynch, USA TODAY

~~
~~

It's no surprise that the administration would proclaim its own policies a success. But its verdict is backed by economists at Goldman Sachs, IHS Global Insight, JPMorgan Chase and Macroeconomic Advisers, who say the stimulus boosted gross domestic product by 2.1% to 2.7%.

It's impossible to determine precisely how many jobs or how much growth the stimulus program caused. In a nearly $14 trillion economy, economists can't go employer to employer counting new hires. And there are too many moving parts to confidently link any single factor with individual hiring decisions. Roughly one-third of the stimulus, for example, came in the form of tax cuts, which are designed to boost demand for a wide array of products and eventually result in related hiring.

But to estimate the answers to such questions, economists rely on models based on historical relationships between various policies and real-world results. Earlier this month, Zandi and co-author Alan Blinder, former vice chairman of the Federal Reserve, released the most detailed assessment of the government's efforts to combat the so-called Great Recession. Neither economist is regarded as a partisan firebrand. Zandi, for example, backed John McCain in the 2008 presidential campaign and has advised members of both parties.

Their conclusion: The fiscal stimulus created 2.7 million jobs and added $460 billion to gross domestic product. Unemployment would be 11% today if the stimulus hadn't been passed and 16.5% if neither the fiscal stimulus nor the banks' rescue had been enacted, according to Zandi and Blinder. "It's pretty hard to deny that it had a measurable impact," Zandi said.
(more)

[Tiras De Carne Seca]

27. Seriously.......... Goldman Sachs and JPMorgan Chase?

Those are your go to guys? Have you followed the news since this all started. Those groups have done a bang up job in getting us to where we stand today.

[JohnWxy]

28. Alan Blinder, former vice-Chairman of the FED Reserve, Mark Zandi, Chief Economist Moody's Analytics

..and IHS Global Insight and Macroeconomic Advisers...

BTW, the people doing the Macro Economic analysis at GS and JPM are NOT the people who made investment and trading decisions in those organizations.

[BootinUp]

11. hows about we look at current conditions which belie any increase in interest rates

for the foreseeable future and instead get demand going and get people back to work.

[South End Liberal]

12. Why more stimulus does not replace real jobs.

This is from a 2005 article posted on the aflcio.org web site. The jobs situation will not change until the US Congress changes the laws that make outsourcing so profitable. Without jobs for Americans, the economy cannot recover. NAFTA and those other trade policies are the huge elephant in the room that both Dems and Repubs are trying to ignore.


With NAFTA, the World Trade Organization and other trade deals of the last decade, American corporations are now tapping into a global supply of workers who can be trained to do everything from design to production, maintenance to marketing,” says Jeff Faux, economist and founding president of the Economic Policy Institute. “And while these workers become more productive, their pay doesn’t rise, because in many of these countries, to be a labor organizer means you risk winding up in a ditch with a bullet in your head.”

American jobs sent out of the country aren’t likely to return anytime soon. “As long as employers can take advantage of much lower labor costs in other countries, there’s no compelling reason to bring back many of these well-paying jobs,” says Ron Hira, an engineer and assistant professor of public policy at Rochester Institute of Technology. “Policymakers seem to be at a loss as to what to do about this problem.”

Meanwhile, the Bush administration directs multimillion-dollar tax cuts to the wealthy while supporting trade laws that encourage offshore outsourcing. And even as Bush opposes unemployment insurance extensions for some 1 million Americans who have exhausted their benefits, his administration refuses to embrace job-creating programs that would repair the nation’s infrastructure and help balance devastated state budgets.

“The Bush administration doesn’t seem to care about jobs,” says Center for Economic and Policy Research co-founder Dean Baker. “To retain and create jobs, there have to be policy changes, and I don’t think this administration is willing to make them.”

[JohnWxy]

15. Outsourceing is a HUGE part of the problem. The article you sited makes an incontrovertable point.

I do know though, that we needed a bigger stimulus. But, if you'll remember, Obama had directed some of the stimulus money to green technologies which are all domestically sourced.

This was one of the things Republicans called part of a "liberal agenda"....even though it supports creating NEW jobs in a NEW INDUSTRY, with a view to developing it as a DOMESTIC capability. This is the very best kind of stimulus....it's directed at developing jobs not just for now, for jobs that will still be around in the future.


Thanks for bringing up OUTSOURCING. A BIG problem.

[bemildred]

34. Jobs, we need jobs. Enough good jobs, everything else will straighten up. nt