Beating A Dead Horse
Apparently the Left is still trying to argue that the stimulus (the process of taking money out of private hands to have it spent by government officials instead) was really a super-fabulous idea and only failed because it was too small. Here is Kevin Drum:
But another reason [the stimulus failed] is that at the same time the feds were spending more money, state governments were cutting back. The chart below from CBPP tells the story. They have data for all but six states, and on average for 2012, "those 44 states plan to spend 9.4 percent less than their states spent before the recession, adjusted for inflation." That's not just less than last year, it's less than 2008. That wiped out nearly the entire effect of the federal stimulus pacakge [sic].
I have a different take. A number of states, because they don't own a printing press as does Uncle Sam, actually tried to deal with economic reality and cut their bloated spending, an effort that was largely wiped out by Obama's "stimulus" spending.
Chris:
There is no practical difference between saying "Keynesianism doesn't work" versus saying "Keynesianism doesn't work for less than a trillion dollars".
Unfortunately, it is only Keyensians who are unable to recognize this.
March 22, 2011, 10:41 amHasdrubal:
Funny how people only look at fiscal stimulus and ignore monetary stimulus. They're pretty much interchangeable in theory, and we've been doing both: 10% annual growth rate for seasonally adjusted M1 money supply over the past 12 months, and a 37% increase in seasonally adjusted M1 from Feb 2007 through Feb 2011.
http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt
March 22, 2011, 11:41 amJohn O.:
I totally agree with your observation: the "Stimulus Act" wrecked the attempts at cutting spending at the state level.
-- John O.
March 22, 2011, 11:44 amMax Lybbert:
Drum is simply parroting Krugman ( http://www.nytimes.com/2010/10/11/opinion/11krugman.html "And federal aid to state and local governments wasn’t enough to make up for plunging tax receipts in the face of the economic slump. So states and cities, which can’t run large deficits, were forced into drastic spending cuts, more than offsetting the modest increase at the federal level."). Krugman's as wrong as Drum, of course, but it's important to trace the logic back to the source.
Krugman's op-ed is partly based on the idea that the federal government never spent the money because it didn't create many new programs. Krugman apparently can't wrap his mind around the possibility that the feds could have spent more through existing programs.
March 22, 2011, 12:10 pmNL:
Keynesianism failed in 2009 and 2010 because of proposed spending in 2012?
March 22, 2011, 1:03 pmcaseyboy:
Obviously you are all missing the point. If government could have spent more to hire more people it would have increased employment and fixed our economy. After all more jobs is the key, right? Doesn't matter what they do so long as they draw a paycheck. That is what was so great about extending unemployment to 99 weeks. We gave people money and the time to spent it. Now that was stimulus squared as Nancy would say.
I don't know why you fight it. Just give it all over to the government and let them sort it out and take care of us. Isn't that a comforting thought?
March 22, 2011, 2:24 pmVal:
I used to think Drum was intelligent, but I can't seem to pull that thought off anymore after comments like that...
And Chris, come on, Keynesianism won't work with even a trillion dollars. I mean, EVERYBODY knows it will only work with TWO trillion dollars... Or was that three? I forget.
March 22, 2011, 6:22 pmSam L.:
They will ALWAYS say that, and never stop saying that. When someone doesn't understand what you're saying, say it over and over again, louder and louder each time. That's what they know.
March 22, 2011, 6:29 pmNeo:
"on average for 2012, “those 44 states plan to spend 9.4 percent less"
What's missing is what happened between 2008 and 2012, when part of the "stimulus" kept the state's employment roles bloated. That money has now run out and states are scrambling to cut this and next year's budgets.
March 22, 2011, 8:43 pmJeff:
At the end of the day, they're still arguing we didn't dig enough worthless holes. The root cause of the recession is low interest rates encouraged people to accumulate too much debt, and the resulting poor allocation of capital. You can't fix it by piling on more debt and spending more capital on worthless investments.
By preventing the market from finding a true bottom, we're creating more risk and uncertainty for business owners and investors. That's why they're sitting on cash and not expanding.
March 23, 2011, 7:22 amEd Darrell:
One of the issues, of course, is whether one is willing to look at the evidence.
But then, you have Junk Science and John Stossel in your blogroll. Who needs evidence when hallucination can get electronic ink, eh?
March 24, 2011, 10:54 pmepobirs:
Drum is a fool. Always has been.
Most of those states cutting spending were still massively in deficit and hoping the stimulus would help get them past another year. When the stimulus only serves to reduce the volume of red ink by a fraction, why would anyone expect things to actually improve?
March 25, 2011, 2:56 am