Beware “an atmosphere of haste and panic brought on by recession.”
That line came from economists in the John F. Kennedy era.
We need a little of that wisdom now.
It is by no means certain that more massive spending will solve the current recession and “stimulate” the economy toward growth and prosperity.
In fact, the entire proposition is a gamble. A Vegas long shot.
Why rush?
It’s your money. It’s my money too but not much is left.
David Brooks of The New York Times says, “Obama is compelled to jump into unchartered territory, with no compass or guide.”
And speed as his number one ally.
What is certain is that legislative rushing always yields bad laws….
The President-elect made an impassioned plea for urgency on his stimulus plan in a speech yesterday.
“It was a remarkable speech for someone who isn’t president yet and hasn’t revealed the details of his economic rescue plan,” ABC’s Jake Tapper reports. “The most pointed criticism of the plan came from Democrats who objected to Obama’s plans to cut taxes for businesses and for middle class families.”
John E. Carey
Peace and Freedom
The government report on jobs today is expected to report about 7% unemployment; which will probably rise each month all year despite the stimulus….
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By David Brooks
The New York Times
Christina Romer is Barack Obama’s choice to lead his Council of Economic Advisers. In 1994, Romer and her husband, David, wrote an essay entitled “What Ends Recessions?” In the first paragraph, the Romers noted that “economists seem strangely unsure about what to tell policy makers to do to end recessions.”
The Romers surveyed the recessions of the previous 50 years to try to reach some conclusions about what works. “Our central conclusion is that monetary policy alone is a sufficiently powerful and flexible tool to end recessions,” they wrote. Automatic spending policies like unemployment insurance have sometimes helped. Discretionary policies, like tax cuts and stimulus plans, have not been of much use. As they put it: “Discretionary fiscal policy, in contrast, does not appear to have had an important role in generating recoveries.”
The Romers briefly described how different administrations responded to recessions. All the administrations, Democratic and Republican, resisted large-scale fiscal stimulus plans. They didn’t believe they could time a stimulus correctly. They didn’t trust Congress to pass the bills quickly or cleanly. They decided they shouldn’t be making policy in what Kennedy administration economists called “an atmosphere of haste and panic brought on by recession.”
The Romers’ essay exemplifies the economic doctrine that reigned up until a few months ago: fiscal stimulus plans that try to time a recession are dangerous, unproven and unnecessary.
That doctrine has suddenly vanished. But not because we suddenly know how to create effective stimulus plans. Last year, the Congress passed a $165 billion plan that seems to have done almost nothing for the economy. The doctrine has vanished because this recession is deeper than the others and we’ve run out of other stuff to do.
Today there is wide support for fiscal stimulus. It’s just that there is no historical experience to tell us how to do it, and there is no agreement on how to make it work. The economists’ prescriptions are all over the map.
Obama is compelled to jump into unchartered territory, with no compass or guide. He could have chosen to spend the big money that is apparently required in cautious ways. He could have chosen to pick out a few easily implemented policies that could be enacted in a way that is targeted, temporary and timely. He could have chosen to merely cut the payroll tax, boost aid to the states and do infrastructure projects.
Read the rest:
http://www.nytimes.com/2009/01/09/op
inion/09brooks.html?_r=1
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Noting that 1.9 million jobs have been lost since the start of the recession a year ago — two-thirds of them since September — President-elect Barack Obama invoked public spending as the best way to get a dead-in-the-water economy moving again. “This painful crisis,” he said in a statement, is an opportunity “to improve the lives of ordinary people by rebuilding roads and modernizing schools for our children,” and by investing in clean energy projects.
A goal of all this spending is to generate 2.5 million jobs over the next two years, he said, repeating an earlier pledge. Given the accelerating job losses, hitting that target would barely recover the jobs that have disappeared over the last year.
Read the rest:
http://www.nytimes.com/2008/12/06/business/economy
/06jobs.html?_r=1&scp=10&sq=unemployment&st=cse
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By JEANNINE AVERSA, AP Economics Writer
Even with a new government stimulus, the unemployment rate is expected to keep rising this year. Some think it could hit 9 percent or 10 percent at the end of this year.
Read the rest:
http://news.yahoo.com/s/ap/20090109/ap_on_bi_
go_ec_fi/financial_meltdown
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CNN:
http://money.cnn.com/2009/01/09/markets/stocks
watch/index.htm?postversion=2009010904
Related:
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Where is The Plan To Make Economy Bigger, Increase Wealth?
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Pelosi, Committee Told, “America becoming the nation of the unemployed,” — Congress to Blame?
