is the wsj a bunch of troublemakers?

[Winstonm]

The national data won't be available until later this month. But based on preliminary information obtained by The Associated Press from a handful of states, teachers appear to have benefited most from early spending. That's because the stimulus sent billions of dollars to help stabilize state budgets, sparing what officials said would have teacher layoffs

 

There is no doubt that assisting states helped preserve government jobs. Unfortunately, the present Great Recession has been so severe as to overwhelm the stimulus attempt - and why I doubt the V-shaped recovery scenario that MSNBC financial T.V. and their green shoots boosters tout.

 

Again from Bloomberg:

 

For the 12 months to June 30, the fiscal year for most states, revenue declined 8.2 percent, or $63 billion, about twice what states got from the $787 billion U.S. economic stimulus package, the institute said.

 

If you look to grocery chains like Kroegers and Safeway you will see they are in a pricing war to lower prices - nationwide rents fell for the first time in 17 years - high unemployment keeps a lid on wages - it is this type recurring deflationary pressure that will keep the jobless rates high for much longer than anyone believes.

[jdonn]

The national data won't be available until later this month. But based on preliminary information obtained by The Associated Press from a handful of states, teachers appear to have benefited most from early spending. That's because the stimulus sent billions of dollars to help stabilize state budgets, sparing what officials said would have teacher layoffs

 

There is no doubt that assisting states helped preserve government jobs. Unfortunately, the present Great Recession has been so severe as to overwhelm the stimulus attempt

Sounds like a good argument that the stimulus should have been much bigger, as many believe.

[Winstonm]

The national data won't be available until later this month. But based on preliminary information obtained by The Associated Press from a handful of states, teachers appear to have benefited most from early spending. That's because the stimulus sent billions of dollars to help stabilize state budgets, sparing what officials said would have teacher layoffs

 

There is no doubt that assisting states helped preserve government jobs. Unfortunately, the present Great Recession has been so severe as to overwhelm the stimulus attempt

Sounds like a good argument that the stimulus should have been much bigger, as many believe.

The problem as I see it with Keynesian-like methods being attempted is that the stimulus has not promoted an increase in aggregate demand but replaced a large share of aggregate demand, and thus it is not a one-time event but will have to be repeated again and again.

 

Repetition of government stimulus can only be accomplished in one of three ways: raise taxes, borrow more, or issue debt and monetize it (print more money).

 

Each method has a limit - a limited means cannot sustain an unlimited need.

 

I do not believe we will know for many years all the unintended consequences of the actions taken with fiscal policy and with monetary policy, or whether or not these actions had a net negative or net positive effect.

 

All actors in this play are pretty much flying by the seat of their pants.

[Mbodell]

The problem as I see it with Keynesian-like methods being attempted is that the stimulus has not promoted an increase in aggregate demand but replaced a large share of aggregate demand, and thus it is not a one-time event but will have to be repeated again and again.

The argument, as I'm sure you know, is not whether aggregate demand increased. But whether aggregate demand increased relative to what would happen.

 

The analogy is when you are sky diving you might be accelerating in your declining altitude, then you deploy a parachute, a smart person would realize that even though you kept getting lower and lower the parachute worked to decrease your decline relative to what it would have been. You don't argue the parachute didn't work because you kept falling.

 

Likewise, the argument should be what was the difference relative to what would have taken place. A lot of work has been done relative to what the gov't multiplier generally is for both tax cuts and increases in spending.

 

But it is pretty silly, IMO, for non-experts to debate this. While experts might not agree, at least they do more than think about things in silly blog post and board threads. I mean can you make a primary researched argument against Christina Romer and David Romer's work showing the multiplier to be 1.6 (that is you get back 60% more than you spend) based on looking at gov't changes isolated from other effects over the past ~100 years?