After just four months, media figures ignore economists to declare stimulus a failure
SUMMARY: Media figures have used a recent comment by Vice President Biden -- that the Obama administration "misread how bad the economy was" -- to suggest that the economic recovery package is a complete failure, rather than noting the assessment by economists then and now that the legislation does not go far enough and that further stimulus spending may be necessary.
Rather than highlight the view then and now of progressive economists that the economic recovery package was too small, several media figures are now suggesting that the package is a complete failure. Those remarks -- made by, among others, CNBC's Larry Kudlow, Fox News' Sean Hannity and Greta Van Susteren -- follow recent comments by Vice President Joe Biden that the Obama administration "misread how bad the economy was." Kudlow, for example, said that the current jobs situation reflects not just a "misreading of the economy, but a misreading of the solution to the economy." Van Susteren raised the question of whether the stimulus package was a "house of cards." Neither noted the view by progressive economists, including Nobel laureate Paul Krugman, that the current situation means not that it was wrong to pass a stimulus, but that further stimulus spending may be necessary. Krugman, who among others advocated strongly for a bigger stimulus package than what was passed, said of the American Recovery and Reinvestment Act on July 5: "[I]t was never expected to do very much this soon. The problem, instead, is that the hole the stimulus needs to fill is much bigger than predicted. That -- coupled with the fact that yes, stimulus takes time to work -- is the reason for a second round, ASAP."
- Discussing Biden's comments during the July 6 edition of The Kudlow Report, Kudlow asserted, "Here's a big problem: Wages have flattened and private hours worked keep declining. And the administration's $800 billion fiscal stimulus package has failed to stimulate. What Mr. Biden missed yesterday is not just a misreading of the economy, but a misreading of the solution to the economy."
- During the July 6 edition of his Fox News show, Hannity asked whether Biden's comments indicated that "the White House finally admitting the stimulus has failed." Hannity subsequently characterized the stimulus as a "screw-up" after airing Biden's comments.
- During the July 6 edition of On the Record, Van Susteren asserted, "If they're now saying that they misread it in January, then this whole policy -- this whole plan, 787 billion, is based on a house of cards. I mean, in the sense that -- on a false reading."
In fact, contrary to Hannity's suggestion that Biden was indicating that the White House thinks "the stimulus has failed," Biden specifically noted that is not the administration's view, stating in his July 5 interview on ABC's This Week:
BIDEN: The truth is, we and everyone else misread the economy. The figures we worked off of in January were the consensus figures and most of the blue-chip indexes out there.
[...]
BIDEN: And so the truth is, there was a misreading of just how bad an economy we inherited. Now, that doesn't -- I'm not laying this -- it's now our responsibility. So the second question becomes, did the economic package we put in place, including the Recovery Act, is it the right package given the circumstances we're in? And we believe it is the right package given the circumstances we're in. We misread how bad the economy was, but we are now only about 120 days into the recovery package. The truth of the matter was, no one anticipated, no one expected that that recovery package would in fact be in a position at this point of having to distribute the bulk of money.
Moreover, none of the three hosts mentioned economists, including Krugman, who reject the claim that economic performance since the passage of the recovery act indicates that fiscal stimulus was a failed policy and who say that further stimulus may be needed. For example, in a June 5 The Nation column headlined "Time For a New Round of Stimulus" by editor Katrina vanden Heuvel, University of Texas professor and The Nation contributor James K. Galbraith was quoted as stating: "This crisis is, above all, a crisis of unemployment, of foreclosures, and -- as we see in California -- of the essential services, including healthcare, that state and local governments provide. None of these will be remedied fast enough by the stimulus already in the pipeline. New, stronger, better targeted and faster-acting measures are needed, including general revenue sharing, a national infrastructure fund, a housing program and publicly-funded health care."
Also, in a June 5 blog post, Economics Policy Institute economist Heidi Shierholz stated: "The May employment report shows that while the pace of losses may be slowing, the U.S. labor market is still hemorrhaging jobs. With the continued loss of jobs and hours along with the collapse of wage growth, it is time to start thinking very seriously about additional stimulus spending."
From the July 6 edition of CNBC's The Kudlow Report:
KUDLOW: All right. I don't think it's the right package, but here is the key point. Even an optimist like myself has to acknowledge that the big drop in June jobs for both payrolls and households tells a bad story and it postpones recovery. There isn't going to be a real recovery until jobs start rising; it's the most important coincident economic indicator. And even while leading indicators from Fed money creation and financial improvements and credit market spreads, along with the rising stock market since early March and a pickup in commodities -- though not today on commodities -- all those are flashing "go" for future growth. But now, perhaps, that real growth may not come until the end of the year.
Here's a big problem: Wages have flattened and private hours worked keep declining. And the administration's $800 billion fiscal stimulus package has failed to stimulate. What Mr. Biden missed yesterday is not just a misreading of the economy, but a misreading of the solution to the economy. Tax rates should have been slashed across the board for individuals, businesses, and investors. And instead of fiscal nymphomania, we need incentives and rewards for risk-taking and job creation.
From the July 6 edition of Fox News' Hannity:
HANNITY: Is the White House finally admitting the stimulus has failed?
BIDEN [video clip]: We misread how bad the economy was.
HANNITY: All of that, plus Ann Coulter, Frank Luntz, and our great "Great American Panel."
[...]
BIDEN [video clip]: The truth is we and everyone else misread the economy. The figures we worked off of in January were the consensus figures of most of the blue chip indexes out there. [...] We misread how bad the economy was, but we are now only about 120 days into the recovery package. The truth of the matter was no one anticipated -- no one expected that that recovery package would in fact be in a position at this point of having distributed the bulk of the money.
HANNITY: I thought this was the worst economy since the Great Depression? Now, that was Vice President Joe Biden yesterday, discussing the stimulus package with ABC's George Stephanopoulos.
And if the stimulus screw-up wasn't enough, well brace yourself for the gargantuan cap-and-trade bill making its way through the Senate right now.
From the July 6 edition of Fox News' On the Record with Greta Van Susteren:
VAN SUSTEREN: OK, what is going on with our economy? Unemployment: 9.5 percent, and only 14 percent of the massive stimulus bill has been paid out so far.
Vice President Biden said this yesterday:
BIDEN [video clip]: We and everyone else misread the economy. The figures we worked off of in January were the consensus figures of most of the blue chip indexes out there. [...] The truth is there was a misreading of just how bad of an economy we inherited. Now, that doesn't -- I'm not laying this on anybody. We -- it's now our responsibility. So the second question becomes: Did the economic package we put in place, including the recovery act -- is it the right package, given the circumstances we're in? And we believe it is the right package, given the circumstances we're in. We misread how bad the economy was, but we are now only about 120 days into the recovery package.
VAN SUSTEREN: So, will the White House come hat in hand, asking for a second stimulus? Steve Moore, senior economic writer for The Wall Street Journal editorial page, joins us in Washington.
Steve, here's the problem that's really nuts, is that the stimulus package was crafted on what they -- how they read the economy. Now they say they misread the economy, so the stimulus package has to be suspect. If we are not having indicators right now that the economy is taking off, you know, there's a problem, a bigger problem, because we're not headed down the right track.
MOORE: Yeah, Greta, you know, I wish the White House would get its story straight on the economy. And it's not clear whether Joe Biden was maybe freelancing a little bit on those Sunday TV shows.
But if you think about the chronology here for a minute, Greta, remember during the election season, we were told this was the worst economy since the Great Depression and everything was horrible and we were in the midst of a financial meltdown. Then, after the president was elected and he presented his budget, we were told that -- we actually had rosy scenario from the White House, and they were taking numbers that were much better than the blue chip forecasts because they wanted to make the deficit look not so bad. Now we here are four months after the stimulus bill passed, and they can't quite get their stories straight. One day, the president says --
MOORE: -- "Well, things look like they're improving." And then Joe Biden says today, "Well, we misread the economy. It's worse than we thought."
VAN SUSTEREN: OK, that politically looks bad, because they sort of get caught with their pants down, saying one thing one time, another thing, another thing.
MOORE: Right.
VAN SUSTEREN: The problem that I have is a little bit more fundamental, and I think a little more serious is that -- is that their stimulus bill in February was based on what their -- how they read the economy in January.
MOORE: That's right.
VAN SUSTEREN: If they're now saying that they misread it in January, then this whole policy -- this whole plan, 787 billion, is based on a house of cards. I mean, in the sense that -- on a false reading.
MOORE: Greta, I agree with that. I think that there's a lot of panic going on now in the White House with respect to these horrible unemployment numbers that we talked about the other night on the show. We have 15 million unemployed Americans right now. This isn't the way it was supposed to be. We were supposed to be putting a lot of those Americans back to work because of this $800 billion stimulus plan.
And, Bruce (below), as long as Congresspersons are more interested in their own careers than in balanced budgets, the deficit situation will never be correctly addressed. Raise the top marginal rates to about 65% on those earning over $250K/year and you will find that the number of those earning that kind of money will decline. Most of those earning that kind of money have the ability to set what they want to pay in taxes and there is a "break-even" point. When one piles the problems of the States on top of the Federal mess, it is hard to see how tax rates can be raised high enough to get past the mess, unless we are willing to accept a lower standard of living and reductions in government (and personal) spending.)
The country is in an unwinnable game and it's just a matter of time before the game's over.
Every major power in history has eventually gone down under its own weight. Why would we be any different?
Today's republicans are all about farmers, and eliminating the estate and gift taxes. The only thing they have in common with Coolidge is that he couldn't care less about federal flood control even after the worst natural disaster prior to Katrina, the Great Mississippi flood of 1927, occured on his watch.
Today's republicans are all about farmers, and eliminating the estate and gift taxes.
The only proviso I would throw in there is that the GOP is for corporate farmers. None of the family farmers, that I know, get much if any benifit out of the USDA subsidies that are out there.
Boy, I never heard that line before. (not)
People are competitive, part of that is reflected in how hard people work to make money. If you think someone making inexcess of $250k a year is going to stop working so hard, because taxes were raised, I think you are barking up the wrong tree.
As far as the States mess and the Federal mess, don't forget the local mess, just take a walk into the bathroom and look in the mirror. You are one of the 200 million americans that need to accept the blame for that. (yes, I include myself in that bunch)
Polititians want to stay in power, they do this by giving the voters what they want (or what they think they want) while neglecting to point out that it will cost so much to give them what they want.
If you don't want to pay high taxes decide what government programs, that you use, that you are willing to give up and tell your congressman that you are willing to give these up. Smaller military, worse roads, no garbage pickup, etc, etc. Your choice.
AND YES, REPUBLICANS ARE JUST AS BAD!
Money needs to actually be SPENT for it to STIMULATE anything. I think that's a fairly basic and universally accepted economic precept...
Inflation won't happen in a recession. Not something to worry about now.
If inflation does occur in the future, the Fed has plenty of tools at their disposal with interest rates at or near 0 to pull things back.
I would rather take my chances now to stop a steeper dive into recession and job loss.
However, when the govt creates money and gives it to BANKERS, HEDGE FUNDS, SPECULATORS, then massive demand (cash) is created on top of a dwindling supply (production, jobs) and that causes the type of hyper-inflation we saw in Weimar Germany.
Unfortunately, the FEDERAL RESERVE, has floated a bailout to banks and speculators which is around 15 times the Stimulus. Last time I checked, Bloomberg reported that the Fed pumped $15 TRILLION into it's friendly banks, after suing for lack of transparency.
I did not believe it at first, but now I know that not only the FEDERAL RESERVE a private company whose stock is owned by member banks, it's not even "quasi-public" because when Greenspan was asked the Fed's "relation with the President and Congress" he said "None" they do whatever they think is best (for whom)?
Obama would have to rely on his "bully pulpit" to go the public and expose the Fed's criminal malfeasance. He could ask Congress to withdraw the Fed's license to create money privately, and return that power to the Treasury, as the Constitution orders, under democratic oversight instead of secret. (Not that the Constitution is "socialist" for insisting on honest democratic money.)
Will Obama do that? Look at who gave millions to his election. Not the poor people. Goldman-Sachs and other big corporations that rule us. (that is NOT socialism, it's the antithesis)
Why not make a virtue of necessity, and go the way of the Lincoln greenbacks? Inflationary, you say? Not in this deflationary context, no.
understand our political system or is ignoring
it. For a stimulus to be passed, it must start
in the House and then go through the Senate in
sequential order. For money to be discussed in
the House, each Representative asks "What's in
it for my district?" Those questions are always
answered and a bill originally targeted at
creating jobs is diluted by pork
barrel projects that may or may not involve
hiring. In addition, the money spent to create
jobs is spread out over years [like the current
"Stimulus" bill]. The result is two effects. The
first is for each $2 of money allocated in the bill only
$1 goes to jobs. While the ratio might not
be 2 to 1, it certainly is not 1 to 1 by a
casual reading of the Omnibus spending bill
and the Stimulus bill. The second effect is
the time delay. A stimulus bill will allocate
money to be spent over a period of time (for
our beloved stimulus bill, the time span
is 3 years). The economy can go horribly wrong
before the stimulus money even gets into the
economy. A deteriorating economy is a real
time event. Planning on spending money 3 years
from now to correct a disaster unfolding
before your eyes does not sound like a
smart thing to do and is very likely to miss
the target.
Finally, once the stimulus bill has been
passed and money is available, more politics
are involved in order to actually spend it.
Almost all projects are state run and states
have their own legislatures to make happy. The
pork barrel process starts all over again.
All in all, Government spending is a most
inefficient way to stimulate the economy.
Few doubt that hiring people to build
infrastructure stimulates the economy. What
I doubt is that it can be done efficiently
and quickly and that when the money runs
out the economy will have recovered and not
just make all those hirees newly unemployed.
Any economy worth its salt can easily
outrun the two levels of politicians
who chase it.
Good observations, btw.
My point was how all these conservatives who are now screaming that Obama's policies have failed wouldn't have or never did say the same thing about Reagan's policies 6 months after he took office. I hold the position that 6 months is certainly not near enough time to declare anything a success or failure. Perhaps I wasn't clear enough in my first post, but the hypocrisy of those on the right when it comes to delcaring Obama a failure seem to have developed vague memories of the first two years of Reagan.
That being said, I am certainly not a fan of Reaganomics, but I think it is hard to argue that the economy didn't improve (for whatever reason) during some of Reagans term. Those on the right certainly wanted to give him plenty more time than 6 months to prove his worth.
Government spending buys things that have no productive value. There is no ongoing employment associated with infrastructure
investment and infrastructure produces nothing. Private investment causes factories and call centers and information libraries to be invented and created. Government does not.
Government is also subject to significant overhead. The first is the overhead of federal and state governments both managing the spending. The second is where the money allocated by the federal government goes for things other than infrastucture -- pork. The result is that for $1 of infrastructure construction, $2 is needed from the tax coffers.
The ratio can be verfied by looking through the Stimulus bill to see how much money actually delivers infrastructure. Finally, the last problem is with the short term nature of "stimulus" spending. By the time the stimulus money runs out,
those hired at the beginning of the program are already unemployed and at the end, they are all unemployed.
Goverment spending has the same value to society as welfare and unemployment. It can be used successfully, but it doesn't solve
any problems. The prayer is that if we put these people to work for 3 years, by the time the stimulus {welfare,unemployment} runs out, the economy will have recovered and they won't go back on government payroll. The whole program does nothing to solve the economic problems but does help people over the hump. Only problem is raising taxes, hindering foreign trade, creating an oppressive regulatory environment, and going after businesses in the courts is a recipe taken directly from the FDR playbook. That playbook inherited a 24% unemployment rate in 1933 and lowered it to 21% by 1937.
Stimulus spending is temporizing but no solution. Our government is aggravating the economic downturn, not improving the economy.
"a recipe taken directly from the FDR playbook. That playbook inherited a 24% unemployment rate in 1933 and lowered it to 21% by 1937."
Could you be anymore disingenuous? Of course, FDR did not leave office in 1937. What was unemployment when FDR was done? It's almost as if you do not realize that your examples are actually arguing against your point of labeling Obama's economic recovery a failure.
By the way, wikipedia disputes your numbers.
Your history regarding Roosevelt's record is also faulty. Unemployment dropped much more dramatically prior to 1937 than your figures reveal, and most legitimate economists believe the "rebound unemployment" in 1937 was the result of Roosevelt's adopting more conservative policies.
Amen
Don't worry - you usually are.
Actually... that would be from 1981 - 2008
Ever since Reaganomics became the new norm for economic policy this country has been in a tail-spin with an occasional leveling out (in the 90's)...
From my point of view... the damage don't by 28 years of conservative/right-wing economic policy is going to take more than the centrist policies of the Obama administration to fix!!!
We are, in the biggest way, in need of a brand new "New Deal" the likes of which got FDR re-elected 4 times... or all this 'recovery' taking place now is going to be a waste of time.
From 1977-1981 went from $40,100 to $40,500
From 1981-1989 went from $40,500 to $44,500
(Data from Census bureau).
From 1973-1981
poorest quintile experienced a -5% change in real family income.
From 1981-1989
poorest quintile experienced a 5% change in real family income.
[Census data]
Reagan also made the "misery index" disappear.
["Misery index" = inflation + unemployment.]
Reaganomics not only worked, but everytime it was
overruled, the economy slowed. Reagonomics was not only
about taxes.
Read your United States statistical abstract and get the facts.
Here are some facts you conveniently leave out:
revenues did increase by $474.1 billion dollars during the Reagan 8-year term of office, but each and every year resulted in a budget deficit and by the end of his 8-year term Ronald Reagan had increased the federal debt by almost $1.7 trillion dollars - 3.5 times the amount the revenues increased. In fact, Reagan had to agree to tax increases in his second term The Tax Reform Act of 1986 to off-set the damage he had sone durng his first four years.
Historically, the national debt has risen in periods of war when the costs of war have generally been financed by borrowing rather than raising taxes. The entire Reagan presidency was during peacetime so there was not any war cost involved.
The debt, as a percentage of GDP ballooned from 26.1 percent of GDP when Reagan took office, to a whopping 40.6 percent of GDP when he left office.
The economy grew through the '80s, '90s, and '00s. As a percentage of GDP, it was in line with historical averages and also in line with the same ratio in most other industrialized nations. Reagan's policies were not some miracle cure we have never seen before sir. Unemployment in the blue-collar sector was at it's highest since the Depression. The rich were getting richer, and the poor were getting poorer.
What fewer people know is that among wealthy industrialized nations, the US is second only to Switzerland in the amount of its national wealth owned by the richest 10 percent of the population. The United States’ rich have been getting richer and richer since the Reagan Revolution. According to the Federal Reserve, the wealth of the bottom 40 percent of the US population dropped by two thirds since Reagan took office.
Just check out these statistical numbers on how inequality became so prevelant during the wonderful years Reagan
http://www.huppi.com/kangaroo/4Inequality.htm
Change in Mean Real Household Income, By Quintile,
from 1981 to 1989
quintile total change change per year
Poorest 20% +7.6% (+5.4%) +0.9% (+0.7%)
Second 20% +11.3% (+9.1%) +1.3% (+1.1%)
Third 20% +12.0% (+9.8%) +1.4% (+1.2%)
Fourth 20% +13.8% (+11.5%) +1.6% (+1.4%)
Richest 20% +27.0% (+24.4%) +3.0% (+2.8%)
The Clinton Years
Change in Mean Real Household Income, By Quintile,
from 1993 to 2000
quintile total change change per year
Poorest 20% +16.9% (+15.3%) +2.3% (+2.1%)
Second 20% +15.4% (+13.9%) +2.1% (+1.9%)
Third 20% +15.2% (+13.7%) +2.0% (+1.8%)
Fourth 20% +15.0% (+13.5%) +2.0% (+1.8%)
Richest 20% +18.9% (+17.4%) +2.5% (+2.3%)
From my viewpoint it looks like Clinton did better. Larger increases that were more evenly spead out across the economic spectrum.
Gosh, that looks like crap in preview mode. I hope it looks better posted. (not likely)
The President can talk a good game and his party can do his bidding, but ultimately, the House of Representatives must take responsibility for all government spending.
What can I say, Hannity and Van Susteren, just another pair of right wing hacks that love to ignore and/or rewrite history.
The $75 billion “Making Home Affordable” program to help qualified homeowners avoid foreclosure. ( foreclosures are increasing)
to the depression actions by FDR. Cap and Trade will raise taxes by increasing prices for energy. Health care cannot be enacted without taxing people -- most of whom today are happy with their health care plans. High taxes reduce government revenue. High taxes make small businesses stop hiring and in some cases shrink. Trade barriers reduce foreign trade. Anti-trust causes
business to focus on courts and not business growth and certainly not
investment. Flooding the economy with money will create inflation and disuades foreign investment. About the only thing that hasn't happened yet is for the FED to reduce the supply of money and start a deflation cycle. I think everyone in the FED understands the dangers of deflation.
The President has also not yet mentioned price stability, but he has offered his thoughts on maximum salaries which is the same thing.
Our government seems to be gearing up to helping people but freezing the economy.
Name ONE.
Yeah, they misread it. Had the money gone to actual homeowners, the bankruptcies would have stopped.
The whole problem started with the Adjustable Rate Mortgages, and when people couldn't make their payments, it collapsed.
Bundling these mortgages and selling them to Wall Street just worked so well.
Then the Bailouts...I believe Bush was in office then.
I'll tell you what was a house of cards-ARM's! Then bundling them and selling them as get rich quick schemes!
Raising the prices on housing to get a profit, and jacking up the prices again, and again, and again....
OOOPS! Sorry, I guess that process just didn't work so well, but since it worked so well getting us in this mess, we'll give our CEO's bonuses. Because they're so INTELLIGENT.
Banks have restricted lending.
Credit card companies are putting their rates up to make up lost profits.
And that's President Obama's fault?
My taxes are lower because of Bush or maybe the alternative explanation is that Obama let them be lower. In either case, lower taxes are more stimulative to the economy than government spending which produces no products and therefore, no long term employment.
Do you think Obama will let the Bush tax cuts expire?
There, fixed it for ya.
Put simply: John Maynard Keynes thinks your an idiot.
The US govt plans on borrowing so much money from our friends in China that the US Mint will need to buy more printing presses from India. This debt will be passed on to my children s children s children.
But to be fair, it's only been 6 months...lets wait and see if the Govt can fix things given more time to borrow trillions more from the Chinese.
The way I see it a medium to poor investment into this country is better than a great investiment into a war like Iraq.