1.) "I complain therefore I am". People -- a large percentage of whom argued for the stimulus and in some cases are arguing for more -- are now complaining that government spending was responsible for some of the growth. Here's a news flash: we're in the middle of a pure Keynsean period where the government is supposed to ameliorate the impact of the recession and help us get back to a period of full employment. That is one of the central themes of Keynes arguments. In addition, consider that government spending usually accounts for about 20% of economic growth. Do we now completely discount this part of the GDP equation going forward?
2.) "GDP doesn't matter or is a bad indicator of economic activity." Since when? We've been using this number for a really long time. Here is the basic definition:
The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
It tells us lots of incredibly important information. But now it's flawed? Please. If you want to look at other parts of the economy -- like quality of life etc. -- there are plenty of statistics already available. But don't tell me that because GDP doesn't include quality of life issues or because it doesn't favor certain types of activities over others that it's somehow flawed. That's plain bullshit. What they're really saying is "I know squat about how economic numbers work together. But I really want people to think I do. So to hide my ignorance I'll just say all the numbers are bogus and use a made-up number that can't be empirically verified that also jibes with my point of view."
Here's the basic deal: the government spent money and initiated programs to get the economy moving forward. Guess what? It worked. That's because it was designed to work that way.
3 comments:
How about that September consumer spending report? In the real world, the troubles are deepening.
The bottom line is that we aren't opposed to fighting the battle, but to arrogantly and foolishly declaring victory before the battle is over.
(as if your opponents don't know what Keynesianism is! that's arrogant!)
New, people-centered stimulus. Now.
On the first point, to be fair, most of the commentary I've seen has taken the government role in the GDP numbers as something to be concerned about going forward. That is, at some point the training wheels have to come off of this economy and then we get to see where we're really at. We're keeping the economy running by massive borrowing and spending by the government (as we should) but soon we'll have no choice but to roll that back and that's the real test.
As to the second point, most of the commentary I've seen about the GDP not mattering has been more a point about the still weak numbers like unemployment. Of course unemployment is a lagging indicator, but ultimately if the economy grows but doesn't produce jobs we've still got a problem.
So the numbers right now suggest that we're heading the right direction and turning things around, but the question we have not yet answered is whether it's sustainable. Is this going to be a long jobless recovery? Is this going to be a quick recovery? Is this going to be a double-dip recession?
Sure there's always going to be people who are convinced the government is out to get them and that all of this is just made up BS. No fact is going to persuade them.
Oh I don't think we are poo-pooing Keynes here, but what the government did isn't necessarily stimulative, it's more like a quick shot of adrenaline (good for a quick fix, but leaves you fatigued after). The question I and many others are asking is "when autos return to their normal level (about.2%+ to GDP) and oil prices raise imports, where is the continued growth going to come from?"
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