Gut, we've already gone over this...the State's have been undermining the recovery by deleveraging. Do you dispute the economic analysis of Macro Adviser's? Moody's? Had the lame American Jobs Act been passed, growth is faster and unemployment is lower, period. And, there's better things we could do than food stamps but it's better than nothing.gut;1264145 wrote:SMH....Then why don't we give everybody food stamps? Surely that would be a net positive for the economy, it's not possible that there are crowding out effects, offsets or - gasp - actually a multiplier less than 1? C'mon Boat, Obama is running trillion dollar deficits yet it's the slowest, most anemic recovery since the Great Depression. Multipliers of 1.5+?!? If it worked, where's the tax revenues Boat? Receipts fell off a cliff, so there's not tax revenue coming in from this. Corporate profits are at an all-time high, but why was the % of GDP flat in 2010 at 15.1% and up just a smidgeon to 15.4% in 2011? Where's your multiplier effect?
Where is you're vaunted multiplier effect? Because it doesn't exist (at least this go around), after 30 years no one is fooled any more. Let's see if we can walk you thru understanding why:
1) What is the key principle in keynesian economics that has not been practiced?
2) Why is that fundamental to the foundation of the theory?
3) And what does classical theory say about deficit spending year after year with no end in sight?
Even Krugman admits the stimulus didn't work, so why can't you? Now whether it was the design/structure of the stimulus or diminishing returns/tipping point, the fact is it didn't work and all we have to show is trillions more in debt.
And, keynesian's have not said the stimulus didn't work. It did work and unemployment would be higher and gdp slower without it...counterfactuals we can believe in! They just argue that it wasn't designed optimally nor large enough in comparison to the economic contraction.
And you're going to lecture me about the key principle of keynesian economics that hasn't been practiced, namely, that we should have been running surpluses or at least balanced budgets when we had full employment and interest rates above the zero bound...but it's the GOP and Alan Greenspan who blew that wad with an irresponsible expansion of the welfare state, two wars and budget busting tax cuts! They actually argued that we would pay down our debt too fast. That is why the GOP must be repudiated, they run deficits at the wrong time and try to balance the budget at the wrong time.
I'm sorry that we ran large deficits then but that doesn't mean that the correct policy isn't to run them now. And, I'm sorry but if the government came to a firm demanding them to build a bunch of F-22's they're going to do it even if it means large deficits despite the idea that it may mean higher taxes in the future. Because people/firms aren't ricardian. And, there has been no crowding out effects. Why are interest rates at historic lows if there's crowding out??
Additionally, no keynesian has said the ARRA didn't work...it just could've been better. You and I have been going back and forth about this for years now. The evidence is clear...when interest rates are at the zero lower bound, deficit spending by the government raises gdp and lowers unemployment. Not all deficit spending is equal and some is better than others but the general point is true. Austerity measures by states in a federal system undermine this effect as does deleveraging in the private sector (one of the primary reasons you need to do federal government spending in this unique, specific, rare scenario).
And, it's funny, you talk about firms being skittish because of the fiscal cliff but the CBO projects that it will reduce the deficit (i.e. meaning lower taxes in the future) if they were ricardian the fiscal cliff would have them spending and investing. However, without the spending cuts and tax raises, the deficit is projected to be higher again but unemployment lower and gdp higher...if firms/people were ricardian they would be predicting higher tax raises in the future and stopping the fiscal cliff to run deficits still would result in higher unemployment and slower gdp....but that is the opposite of what the experts predict.
Oddly enough, if the American Jobs Act had been passed and we actually were getting closer to full employment, Obama would be a lock for re-election, there wouldn't be pressure on the FED for more monetary stimulus but instead to think about raising rates and I might even be joining you in the chorus about the need for a credible budget plan, but alas.
