President Obama Re-Elected - Page 170

On July 07 2012 07:05 DoubleReed wrote:


...oh come on. That's the very definition of an oversimplification.

On July 07 2012 04:42 JonnyBNoHo wrote:


CBO's estimates table 1:
http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/100xx/doc10008/03-02-macro_effects_of_arra.pdf

Things that had a higher estimated multiplier didn't always get prioritized. Infrastructure spending got the shaft (big time) despite the fact that it has a very high multiplier and was and still is sorely needed. Infrastructure spending would have also been targeted where the economy need it most. Construction was at the core of the recession and infrastructure spending could have put those people to work.

Comparing to past recessions may not be fair but the stimulus from the Federal government has been the largest since WW2 so it is reasonable to expect a lot out of it.

On July 07 2012 06:55 Romantic wrote:
Stimulus won't work because all that matters is the Federal Reserve's actions. If there is a fiscal stimulus, to any extent that it changes Fed behavior it was a useless adventure in wasting the taypayer's money and sucking it out of private markets.

On July 07 2012 14:44 paralleluniverse wrote:

On the first point I don't think we are in disagreement. Slightly less than half of the stimulus was in tax cuts which are not very stimulative. But they were added in an attempt to get Republican support.

Infrastructure spending is desperately needed, and it's part of Obama's stalled jobs bill. Yet you don't ever see a Republican calling for infrastructure spending.

On the second point, no the comparison isn't fair, but as I've said, the stimulus wasn't near large enough here. The output gap was almost $2 trillion and the stimulus was only $700 billion. Many economist argued that it should have been larger, at least twice the size, and they are right.

On July 07 2012 14:49 paralleluniverse wrote:

That is completely untrue.

Stimulus doesn't work when the economy isn't in a recession because the Fed will raise interest rates to offset the inflationary and expansionary effects of the stimulus.

But stimulus does work in a recession, because the Fed will lower interest rates, reinforcing the stimulative effects.

The Fed has now hit the zero lower bound, it has lowered interest rates all it can, it's essentially out of ammo, and anything more it can do will have only very minimal effects in stimulating the economy. Fiscal policy, i.e. more stimulus, is the only option left as the Fed can't really do anything.

In a depressed economy, when the Fed has hit the ZLB, stimulus is even more effective than normal: http://delong.typepad.com/sdj/2012/03/delong-and-summers-fiscal-policy-in-a-depressed-economy-conference-draft.html
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On July 07 2012 17:32 Romantic wrote:


It is completely true. You'll note Delong does not say they are out of tools, he hedges his bet by saying they cannot or are unwilling to act further. If anyone believes the Fed is out of tools when they can't lower interests rates then they forgot the Fed can print as much money as it would like.

If you are going to argue the Fed could be won't do anything, fiscal stimulus still doesn't pass the test. If the Fed was unwilling to generate higher output or employment because they were committed to a lower target, why would they sit back and let Congress ruin their target? Delong's paper http://www.brookings.edu/~/media/Files/Programs/ES/BPEA/2012_spring_bpea_papers/2012_spring_BPEA_delongsummers.pdf says he just doesn't think it will happen. Apparently the Fed will not expand due to the consensus being against expansion beyond what they have currently done, but they will sit back and watch Congress do it.

You can post people like Delong simply stating they are correct in their assumptions fiscal policy will not be offset by different monetary policy, I can post people who think it will be offset, that the stimulus money will be wasteful as compared to leaving it in private hands, and that self financed borrowing is silly even now - all within the mainstream.

We are here to say that, as a matter of arithmetic, in a depressed economy like the present, if a long deep recession casts even a small shadow on future potential output, with interest rates in the range at which the U.S. has been able to borrow, there is a substantial likelihood that expansionary fiscal policy right now would be self-financing, and an overwhelming likelihood that it would pass a benefit-cost test.

In normal times expansionary fiscal policy as a stabilization policy will flunk its benefit-cost test. In normal times the multiplier μ will be close to zero. Either way, expansionary fiscal policy as stabilization policy has only costs and no stabilization-policy benefits.

In a depressed economy, however, there is less increase in inflationary expectations following from higher output, and less reason for the monetary authority to fully offset the effects of expansionary fiscal policy.

On July 07 2012 17:53 Lightwip wrote:
The Fed was dealing with the dotcom crisis when the recession kicked in (low interest rates -> bad investments -> credit crisis). I highly doubt this recession is one to be solved with monetary policy.

On July 07 2012 07:41 Signet wrote:
The 538 blog ( http://fivethirtyeight.blogs.nytimes.com/ ) is the only site I know that calculates a percent odds for each state. He thinks Obama is more likely to lose Michigan or Pennsylvania than Wisconsin...

NH/IA/CO each about 66% odds of going for Obama.
OH/VA closer to 60% each (Ohio a little higher, VA a little lower)
FL basically 50/50.

On July 09 2012 08:05 Savio wrote:


Thx for a link to that site. It is fairly awesome.

On July 07 2012 18:03 paralleluniverse wrote:

Monetary policy can do no more. It is at the zero lower bound.

The Fed can and has engaged in unconventional monetary policy (to reinforce stimulus, despite some peoples heads being stuck in the sand), through managing expectations and asset purchases (QE). All of this has some small stimulative effects in increasing demand (not reducing demand to offset the stimulus).

Another thing the Fed should do (but refuses to do), is to increase it's inflation target to, say 4%, which will make real interest rates more negative, and thus stimulate demand. Although it would likely not make too large of a difference. But the Fed refuses to do this because it would undermine it's inflation creditability.

On July 09 2012 08:50 farvacola wrote:

I will if no one with more zeal volunteers.

On July 10 2012 22:39 Epocalypse wrote:
O'Reilly compares Obama to Reagan.
Shows video of Obama contradicting himself.
Compares some of Obama's to Romney's plans on taxing.

http://video.foxnews.com/v/1727652336001/