STOCK MARKET WATCH -- Friday, 10 February 2012

[Demeter]

18. Tie U.S. Recovery Program to Economic Indicators: Peter Orszag

http://www.bloomberg.com/news/2012-02-08/tie-u-s-recovery-program-to-economic-indicators-peter-orszag.html

THIS IS A VERY IMPORTANT AND TROUBLING IDEA. "STABILIZERS" ARE SOCIAL BENEFITS. CREATING A PERMANENT "KETTLING" OF PEOPLE FROM THE "ELITE" SO THAT THE "ELITE" CAN RIPSAW WHATEVER, WHENEVER, AND THE PRICE IS REMOVED TO A LATER DATE...IT'S LIKE PENICILLIN FOR ORGIES...EXCEPT, THE GONORRHEA GERM IS BECOMING RESISTANT...

...Automatic stabilizers are components of the budget that cushion the blow from an economic decline, without the need for emergency congressional action. For example, when the economy weakens, tax revenue falls and certain forms of spending -- such as unemployment insurance -- automatically increase. The net result is to attenuate the impact of a recession, by providing stimulus right when it’s needed. As the economy recovers, the stabilizers recede, mitigating the longer-term effect on the budget deficit.

What’s crucial is that, once the automatic stabilizers are put in place, they do the work. They remove the need both to guess about the economy and to overcome legislative inertia.

In the U.S., automatic stabilizers offset about 20 percent of an economic shock after two years, according to research by Glenn Follette and Byron Lutz of the Federal Reserve. In Europe, the effect is even larger, research published by the National Bureau of Economic Research suggests. The automatic stabilizers in Europe offset a shock by about 10 percentage points more than in the U.S...

(Peter Orszag is vice chairman of global banking at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration. The opinions expressed are his own.)