The Republi-CON Stimulus Myth

UPDATE VIII: In the third and fourth quarters of 2008, U.S. economic output "fell by 3.7% and 8.9%, respectively, not at 0.5% and 3.8% as believed at the time. Employment was also falling much faster than estimated. Some 820,000 jobs were lost in January, rather than the 598,000 then reported. In the three months prior to the passage of stimulus, the economy cut loose 2.2m workers, not 1.8m. In January, total employment was already 1m workers below the level shown in the official data. . .

What's striking to me is that as new data have revealed the true dimensions of the 2008 collapse, the public's perception of events hasn't much changed. Critics still jeer the stimulus for its failure to deliver promised results, despite the now-obvious inadequacy of the package. Few in Washington seem willing to discuss how drastically officials underreacted in 2009, and how the results of that underreaction are still with us, waiting for a more appropriate policy response. I don't know which tragedy is the more troubling: the failure to see the true scope of the disaster when accurate numbers weren't available, or the failure to see it now that they are."

Read The Economist, Flying blind.

One conservative colunmist, a former Bush economic speechwriter, has called the decline "at -3.7% and -8.9%: Great Depression territory" and wonders "Were Our Enemies Right?"


UPDATE VII: "If Republicans dislike monetary stimulus, they loathe its fiscal cousin even more, routinely labeling Obama’s stimulus as ineffective, or worse, counterproductive. They want balanced budgets, the sooner the better. . .

That would be tolerable if a recovery were well entrenched by 2013 — but would constitute a major headwind if growth remained tepid. A shift toward fiscal and monetary austerity in the United States in 1937 helped prolong the depression. Fiscal tightening helped push Japan back into recession in 1997. "

Read the Washington Post, The Republicans’ new voodoo economics.


UPDATE VI: J.P. Morgan has warned of "a 'policy-induced slowdown.' Another way of saying that is we’re entering an unnecessary [politically-caused economic] slowdown." Read the Washington Post, A ‘policy-induced slowdown’.

Republi-cons want Obama to fail, the American economy is just acceptable collateral damage to achieve that goal.


UPDATE V: "Washington has been obsessing over deficits and debt ceilings while the economy crumbles." Read The New York Times, The Wrong Worries, which notes:

"Republicans won’t stop screaming about the deficit because they weren’t sincere in the first place: Their deficit hawkery was a club with which to beat their political opponents, nothing more — as became obvious whenever any rise in taxes on the rich was suggested. And they’re not going to give up that club."

UPDATE IV: "It has been three decades since the United States suffered a recession that followed on the heels of the previous one. But it could be happening again." Read The New York Times, Time to Say It: Double Dip Recession May Be Happening.

I've been warning of a Republi-con double-dip recession since February 2011.

Republi-cons want Obama to fail, the American economy is just acceptable collateral damage to achieve that goal.


UPDATE III: "Fresh signs of weakness in the economies of the United States and Europe send global markets plummeting." Read the Washington Post, Stocks plunge as investors fret about Europe, US economy.


UPDATE II: "America’s real crisis is not a debt crisis. It’s an unemployment crisis. Yet this agreement not only doesn’t address unemployment, it’s guaranteed to make it worse." Read The New York Times, Tea Party’s War on America, which ends:

For now, the Tea Party Republicans can put aside their suicide vests. But rest assured: They’ll have them on again soon enough. After all, they’ve gotten so much encouragement.

All part of the Republi-CON's economic no recovery plan: destroy jobs and pay workers less.

Thank God we saved the Banksters, but why?


UPDATE: The debt ceiling deal farce includes these losers:

"The unemployed: In the 2010 tax deal, Democrats managed to expand and extend unemployment benefits through 2011. This deal lets them expire at the end of the year. That means that barring some later rescue, $60 billion in support for the jobless will evaporate Dec. 31, 2011. That’s not only a huge blow to the uninsured themselves, but it removes some much-needed economic support from a teetering economy. Speaking of which ...

The economy: 'The nation’s political leaders agreed on Sunday to spend and invest less money in the American economy, a step that economists said risks the reversal of a faltering recovery.' Does that sound like the beginning of an Onion piece? Sorry, it’s actually the first sentence of an article in today’s New York Times. And it’s true. Last week, we learned that the economy had been much weaker than we had thought over the past three years, and that the recovery was continuing to sputter because businesses, governments, and individuals weren’t spending enough. So what are we doing? We’re letting the payroll tax cut and unemployment benefits expire, which will further cut spending among individuals. We’re cutting government spending, which will remove that source of demand. And we’re somehow assuming that businesses will invest more even though their government contracts just got canceled and their customers just saw their paychecks and benefits shrink."

Read the Washington Post, Winners and losers: policy edition.

"[T]he financial crisis was much, much more severe than we’d thought—the economy actually shrank at a 7.8 percent annual rate in the fourth quarter of 2008 and first quarter of 2009, not 5.9 percent as originally believed.

Then, Congress passed the stimulus bill, the fall in growth dwindled to 0.7 percent in the second quarter, and, by the third quarter of 2009, we had 1.7 percent growth. 'We went from negative to positive at precisely the time that the stimulus was providing maximum benefit in terms of tax cuts and spending increases,' [Moody’s chief economist Mark] Zandi says. 'The numbers actually reinforce the importance of the stimulus in jump-starting a recovery.' What the stimulus didn’t do, however, was raise employment to the levels that the White House had predicted — partly because the economy was in worse shape than anyone, even the official data-crunchers, knew.

Of course, the stimulus only lasted two years, winding down in the end of 2010. And what happened then? As Dean Baker, an economist at the Center on Economic and Policy Research observes, 'The downward revision to the first quarter data coupled with the revision of the fourth quarter growth to 2.3 percent from 3.1 percent, suggests that the winding down of the stimulus has seriously dampened growth.' Zandi agrees: 'If fiscal policy had simply stayed neutral, the numbers suggest we would have had around 2 percent growth these past two quarters, which isn’t great, but it’s a lot better than what we actually had.' Except fiscal policy wasn’t neutral—it was shrinking. The stimulus wound down, that extra government spending started disappearing, and, with it, economic growth dwindled."

Read the Washington Post, What the new GDP numbers tell us about stimulus.

Republi-cons wanted Obama to fail, the American economy is just acceptable collateral damage to achieve that goal.