Commenting on his exchange with Ali Velshi on CNN’s American Morning where that latter dismissed as a talking point his observation that “barring a sudden drop in the unemployment rate between now and November 2012, the unemployment rate for every month of Obama’s presidency will be higher than it was for every month of Bush’s two terms”, Jim Geraghty makes a great point which I may find echoed in the Gipper’s new book:
I suppose either you find the comparison of the economic performance under Bush and under Obama relevant, or you don’t. It seems that the pro-Obama argument relies on the notion that the Great Recession just happened, and there just wasn’t much Obama could do about it over a four-year period. (Of course, if there was nothing that could be done to really mitigate it, that more or less undermines the central argument of liberalism that sufficient government spending can create economic growth.)
Emphasis added. Interesting how he put the meat in the parenthetical.
Exactly. If economic growth comes from government spending, then the miserable failure of Obama’s recovery is truly “unexpected”. But that means the failure wasn’t Bushitler’s fault. Because if the miserable failure of Obama’s recovery was Bushitler’s fault, then why didn’t Obama/liberals do a better job of expecting the failure? I.e., why didn’t they try a different set of policies? They’ve had 2 and 1/2 years now, going on 4.
The answer is that economic growth does *not* come from government spending. By borrowing from our grandchildren, government spending can create a temporary illusion of growth and good times – the economic equivalent of a Potemkin village. Then comes the collapse.
One has to remember that the only place the vast and overwhelming majority of the Obama administration, the Obama Party, and liberals as a whole have received a check from is the government.
Hence, their cult-level belief that government is the only thing that can create wealth and value in society. They literally have no concept whatsoever of private industry, value, or wealth creation. They cannot understand what businesses do.
This is the wellspring of all of Obama’s rhetoric. Obama and his Obama Party have operated in an environment where they literally can make up whatever budget numbers they want, assuming they provide a budget in the first place, put out whatever financial numbers they want without any challenge or cross-reference, hire whomever they want without review, and demand that their workers pay their bosses kickbacks (aka campaign contributions) as a condition of keeping their jobs.
Notwithstanding the left-wing trolls that still blow through here (Levi, Tim, “Jennifer”, etc.), we have fewer of them than I remember in years past. I think they sense that something is very wrong.
Hi Dan,
“It seems that the pro-Obama argument relies on the notion that the Great Recession just happened, and there just wasn’t much Obama could do about it over a four-year period. (Of course, if there was nothing that could be done to really mitigate it, that more or less undermines the central argument of liberalism that sufficient government spending can create economic growth.”
I think the pro-Obama argument relies on the counter-factual. If we had not done what we did back in 2008-9, then the situation would be a lot worse. I would go further and say that the actual argument that needed to be made was that there was not enough stimulus then, and there isn’t enough now. I know that this is a very unpopular view on this web-site, but in following Geraghty’s line of reasoning, one might also argue that the tax cuts that got extended into law don’t appear to have done the trick as well. One response is to argue we need more tax cuts as a form of stimulus. OK. One can also argue we need more spending as a form of stimulus. I follow that line.
But we don’t; less spending (i.e. reducing government role in / burden on the economy) is what would function as a true stimulus.
No, the situation would be a lot better. Going trillions deeper into debt, in response to a crisis essentially caused by too much indebtedness, was exactly the wrong thing to do.
I know that this is a very unpopular view on this web-site, but in following Geraghty’s line of reasoning, one might also argue that the tax cuts that got extended into law don’t appear to have done the trick as well.
If one argues that tax cuts that were extended six months ago versus a “stimulus” that has been in place for over two years is a valid comparison, sure.
But only Obama partisans think that’s a valid argument, so who cares?
Better question: How about we hold Cas and its fellow Obama puppets accountable to the same standards they imposed on Bush, which are as follows:
1) The comparison between you and your predecessor must always be made between when their numbers were highest and yours were lowest
2) The following economic indicators equal utter failure and collapse:
a) 5% unemployment
b) GDP growth of less than 6% a quarter
c) Any decline in major indicators such as manufacturing indices, consumer confidence, and the like
And last, but certainly not least:
3) You cannot blame your predecessor for any economic problems at all. Even if a recession started prior to your taking office, you are solely responsible and accountable.
Looks like, by the metrics Obama and the Obama Party imposed on Bush, they and their “stimulus” are a complete and total failure.
Cas,
I asked this elsewhere and never got a reply, so maybe you’d like to tackle it.
If the projected unemployment didn’t materialize becaue the amounts given were insufficient, doesn’t that mean that we’d have been better off doing nothing, based on the same projections?
Going trillions deeper into debt, in response to a crisis essentially caused by too much indebtedness, was exactly the wrong thing to do.
Exactly, ILC.
When a business forecasts a sharp decline in revenue, it normally does two things in response:
1) Shed unprofitable businesses or products
2) Reduce staff
3) Hold prices at or near the same level, or even discount
Obama, by contrast, added more unprofitable businesses (Obamacare), increased staff (massive government hiring/retention), and jacked prices (higher taxes)
This is what happens when you elect someone who has never in his life had to take responsibility or accountability for his actions. Someone else has always paid Obama’s bills, wiped his nose, and bailed him out of jail. As a result, he is the functional equivalent of a child, truly and seriously believing that Mommie and Daddy have the money, but are just being mean and refusing to buy him all the toys he wants so that he can be cool and popular.
Three things, that is. 🙂
I am bothered that people seem to not be considering the impact to the economy of Obama’s regulatory initiatives:
– EPA Greenhouse gas regulations threaten to greatly increase the cost of energy.
– EPA pursuit of other environmental regulations discourage industry from locating or expanding in the USA.
– The NLRB is being used as a political tool to attack companies that displease the regime; e.g. the lawsuit to prevent Boeing from operating a new factory in South Carolina.
– The Frank-Dodd financial regulation bill greatly increases the burden of regulatory compliance for the banking industry and any business seeking capital.
– The threats from the DOJ to pursue “disparate impact” suits against companies whose workforces are judged to be insufficiently diverse.
– Obamacare, greatly increasing the cost and burden of providing health care coverage to employees.
The regime has made no secret of its hostility to business, and its policies have followed.
If you got back to the original reasoning behind the stimulus, at this point in time, if we had not passed the stimulus, Mr. Obama said we would have 8% unemployment and 3% GDP growth. I will take that along with the trillion dollars instead of what we have now.
This is scary : “The fundamental economic issue working against a sustainable economic recovery is the extreme level of U.S. public debt which takes necessary capital away from private sector investment. For decades, the U.S. government has been adding debt to its balance sheet, but with the recent financial crisis, the level of debt has become extreme. According to a recent article in the Economist magazine (“Botox and beancounting“, Apr 28, 2011), using Europe’s preferred measure of public-sector debt – general government gross debt, which also includes the borrowing of state and local governments and Treasury securities held by other government bodies, such as the Social Security Trust Fund – U.S debt stood at 92% of GDP at year-end 2010, on par with beleaguered Portugal’s level of public debt.”
http://blogs.forbes.com/jonathansherman/2011/06/02/this-looks-like-a-major-top-in-the-u-s-stock-market/
So, more is not better. Not by a long shot.
If liberalism’s thesis were true, the Soviet Union would not have fell, North Korea would be a true paradise instead of a wasteland, & Cuba would have turned their iron into gold by now. However, the exact opposite is true as captured in the quote. Stagflation is here as we head into 2012 while the Obama White House panics about raising his polls numbers…
Oh, President Obama is not really running on anything as well as he runs away from ObamaCare, Porkulus, & tries to demonize the Republicans with Medicare; it hasn’t worked. Obama is not leading as he goes through his own inertia. The Democrats cannot run on demonization alone, but this is all they have. It’s pathetic.
I can’t wait for Obama to keep talking about green energy & Amnesty 2.0. Watch out for that tug on your leg Chrissie Obama:
http://www.youtube.com/watch?v=UPEHygqoKZU
Good point. The counter-factual, that we would be better off now without any of Obama’s stimulus, derives in part from Obama’s own numbers (economic projections).
To seriously argue that we needed an even bigger Porkulus is to concede (just in a different way) the basic proposition that Obama is clueless.
No and yes. The key reason that private businesses don’t want to borrow, and that banks don’t want to lend to them, is Obama’s other anti-business policies (as V pointed out). Thus, private lending is down and capital seems freely available to the government at very low rates.
Keynesians then say “Look, there is no crowding out! Government borrowing and spending actually are needed!” But what is needed is that we drop the anti-business policies. If we did, then there would be more private-sector demand for loans. Then rates would rise as the private sector and government compete for funds, and we would be able to see more ‘textbook’ type of crowding-out effect.
Having said that, government borrowing is still very harmful to the business climate (i.e., all businesses), in that the sheer scale of the borrowing / new debt raises frightening prospects of future taxation. It reduces the discounted present value of all business efforts.
So, it may not be quite right to suggest that Obama’s borrowing competes directly with private-sector borrowing. Nonetheless, Obama’s borrowing greatly worsens overall business conditions. Combine that with Obama’s other anti-business policies, and you get a worsening aggregate supply curve, a.k.a. stagflation. That’s what our doltish lefty friends just cannot understand.
But setting up a slush fund and laundering tax payer money through your cronies doesn’t do a DAMN bit of good for the rest of the country, does it?
“Obama’s stimulus plan has had about as much effect on this economy as the Anthony Weiner photo would have on a woman: Zilch, zero, nada. In fact it’s a turnoff, not a turn-on!” – Rush
When I was driving home from Indiana, I saw a lot of gas stations with a 10¢/ gallon lower price if you paid in cash. I’ve not seen that before and I can only guess it has to do with Frank-Dodd. I wondered when there would be protests about the unfairness of that pricing.
Still pissed at Turban Durbin’s amendment which has ended my ability to get Continental OnePass miles on my debit card.
I comment, partly just to get my own thoughts together. To summarize: Government spending must always be financed. It can be financed in one of 3 ways: taxes, borrowing, money printing. All have bad effects.
1) Taxes – Injures aggregate demand, which counterbalances any expected “good” effect on AD from the government spending. Also injures aggregate supply by having transferred spending power from efficient / prudent / productive actors to comparatively inefficient / foolish / unproductive actors. The injury to AS leads to stagflationary conditions.
2) Borrowing – Injures AS by raising a threat of future taxation, reducing the present value of all business efforts (i.e. the incentive to undertake them). Also by, again, transferring capital from relatively efficient (private) uses to relatively inefficient (government) uses.
3) Money printing – It depends if this is done literally or figuratively (by a central bank that buys government bonds)… but in general it dilutes the value of money, again injuring AS by transferring purchasing power to relatively inefficient uses, and consuming or destroying (the real purchasing power of) savings/capital.
Thus, the more government spends, the more it burdens the economy.
Hi all,
Thanks for your thoughts. My apologies, but I am tied up right now, so I will get back to you in the next couple of days.
Bow-chicka-bow-wow!
You know TGC, when I wrote “tied up” I wondered if someone was going to “Bow-chicka-bow-wow!.” Thank you. 🙂
Hi TL,
“If the projected unemployment didn’t materialize because the amounts given were insufficient, doesn’t that mean that we’d have been better off doing nothing, based on the same projections?”
I will grant that that the initial projections have come back to bite Obama in the bum, though as has been pointed out by many commentators here on other issues, future projections are not worth very much! I hold that if we had done nothing, we would have fallen off an economic cliff. Unfortunately, the only way to really know for certain is to have been able to have done the experiment you suggest and then compare the two results. As it is, in my view, some stimulus was better than none. It just wasn’t enough.
NDT,
“If one argues that tax cuts that were extended six months ago versus a “stimulus” that has been in place for over two years is a valid comparison, sure. …”
Well, given that we have had these tax cuts for a number of years, and we just extended them, well then–sure. Also, I would point out that the 2010 Tax Relief Act was mostly about tax cuts and tax code subsidies and rebates. According to the model you have of the economy, this should be boosting output and jobs, right? When we add the 37% of the 2009 stimulus that was aimed at tax relief and subsidies of various kinds, I do not get the argument that you and others raised. If the stimulus bill is ineffective–then why not go back and also argue that tax relief also appears to be ineffective? I know, this does not fit your narrative, but it is unclear what would, given the emphasis we have spent on tax relief as a major mode of fiscal stimulus over the last ten years.
“This is what happens when you elect someone who has never in his life had to take responsibility or accountability for his actions….” OK, for the sake of argument, let us accept this. Would it be fair to assert the same about GW Bush?
Hi ILC,
“No, the situation would be a lot better.” I found the claim at #16 interesting.
“Keynesians then say “Look, there is no crowding out! Government borrowing and spending actually are needed!” But what is needed is that we drop the anti-business policies. If we did, then there would be more private-sector demand for loans.”
This piece of your argument does not actually argue against government spending at the moment as I read it, but talks about the degree and type of business regulation that we ought to have in the US economy, right? If so, the crux of the argument that you raise about fiscal stimulus’ damaging activity, at the moment, is based on the following:
“Having said that, government borrowing is still very harmful to the business climate (i.e., all businesses), in that the sheer scale of the borrowing / new debt raises frightening prospects of future taxation. It reduces the discounted present value of all business efforts.”
I think this is also part of Lucas’ argument, right? I think his is worth considering, though a lot of the things that he points to could have been said about earlier parts of US economic history, especially the 60s (Great Society reforms, etc), and we did not have the kind of situation regarding long term GDP growth then that we have now concerning the current business cycle and where we are in it.
In any case, what about firms’ aversion to the possibility of increased taxation in the future? I grant that this is a real consideration, but I also think you have to weigh it against what a firm is dealing with now–the certainty of lower demand for their products and lower profitability (high U/E really hurts demand…) and a credit/housing sector which is still a basket case. I have looked for stats on credit loans and small business, and I found this tidbit: http://wearethe1s.org/small-business/is-small-business-lending-really-ramping-up/. If you have something a bit clearer or more recent, I would appreciate the link. It suggests that there are two issues at the moment–lenders are not eager to lend to small firms as they are perceived as risky bets and small firms worry about getting burned again given the way banks pulled credit lines at inopportune moments, so they want a stronger economy before plunging back in. The tax rate of the future is not mentioned. Given that only 44% of small businesses make it past 4 years of operation–the fact that the link didn’t mention taxation uncertainty as an issue is consistent with this high die-off rate, so it isn’t clear to me that it would be a major part of the decision process for many small business owners.
Theoretically, I get the point you make, but I think it is just part of the mix. Would you grant that the lack of product demand and risk averse lenders are also real issues here? I do. I argue that there is room for stimulus to raise depressed demand. Given that education and infrastructure investment improve physical and human capital, I think that stimulus in those areas would benefit the long-term economic health of this country, and give a much needed boost to employment right now.
Given that only 44% of small businesses make it past 4 years of operation–the fact that the link didn’t mention taxation uncertainty as an issue is consistent with this high die-off rate, so it isn’t clear to me that it would be a major part of the decision process for many small business owners.
Actually, Cas, we can provide you a real-world example of what your government-first methodology does.
According to 2006 census data, the average payroll of the 647,000 firms with 10 to 19 employees is $436,000. That’s just above the $400,000 cutoff where the full tax penalty will kick in. The Kaiser Family Foundation reports that 62 percent of businesses with three to 199 employees offer employee health coverage. And a White House study released over the weekend said that 22 percent of companies with 10 to 24 employees don’t offer health insurance to their workers. If we take the White House numbers, that’s roughly 142,000 firms sized 10 to 19 that will be charged a penalty, which will average $34,880 per firm.
According to the Census Bureau, the average revenue of firms of this size was $1,768,000 in 2002. So these businesses will pay about 2 percent of their revenue as a penalty under the new law. That doesn’t sound like a lot, but it actually is.
If we look at the data from the I.R.S. Statistics of Income on corporations of similar size, we find that net income averages only 1.3 percent of revenue. If we add in the cost of the penalty for the 22 percent of businesses that don’t offer health care, we get a rough estimate that the proposed tax penalty will wipe out 38 percent of the profits at the average firm with 10 to 19 employees.
So you see, Cas, no bank in their right mind is going to lend money to an enterprise that can predict with absolute certainty that nearly 40% of its profits, aka the money that it will need to pay back the loan, will vanish in two years.
Add to that the fact that Barack Obama is screaming about raising taxes again and the Obama Party is demanding that the corporate tax rate be raised to somewhere near 40% of all revenue, and the problem becomes blatantly obvious.
Oops, link for above.
This is just a great example of how Obama Party decisionmaking creates uncertainty for the business climate. This isn’t even the final Obamacare proposal, which is even worse.
So Cas, if you want to “stimulate” the economy, how about you and your Obama Party stop stealing money from it in the first place?
That’s what makes you really hilarious, Cas. You insist that lack of money kills demand, so you demand “stimulus” — which you pay for by taking money away from productive individuals and businesses.
You are merely redistributing wealth, Cas. You are not stimulating the economy. You are crushing and punishing the productive.
NDT,
My comments to #23, though thank you for the link provided in #24.
Note: On the face of it, it sounds like a sizeable objection–but it also assumes that government is a bunch of bastards or incompetents (or both) intent on screwing Americans deliberately or inadvertantly. I know that this vision fits within a certain ideological framework, but is it true in the case you cite?
The potential problem appears to affect about 2.5% of US employer firms, according to Prof Shane.
“If we take the White House numbers, that’s roughly 142,000 firms sized 10 to 19 that will be charged a penalty, which will average $34,880 per firm. ”
That is 2.5% of employer firms and 0.5% of all US firms
Still an issue I agree, and one that should be addressed.
The good news is that, if you continue to read the link you sent me to the end, you’ll notice this little bit from the second update to your cited June 2009 article:
“The Times reported today that members of the House of Representatives had reached agreement on a plan that would raise the payroll threshold at which companies start paying penalties if they don’t provide health insurance from $250,000 to $500,000. (The full 8 percent tax would kick in at $750,000, up from $400,000.) Though I can’t take credit for having persuaded them, it does appear that the House members realized that too many small businesses would be hurt under their initial plan.”
Your article then kindly gives a link to the actual events of June 2009: http://www.nytimes.com/2009/07/30/us/politics/30health.html?_r=1&pagewanted=2&hp which confirms what your commentator said. It appears that government took note of the problem you cited, and acted in good faith to correct it.
Fancy that.
Yes. But as you pointed out, the problem is not the “uncertainty” – it’s the certainty. The certainty that the government will take morev and more of future profits.
Given the coming damage, successful and responsible small businesses rightly do *not want* to borrow (or expand). Meanwhile, the government is borrowing around 1.6T per year. If you were a bank, which would you rather lend to? The government is clearly the less imprudent bet. Sure enough, banks have been lending – to the government: http://static.seekingalpha.com/uploads/2011/6/2/saupload_usgsec_max_630_378.png
I was trying to say earlier that it’s not a “crowding out” effect that we see working against small business lending at present, so much as a “scaring out” effect. Then idiot Keynesians, who created the problem to begin with (the anti-business climate, with future taxes looming large), say “We need more government borrowing to solve the problem!” They unfailingly offer poison as food, poison as antidote.
Hi ILC,
Yes, banks have been lending to the Government. I would too, if I was getting money for nothing (near zero interest rates) and getting a positive return when I re-lent it. But they can get a higher rate of return lending to small business–but they don’t want to, and small businesses aren’t keen either (risk issues we both agree). As for “uncertainty”, I agree it is an issue. Unfortunately, I don’t think the government and Fed interventions per se are the cause of that uncertainty at the moment. I think that the lack of demand is a main cause. What makes it far worse is the uncertainty over this stand-off over the debt ceiling, with both sides playing chicken. Interest rates might rise precipitously (or not), and if I am a small business, that kind of variability is unacceptable (as it is to a bank, if locked into a long term loan at a given interest rate). What we appear to have is a failure of political will to find a solution. Repubs are locked in by TP constituents, Dems by the realization that if they do as the Repubs want, they can kiss their re-election chances good-bye. If I am a small business or a bank, that is what I fixate on. So, I see probable disaster, unless a bargain giving short term real expenditure increases now, for long term debt reduction over time can be made. Or, corporate donors tell Repubs and Dems to grow up and get things done…
I get the “scaring out” idea (nice term coining, yours?)–its tied to the issue you raise concerning uncertainty. As I said earlier, it could be part of the mix, but I am unconvinced that businesses are fixated on that at the expense of the uncertain demand picture that they see. And that demand picture will not be made better by cutting government spending at this point (maybe in the future, when the economy is on its legs and not wobbly as it is right now). On that, I think you and I disagree.
If we take the White House numbers, that’s roughly 142,000 firms sized 10 to 19 that will be charged a penalty, which will average $34,880 per firm. ”
That is 2.5% of employer firms and 0.5% of all US firms.
And it represents between 1.4 to 2.7 million jobs.
Still think that’s a small amount, Cas? You don’t care if the economy sheds 1.4 – 2.7 million jobs, do you?
I seem to remember you and your fellow Obama Party members shrieking about “2 million lost jobs” or something under Bush and saying that this represented catastrophe. Yet here you are pushing something that could lead to the same number of job losses just in this tiny fraction of the US workforce and you’re claiming that it’s no big deal.
Meanwhile, let me enlighten you to the genius of the actual Obamacare plan — which perversely encourages employers to drop coverage, since it’s cheaper for them to just pay the penalty, penalizes employers who give salary increases, since pushing the average salary above $40k removes any eligibility you have for tax subsidy, and provides strong incentive NOT to hire and in fact to reduce in size, since the costs vastly increase with the number of employees you have.
This shows your Obama Party’s lack of intelligence and experience, Cas. You put in place laws that penalize employers for expanding, hiring/keeping employees, and giving salary increases — and then act surprised when employers don’t expand, don’t hire, cut jobs, and freeze salaries.
So, I see probable disaster, unless a bargain giving short term real expenditure increases now, for long term debt reduction over time can be made.
And here we see the game the Obamabots like Cas play.
Obamabots like Cas whine and cry and scream that government cuts now will kill Grandma and that this problem can be taken care of in the future.
Two years later? Grandma will die again, they’ll take care of it in the future.
Because the Obama Party base is made up of irresponsible demagogues like Cas who scream about Grandma-killing every time government cuts are to be made, CUTS NEVER GET MADE.
The bullshit stops now, Cas. Your Obama promised a cut, and now he’s weaseling. You keep trying to ratchet up these spending levels and never – NEVER – follow through on your promises.
Republicans are humiliating you, Cas. They are showing that you have no intelligent plan, you have no honest argument, you have no real numbers. You just keep screaming about “stimulus” and claim that anyone who says government should stop spending so much wants to kill Grandma.
This is f’ing hilarious to me. Cas and his Obamabots scream and cry about adjustable-rate mortgages, teaser credit card rates, and everything that encourages consumers to make short-term real expenditure increases now as being bad because they make the long-term costs worse — and then turn around and make the exact opposite argument when it comes to their own government spending.
ILC says it best. Poison as food, poison as antidote. The Obama/Cas solution for an economic bullet wound in the foot is to shoot yourself in the chest.
NDT,
With regards to your reply in #28, you do realize that the problem you pointed to earlier (#24) concerning small businesses having to pay ruinous penalties doesn’t exist, right? That they (i.e., gov’t) dealt with this back in 2009, right?
Indeed, Cas; that’s why I said this:
This is just a great example of how Obama Party decisionmaking creates uncertainty for the business climate. This isn’t even the final Obamacare proposal, which is even worse.
Perhaps if you had actually read my post, you would have noticed.
And then I cited the final Obamacare law:
Meanwhile, let me enlighten you to the genius of the actual Obamacare plan — which perversely encourages employers to drop coverage, since it’s cheaper for them to just pay the penalty, penalizes employers who give salary increases, since pushing the average salary above $40k removes any eligibility you have for tax subsidy, and provides strong incentive NOT to hire and in fact to reduce in size, since the costs vastly increase with the number of employees you have.
So basically, all you’re doing here is bringing up a red herring to avoid answering why you support and endorse the final Obamacare law that punishes businesses for hiring and expanding.
Indeed. I missed your very subtle point, since it isn’t what the article actually ended up saying, though you are entitled to your interpretation. But if it keeps you warm, that is fine with me.