The surge^H^H^H^H^Hstimulus is working!

NYT gathers projected counterfactuals...

Blaming the president for unemployment

Megan says bugger off:

The president has very little control over employment in the economy. The stimulus undoubtedly kept the economy from losing even more jobs than he did. But the economy is undergoing a hell of a deep structural adjustment: from debtors to savers, from housing-and-finance led growth to . . . well, if we knew that, the recession would already be over. Those adjustments need to happen, because the previous situation was totally unsustainable. But they definitionally imply higher unemployment and less consumer demand in the short run.

A third stimulus might lower the unemployment rate a little, at least from where it would otherwise be. But it would not put us back at 5% unemployment, and it would have a lot of other costs, including further risking our AAA bond rating. Stimulus is at best an incredibly blunt instrument. And it is made blunter by all of the procedural checks we've accumulated over decades of government growth, not to mention very powerful public sector unions. FDR could tell his government to go out and hire people to paint hallways or build dams. The current president needs Environmental Impact Statements, public review periods, and the okay of ACFSME.

The fact is, most of the time, the best the president can do is avoid making things much worse. And though I have many disagreements with the specifics of Obama's policies, I'd say that largely, he's kept from making stuff worse, and eased the worst of the damage on hurting families. We could be doing more with more generous unemployment benefits or other income assistance, less with atrocious auto bailouts. But the economics of recession is truly a dismal science, and demanding that the president cure the recession is about as effective as expecting him to cure Hep C.

Agreed on all counts.

But this won't stop me from gawking at the laughably rosy scenario Obama's economic team painted to sell the stimulus last February:



Though I suppose reassurance is part of the president's role, so as to avert greater panic. Don't worry people, everything is gonna be just fine!

Unemployment update

Better GDP numbers and the stimulus

In a typically wonkish post that's fairly over my head, Econbrowser argues that the 'American Recovery and Reinvestment Act' did not contribute much to the recent less-bad-than-expected growth, and that its most positive contributions to GDP are yet to come.

So I'm still of the opinion that most of its handouts to Democratic interest groups were unnecessary pork that's going to come later than would have been helpful, and crowd out some of the more desirable private investment during the coming recovery period.

In its place, I think a more immediate disbursement of funds, such as in the form of a payroll tax cut, would have been more immediately stimulative and helpful for the lagging employment numbers that are still very poor.

Bad news is good news

USA Today:

WASHINGTON — The public's confidence in President Obama's ability to handle the economy is eroding amid concern about higher federal spending and expanding government power, a USA TODAY/Gallup Poll finds — a development that could complicate his efforts to push a health care plan through Congress in the next few weeks.

In the survey, taken Friday through Sunday, Americans by 49%-47% disapprove of his handling of the economy, and by 44%-50% disapprove of his handling of health care.

WaPo shows a similar drop.

This is a welcome development, given how:

1) The stimulus was mis-sold as something that would have immediate, short-term benefit when it was a more of a slow giveaway to Democratic interest groups without the nearer-term benefit that tax relief would have provided.

2) Health-care 'reform' devolved from cost-cutting, spending-reducing promises to something that seeks to soak the rich and expand entitlement coverage--thus exacerbating solvency problems in a misguided quest for universal coverage rather than helping to solve them.

Welcome back down to Earth, Mr. Obama. Now try to find a way to "make the hard choices" you've given so many pretty speeches about that doesn't involve morphing the phrase into a glorified euphemism for raising taxes and increasing entitlement spending.

How stupid do they think we are?

I hope other lefty economists have some shame.

Heckuva job, stimulators

Here is the graph that was used to sell the stimulus in February, updated with later unemployment numbers:



Obviously this new data means we need more government spending, as our enlightened technocrats from the left will surely tell us.

It's like the Iraq war, man. When something isn't working as planned and in fact producing an outcome worse than your original projected baseline, clearly the patient needs more medicine. Let's hear it for a stimulus surge!

Dig us deeper, man...

As Paul Krugman preemptively wrote:

I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now [this happened], is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.”

Let’s hope I’ve got this wrong.

According to Obama's economists, he did get something wrong--the plan didn't limit unemployment relative to their baseline. It is not the case, as Krugman feared, that the stimulus was too small--but rather, even with a more moderate stimulus, things are worse than the predicted non-stimulus baseline!

The real problem here is that projected baselines of economic performance are always uncertain. And no matter how bad employment numbers get, lefties like Krugman will argue things would be worse without their spending programs. That's the magic of "jobs created or saved".

Free* government money!

* we'll tax you later

Heading to Canada might actually become a good option...

Factoid of the day: $670 billion so far

TMV:

According to the National Priorities Project, the War in Iraq has now cost American taxpayers $670 billion. That stands in stark contrast to the $100 billion to $200 billion pricetage estimated by President Bush’s chief economic advisor in September 2002 or the $50 billion to $60 billion estimate offered by the White House Office of Management and Budget Director in 2002.

I think $670 is a lowball estimate, as I've seen estimates in the $2-3 trillion range for the final costs of the war, which takes into account costs to individuals that don't appear on the government's war spending budget.

But this is why it's difficult to get worked up about Obama's $787 billion stimulus. Both boondoggles to feed the respective party's interest groups, but I know which I'd prefer.

The allure of high speed rail

DIA:

[..] $8 billion in stimulus money and $5 billion over the next five years for high-speed and intercity passenger trains.

Richard Florida, an Atlantic correspondent, has a long, thoughtful and information-rich post about high-speed, intercity rail networks in America. He presents a map that shows the potential links, but the real gem is a table down below showing travel time between cities at French TGV speeds. As Mr Florida notes, putting Philadelphia 36 minutes from New York, and San Diego 46 minutes from Los Angeles—and that is 36 and 46 minutes of train-time, meaning productive time, not 36 and 46 minutes in the air, meaning 3 hours of airport misery—would effectively make those cities into suburbs.

Among all the things we're throwing money at, this sure seems like one of the better ones.

Evaluating the stimulus

Greg Mankiw has a question for 'senior administration officials':

Going forward, what macroeconomic data would you have to observe before you concluded that the stimulus bill has been a failure? Or will you conclude, no matter how bad things get, that the economy would have been in even worse shape without the stimulus? And if the latter is the case, aren't these quarterly reports just a bit surreal?

Pandemic flu planning is not stimulus

Democrats are jumping on the revelation that Sen. Susan Collins (R-MN) objected to funds for pandemic flu planning in the stimulus bill.

I'm with The Economist's New York blogger:

Stimulus bills are meant to quickly stimulate demand in the economy and create jobs. They are not meant to account for all unforeseen contingencies. Congress could've included all sorts of funding in the stimulus—volcano monitoring, tornado tracking, alien surveillance—if the only reason needed was "just in case". Perhaps it's not the best time to brag about it, but Ms Collins was right to oppose the inclusion of this funding in the stimulus measure. Put those items in the annual budget, where they belong.

Update: A more valid criticism of the GOP is that they've delayed the confirmation of a HHS secretary.

Converting federal stimulus handouts into commensurate state tax cuts

Missouri House Republicans have the right idea:

House leaders are now working to direct $1 billion of the state’s stimulus share toward an 8-percent state income-tax cut for the next two years.

[..] The new plan would reduce the state income tax rate from 6 percent to 5.5 percent for two years, said House Budget Chairman Allen Icet, a St. Louis County Republican. The cut would apply to earnings from 2009 and 2010.

“At the end of the day, the Missouri taxpayer will be able to put more money in their pockets and decide how it should be spent to stimulate the economy,” Icet said.

Of course, state Democrats aren't keen on the idea—because they believe they can spend stimulus money better than the public. It's just typical lefty arrogance.

Spending free fall

Free speech for terrorist sympathizers!

Yesterday I wrote "Free speech means defending the vile" and compared it to protecting the rights of terrorists and other criminals to due process.

As it turns out we can almost do both at the same time. Here is the first U.S. Based Pro-al Qaeda Magazine:


(meme) The Jawa Report:

It's called Jihad Recollections and is a production of Charlotte, NC al Qaeda supporter Samir Khan's self-styled jihad media company, as-Fursan. You can download a PDF version at the links provided by Sammy here.

The magazine is 70 pages of the same kind of garbage that you'd expect from al Qaeda itself, and certainly not from an American living in North Carolina. It seems to be imitating several other jihad magazines, which started with al Qaeda in the Arabian Peninsula's Voice of Jihad.

In addition to links to al Qaeda produced videos all within a clear context of support (note to Sammy: many of your links don't work. Better luck embedding them next time) It includes two English feature length articles by al Qaeda's #1 and #2: Four Practical Steps to Expand the Global Jihad, by Osama bin Laden, and Have We Forgotten Who Is America?, by Ayman al-Zawahiri and Nasir al-Fahd.

Another article is a translation of an al-Qaeda produced video extolling the virtues of former operational leader Abu Laith al-Libi.

There's some fairly laughable poetry, articles about getting in shape (do I look fat in this bomb belt?), what appear to be advertisements but are really links to al Qaeda videos and sermons by the likes of American jihad supporter living in exile Anwar al-Awlaki.

Sammy's authors also warn Muslims in the West not to integrate and there is even an article predicting that Islam will one day conquer Rome. Don't worry, the author seems to mention Rome only metaphorically. In fact, by Rome he seems to mean either Saudi Arabia or the United States (Yes, it's that poorly written and is filled with the quotes from Osama bin Laden and an odd assortment of conspiracy theorists.)

The most worrisome articles, though, aren't the two aimed at teaching wanna-be terrorists about the technologies behind EMP and night-vision --- even though we are told that "through war booty, we can expect to see more mujahideen using night vision in their strategies." No, I think the most worrisome article is one entitled Principles of Guerrilla Warfare.

Clearly the point of the magazine is to gain sympathy for al Qaeda, the Taliban, Shabaab, and any other violent Islamist terrorist organizations (except, of course, Shia terrorists who Sammy claims are murtadeen [apostates]).

I'm not sure what allowing the likes of Samir Khan --- and whoever his coauthors are --- to vocally support the enemies of the United States and to incite others during a shooting war to lend support to those enemies [note, though, that while Samir encourages others to go off and fight the kaffir Americans in Iraq and Afghanistan -- reminding Muslims of the personal obligation of jihad -- that he conveniently writes this from an affluent suburban Charlotte home from the comfort of mommy and daddy's basement] says about where our country has gone?

Seems to me it says our country is still here, still operating under the first amendment. We allowed people to disseminate information on how to make explosives or enemy propaganda during other periods.

But I especially like how they had room to question Obama's economic stimulus package. That's a real doozy.

Update: Some info from Wikipedia:

In the landmark decision of Brandenburg v. Ohio, 395 U.S. 444 (1969), which expressly overruled Whitney v. California, 274 U.S. 357 (1927) (a case in which a woman was imprisoned for aiding the Communist Party), the Supreme Court referred to the right to speak freely of violent action and revolution in broad terms:

[Our] decisions have fashioned the principle that the constitutional guarantees of free speech and free press do not permit a State to forbid or proscribe advocacy of the use of force or of law violation except where such advocacy is directed to inciting or producing imminent lawless action and is likely to incite or produce such action.

Back to the future economics

From ten years into the Great Depression:

We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong . . . somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. . . . I say after eight years of this Administration we have just as much unemployment as when we started. . . . And an enormous debt to boot.

—Henry Morganthau, FDR's Treasury Secretary, testimony to Congress, May of 1939

Clearly our high school text books have been wrong on the economics of the New Deal, though unfortunately right on the popularity of the politics. For what economists understand to have actually ended the Great Depression, see the two theories.

Another fun fact: at the time Ronald Reagan was an admirer of FDR and supported the New Deal.

Exceptional irrationality

HuffPost:

In an interview with U.S. News & World Report, conservative Christian leader Pat Robertson denounced talk show host Rush Limbaugh for saying he wants President Obama to fail.

"So you don't subscribe to Rush Limbaugh's "I hope he fails" school of thought?" asked interviewer Dan Gilgoff.

"That was a terrible thing to say," Robertson responded. "I mean, he's the president of all the country. If he succeeds, the country succeeds. And if he doesn't, it hurts us all. Anybody who would pull against our president is not exactly thinking rationally."

After the election, Robertson pronounced himself "remarkably pleased" with Obama and not so happy with President Bush. Robertson told Gilgoff that Obama hasn't been "as skillful" since taking office but that he wants "to give him the benefit of every doubt, and I definitely hope he succeeds."

Limbaugh has repeatedly expressed his desire to Obama -- and the stimulus package -- to fail.

Yeah, "you really have to be out there for Pat Robertson to accuse you of not thinking rationally."

David Brooks on the stimulus

The Conversation:

This is going to unleash the familiar debate on what should be the role of policy intellectuals in the White House. Some dumb Republicans are going to get some mileage by attacking the idea of a White House run by geeks. Some smug Democrats are going to claim that of course they have intellectuals since they are the party of reason and intellect.

The correct position is the one held by self-loathing intellectuals, like Isaiah Berlin, Edmund Burke, James Madison, Michael Oakeshott and others. These were pointy heads who understood the limits of what pointy heads can know. The phrase for this outlook is epistemological modesty, which would make a fine vanity license plate.

The idea is that the world is too complex for us to know, and therefore policies should be designed that take account of our ignorance. Whether the Obama administration understands this is an open question.

Geithner seems to. He designed the outlines of a bank bailout plan on the supposition that government can’t accurately price toxic assets, or effectively run banks. That was nicely modest, though the infants on Wall Street, who are seeking a savior, panned the idea.

On the other hand, the stimulus package was designed by people who have complete faith in government technocrats, who think an agency can triple its size overnight and still be managed efficiently, who think government knows enough about business to set salaries. Some people think government officials know enough to run the auto industry.

[...]

This stimulus has two gigantic problems. One. It forever after raises the budget baseline. That means it’s true cost, as The Washington Post reported, is $3 trillion. We’re going to have budget deficits worth 15 percent of gross domestic product, and there is absolutely no political path to addressing them because there is no bipartisan trust. No one party can move alone when it comes to cutting benefits and raising taxes.

In other words, a no-exit-strategy stimulus exacerbates our long-term disaster.

My second problem is the greed. Shoving permanent programs into a stimulus bill means you get a lot of terrible permanent programs. We need a fundamental rethinking of our infrastructure policies, but instead we just throw fast money into obsolete and useless programs (see Popular Mechanics’ reporting on this). Instead of carefully planning a new Head Start, we’re going to try to throw together a bunch of programs in a rushed stimulus fashion. The evidence shows that good Head Start really works but bad Head Start is terrible. We’re going to get the latter.

As for the broader point that capitalists can be pretty dumb. Granted. But the market does have a mechanism for educating itself: prices, and in some cases bankruptcy. Government lacks a self-correction mechanism, or at least a good one.

The odd thing is very few conservatives consider me conservative any more because I am so pro-government. But the events of the past few weeks have made me sound like a raving libertarian. The administration has taken its faith in government to such an extreme I’m turning into Ayn Rand. Help!

Non-Keynesian macroeconomist "not equipped to debate"

There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy.
— President-elect Barack Hussein Obama, January 9, 2009

In response, the Cato institute took out an ad in the Times and the Post which reads:

With all due respect Mr.President, that is not true.

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

I too believe this, and I meant to post about it earlier but Yglesias reminds me via this curious anecdote from UC Davis Economics Department Chair Greg Clark:

Recently a group of economists affiliated with the Cato Institute ran an ad in the New York Times opposing the Obama’s stimulus plan. As chair of my department I tried to arrange a public debate between one of the signatories and a proponent of fiscal stimulus — thinking that would be a timely and lively session. But the signatory, a fully accredited university macroeconomist, declined the opportunity for public defense of his position on the grounds that "all I know on this issue I got from Greg Mankiw’s blog — I really am not equipped to debate this with anyone."

He's certainly more qualified to debate the stimulus than an average joe like I am -- indeed I'm not even knowledgeable enough to know how much I don't know.

But if you think you're unequipped to "debate with anyone" I really don't see how you can justify signing an open letter to the President which gets waved by Republican congressmen on the floor of the House and Senate.

Damned if you do, damned if you don't.

Some stimulus opponents criticize Obama for only waiting 3 days before signing the bill, saying he should wait longer.

Others complain he should NOT have waited 3 days if it was so important.

So which is it kids?