PrintAEI has its economic outlook, by John Makin. Notice anything strange here?
We can expect 2010 to be a volatile year. This likelihood is underscored by looking back at 2008 and 2009. Two thousand eight was a highly volatile year leading up to the collapse of Lehman Brothers in September, which was followed by the risk of a total systemic meltdown. That sharp and obvious risk spike prompted massive policy responses that were simply the largest that central banks, with rate cuts and liquidity provision, and governments, with tax cuts and spending increases, could manage. The result--beginning in March 2009--was a linear rise in the prices of risky assets, the result of massive relief once the slip into a global depression had been averted and the acute phase of the crisis in the financial sector had passed.
The real economy also responded to the massive stimulus but remained heavily dependent on it. In the United States, growth during the second half of 2009 probably averaged about 3 percent. Absent temporary fiscal stimulus and inventory rebuilding, which taken together added about 4 percentage points to U.S. growth, the economy would have contracted at about a 1 percent annual rate during the second half of 2009.
The conservative line, of course, is that stimulus has utterly failed. To be sure, Makin is a credentialed economist, and therefore not in a position to be influencing the likes of Jim DeMint:
It is now clear that taking a trillion dollars out of the private economy and spending it on wasteful government programs has been an utter failure. Instead of creating real job growth, the stimulus has grown the burden of debt and increased the likelihood of high inflation and taxes. Since the beginning of this year, nearly 3.8 million Americans have lost their jobs. Unfortunately, instead of ending the failed stimulus, Washington continues to pursue a big government agenda of takeovers, spending and taxes that would further harm our economy."
COMMENTS (3)
DeMint should talk more with Dick Cheney. Deficit spending ADDS dollars to the private economy. If DeMint was right, and it subtracted dollars, who had the 12 trillion dollars before the US government borrowed it? Does that mean some collective group of people had 12 trillion dollars in savings back in 1970 that they've since slowly lent to the Treasury?
Government deficit spending ADDS dollars to the private economy. Dick Cheney knew that, that's why he said "deficits don't matter." Too bad Democrats don't believe it either. Then they might be able to justify the stimulus without resorting to hand waving. Also would have been nice to have a larger stimulus. Since you know, it works!
DeMint should talk more with Dick Cheney. Deficit spending ADDS dollars to the private economy. If DeMint was right, and it subtracted dollars, who had the 12 trillion dollars before the US government borrowed it? Does that mean some collective group of people had 12 trillion dollars in savings back in 1970 that they've since slowly lent to the Treasury?
Government deficit spending ADDS dollars to the private economy. Dick Cheney knew that, that's why he said "deficits don't matter." Too bad Democrats don't believe it either. Then they might be able to justify the stimulus without resorting to hand waving. Also would have been nice to have a larger stimulus. Since you know, it works!
Here's a strange thing, Mr. Chait: your math/reading skills. AEI says that "stimulus and inventory rebuilding...taken together" added 4 percent to the economy's growth.
That must not have been clear.
(For the record, I supported more, not less stimulus. But among the reasons I've canceled my print subscription to TNR after nearly 20 years is that the argumentation has slid into the sort of tendentious sloppiness that your posts on Brit Hume, Jim Manzi, and AEI have each evinced.)
Here's a strange thing, Mr. Chait: your math/reading skills. AEI says that "stimulus and inventory rebuilding...taken together" added 4 percent to the economy's growth.
That must not have been clear.
(For the record, I supported more, not less stimulus. But among the reasons I've canceled my print subscription to TNR after nearly 20 years is that the argumentation has slid into the sort of tendentious sloppiness that your posts on Brit Hume, Jim Manzi, and AEI have each evinced.)
Not so fast, wrdcsc. This is less sloppy than you claim. Not only is inventory rebuilding partly a function of the stimulus, but the AEI economist says that the 4% boost is "an ominous fact because the fiscal stimulus will fade rapidly by mid-2010." So he clearly sees the stimulus as a significant part of that.
Not so fast, wrdcsc. This is less sloppy than you claim. Not only is inventory rebuilding partly a function of the stimulus, but the AEI economist says that the 4% boost is "an ominous fact because the fiscal stimulus will fade rapidly by mid-2010." So he clearly sees the stimulus as a significant part of that.