Our UK readers my be interested to learn that the Obama administration has introduced a rival to Postman Pat: Preliminary Pat. “The White House Council of Economic Advisers gave the [Cash for Clunkers] program a preliminary pat on the back Monday,” The Detroit News reports. “Saying it created or saved 21,000 jobs in its short, four-week life by forcing automakers to boost production and add shifts.” That, however, is not our money shot. A little wood, please, as the Council addresses the question of whether or not C4C simply bribed buyers to buy earlier than they would have. Stimulating new car sales but not actually increasing them. The Council admitted the possibility, but wasn’t fussed. “This time-shifting is valuable if the economy is in recession because the economy is likely to be closer to full employment in the future.” All the birds are singing, and the day is just beginning. Pat feels he’s a really happy man.
To everyone about to be critical of C4C or of stimulus in general in what-ever form it takes, please provide your proven alternative.
The “damn Gummint” talking point rhetoric is tedious.
In a time of need, while trying to avoid another Depression, it’s not enough to carp from the sidelines.
Pete,
Can I outline why I hate C4C? It was $3 billion in welfare for people who could afford new cars, as well as new car dealers. It was just too expensive of a program for what will be little long-term results or even a short-term boost to our economy.
Keith Griffin
@ kgriff1118
So facing contraction in the auto industry (and many others) what is your alternative?
It was $3 billion in welfare for people who could afford new cars, as well as new car dealers.
Which worked nicely in other countries, especially Germany, in encouraging people who could afford to spend to come out from under their mattresses.
PeteMoran:
Politicians are good at making a drama out of a crisis (as the Brits would say). Just because a problem is serious doesn’t mean that a radical (not to mention expensive) reaction is the best course of action. Hard to believe, but sometimes it’s best to simply wait. Or take gentle corrective action.
C4C was rushed through: 30 days to create a $3 billion program? And was it really the best way to “save” the auto industry? More fundamentally, I believe that government intervention should never be the default option.
“So facing contraction in the auto industry (and many others) what is your alternative?”
You’re right. There is no alternative and it’s great the fix is so easy. I just wish economic theorists had solved this problem years before: just keep increasing deficits/debt until the whole thing blows up.
Seriously, have you seen the latest predictions that obozo released before he ran off for vacation? Do you really think this can continue? Even loyal democrats are getting scared about this.
@ RF
…. sometimes it’s best to simply wait.
Either jobs are still being lost or their not. If you accept that they are, and you also accept that such job loss turns into a contraction of economic activity, then only the Government is in a position to react.
Timing will always be the unanswered question.
@ troonbop
Seriously, have you seen the latest (debt) predictions that obozo released before he ran off for vacation? Do you really think this can continue?
Yes. When the US economy recovers plus the necessary energy reform, population growth and you’ll be swimming in money to pay that debt down.
It’s called an economic cycle.
In the meantime, it’s just possible a Depression has been avoided where you might well not have been able to keep your house along with your neighbours. How’s that feel?
30 days?
They talked about it when Chrysler wasn’t even bankrupt
“When the US economy recovers plus the necessary energy reform, population growth and you’ll be swimming in money to pay that debt down.”
Holy Toledo.
“When the US economy recovers plus the necessary energy reform, population growth and you’ll be swimming in money to pay that debt down.”
Uh, no. When times are good then government crates major new programs and entitlements to suck up the cash. Then when the inevitable downturn comes they go deeper into debt to pay for the new programs.
California is deeply into this right now, and unfortunately it looks like it is another trend that will end up spreading to the rest of the country.
@ cstoc
A tad fatalistic perhaps?
@PeteMoran:
+1.
I’ve wondered for some time whether any genuine working economists read this blog, or whether they buggered off for greener pastures, astounded.
@ cstoc
A tad fatalistic perhaps?
Is it really fatalistic if all the data supports the argument?
Since 1992, average federal spending increases have outpaced inflation by 2.2%. Moreover, that number is much higher if you look at the most recent 10 years; the relative fiscal sanity of the Clinton/GOP years brings the average down.
“Postman Pat, Postman Pat, Postman Pat and his black and white cat, early in the moooornninggg…”
How many times did I hear that when my boys were little?! Yikes.
Memories. (Yep, we live in the states now. No Postman Pat).
wmba said “I’ve wondered for some time whether any genuine working economists read this blog, or whether they buggered off for greener pastures, astounded.”
You mean these genuine working economists who helped bring us the Great Depression #1, recession after recession and now the Greater Depression?
The ones who have continually said that fiat money is just fine, despite the historical evidence of (fallen) nation after nation throughout all of history (in which the true value of fiat money eventually is where the money levels out at – zero)?
How about the “professional” economists who think – despite common sense – that an extra nearly $2 trillion dollars in debt this fiscal year alone is honkey-dorey?
Or that an extra $9 trillion over the next decade is just fine, on top of the God-only-knows-is-it-
$17-Trillion-right-now-or-what?- debt I can’t count that fast…..
You mean those “working economists”?
Thanks, I’ll take the common sense of Ron Paul and the competent minority of flyover Americas who actually have some deep seated concept of living within their means, instead.
Is it really fatalistic if all the data supports the argument?
I see your point – may as well slip out the back and end it all. The sky is falling.
How about the “professional” economists who think – despite common sense – that an extra nearly $2 trillion dollars in debt this fiscal year alone is honkey-dorey?
“They” know that it is not the absolute number that’s important, it’s the RATIO of debt to GDP. Geez, honestly, this stuff is really really REALLY basic.
Is it really fatalistic if all the data supports the argument?
I see your point – may as well slip out the back and end it all. The sky is falling.
Um, I’m afraid you don’t. While I must confess indifference as to whether you elect suicide for yourself, nobody said that the sky is falling. A statement was made that, historically, increases in GDP do not allow for retraction of total federal debt, because GDP increases are accompanied by corresponding increases in federal spending. I merely pointed out that, basically, that is true. I also pointed out that, despite a relatively benign trend in the nineties, a much more alarming trend has taken hold in the last 8-10 years.
Indeed, a quick glance at Wikipedia (http://en.wikipedia.org/wiki/United_States_public_debt) confirms that, particularly when measured against GDP, the trend described above is set to rapidly escalate federal debt to levels not seen since WWII. It’s worth pointing out that it may well be worse; those projections assume GDP growth better than that predicted by many experts.
There are many factors that, politically, almost assure that this will play out. An example would be federal income tax burden. In 2006, 10% of income tax returns supplied over 70% of revenue. The bottom 50% of returns supplied 3% of revenue. Now, given that services supported, directly or indirectly, through federal income tax revenues are almost free to half of all those reporting income, how likely is it that we will see that kind of dramatic policy change needed to control debt explosion?
So, again, I’m not sure where you picked up any suggestion that the time has arrived to loose yourself from this mortal coil, but I also don’t see any reason to minimize or deny the figures put forward by Obama’s own budget projections.
@ gossard267
What happened after 1945 and in the mid 1990s? Debt-to-GDP wise?
BTW, I’m old enough to remember the sky is falling chicken-hawks from the 1980s too…
Obviously, the most impressive part of the historical charts is the decline in the late 40’s. The question is this: was that achieved through a dramatic curtailing of previously enormous government spending, a protracted period of unprecedented economic growth, or both?
The answer, clearly, is ‘both’.
America had just exited the New Deal era and, much more importantly, WWII. Both, but particularly the latter, had seen staggering increases in government expenditures and deficits. Obviously, the end of a depression and the largest conflict of all time meant tremendous opportunity for federal budget reduction. See the more detailed charts here:
http://www.geocities.com/gordonite32/philo/fedbgt.htm
Particularly striking are the few years right after WWII; note the big (positive) gap between revenue and spending. So, big, big budget cuts definitely occurred.
But, the other part of the measure is GDP. I think the record of explosive US economic growth during the post-war era is well known. The question is: what fueled that growth? Well, we could start with the singular fact that, in 1946, America was categorically the best place in the world to do just about any kind of business. Is that ever going to be true again?
Not likely. Indeed, current US policy is, in general, directed towards making America a still costlier and more difficult place in which to do business. Other nations are rapidly following the opposite course. They will, of course, be happy to take our wealth, but I doubt very much that we can export enough jobs to Mexico, buy enough Chinese widgets, or educate enough Indian engineers to grow our way into massive, sustained GDP increases.
As far as I know, no one, not even amongst those most heavily imbibing the ‘green recovery’ Kool-Aid, believes we will be seeing post-WWII GDP growth again.
The Clinton era was, comparatively, small potatoes. Spending was kept in check by a balanced government, taxes were sharply increased, and there was a decent economic upswing. Could that sort of thing happen again? I suppose. But Clinton wasn’t facing a debt-to-GDP ratio like WWII, which we will be in the near future.
Obama’s own numbers show us ascending the tall, black line on the left of the graph you link. As early as 2010, we will be above the number for 1950. I’m just curious what mechanism(s) will lead us back down the hill this time.
A little wood, please, as the Council addresses the question of whether or not C4C simply bribed buyers to buy earlier than they would have. Stimulating new car sales but not actually increasing them.
I bought a car due to CFC. I would not have bought a car otherwise. You have to know that I’m not the only one. So that’s an INCREASE in sales.
How significant an increase? We’ll probably never know.
have you seen the latest predictions that obozo
I’m so sick of listening to that crap.
From 2000-2008 we had….
The largest increase in the size of the federal government since the 1930’s (DHS)
The largest increase in federal entitlements since the 1960’s (medicare prescription benefits)
Fought two wars whose cost have actually made vietnam look like a policing action (remember “I’m not going to fire a million dollar missile to destroy a ten dollar tent”, no instead we just spent a trillion to do it)…While massivily increasing spending on weapons that had no use in above wars.
And significantly cut taxes (especially for the wealthy, good old trickle down economics, did anyone here get trickled on?), so we weren’t actually paying for any of the above.
All the while feeding an economic monster with free credit and almost no oversight or regulation.
And what were the results of this grand economic policy….
A doubling of public debt, in 8 years we managed to double what had taken 40 years before it.
And a complete collapse of global finance and asset values.
But yuppers that Obozo fellow is going to ruin us!
And I’m not republican or democrat I actually take the time to vote for whoever maybe makes alittle sense.
“you’ll be swimming in money to pay that debt down.”
Not only that, there’ll be pie in the sky by and by.