Learning the wrong lesson (on stimulus)

[ProSense]

LEARNING THE WRONG LESSON....

Ezra had a fairly brief item today that summarizes a problem that comes up nearly every day.

Last year's stimulus worked exactly as it was intended to work -- in some ways, it even exceeded expectations -- but it was too small. There was a hole in the economy, which turned out to be even bigger and more serious we realized at the time, and policymakers only filled part of it. Ezra noted that part of the problem may have been an assumption that Congress and the White House would get another bite at the apple.

<...>

Look, this is pretty simple. Early last year, the economy stood at the brink of an extraordinary collapse. There were effectively four options:

1. Pass a massive, ambitious economic stimulus.

2. Pass a trimmed down economic stimulus that could overcome a Republican filibuster.

3. Do nothing.

4. Pass a five-year spending freeze proposed by confused congressional Republicans at the time.

Left with limited options, Democrats went with #2, and disaster was averted. We would have nevertheless been better off with #1, but we can all be very thankful #3 and #4 were rejected.

But the economy still needs more, and it won't get it, in part because Republicans learned the wrong lessons, and in part because they hope to keep the economy down on purpose to improve the GOP's electoral chances.

[ProSense]

1. No comment? n/t

[girl gone mad]

7. I could say "I told you so", but..

what's the point?

[Demeter]

2. Disaster Is Not Diverted

Disasters don't respond to bread and circuses--populations do.

Disasters respond to meaningful change.

As there has been NO meaningful change for the better, this disaster is merely delayed by a flimsy chainbolt on the door until it breaks. Then there will be a much greater and stronger Disaster to face, and no door in the way.

[ProSense]

3. Want to know what a real disaster would be at this point:

If the economy was still trending based on the brown bars.

[Demeter]

4. My Dear Friend

It IS trending on the brown bars--it's just that the data is so thoroughly cooked that the casual observer thinks things are improving....provided he/she ISN'T among the 24% in U6--the REAL unemployment rate.

[ProSense]

5. "it's just that the data is so thoroughly cooked" And there is the problem.

If you think the data is so "cooked," where are your facts to suggest that it's false?

Cynicism isn't going to change anything.

[Demeter]

6. Look up the Definition for U6

[girl gone mad]

8. I don't think it's cycicism, just the facts.

The way in which unemployment is measured has been dramatically altered over the past few decades.

http://www.ritholtz.com/blog/2008/06/unemployment-reporting-a-modest-proposal-u3-u6/">Barry Ritholtz has written definitively on this topic:

U3 is now comprised in a way that merely repeating it without a slew of caveats borders on fraud.

U6, on the other hand, is the broadest measure of Unemployment: It includes those people counted by U3, plus marginally attached workers (not looking, but want and are available for a job and have looked for work sometime in the recent past), as well as Persons employed part time for economic reasons (they want and are available for full-time work but have had to settle for a part-time schedule).

To be honest, I do not know what the true Unemployment rate actually is; I believe it is considerably higher than U3 (by 100s of basis points), but I suspect it might be lower than U6.

Its been pretty obvious for sometime that the Financial Media are doing a disservice to their readers by only reporting U3, given how dramatically it understates Unemployment. Indeed, consumer sentiment reports are at deep negative levels that only occur when Unemployment is much than what U3 has been saying. It is painfully obvious that U3 does not paint an accurate view of the Employment situation.

[ProSense]

9. OK, now what? Adjust the numbers across the board and you see

That the trend was still broken.



more

[girl gone mad]

10. I don't see how you can say the stimulus worked as it was intended to work..

Here was the WH projection on unemployment (the red dots are the actuals through June):



As you can see, even without the stimulus, unemployment was expected to peak in Q2.

[ProSense]

13. Wait, what is that chart showing?

The red dots are also going down. No one is arguing that the original projections weren't off. The fact is the stimulus stopped the rapid loss of jobs and is slowly reversing the trend. This is not an argument that more stimulus isn't needed.

[girl gone mad]

14. If the projections were off, the stimulus didn't work as intended..

since the stimulus was intended to prevent unemployment from even reaching double digits.

[ProSense]

15. The projections came before the stimulus and did not reflect

the reality that the administration encountered. That has nothing to do with whether or not the stimulus worked. The reality is it stopped the trend in job losses.

[girl gone mad]

16. That trend was projected to stop without the stimulus, too.

Take another look at the graph.

[ProSense]

17. So the stimulus wasn't needed? n/t

[thetonka]

19. It did not stop the trend in job losses.

In fact based on the data you could easily argue that the stimulus increased job losses.

[ProSense]

25. "In fact based on the data you could easily argue that the stimulus increased job losses."

No, you can't.

[thetonka]

28. Without ALL the information, you could argue anything.

[jpak]

23. Yes it was - too bad

yup!

[Scurrilous]

11. Thanks.

K & R :thumbsup:

[thetonka]

12. Last time I checked

W was in office long before 2007. If you are going to blame it on the president and compare the presidencies, at least be honest about it and compare the whole period.

[ieoeja]

21. More jobs have already been created under Obama than in W's entire presidency. nt

[thetonka]

22. Still need to be honest

After all if you include all of W's presidency what you are saying will be shown.

Playing the game of only showing what supports your argument is just dishonest.

[ProSense]

27. "Playing the game of only showing what supports your argument is just dishonest."

Dishonest?

Are you disputing that Bush fucked up the economy with his bullshit policies, resulting in millions of jobs being lost?

[thetonka]

29. No

But so far the information given is misleading. I'm more interested in the facts, not the propaganda.

[ProSense]

26. Hmmm?

"If you are going to blame it on the president and compare the presidencies, at least be honest about it and compare the whole period."

Which President do you think deserves the blame?

[applegrove]

18. I love Ezra

[Greyhound]

20. Another pant-load from the spin factory.

"turned out to be even bigger and more serious we realized at the time" is just a flat-out lie. Everybody that didn't have a direct stake knew, and told them, that it was worse than they claimed and it was too little too late in addition to being applied to the wrong places.

Partial credit for not choosing that very worst option.
:eyes:

[ProSense]

24. "Everybody that didn't have a direct stake knew"

Actually, no

[Greyhound]

30. As usual, posting links you bet nobody will bother to check.

First link: quoted his prediction of what the stimulus would be (and he was right on if you leave out unstimulating the tax cuts). He wrote this in addendum to his column stating that Obama would need about $3T, along with real regulation, to fix the mess.

Never mind, talking to a wall will make people stare.
:banghead: