Comments on: The Obama administration’s biggest macroeconomic mistake

By: ikitov

ikitov — Sat, 15 Oct 2011 14:35:17 +0000

1. If to dig deeper into BEA’s publiations one can find an unofficial estimate of the uncertainty in the GDP growth rate of 1% per year or annualized 4% per quarter. Thusall revision you have mentioned are within the limits and 8.9 not worse, actually, than 6.3%. Both values inside 4%.
2. Okun’s law is very relibale for the US(http://mechonomic.blogspot.com/2011/1 0/some-corrections-to-david-altigs-job.h tml) but BEA statistics makes a big difference when used as it is – dhttp://mechonomic.blogspot.com/2011/10/ beware-of-bea.html
3. real proble is that there is no comparability of GDP estimates over time – http://mechonomic.blogspot.com/2011/10/b eware-of-bea.html

By: DaveRoberts

DaveRoberts — Sat, 15 Oct 2011 00:39:57 +0000

Smart cramdown would still make a lot of sense. So would getting a HFHA director who was interested in the long term stability of Fannie and Freddie and the overall housing market. Obama’s team really did whiff on housing. Still are, and they don’t have to be. Making the banks own their piece of the housing mess via bankruptcy and cramdown goes hand in hand with the jobs push as a middle class strengthening effort.

By: JohnBChilton

JohnBChilton — Fri, 14 Oct 2011 18:37:53 +0000

We’re turning Japanese.

Yes, I really think so.

http://www.youtube.com/watch?v=VqZ_dC1T7 pA

By: dellbell

dellbell — Fri, 14 Oct 2011 18:27:14 +0000

So, we got a series of measures (of varying effectiveness) designed to be counter-cyclical to/cure a V-shaped, business-cycle recession, when the real problem was a L-shaped, balance-sheet recession. And those measures weren’t even aimed at, nor particularly effective at resolving that, the real problem. Lovely.

We not going to get inflation going to cure the problem. The banks, if forced to mark all their assets to market, are still insolvent. The politics of debt relief stink. Feldstein’s idea, presented in FT, may be the start of a way out of this trap.

By: TFF

TFF — Fri, 14 Oct 2011 13:15:04 +0000

Go ahead and multiply by four… It is a simpler computation, and the difference between that and the actual computation is far less than the uncertainty in the inputs.

By: FelixSalmon

FelixSalmon — Fri, 14 Oct 2011 03:12:19 +0000

Actually, Jeff Holmes, they do raise to the fourth power. Look at step two of how to compute an annualized rate:
http://www.bea.gov/faq/index.cfm?faq_id= 122

By: TFF

TFF — Thu, 13 Oct 2011 23:47:43 +0000

“oddly enough the vast majority of the stimulus was tax cuts.”

…which do little or nothing to stimulate demand, partly because the benefits flow primarily to people who already have enough to meet their needs. (Those who are struggling pay very little tax.)

By: TFF

TFF — Thu, 13 Oct 2011 23:45:13 +0000

“pushing people into early retirement the minute they become eligible for Social Security at 62″

Aren’t Social Security benefits calculated so that the value of the payout is roughly the same at 62, 67, and 70? More years but less money…

Comparing direct employment at the minimum wage to unemployment benefits is trickier. I suspect unemployment benefits for many are *above* the minimum wage? In which case paying them less would definitely save money. For the rest, it wouldn’t save money — it would simply get something done that hopefully benefits society.

Of course the unemployed aren’t all sitting on their bum in front of the TV. Many of them are working odd jobs under the table. Many of them are performing household work (esp. child care) that would otherwise be farmed out. So making them actually work for their handout would leave them substantially less well-off.

“The goverment could take an even more controvercial step and shift all FICA taxes to workers.”

Ironically, their present policy is the exact opposite. Obama’s FICA tax rebate is on the *worker* share, not the *employer* share. Moreover, there has been a big crackdown on 1090-MISC payments, forcing many situations to be converted to W2 employee status (and thus forcing the employer to pay half the FICA liability).

By: y2kurtus

y2kurtus — Thu, 13 Oct 2011 22:20:55 +0000

What could Obama or the administration or the Fed possibly do to increase employment?

Well #1 they could employ people directly via a minimum wage jobs program. That would be, controvercial, hard to manage, and wasteful… but no more so than paying people not to work via extended unemployment benifits, or pushing people into early retirement the minute they become eligible for Social Security at 62. The cost would be about 100B/year assuming minimum wage and zero benifits.

#2 The goverment could take an even more controvercial step and shift all FICA taxes to workers. This would pull money out of the paychecks of workers instantly. It would be massively regressive as it only hits people making below the social security wage base… and it would make US workers cheaper to employ and would immediatly boost employment. It would hurt everyone with a job and help everyone without one.

By: politicalcalcs

politicalcalcs — Thu, 13 Oct 2011 20:18:45 +0000

Ultimately, it’s not about the projections of how the economy was performing and whether the economy performed worse than expected. It’s about the Obama administration’s lack of response to the evidence that the stimulus was failing to achieve its objectives of stemming the increase in unemployment.

A competent leader would have adapted their original plans to fit the developing situation. If they weren’t getting the results they anticipated, they could accelerate other aspects of the plan within the scope of the stimulus, to compensate for things turning out worse than they had originally expected.

And it’s not like they were having to wait to get that feedback. While three months might have been a bit short, shouldn’t there have been some action taken by the President’s administration after six months? How about nine months? Or a year later?

Instead, the Obama administration just let the stimulus play itself out, without any useful intervention on their part, over the two years it ran.

And here we are three years after the stimulus was launched. It’s sad that one of the big knocks against the President today is the claim that he’s basically already quit as President, stopping doing the job without bothering to resign, choosing instead to campaign for whatever without end.

The lack of any effective response to the jobs situation while the stimulus was running suggests that really happened sometime during his first year in office.

By: willid3

willid3 — Thu, 13 Oct 2011 19:23:15 +0000

oddly enough the vast majority of the stimulus was tax cuts. there were support for new infrastructure spending, and help for states.
and remove the support for states, and you will get even less demand. so many want to say these jobs don’t matter. fine, then don’t count the jobs that come about because the teacher bought food, clothes, or any thing else. and that could and probably does includes your job.
and retirees who depend on interest income.
while Fed may have set the discount rate really low.
that won’t stop rates from being higher if there was any demand.

but there isn’t any demand

By: Curmudgeon

Curmudgeon — Thu, 13 Oct 2011 18:38:24 +0000

klhoughton, the mix mistake was my take too. It was clear at the time that the bulk of this money shouldn’t have went into keeping public sector employees in paychecks for another year. All that did was inhibit state and local governments from matching spending with revenue earlier. And the “stimulus” had its share of pork, too. If we were going to do infrastructure spending, that was the time to do it, but less than half of the stimulus was spent on that. In terms of what it might do for the economy, I wonder if the infrastructure boat has long since sailed.

By: MyLord

MyLord — Thu, 13 Oct 2011 16:25:04 +0000

He could have gotten around the politics by being even bolder. Legalizing the money drop would have been unifying rather than divisive and would have allowed a much greater plan.

By: Eric377

Eric377 — Thu, 13 Oct 2011 16:24:30 +0000

Ah, the stimulus. After 8 years in the wilderness, the first big act of the Obama administration carried a double duty: provide stimulation to aggregate demand and incorporate as many specific desires of the coalition of interests that the President believed elected him. And then get it enacted by a Congress in which Republicans will vote no almost to the last man or woman and the Democrats had a sizeable cohort of near-Republicans in their caucuses. The 2009 stimulus, both in size and composition, was what the Democratic party wanted it to be.

By: klhoughton

klhoughton — Thu, 13 Oct 2011 15:07:21 +0000

“The Obama administration, perhaps cognizant of the politics, was not nearly so bold.”

Someone–it ain’t gonna be me, though I know which way to bet–needs to count (1) the number of times in the 2004 campaign that GWB prominently mentioned the “need” to reform Social Security and (2) the number of times in the 2008 campaign that Obama or one of his key advisors used the word “cramdown” in a positive sense.

Ezra can spew all the window dressing he likes, but the core of that stuffed cabbage isn’t the nice, appetizing mix of rice and meats he would like to pretend.

(And I note that none of you who are discussing the piece as if it were a real find, to your immortal shame, are talking about the =mix= that went into that “stimulus package” [which ended up being all sock, no ****].

If you’re capped on the amount you can get–arguable, but when your Administration thinks David Axelrod knows more than Christina Romer, inevitable–you work to get the most out of what you can get.)

BarryO apologized for his idiocy with the stimulus request so long ago that the Kleins of the world are making apologies for it while dropping the admission of ineptitude down the memory hole.