It seems like there are two camps on the question posed by the title of this thread. Paul Krugman holding the first position that the stimulus was too small (we will not go there, for those of you thinking innuendo), and the second camp, mainly composed of conservatives, who complain that the results of the stimulus has not helped that much and is producing crushing debt. It would seem to me that evidence for both positions could be found.
See this link: http://www.calculatedriskblog.com/2009/07/second-stimulus-debate-geithner-vs.html
I have never taken an economics class, but I am impressed by the fuzziness of the discipline. I am interested in psychology, so I am reasonably tolerant of methodological uncertainty. Is there such a thing as experimental economics?
If we look at history, one interpretation is that the stimulus programs of FDR in the 1930’s were successful, in at least making a bad situation less worse. Does that sound familiar, or not?
Amity Shlaes suggests that the FDR administration’s hostility toward wealthy people and the ineffectiveness of government interventions actually prolonged the great depression. In fairness RE: this source, Shlaes is a conservative Wall Street Journal editorial commentator.
http://www.harpercollins.com/books/9780066211701/The_Forgotten_Man/index.aspx
So, who is correct in their assessment? The right, the left, both, or neither – please offer your opinion; it can’t be any worse or better than those out there already. Thanks!
iggy donnelly
PrairiePopulistsAndProgressives.net 
Amity Shlaes even suggests that FDR got the whole concept of “the forgotten man” wrong. The term was originally coined to describe the person who was working and paying taxes for programs determined by elitists to help those with less resources – pretty conservative I would say…
But what choice did FDR have? There were millions of people literally starving to death and no prospects of work anytime soon. So, was he expected to turn his back and simply go on eating his lavish meals in the White House and tune out the sounds of the average American?
In today’s society of these Conservative Republicans, I can imagine the majority of these so-called compassionate Conservatives doing just that.
Where is the feeling of ‘We the People’? If the country is divided between the haves and the have nots – what kind of country will we really have?
But I do think we have gone too far in giving help to people who only abuse the system. But let’s fix the system we have, not just stop helping people entirely.
And therein lies the problem: the so-called compassionate Conservatives are anything but. Lend a hand to your fellow man? How much is it going to cost me? Health insurance? I got mine; go get yours. Bible beating Christian? You betcha, as long as it doesn’t cost me anything.
Every time a program comes up that could help people, the right wing comes back with, “Someone might scam the system, ergo, it’s bad.” Of course some people will try to scam the system. They’ve been doing it since the first rock was used for trading. You can make a program as scam proof as possible, but it’s going to get scammed nonetheless.
The bailout was and is a bad idea in my opinion. The only entity too big to fail is this government. AIG, BOA, and the rest should have either failed or not on their own. It’s called doing business. It’s called Capitalism. That business put itself in the position it did is not a problem for the government to fix; the market would have taken care of that.
Yes on the bailout and Capitalism, but remember who first jumped in with the bailout–those capitalism worshipping Republicans.
That first bailout was the worst handled. No oversight, just hand ’em over a check. What irked me was when they turned around and gave the automakers the third degree. Why? If the first bunch got by without even a slap on the wrist, why make the second the punching bag? Bad form, Congress, as Cap’n Hook would say.
I don’t agree or disagree with the bailouts. What I do believe is that something had to be done. Yes, maybe the banks could fail, but if we look at when that occured during the Depression, it nearly crippled the country. The same goes for the automakers. How many jobs would have been lost on the ones already lost in the past? Could we afford losing those? OTOH, if the car guys had done what they should have back in the late 70’s and making fuel efficient cars, we wouldn’t be in the pickle we’re in with fuel now.
It’s a conundrum=A paradoxical, insoluble, or difficult problem; a dilemma: “the conundrum, thus far unanswered, of achieving full employment without inflation” (Arthur M. Schlesinger, Jr.)
(so nice of dictionary.com to give a quote that applies.)
The conservatives routinely exclude from “worth” anything that helps those they regard as undeserving–it’s a long list.
The more seminal question is whether helping the presumably undeserving in the long run helped the economy. I suppose there is certainly the standard share of fraud, theft and waste (what Mark Russell called “the Departmenet of FTW), but there is little question that keeping those on the edge from being completely crushed helped this nation recover.
Rural electrification was an unqualified success.
Shlaes’ premise is typical for the rabid oligarches at the WSJ editorial staff. It ignores the inconvenient fact that the prosperity of the 20’s was generated by the same type of disposable paper wealth we saw in the 1880s and the 1990-2000s; that in each instance, a tiny slice of the wealthy maximized their wealth, leaving crumbs for the rest of the populace; and the very essence of democracy was threatened by the power that this wealth wielded.
Because people like Shlaes want it that way. Anything less threatens their profit margins.
Put me firmly in Krugman’s camp. Geithner’s approach has made America safe for political powerhouses like Goldman Sachs, but props up the banking industry at the ultimate threat to the rest of the economy (no, I’m not saying “let them fail,” but no accountability exists for the financial institutions–particularly Goldman-Sachs–in official Washington, because if you over the people in charge these days, regardless of party, they are, to a shocking degree, in the banking industry.
And FDR took on these types not because he was a radical out of undermine basic American capitalism but because, in my own speculative view, he was a unique combination of power-privilege and vulnerability, having grown up among the elite (and seen their ways), yet having lost the use of his legs, and felt the sting and not-subtle judgments inherent when one is dependent on others for simple daily tasks.
In short, FDR “got” it in a very unique way.
And conservative hysteria notwithstanding, this isn’t rocket science:
Income Gap Is Widening, Data Shows
By DAVID CAY JOHNSTON
Published: March 29, 2007
Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows.
The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression.
More here
Thanks for this excellent post, Zippy. I enjoy learning stuff here.
My father’s parents thought that FDR was a saint, in much the same my father thought Kennedy was. Thus, as it should be clear, I come from a long line of Democrat suckers.
Shlaes account is pretty clearly slanted to the hard right position. But FDR really did seem to hate and take after very wealthy people. Mellon (I presume the one whose name was used in the university in Pittsburg, PA) was a favorite target of FDR’s. To me, it was not clear why those folk inspired his wrath so much.
Your first sentence nails it, Zippy. And that “worth” is determined by them. Not rich enough? You’re not worthy.
Strange that most of those we know “somewhere else” think they belong in the worthy crowd, when if truth were known, they’d be kicked to the curb like the rest of us.
I agree with you jammer about the bailout but when Bush started it, then was Obama obliged to follow through with it?
Even when Obama came out in favor of capping the CEO’s salaries to $500,000 – who was it that ranted the loudest about it – Republicans.
Even now with the regulations that Obama is trying to put back into place to prevent a future Wall Street meltdown and what do we hear from the Republicans?
On the Opinion Line when some Republican blamed Clinton for the Wall Street meltdown, I reminded them of the Gramm, Leach and Bliley Act of 1999 that did away with most of the banking regulations and that was passed through a Republican-controlled Congress.
Of course, any self-respecting Republican will refute that little detail as ‘liberal media bias’. Yeah, right.
BTW – You’ve noticed the only company that was allowed to go bankrupt was GM. And isn’t that sad, in a way? An American company that has been around for many, many years is allowed to go belly up while the Wall Street banks are allowed to keep going and then to come back for more taxpayer money multiple times.
I SO agree with you on the GM thing, Lilac. Absolutely rotten.
When I went to see Terry Fox in person, one thing I noticed was the change in the sermon from the good old days. Everyone use to walk out of church secretly checking both side of your rump to see if anything was left after the butt chewing. During Fox’s sermon it seem to focus on wealth and stressing that God wants you to achieve. LOL also how to stripe an engine down to a short block?
But the general theme was that if you achieve it’s because of God’s will you achieve and if you fail that to is God’s will. The compassionate Conservatives are influenced by such teachings, therefore it is God’s will so there! Those in need of help, to help them it is against God’s will and if you help you are against God’s will.
As to the stimulus, only ten percent has been sent out so as of yet there is not a real effect. My question would be why has not more been sent out? Republicans can not say it failed because as of yet it has not been spent. Democrats can not say there is a need for a second since the effects of the first has not been felt with only ten percent spent.
Actually, Lilac, Chrysler was also involved.
My opinion; both camps are correct. The stimulus package was and is underfunded; the pork that was included in the bill that was passed did expand the deficit for no return.
My concern has been and continues to be that the recovery in the economy which appears to be starting will be, for the most part, “jobless”. Frankly, the economy, whether local, national, or international, has not needed to employ all those heretofore employed therein for some 20 years (or more) and this “wring out” was more painful than it otherwise needed to be due to actions taken in prior years and other down times to hang on to employment that really wasn’t needed in an efficient economy.
On the local level, who recalls the political maneuvering that amended the IRC to allow for faster write-offs of business aircraft the last time there was a downturn? This created artificial demand and thus artificial employment levels in this industry, which has led to major layoffs this time to correct the problem. If the “market” had been allowed to function earlier, there would have still been employment losses this time; in smaller numbers to be sure, with hopefully other employment having been generated here in other industries to soften the blow somewhat. We are paying the price for the blinders worn, voluntarily, for so long in doing everything possible for aircraft at the expense of other businesses and industries. Wichita is not alone in this; think Pittsburgh, PA and steel; Detroit and motor vehicles for two other examples. Much as steel production has changed in Pittsburgh, and autos will be changing in Detroit, the corporate/personal aircraft market will need to change here for there to be any future.
6176 – Thanks for keeping me honest…I knew after I posted that I should have included Chrysler.
I’m really torn about this bailout and stimulus spending. I can see the need for it but it really burns my britches that we allowed ourselves to get into this mess in the first place!
And where is the accountability for past behavior? Are we simply rewarding bad behavior – but in the case of GM/Chrysler, we just let them go belly up but no one else is allowed to?
One part of me says to just let everyone that ran their company into the ground to go belly up but then the other part of me (the practical side) asks what harm will do that do to the rest of us that did not make bad decisions?
If the aircraft companies had been smart, they would have diversified years ago. Look where they could be now, leading the nation in things like wind generators.
Oh, well.
I’m with Zippy,
The bailout was a farce, IMHO we should have nationalized the too big to fail investment banks split them up and sold off the assets.
Stimulus who knows too early to tell.
annie – but if Obama had nationalized the too big to fail banks – then what political points would that have created for the Republicans?
They were already calling Obama an evil socialist during the campaign and if he had nationalized the banks, then wouldn’t that just be giving them his head on a silver platter?
And with our future back into the hands of Republicans – who still take no blame for the economy mess – would our country be better off?
“My concern has been and continues to be that the recovery in the economy which appears to be starting will be, for the most part, “jobless”. Frankly, the economy, whether local, national, or international, has not needed to employ all those heretofore employed therein for some 20 years (or more) and this “wring out” was more painful than it otherwise needed to be due to actions taken in prior years and other down times to hang on to employment that really wasn’t needed in an efficient economy.”
spot on 6,
I might add the next bubble forming is in education and health care.
annie – but if Obama had nationalized the too big to fail banks – then what political points would that have created for the Republicans?
lilacluvr,
I read alot of econ blogs, Calculated risk is one of them. What I take from the comments there are people are very disappointed because something along those lines didn’t happen. Team Obama has just not given us change we can believe in.
As far as the wingnuts are concerned there is nothing Obama could that would make them happy.
Of course, you’re right abot the wingnuts never being happy with Obama – but I know how fickle politics can be and with this economic tightrope Obama is walking right now – why just give these wingnuts ammunition for their wingnut guns?
“I have never taken an economics class, but I am impressed by the fuzziness of the discipline.”
Iggy, I loved that line! Me too, and I have nothing worthwhile to add to the discussion, just wanted you to know that these “experimental economics” you mention in the thread header seem to be working to some extent.
I do remember Prairiepond, who does know economics talking about velocity — money needing to move, be spent, be lended… And even tho the banks were bailed out, are they lending? Are they doing their part in this velocity?
Like I have said before, I am torn about this economic mess issue. And I, too, do not understand enough of economics to really know what the true answer is to this problem.
But when I hear these big banks have received multiple bailouts of taxpayer money and they are still in trouble, and then they are not lending money to consumers but to each other – then why did we even bother to bail them out in the first place?
When is enough going to be enough?
I am in the camp that I don’t know if the stimulus actually helped. I would think not b/c it really isn’t hasn’t shown anything. So maybe we are at 10% unemployment instead of 10.5% without.
As far as the banks are concerned, much of the issues was with Congress interfering with the banking system and saying they had to go outside of market determination and provide loans to those with not so good credit. They backed it with Freddy and Fannie so the banks agreed. As long as the market continued to rise everything is good.
I think the bank stimulus was more a reaction to prevent a run on the banks. If people thought their bank would collapse, they would make a run on it and it would collapse the entire system. Many of the banks who recieved money have already paid it back. The others are under tight government regulations until such time as they do. I don’t know if the auto industry or others are planning on paying it back.
I tend not to believe in over government regulations but I have to agree with the sentiment that if you are too big to fail, you are too big. Relative to the auto industry, the only thing I would have wanted to see the gov’t provide a bailout for is to protect the pensions if there were a major collapse of the industry.
The only real stimulus should have been in creating gov’t jobs to improve the infrastructure. Create a national rail system, etc.
The only real stimulus should have been in creating gov’t jobs to improve the infrastructure. Create a national rail system, etc
====
I thought that was what Obama had planned with the stimulus. Did the plan get hijacked by politics or have the funds not been released yet?
Is or isn’t some of the auto industry now “nationalized”? I admit to hearing something about that, but don’t recall the final announcement on it. Hey, I can’t keep up with everything!
As for a national rail system, it would be nice if we could get that south route to OKC, then on to Dallas and beyond. I’d be on that baby several times a year to visit a friend. Depending on gas prices, the cost is about the same as driving it, but there’s no wear and tear on the vehicle, and I could sit back and relax! Take my laptop or portable DVD player and enjoy a couple of movies both ways. 😉
Don’t get me started on Wichita’s “public transportation”.
If GMC and Chrysler would have been allowed to fail outright, the economy of SE Michigan and the rest of the state would have seen beyond Great Depression levels of unemployment. My home state would have taken a shot that they never could have recovered from in hundreds of years.
The banks and investment house could not have been stripped down and their assets sold off – that was the issue – they were upside down – their assets were worth far less than their liabilities.
The problem with letting a company like AIG (and the others) fail is that billions upon billions of pension dollars would have been lost. Millions of unsuspecting American seniors and soon to be retiring baby boomers would have awaken one day last fall to find that their nest eggs were gone completely and any thought of retirement was impossible.
Republican deregulation got us to this point – now it is up to the Democrats to clean up the worst fiscal disaster since 1932.
It ain’t gonna be easy and it will take time.
And it ain’t gonna be pretty either, biker.
One big question is – will Americans have the patience to ride this economic mess out with Obama or will they want to jump ship and board the Republican’s Titantic for one more trip around the iceberg?
“Republican deregulation got us to this point – now it is up to the Democrats to clean up the worst fiscal disaster since 1932.”
Bad Biker…while republicans controlled congress in 1999 there was vaste support among Dems. And Bill Clinton doesn’t believe dereg was the cause of all this…
See this http://online.wsj.com/article/SB122282635048992995.html
“The Gramm-Leach-Bliley Act passed the Senate on a 90-8 vote, including 38 Democrats and such notable Obama supporters as Chuck Schumer, John Kerry, Chris Dodd, John Edwards, Dick Durbin, Tom Daschle — oh, and Joe Biden. Mr. Schumer was especially fulsome in his endorsement.”
Were these Democrats taking donations from Wall Street lobbyists or were they making some kind of backroom deals with the Republicans as to if they voted for this act then the Republicans would bring certain bills the Democrats wanted to the floor for debate?
Politics makes for strange bedfellows and deals are made all the time. Is this one of those times?
“Bad Biker…while republicans controlled congress in 1999 there was vaste support among Dems. And Bill Clinton doesn’t believe dereg was the cause of all this…”
There are reasons that Bill Clinton was call the “best Republican President ever.”
That aside, there was additional deregulation during the Bush Admin in addition to willful ignoring of existing regulation.
The auto industry failure was of their own doing – they made the foreign auto makers look like Ali to their Foreman.
They should have realized that the story wasn’t going to have a happy ending when South Korean makers like Kia and Hyundai appeared from nowhere and carved out market share. Those two companies started from scratch and now have a better reputation than GMC and Chrysler.
Nice going, Detroit.
Nice going, Detroit.
twas globalization that killed Detroit. The world is swimming in excess manufacturing capacity. Capacity has to match consumption, the credit bubble masked what the real demand was. Also cars last longer. The one I drive is ten years old. I have gone through 3 sets of tires and 2 batteries zero mechanical problems. I have no incentive to buy a new car.
annie, are you saying cars made now last longer? If so, I strongly disagree. Detroit started making throwaway cars. I know, I had one. I loved it.
And now I drive a 1990 Chrysler Fifth Avenue. It’s a bit of a boat, but the gas mileage isn’t bad. And it RUNS. I learned long ago not to be too proud. BTW, my son-in-law bought me the car. It had been his mothers. How can I not love that guy?
“twas globalization that killed Detroit.”
Detroit killed Detroit by being fat, lazy and happy.
In a Toyota plant in the United States, they can change models manufactured in a matter of four hours. For GMC, et al, it takes weeks.
The Japanese auto manufacturers can develop a platform (the basic chassis that several models are made from) in three years. Detroit takes seven years to accomplish the same thing.
Japan and German moved towards supercharging and turbocharging smaller engines to gain horsepower while making mileage improvements long ago. Detroit has yet to use the technology on anything but high end products.
Detroit can do it if they choose – some American high end products rival the best that the world has to offer. For example, the Cadillac CTS – V, supercharged V-8, four door sedan rivals the best from Mercedes, BMW, Audi and Lexus, while being priced below the competition. It has every performance trick in the book down pat, while costing thousands less.
So why can’t Detroit make a Civic, Camry or Scion xB?
For that matter, why can’t they make a Subaru WXR or a Kia Sportage or a Hyundai Sonata?
Hell, SUZUKI makes a four door, all-wheel drive sports sedan that has fabulous performance while getting thirty miles per gallon.
And really, why can’t most Americans shift their own gears?
I’ll take a manual transmission over automatic any day. Back when I was in driver’s ed, we learned to drive stick. To be honest, I’d never been behind the wheel of any car before that first day, and I embarrassed the hell out of myself. The only distance I got was when the car lurched forward and died. But my uncle took me out on the country road near his house and put me in his old farm pickup and told me to just go. By the time the afternoon was over, I could drive a 3-speed on the column of an old Chevy pickup almost as good as the rest in the class.
I guess I’m just an old-fashioned girl. 🙂
My daughter is learning to drive. My parents live near Anness, KS and I taught my son to drive on the country roads around there (the very beginning steps, that is). Emily was driving out there last week and nearly ran over my parents’ mailbox. The thing about turning corners, you can’t teach it by lecturing – people have to experience it, ya know. I may be getting too old for this level of excitement, though.
Anness? Really? I was just out by there a couple of weeks ago. I had to hunt down my ex who was working in the field about 3 miles west of the elevator to get a key.
The farm where I lived while married was only a few miles from there, and we took our wheat there every year during harvest, until the last few.
Uncanny. I bet I know some of the same people your parents do. Neighbors. I might even have played bridge with one couple.
“annie, are you saying cars made now last longer?”
Yes compared the 60’s, 70’s and 80’s they last much longer.
“And now I drive a 1990 Chrysler Fifth Avenue.”
I believe that makes the car 19 years old.
——–
Detroit killed Detroit by being fat, lazy and happy
Hmmmm me thinks Detroit put most of their eggs in the SUV and bigger truck niche. From what I understand it was the most profitable for them. Gas prices and legacy costs [health care] went through the roof and then the credit crunch
I still think there are too many car makers. The Indians and Chinese have entered into the game too.
http://auto.indiamart.com/cars/
With Korean cars carrying 100,000 mile warranties, Detroit couldn’t keep up. The “Smart” car from Mercedes only has a 24,000 mile warranty, and uses premium. Ridiculous.
China will soon offer a plug-in electric car. It will get here before GM’s electric car does, assuming GM offers any new cars ever again…
The Chinese are coming after our car market. They will likely buy up some bargains available in Detroit, MI, too.
If that means jobs for workers, no complaints from me.
I believe that makes the car 19 years old.
Depends. (No, not the wearable kind.) I was introduced to the 2010 Prius a couple of weeks ago. Yes, I was drooling, but it wasn’t over the price tag.
(maybe the precursor to the National Lampoon?)
Correct. If I recall, Doug Kenney and Henry Beard both worked on the publication as students, then founded the magazine after graduating.
What the hell. . . .how did I end up here??
Nevermind. . .