Because their model was screwed up. Public choice theory is involved as well.
5 thoughts on “Why Did Obama’s Brain Trust Get The Stimulus So Wrong?”
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Because their model was screwed up. Public choice theory is involved as well.
Comments are closed.
There is a multiplier for government spending, only most of the time, the multiplier is less than one.
It didn’t help things when much of the stimulus money was misdirected. After Obama announced the stimulus was going for “shovel ready projects” – mainly infrastructure work to be done by male construction workers – the feminists howled and got a lot of the money directed to women. This was done dispite the fact that men were losing their jobs much more than women, so much so that some called it the “mancession.” Like the article mentioned, a lot of the money went to states to prop up their unsustainable spending for another year. Rather than eliminating personnel they could no longer afford, states largely kept their payrolls intact without having to borrow money. Unfortunately, the federal government had to borrow the money so it was a wash.
It’d be easier to create policies that stimulate job production if the Obama administration had any members who’ve actually held real jobs or had real business experience instead of spending their entire careers in academia or government.
Let us keep Jim’s words, written more than a year ago, in mind:
And yet they are eminent economists, among the most acclaimed in the world. But if Rand says otherwise, that must settle it….
The logic seems to be: they are doing things that I think are wrong, so clearly they don’t understand what they are doing, or else are doing them for nefarious reasons. The notion that the posters here — without 1% as much relevant experience or any remotely similar credentials in the field — might possibly be wrong is of course inconceivable. Likewise the banal possibility that even the greatest economist on earth, with the finest understanding of the field, acting in unimpeachably good faith, can still be simply wrong about specific predictions or policy prescriptions.
For some reason it isn’t enough for Rand to say that Summers and Romer are wrong; he has to smear them (without the least evidence) as unqualified, ignorant and/or dishonest.
Since then, we’ve accumulated even more evidence that their predictions were wholly wrong. I still see no evidence that there was an honest mistake made here. There remains no basis in the first place for the claim that government spending is a factor of three or so better than tax cuts in spurring economic activity. This was pointed out at the time shortly after Romer’s report came out in early 2009 and evidence bears it out.
Further, the claim rationalized bad Obama administration policy at the time which was barely Keynesian. I see the economic claims, particularly Romers, as pretty fake propaganda in support of bad policy. These people should have been ashamed of themselves for propagating nonsense.
I’m still stuck on the “barely Keynesian” aspect.
1) Identify actual freaking infrastructure that will have an inherent, positive rate of return. This is the indirect effect.
2) The money needs to not only ‘be spent’ locally, but it actually needs to end up locally for the ‘direct effect’ to even apply. Spending 5% on local “installation” labor while the other 95% goes to foreign raw material production and manufacturing doesn’t qualify.
If you can’t manage either 1 or 2, you’re just printing money and setting fire to it… then patting yourself on the back.
You say that like it hasn’t been SOP for Obama and his circle since he got out of law school.
Whenever you hear the word model, alarms should sound. You can tweak a model to justify any claim you want to make.
I am so sick of the spin doctors. Unavoidable fact No. 1. Every dollar spent by the government was taken from somebody. Limit what they take and people will feel more secure in spending. Take more and people will feel less secure.
No. 2. All government spending has a political constituency.
I really do not know how to deal with fact 2. Add in corruption and a public without a clue and we are in serious, over the cliff, into the pit, trouble.