Archive for the ‘economists’ Category

Stimulus: On This Path, Here’s What We Have in 2010 and Beyond

February 13, 2009

Between 1990 and 2007, the total mortgage debt held by Americans rose from $2.5 trillion to $10.5 trillion. This rise was part of a societal credit bubble that burst in 2008. To cushion the pain of that collapse, federal authorities decided to replace private debt with public debt.

By David Brooks
The New York Times
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In 2008, the Bush administration increased spending by about $1.7 trillion, and guaranteed loans, investments and deposits worth about $8 trillion. In 2009, the Obama administration spent $800 billion on a stimulus package, $1 trillion on a second round of bank bailouts and committed another trillion on health care reform and other bailout plans.

Americans generally welcomed the burst of public activism. In “Democracy in America,” Alexis de Tocqueville wrote about what happens to a people beset by anxiety: “The taste for public tranquility then becomes a blind passion, and the citizens are liable to conceive a most inordinate devotion to order.”

In normal times, Americans would have been skeptical of proposals to double or triple the size of federal programs, but amid the economic fear, that skepticism fell away. Wall Street traders hungered for a huge federal bailout replete with strings. Economists produced models that assumed that government could efficiently spend huge amounts of money, and these models were accepted.

The Obama administration was staffed with moderates who found that there was no reward for moderation. Liberals attacked them for being tepid. Republicans attacked them because it was enjoyable to see Democrats attacked. Over time, the administration drifted left and created what you might call Split Level Technocratic Liberalism.

President Obama defended spending initiatives in broad terms. He had enormous faith in the power of highly trained experts and based his arguments on models and projections. The actual legislation was cobbled together by Democratic committee chairmen, often acting beyond the administration’s control.

During 2010, the economic decline abated, but the recovery did not arrive…..

Read the rest:
http://www.nytimes.com/2009/02/1
3/opinion/13brooks.html?_r=1

Obama, Stimulus, Gregg, Recovery? — A News Day of All Bad News

February 13, 2009

“Mr. Obama’s victory feels more than a bit like defeat. The stimulus bill looks helpful but inadequate, especially when combined with a disappointing plan for rescuing the banks. And the politics of the stimulus fight have made nonsense of Mr. Obama’s postpartisan dreams.”

That’s from Paul Krugman of the New York Times, a big Obama believer and one who would have like a much bigger stimulus.
http://www.nytimes.com/2009/0
2/13/opinion/13krugman.html?_r=1

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The Washington Post lead Editorial today commented upon Judd Gregg’s withdrawal from the Commerce Secretary nomination:

Mr. Gregg’s concern about potential changes at the Census Bureau, particularly news that the census director would report to the White House instead of the commerce secretary, are understandable: Either this administration trusts me or it does not, he might fairly have felt.

For the Obama administration, Mr. Gregg’s withdrawal represents another bump at a particularly unhelpful time. Mr. Gregg said yesterday that he had told the White House several days ago of his decision. If so, you have to wonder why the administration did not take better control of the situation, instead of waiting for the news to detonate and then issuing a statement that looked peeved and churlish as it insisted that Mr. Gregg had come calling for the job, and not the reverse.

Read the rest:
http://www.washingtonpost.com/wp-dyn/cont
ent/article/2009/02/12/AR200902120346
2.html?hpid=opinionsbox1

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When Will We See Economic Recovery?

By Kelly Evans
February 13, 2009
Perth Now

ECONOMISTS in the latest Wall Street Journal forecasting survey predict a second-half recovery is looking less likely now than it did a few months ago.

Recent data, showing just how sharply growth has declined in the US and abroad in the final months of 2008, has cast a deepening shadow over 2009.

As recently as last September, economists on average thought the US would see annualised GDP growth of 1.2 per cent in the first three months of this year; now, they see a 4.6 per cent decline.

Forecasts for the second quarter, the April-June period, have seen a similar shift, from a 1.9 per cent growth forecast to a 1.5 per cent decline, based on the 52 economists who participated in the Journal’s February survey.

The average forecast now sees growth in the third quarter at 0.7 per cent, less than half the rate expected last fall.

The fourth-quarter picture has also darkened, but just slightly, to growth of 1.9 per cent from the 2.1 per cent seen in November.

Read the rest:
http://www.news.com.au/perthnow/st
ory/0,21498,25049338-951,00.html?
from=public_rss

Incoming White House Chief of Staff Rahm Emanuel gestures prior ... 
Incoming White House Chief of Staff Rahm Emanuel gestures prior to the inauguration ceremony of Barack Obama as the 44th President of the United States, in Washington, January 20, 2009.(Jim Young – UNITED STATES/Reuters)

Despite Stimulus, Economists’ Hopes for Second-Half Recovery Fade

February 12, 2009

Prospects for an economic recovery this year are fading.

Economists in the latest Wall Street Journal forecasting survey, while still mostly projecting growth in the U.S. gross domestic product by the third quarter, largely agree that a “second-half recovery”—a scenario that has been a common feature of most 2009 outlooks—is looking much less likely now than it did a few months ago. Recent data showing just how sharply growth in the U.S. and abroad has declined in the final months of 2008 have cast a deepening shadow over 2009.

By Kelly Evans and Phil Izzo
The Wall Street Journal

As recently as September, economists, on average, thought the U.S. would see annualized GDP growth of 1.2% in the first three months of this year; now, they see a 4.6% decline. Forecasts for the second quarter, the April-June period, have seen a similar shift, from a 1.9% growth forecast to a 1.5% decline, based on the 52 economists who participated in the Journal’s February survey.

The average forecast now sees growth in the third quarter at 0.7%, less than half the rate expected last fall. The fourth-quarter picture has also darkened, but just slightly, to growth of 1.9% from the 2.1% seen in November. Five economists see growth declining through the fourth quarter of 2009; they say the current consensus outlook, which says the recession will end in August as GDP growth returns positive, is far too optimistic.

Read the rest:
http://online.wsj.com/article/SB1234457
57254678091.html

Stimulus Dilusion: More Debt Spending Will Never Resolve Debt Crisis

February 7, 2009
Governments cling to the delusion that a crisis of excess debt can be solved by creating more debt.
Niall Ferguson
The Los Angeles Times
February 6, 2009

It began as a subprime surprise, became a credit crunch and then a global financial crisis. At last week’s World Economic Forum in Davos, Switzerland, Russia and China blamed America, everyone blamed the bankers, and the bankers blamed you and me. From where I sat, the majority of the attendees were stuck in the Great Repression: deeply anxious but fundamentally in denial about the nature and magnitude of the problem.

Some foretold the bottom of the recession by the middle of this year. Others claimed that India and China would be the engines of recovery. But mostly the wise and powerful had decided to trust that John Maynard Keynes would save us all.

I heard almost no criticism of the $819-billion stimulus package making its way through Congress. The general assumption seemed to be that practically any kind of government expenditure would be beneficial — and the bigger the resulting deficit the better.

There is something desperate about the way economists are clinging to their dogeared copies of Keynes’ “General Theory.” Uneasily aware that their discipline almost entirely failed to anticipate the current crisis, they seem to be regressing to macroeconomic childhood, clutching the Keynesian “multiplier effect” — which holds that a dollar spent by the government begets more than a dollar’s worth of additional economic output — like an old teddy bear.

They need to grow up and face the harsh reality: The Western world is suffering a crisis of excessive indebtedness. Governments, corporations and households are groaning under unprecedented debt burdens. Average household debt has reached 141% of disposable income in the United States and 177% in Britain. Worst of all are the banks. Some of the best-known names in American and European finance have liabilities 40, 60 or even 100 times the amount of their capital.

The delusion that a crisis of excess debt can be solved by creating more debt is at the heart of the Great Repression. Yet that is precisely what most governments propose to do.

Read the rest:
http://www.latimes.com/news/opinion/comme
ntary/la-oe-ferg6-2009feb06,0,6972232.column

White House Economic Advisors in Disarray

February 5, 2009

Paul Volcker has grown increasingly frustrated over delays in setting up the economic advisory group President Barack Obama picked the former Federal Reserve chairman to lead, people familiar with the matter said.

Volcker, 81, blames Obama’s National Economic Council Director Lawrence Summers for slowing down the effort to organize the panel of outside advisers, the people said. Summers isn’t regularly inviting Volcker to White House meetings and hasn’t shown interest in collaborating on policy or sharing potential solutions to the economic crisis, they said.

While Summers, a former Treasury secretary, oversees the official White House economic policy apparatus, Obama tapped Volcker for a new Economic Recovery Advisory Board charged with injecting fresh, outside ideas into policy debates.

“When you have two strong, highly accomplished, driven people, it’s not unusual that there is going to be a battle over turf,” said James Cox, a professor at Duke University Law School in Durham, North Carolina. “I would hope that Obama doesn’t lose Volcker’s counsel. They need someone to help them think outside the box.”

By Robert Schmidt and Julianna Goldman Bloomberg News

The contretemps shows the difficulties Volcker, perhaps the world’s most respected economist, may encounter as an outside adviser charged with providing policy alternatives to the president, said William Silber, a finance professor at New York University’s business school.

Outsider’s Disadvantage

Volcker “is not in the White House and he doesn’t have a bureaucracy to command,” Silber said. “It puts him at a disadvantage.”

Former US Federal Reserve Bank Chairman Paul Volker listens ...
Volker  REUTERS/Brian Snyder

After testifying at a congressional hearing yesterday, Volcker declined to respond to questions. His office said he doesn’t grant interviews.

Summers, in an interview, played down any conflict.

“Paul’s got a kind of experience that no one else has, and the president enormously values his advice,” said Summers, 54. “I think this board is going to be very useful, because it’s very easy sitting here to kind of lose sight of what’s happening on the front lines of the economy.”

Obama named Volcker on Nov. 26 to head the new panel, saying he wanted an outside voice to keep administration policy planning from becoming “too insular.”

Read the rest:
http://www.bloomberg.com/apps/news?
pid=washingtonstory&sid=aaLzJZKNcc6Y