Part of the article is based on a memo from Larry Summers to the President regarding the fiscal stimulus. Here is a link (PDF) to the entire article -- which I also recommend you read as it's a fascinating analysis of a very difficult time.
At this point, it's important to note a big difference in the economic world: there are those who believe that Keynes was correct in his economic analysis, and that Keynes basic ideas have been repeatedly born out by history and data. Then there is the Chicago school of economics who live in a fantasy world where economic models are populated by "rational individuals" and prices aren't sticky (seen a chart of housing prices recently?) Need I say more? Simply put, history and data clearly show that targeted government spending boosts economic growth. Hence, note the wide swath of people and organizations who supported the idea of stimulus:
• Robert Reich believes it should be $1.2 trillion over two years, but also indicated it could be larger.Put another way, it's not if we should do this, but how much we should spend.
• Joe Stiglitz believes it should be $1 trillion over two years.
• Paul Krugman: at least $600 billion in one year
• Jamie Galbraith: $900 billion in one year
• Institute for America's future (signed by Dean Baker, Andy Stern, Leo Gerard, John
Sweeney, and others): at least $900 billion
Republican Economists
Marty Feldstein was an early proponent of a spending-only package and currently
believes it should be $400 billion in the first year.
• Larry Lindsey, a former Federal Reserve Governor and NEC Director, estimates that
$800 billion to $1 trillion is desirable.
Ken Rogoff (widely respected macroeconomist, former chief economist of the IMF,
former McCain adviser): $1 trillion over two years
• Mark Zandi (widely quoted economist, fom1er McCain adviser): at least $600 billion in one year
Others:
• Senior Federal Reserve officials appear to be of the view that a plan that well exceeds
$600 billion would be desirable.
• Adam Posen (Deputy Director of the Peterson Institute): $500 to $700 billion in one year
• Goldman Sachs: $600 billion in one year
• Open Letter signed by 387 economists including Nobel Laureates Robert Solow, George
Akerlof, and Joe Stiglitz on November 19th [note that most economists, including Stiglitz,
support higher stimulus numbers today than they did a month ago]: $300 to $400 billion
per year
I should add, I would fully expect some Republicans to now argue that none of the Republicans quoted are in fact "real Republicans" but merely RINOs.
Again, this is not rocket science. In fact, it's simple addition.
9 comments:
and what we got was around $900B over 2 years or so, plus many others smaller versions throughout the last 3+ years suck as payroll tax cut, unemployment extensions, aid to states
So it looks like the administration got on the top end of estimates at the time.
Actually, IL JimP, most non-Republican economists, Krugman included, wanted Obama to spend at least twice what he did:
http://krugman.blogs.nytimes.com/2009/10/05/the-story-of-the-stimulus/
Don't you get it? Republicans are setting the stage for a Come-To-Jesus moment regarding the great value of engaging in stimulus spending on January 21, 2013, just in time for President Romney to get all the credit for reviving the economy. After all, IOKIYAR.
I can hear it now from Mitch McConnell: "The only reason the Obama Stimulus failed America is that President Obama was too weak a leader to get a bigger package through the Congress when he had the majority."
(Sadly, that rings a little bit true.)
HS could you clarify whether these are calls for stimulus now or from 08-09?
"are setting the stage for a Come-To-Jesus moment"
I expect them to revert to their mainstay position of massive defense spending. No need to consciously adopt the other side's position. Spend a few trillion on deficit financed defense spending, economy recovers, take credit for strong economy, completely ignore process of how spending impacts economy.
That's great for Krugman to publish that months after the stimulus passed. Did he have the votes for a double stimulus? I guess the delicate genius couldn't be expected to actually have a realistic plan to pass what he thinks is best.
Besides his estimate was among the high side of the ones listed in this article and the President got on the high side of the estimates. Plus he got additional stimulus throughout the next few years which added up to a figure quite close to what even Krugman wanted.
It is worth noting that not included in Summer's memo was Romer's estimate of 1.2 Trillion.
According to the memo, passage of the stimulus package would result in peak unemployment of 8.1%.
That mistake cost the Democrats the House in 2010, and may yet cost them the White House in 2012.
More to the point is why the hell the GOP is pushing for the government to balance its budget at the expense of society. Since when did the GOP become communists?
IL JIMP, I believe the more accurate figure for the orginial stimulus package passed in 2009 (ARRA) was 787 billion spread out over a 10 year period, with 720 billion of that spent in the first three years. That's nowhere near the high end, or any end, of the packages called for by the listed supporters of stimulus. Krugman called the original package inadequate and explained why as early as January 8th of that year, soon after it was announced by the White House, and a month before it became law.
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