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Thursday June 18, 2009
Keith Hennesey wonders Will the stimulus come too late?:
What I have found really depressing about the entire fiscal stimulus debate is how little attention has been paid to what Hennesey calls "the timing of the macroeconomic boost". I guess I expect it from advocates of fiscal stimulus, such as Brad De Long and Paul Krugman. But I would have liked to seen more discussion of the issue from folks like Greg Mankiw.
I would feel like Cassandra about this issue, but Cassandra wasn't predictly the blindingly obvious which I likely am. I think it's just a case where a lot of very smart people are too intelligent to bother with simple details.
I began this blog at the end of March after the stimulus bill had become law. I had been struck by how much the stimulus debate had focused on whether the bill was efficient. (It clearly was not.) There was much less discussion of whether the stimulus would be effective, and of the timing of the macroeconomic boost...I'll have to read Keith's archives, but even without doing so I suspect he had the same thoughts that I did. Specifically, that this sort of fiscal stimulus was necessarily going to be too late. My thoughts, back from 2008 when the issue was being ignored, are here: What Are The Key Ingredients of Fiscal Stimulus and Fiscal Stimulus - Unlikely To Work in the Real World.
s-l-o-o-o-w – CBO says that $25 B of spending had gone into the economy by May 22nd. That’s less than 4% of the total budgetary impact of that bill. Other news reports suggest that about $40 B is in the economy if you include the revenue side. Remember that almost all of the 2008 stimulus was in private hands by August 1. We will get very little GDP boost from fiscal stimulus in Q3 of 2009, and not much in Q4 either. The stimulus will begin to ramp up in Q1 of next year, and be in full swing by Q2 and Q3 of 2010.
What I have found really depressing about the entire fiscal stimulus debate is how little attention has been paid to what Hennesey calls "the timing of the macroeconomic boost". I guess I expect it from advocates of fiscal stimulus, such as Brad De Long and Paul Krugman. But I would have liked to seen more discussion of the issue from folks like Greg Mankiw.
I would feel like Cassandra about this issue, but Cassandra wasn't predictly the blindingly obvious which I likely am. I think it's just a case where a lot of very smart people are too intelligent to bother with simple details.
Comments
What stimulus? Even if it were true and Obamas transfer of money to poor empoverished inefficient industries and banks actually was able to provide a degree of prosperity in the communities associated with them, surely the money that he uses must come from some other part of the suffering nation, where less would be available for the necessary investment and payment of these working masses too.
The Keynesian Theory on which Obama works is defunct because it does not take in the whole macroeconomy and its model is a poor and limited representation of what is really going on. To stimulate the macroeconomy one must increase the opportunities for work and not merely transfer them. Only when less land is held out of use for purposes of speculation and profit by non-working monopolists, the economy will recover. But as long as these parasites are supported by the governmental laws of land tenure, there is no hope for us to recover.
TAX TAKINGS NOT MAKINGS.