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About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved ...  (More)

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Stimulus 102-- One Year and $800 Billion Later

Uploaded: Feb 20, 2010
This month marks one year since the nearly $800 billion federal stimulus package was passed by Congress. What has the stimulus package accomplished? What should we do now?

Let's start with two simple truths. One, the economy has been much worse than expected. The nation has seen 8 million jobs disappear and unemployment rates appear destined to stay near 10% for quite a while. Two, if Barack Obama (or George Bush) says that today is Monday, there will be a chorus of people saying no, today is definitely not Monday, the President is wrong again.

Why is the economy worse than expected one year ago and how does that affect our assessment of the stimulus program?

The nation lost 7.3 million jobs between December 2007 and June 2009 according to recently revised estimates, much more than had earlier been reported. Since June 2009 we have lost an additional 1.1 million jobs, again more than expected. The explanation about why the recession was deeper and longer than expected is straightforward if you put politics aside.

One, we are doing worse now because in retrospect we were doing much worse than we thought before the stimulus could ever kick in.

Two, we were doing worse because construction levels kept falling, consumers used resources to pay off debt and businesses seeing no customers and an atmosphere of fear reasonably reduced staffing and deferred investments. We had and still have a shortage of customers, so no job growth.

Three, the stimulus program did not fully meet the criteria of being timely, targeted and temporary. I can't defend much of the stimulus package although I like some of the parts that aren't stimulus by the usual definition. Roughly $ 70 billion went to prevent the Alternative Minimum Tax from jumping in the April 2010 tax returns. The AMT should have been funded with other taxes or budget cuts -- it is not stimulus. Much went to programs that I like such as energy grants and extending aid to college students that are part of the President's long-term agenda, not anti-recession stimulus spending.

Four, as a result just over 1/3 of the stimulus money has actually been spent so far including very little of the infrastructure spending. An equal amount is scheduled to be spent in 2010 clearly leaving a substantial amount for after 2010, not timely in any sense from the perspective of February 2009 when the stimulus was adopted.

Once you put the "it must be Tuesday because the President says it's Monday" crowd aside, there is broad agreement that the stimulus, politicized by both parties as it was, has helped. We had hoped the unemployment rate would be 8% instead of 10%. What we got was an unemployment rate around 10% instead of 11% or higher. GDP is higher by 1-2% compared to where it would have been without the stimulus.

The stimulus had the effect of saving some jobs, and creating a few, in a context where the rest of the economy was still laying off staff. This is seen in classrooms, in police departments, in the stores where people who got extended unemployment benefits shop and in the few infrastructure projects underway,

Voices such as the well respected libertarian Economist magazine and the Committee for a Responsible Federal Budget (CRFB) agree that the stimulus helped. CRFB has a short analysis outlining these points while again urging focus on the nation's long-term budget crisis. See .

Where do we go from here?

Americans are reasonably concerned about two dangers: 1) the lack of job growth and 2) the impending explosion of federal deficits and debt. The answer is straightforward but is hard to implement in a climate of distrust and a climate where everyone wants problems to be solved with someone else's money.

From my perspective we need more short-term stimulus and more long-term fiscal responsibility. Doing both is like walking through the raindrops without an umbrella and staying dry -- really, really hard.

A longer recession benefits no one. More people are without jobs. More people are in danger of losing their home. Government revenues and services are cut and the federal government deficit rises.

Our troubled waters are deeper than expected and we need to build a longer and sturdier "bridge over troubled waters."

It is right to view getting out of the recession as a two-step process. The first step is policies to get spending growing again by attacking the "there are too few customers" problem. But the second step is scary. That is when and how much business will respond to increased spending with hiring.

Watch out for the second step. In technical terms economists are wondering if the link between GDP and job growth has been temporarily broken or decoupled. Right now we are in the sixth month of GDP gains with no job gains.

Still, it is right to press on with policies to support spending in the economy.

Currently now the Congress is debating another stimulus package and timidity rules the day. Now is the time to go back to timely, targeted and temporary. The case for another year of aid to state and local governments is the same as the case for extending unemployment insurance benefits. The need is still there and the money will be spent immediately.

Infrastructure is another winner -- short term benefits and we end up with an asset that will keep giving. By now we should have a backlog of shovel ready projects that can go immediately.

For the people in Congress who know this is the right course and for their supporters this is the time to stand up and put getting reelected by playing safe off for another era. We are in serious trouble and it is time to put country first. To people who disagree with this path, let's debate it out without name calling.

Long-term deficit reduction is a much tougher sell because it can't be solved just by the "other folks" footing the bill.

The simple truths for a starting point are one, we have made promises with regard to government health care and Social Security programs that are no longer financially sustainable. Even though these are promised benefits and even though residents have paid into these programs, they are unsustainable and need to be adjusted.

We need a new social and fiscal contract.

Two, the federal deficits and debt are largely related to out of control health care costs and predated the recession. Groups like CRFB have been warning for a decade about the coming crisis. It is not the result of the recession and stimulus package and most Americans have their fingerprints on not solving the problem.

The straightforward answer, the one that Alan Simpson and Erskine Bowles gave last week when they were appointed to co-chair the deficit reduction commission, is that a combination of benefit reductions and tax increases will be needed. This is true even if we are successful in reducing health care cost growth, which is critical to success in deficit reduction.

People who think that this is the fault of one party or another or that it can be solved only through benefit cuts or privatizing these programs are living in an alternate universe from my perspective.

If Americans want problems solved "in the center" here is a great opportunity for sharing in the design and the costs of putting the country on a more sustainable fiscal course.
What is it worth to you?


Posted by Anon, a resident of ,
on Feb 20, 2010 at 1:31 pm

As noted, all responsible economists agree that it is a bad idea to cut government spending during a recession/depression. The hard part is to follow through with the corollary -- as unemployment falls, the government should cut spending and start repaying the debt. Debt as a percentage of GNP fell under every administration, Democratic and Republican, from the end of WWII until the Reagan presidency. Since then, there have been two huge buildups of debt, the first under Reagan, and then, again under George W. Bush-- for the reason that both presidents cut taxes and increased spending at the same time.

The obvious solution is gradually to raise taxes and cut spending as soon the unemployment gradually starts to go down. This worked before, and, it will work again.

However, there is one major difference between "then" and "now": the cost of health care is much higher than it used to be and much higher than in other similarly productive industrial economies. The high cost of health care is something that will have to be addressed one way or the other, because otherwise Medicare will eat up most of the Federal budget.

Posted by Educated Common Sense, a resident of ,
on Feb 20, 2010 at 1:53 pm

no..not true. Please read Thomas Sowell for a live one, or Milton Friedman for a post-humous read.. I am pretty sure they both qualify as "responsible economists", and don't "agree that it is a bad idea to cut govt during a recession"..precisely the opposite is true, as proven repeatedly during history.

The responsible thing to do now is learn from history. Cut taxes and stop trying to regulate "fair and equal outcomes" by "spreading the wealth", stop trying to do "central planning" economics. This has failed every time it has been tried, from Jamestown to now, from Russia to Venezuela.

Have you had enough of economy killing Democrat ideas? Enough "spread the wealth" dreamin', govt takeover of private businesses, govt breaking of private-contracts, demonizing "greedy capitalists", constant attempt to do centrally-planned economics,..all scaring the crap out of business owners and investors?

If so, vote for changing back to what we had, and get ready for our economic engines to roar back to life. Follow Massachussetts' lead.
Throw all "bigger govt" incumbents out regardless of party affiliation ( yes, that goes for all the RINOs like McCain also), start over with folks who understand what made our country the richest heterogenous country in the world..and let us get back to work.

Those of us with any money at all are waiting to get some consistent predictability and common sense back into our government. All this "progressive" regressive thinking has slammed our wallets shut..we simply aren't going to take any more risks when all we have to look forward to is not having any control at all over our business decisions or our income, after having risked what little we have left.

Why should any of us risk anything? The last time many of us risked ( and now have lost most or all of what we risked), a little understood and unknown Congressional law, the Community Reinvestment Act, was perverted and shoved down the throats of mortgage companies..then used to ignite the economic wildfire we have just survived. If common sense with "same rules" had prevailed,nobody would have gotten any house keys without putting 20% down and having a verifiable consistent income.

But, the "progressive thinking", trying to force "equal outcomes", prevailed, and here we are.

This political tide has swept away any desire to work hard and risk anything, since it seems the knee jerk reaction is always the same "tax more, regulate more, class-warfare demonize more"

Forget it. We are riding this one out until the tide turns again. Call us when America wakes up.

Posted by Gene, a resident of ,
on Feb 20, 2010 at 2:34 pm


Here are some suggestions, which do not increase taxes or increase the deficit. In fact they decrease the deficit and increase jobs and GDP.

1. Immediately allow oil companies to drill where the oil is, namely ANWAR and offshore. This creates immediate jobs and reduces our dependence on foreign oil (thus reducing our balance of trade deficit). A real winner.

2. Require that the Highway Trust Fund revnues, paid for by user taxes on fuel, be given back to building highways and roads. No more throwing it down the drain of public transportation and bicycle paths. There are many "shovel ready" highway projects that are lacking funds to start digging. Public transportation is a real loser...ever watch all those empty buses and light rail coaches with next to nobody on them?

3. Immediately vote to allow more nuclear power plants, as well as micro-plants. This would be good for the environment (ask Stewart Brand and read the short article in the latest issue of the National Geographic). It is true that nothing is shovel ready, at this point, because nukes have been opposed by the left, but it would send a huge signal that we, as a county, are back in business...and that we mean business. If the left gets behind nukes, as it should, watch the good times roll.

There are a number of other similar ideas that do not increase taxes, yet stimulate the economy immediately, and for the long run. However, I will leave it at three, and hope that you actually respond to them. Thanks, Stephen.

Posted by Educated Common Sense, a resident of ,
on Feb 20, 2010 at 4:45 pm

BTW, I have to disagree with the assertion that it is a "simple truth" that the economy has been much worse than expected.

Those who invest and have businesses etc knew that this was going to be a really rocky road when we woke up to the election results on November 5th, 2008. There was nobody left to even remotely check the dream of the left to turn us into Europe. Please remember the drop from the 9,000s to the 6,000s of the DOW from election day to inauguration day.

Because of the hope given us by the push-back of the American people last year, we climbed back up to election day levels and have hovered around there since last summer.

So, the real simple truth is that the economy is worse than expected BY THOSE WHO VOTED FOR OBAMA...who expected that that a complete takeover by the left would help the economy. About 46% of us knew better, and voted against him ( most of us holding our noses and voting for someone not much more educated in economics, but with at least a greater probability of surrounding himself with advisors who WERE)

Posted by mba, a resident of ,
on Feb 20, 2010 at 4:57 pm

I agree that it should be no surprise that the economy has gotten worse. I do not blame Obama or the Democrats. Instead, the blame should fall on a corrupt financial system that rewards members of a small self-serving club and essentially cares nothing about the rest of us. Membership in that club crosses party lines.

Don't miss this fascinating piece for a very different perspective: Web Link

Hate to sound like a gloom-and-doomer, but I suspect it's only going to get worse, as those who have the power to change the system are also its greatest beneficiaries.

Posted by Gene, a resident of ,
on Feb 20, 2010 at 5:37 pm

"Hate to sound like a gloom-and-doomer, but I suspect it's only going to get worse"

No, mba, it doesn't have to be all gloom and doom. I have suggested three, among many possible approaches, all of which will make our economy boom. None of these approaches will raise taxes, and all of them will spur jobs and the GDP, as well as increased tax revenues. It is a simple concept called econcomic growth. Economic growth will occur when we decide to exploit our resources that are available to us.

There is a great future in front of us, if only we decide we want it. Will it take 20% unemployment before we decide to get real?

Posted by mba, a resident of ,
on Feb 20, 2010 at 5:55 pm

Gene, your ideas may have merit, but what's that old saying about the violinist on the deck of the Titanic?

Posted by Gene, a resident of ,
on Feb 20, 2010 at 6:12 pm

"what's that old saying about the violinist on the deck of the Titanic?"

mba, we are not going down on the Titantic. Yes, we are slowly sinking, but the ship can be saved. I have suggested some realistic solutions, namely that we need to exploit our own strengths and resources. I fail to see that we are doomed. In fact, we have a very bright future, if only we will choose it.

Imagine that the Titantic did not sink, but was seriously wounded...but made it into NYC harbor. The serious, and sober-minded would have taken a look at the situation, and decided to make engineering designs that made sense. They would not have said, "Trans-Atlantic passage is doomed!" Come to think of it, even though the Tiatantic went down, it was not all dispair and doom...they just made the ships and technology better. Somehow, we have lost our spirit.

I am here to tell you that the American economy has a very bright future, IF we decide to choose that path. If we decide that it is all gloom and doom, and that the only way out is more printing of money and more social welfare spending, then I might agree with you. We need to grow this economy by exploiting our resources.

Posted by Anon, a resident of ,
on Feb 20, 2010 at 6:21 pm

Since all y'all seem to be having trouble remembering the economy during the Reagan years, let me help you recall. Check out the graphs on the following reference, the information in which can be found on many places online. No recent administration, Republican or Democratic, ever loved debt as much as the Reagan administration:

Web Link

Now, some have argued that the economic impact was worth it. After all, some of that spending went towards demoralizing the Soviet Union in Afghanistan, for example. Whether it was worth it or not is a different question than should we have borrowed to maintain our accustomed level of consumption while undertaking the military buildup during those years. Guns or butter became guns and butter and debt.

Posted by Gene, a resident of ,
on Feb 20, 2010 at 7:39 pm


I remember that Reagan supported a hard shock on the stagflation that was in effect when he entered office. He also encouraged private capital formation, by cutting investment taxes, which led to a major influx of capital to the venture capital firms and stock market. These firms supported the commerical development of the Internet, from Defense Dept. initial efforts. Without the capital pool formation, the boom would not have happened in the 1990s. Reagan had his faults, but he was resposnible for the recovery from the Carter stagflation period, and he was responsible for the foundation of the boom.

Reagan, in fact, is a good optimistic example of what we need to do, now. He supported the exploitation of our natural resources, probably because he was raised in poverty, and understood the effects of poverty on his own family. His own emotional view is not popular among the privileged classes, but the current economic decline may yet make believers of them.

Posted by Thanks, Gene, a resident of ,
on Feb 20, 2010 at 7:52 pm

Gene, thank you for taking up the economic flag. The old canards "Reagan was bad for the economy" ( in spite of all evidence to the contrary) and "FDR saved us from the Great Depression" ( in spite of all evidence to the contrary) canards keep resurrecting. It is exhausting to have to always educate folks, but luckily there are others like you willing to take up the flag and carry it forward.

Posted by Anon., a resident of ,
on Feb 21, 2010 at 1:14 am

[Portion removed by Palo Alto Online staff.]
There has been a big cultural ... structural change in the United States over the time that we have worked up to this mess. Huge deficits in health care, and a food system that is dysfunctionally creating sick and sicker kids. Kids that grow up with pornography, crime, violence, etc ... very few images of positive life.

Adults that have no jobs after doing what they are supposed to do. A predator society that is getting just what it set up to get. A government bought and sold by the very people who have brought all of this about.

The idea that the whole rest of the developed world is going a separate way from the United States, and somehow we feel empowered and righteous to use war as an instrument of policy, with very little buy in from allies or the UN, and especially when we cannot afford it.

There is a lot wrong, that steers us into the gutters before we even take a look at the accounting and the big picture of the economy. It is just astounding the idiocy that is taken as serious thinking. Sort of like the idea that making kids sick with diabetes and heart disease is a net plus to the GDP because of the money that is going to spent to fix the problem. This is the kind of thinking that is positively insane, yet it does not get laughed at when it is put out there.

The people who steered us into this mess are insulated and numb to the suffering and problems of America and are clearly unqualified to be behind the driver's seat, yet this is who we have making the decisions, because we have a President who is at the mercy of what he is told by experts. Experts who either caused this or missed it ... hard to know which is worse.

It is clear that the free market privatization thing has been pushed way past incompetent and into disaster, and yet it is not being evaluated, because it does what it is supposed to do, centralize control of the economy with the "Dick Cheney"s of the world. Sorry if many of you do not appreciate that analogy. The cost is put on people who do not know and do not have the power to fight back, while the benefit is handed to those who do not care and who just get richer. In electrical engineering we call this positive feedback, and it often continues until something blows up.

And what else can we expect from our leaders? Since we have never recognized of cultivated diverse opinions in the media, in our government, we have nothing different to look at. What else would Obama do even if he wanted to?

[Portion removed by Palo Alto Online staff.]

The costs of government programs is out of control because of private industry incompetence, so no mention of fixing that. The private industries of health care, big pharma and insurance are the biggest cause of all of our problems, and you continue to the frame the problems as one of government giveaways.

Both parties are owned by the same controllers, and it is the controllers that make both the private system criminal and the government system corrupt. They also now own the judicial, so I guess we will continues to see issues framed as they like until and even after we start to see soldiers patrolling our streets. - probably contract mercenaries at that.

Posted by Anon., a resident of ,
on Feb 21, 2010 at 1:24 am

Yes Gene, exploiting our natural resources will close the loop and put us in the model of the third world countries we have given that advice to. Screw your indigenous population, in this case the American people, and sell off their resources.

According to many history books I have read the idea of infant industries was more or less pioneered by Alexander Hamilton, who through tariffs and protectionist policies built up the US industrial and agricultural base that otherwise would have left us a plantation for Britain. We even ignored many patents in order to do that.

Virtually every other successful country has helped their own domestic businesses in some cases for decades, except in American we have this fundamentalist religion of Free Market Carpitalism, which when looked at closesly makes about as much sense as any other religion ... that is any other religion that has had several hundred year for corruption to fester. Japan, Germany, South Korea, all the places our capitalist leaders who have paid off our democratic leaders to look the other way, have shipped our manufacturing and industry.

The answer is not to exploit our natural resources with limit unless the question is how do we give even more money and power to those who have brought about this gutting of the economy?

Posted by To Anon, a resident of ,
on Feb 21, 2010 at 6:34 am

[Portion removed by Palo Alto Online staff.]

The circular thinking in your post is also quite effective in revealing and strengthening your side of the debate aisle, such as the the one about the cost of govt being out of control because private businesses are incompetent ...or the one about private businesses being responsible for the laws that hurt their businesses and gutted our economy.

Think about it for a moment..would ANYONE making a lot of money purposefully destroy their money-making business? Or do you think it is possible that a factor outside their control and completely unexpected, like government laws and power combined with rabid blackmailing lawsuits from certain tax-funded organizations ..would it be possible in your schema to acknowledge that it is completely irrational to think that anyone would set up something which would HURT HIM OR HERSELF??

The posits on your part are just as effective as Obama, Biden, Reid, Pelosi and Frank ( and McCain when he was running, though he has flipped again in this area)..saying we have to spend our way out of debt ( or, sometimes they couch it better and say "spend our way out of a recession"..uh huh..)

The only thing we agree on is that most people, politicians included, in it for the money and the power..if you always remember that, then you will stop giving government both money and power to wield over us and our private businesses, and then our private businesses won't be in bed with any of the politicians, ( including insurances etc) and we will all be a lot better off....

the good thing about private businesses competing with each other is that, unlike a monopoly by a govt, millions of us can choose which one we like, and let the ones we don' like adapt and/or die.
There..problems solved, adulthood regained for the citizens of the USA.
[Portion removed by Palo Alto Online staff.]

Posted by Anon, a resident of ,
on Feb 21, 2010 at 9:43 am

(not to be confused with Anon of Crescent Park)

I expected to see a lot of Free Market Fundamentalists posts, and, I did. Like any fundamentalist religion, the adherents feel that pragmatic compromises are a slippery slope.

There probably are a few things we could agree on, though, although a Fundamentalist always hates to agree with a pragmatist like myself.

First, I think we could agree that during an economic expansion, the Federal Government should cut spending and pay down the debt.

Second, I think we could agree that the existing Medicare program is a budgetary time bomb -- Medicare taxes won't come remotely close to covering the cost of the program as an "insurance program". Something will have to be done about that--

But, we probably don't agree on what. I, for example, am unwilling to see people, especially children, dying in the streets because their families can't afford basic medical care. Unfortunately, pure Free Market Capitalism doesn't offer a solution to this problem. Free Market Capitalism does a wonderful job with creating and distributing personal electronics, but, it doesn't do a good job of providing medical care service to the people who most need it when they most need it, and, to top it off, modern medical care is so capital intensive that emergency medical care is basically a local monopoly. **This is a hard problem.** Simplistic solutions have never worked. So, we all need to find a pragmatic solution that will mostly work.

Posted by stephen levy, a resident of ,
on Feb 21, 2010 at 10:34 am

stephen levy is a registered user.

I am always happy when a pragmatist joins the discussion.

I agree that economic expansions are times to reduce the deficit although I see it mainly as not spending much of the additional revenue brought in during the expansion--something that both parties regualarly violate.

And I agree that Medicare (and rising health care costs) is a time bomb that needs a new social contract and new health care and insurance arrangements.

I just watched Governors Rendell and Schwarzeneeger on television agree on three other points that were the main thrust of the blog--1) that the stimulus program worked to make the recession less horrible than it is, which is still awful and 2) that more spending on infrastructure and aid to state and local governments is needed now and a good idea. Temporary, timely and targeted. We should add extenstion of unemployment benefits.

There are a couple of people on the thread who keep asking about nuclear power. I am open as is the President to supporting carefully planned projects. But this is not stimulus funding just as energy and Pell grants for the long term are not stimulus funding. Nuclear plants take a long time before construction begins.

Stimulus funding is not my favorite project or your favorite project or what you think is good for the long term. Stimulus money needs to be spent now, be targeted to where that will happen and be temporary so we can get quickly to the task of long term budget balance.

If the answer to everything is to blame political parties or corporations then we in Palo Alto are showing the world that we are unable or unwilling to take on the adult task of governing ourselves without letting disagreement disolve into gridlock and name calling.

The Reagan lovers are misinterpreting history.

Reagan was one of the leading Keynesian Presidents of the century.

Between 1980 and 1986 defense spending doubled. During the Reagan years and into the first Bush presidency, we ran large deficits every year even when the economy was booming. California did very well with the large jump in defense research and procurement spending. No one was complaining as the deficits and debt soared.

We can argue about priorities in spending but the record is clear--increased federal spending and deficits jump started the good economic years of the 1980s and left the task of balancing the budget to President Clinton.

So back to my original questions--how do you assess last year's stimulus efforts--would it have been worse without them, 2) what should we do now and 3) how can we resolve the long-term deficit and national debt challenges.

Posted by Walter_E_Wallis, a resident of ,
on Feb 21, 2010 at 10:51 am

Walter_E_Wallis is a registered user.

Instead of forcing medical facilities to serve non-payers and make it up from payers, directly reimburse providers 70% of their usual rates, but declare all reimbursements to be tax free at state and federal level. Have IRS seek long term reimbursement from those with an ability to pay.
Increase energy supply and reduce energy cost 10% a year for 5 years.
Eliminate capital gains tax.
Then figure out what to do with the budget surplus.

Posted by Pragmatic, a resident of ,
on Feb 21, 2010 at 11:15 am

Again, labeling those who disagree as "fundamentalists" or "not pragmatic" is not helpful.

It IS pragmatic, and fundamentalist only insofar as it harks back to the original intent and context of the Constitution, when we say get back to free(er) markets, free(er) works, it raises everyone's standard of living...therefore it is pragmatic.

I simply do not accept that we have to keep "going along to get along" as we slide ever more into turning into Greece.

Posted by People of the Lie by Peck, a resident of ,
on Feb 21, 2010 at 11:19 am

To call Reagan "Keynesian" reveals a tremendous Orwellian twist on what Keynes/FDR believed and did.

I strongly recommend to all people the book "People of the Lie, The Hope for Healing Human Evil" to understand how we have gotten to this point in our political discourse.

Posted by stephen levy, a resident of ,
on Feb 21, 2010 at 12:10 pm

stephen levy is a registered user.

We teach our children to judge people by what they do, not what they say.

So, although Reagan would never say he believed in government stimulus to jump start the economy out of recession, that is what he did. Lots of spending, lots of deficits, lots of debt. And it worked!! Why a conservative kept spending with big deficits after the economy had recovered is another story, but I guess all politicians find it hard to take away the cookie jar.

You can use all the words you want, tell people to read books with the word Lie in the title but you can't change what actually happened.

So both governors today on This Week, knowing that stimulus had become a dirty word, instead called for an infrastructure surge and more money for states and localities. The President will follow suit.

Hopefully by calling what we need anything but stimulus we can get beyond the sound bites and help people and the economy until private sector spending steps up.

And, hopefully then, we can together take away the cookie jar and get down to reforming health care and working out a new social contract about retirement benefits at all levels of governement.

Posted by Walter_E_Wallis, a resident of ,
on Feb 21, 2010 at 12:16 pm

Walter_E_Wallis is a registered user.

"We teach our children to judge people by what they do, not what they say."
You say potatoe, I say corpseman?

Posted by mba, a resident of ,
on Feb 21, 2010 at 1:02 pm

We need to

* Cut back the government. It's gotten way too big.

* Forgive (or minimize) vast amounts of individual debt, possibly via inflation.

Putting labels on people doesn't help, and assigning party affiliations to posters is particularly meaningless. Both parties have bought into the scam that has resulted in our current situation.

Posted by R Wray, a resident of ,
on Feb 21, 2010 at 2:34 pm

Pragmatism has 4 key features (Tara Smith, The Objective Standard, Fall 2008).
1. A short-range perspective. Range-of-the-moment thinking. What works today may not work tomorrow.
2. The inability (or refusal) to think in principle
3. The denial of definite identity. Whatever the subject of inquiry, each thing is regarded as sort of this and sort of that.
4. The refusal to rule out possibilities. Keep all options open--indefinitely. Nothing is ever off the table.
I would not be proud to claim this style of thinking.

Posted by Thanks R, a resident of ,
on Feb 21, 2010 at 2:43 pm

Cool article. Thanks R.

Posted by stephen levy, a resident of ,
on Feb 21, 2010 at 3:01 pm

stephen levy is a registered user.

Folks might want to consider that people using the word pragmatic or pragmaism are refering to the concept as normally explained--not by someone who thinks it is unprincipled.

So here is the Merriam Webster online dictionary definition

1 : a practical approach to problems and affairs <tried to strike a balance between principles and pragmatism>
2 : an American movement in philosophy founded by C. S. Peirce and William James and marked by the doctrines that the meaning of conceptions is to be sought in their practical bearings, that the function of thought is to guide action,

I can go with "a practical approach to problems" particularly in a world where many issues have 50-50 splits among Americans on ideology and I think the "function of thought is to guide action" is an ok principle to work with.

To the folks who write about cuttijg governemnt here, let's get specific. What would you cut in the federal budget and how do you propose to get it passed?

Posted by Walter_E_Wallis, a resident of ,
on Feb 21, 2010 at 5:07 pm

"To the folks who write about cuttijg governemnt here, let's get specific. What would you cut in the federal budget and how do you propose to get it passed?"
1 Eliminate EPA, D O Energy, D O Ed, Endangered Species Act, Wilderness Act, all armed guards on non-military government buildings, [let them call 911] and all bodyguards and make State Department a agency within department of Defense. 2. Damfino. Prayer? -

Posted by More suggestions, a resident of ,
on Feb 21, 2010 at 6:41 pm

Agree with eliminating the DOE and the EPA.

In addition, eliminate all non-military federal jobs added since Jan 1, 2001 regardless of what they were. WE have about 2 million civilian Fed employees now according to our BLS.

Does anyone know how many non-active duty military Fed employees we had in 2001.?

Don't have time to find it now, but I can venture a guess that we have increased by at least 10% the number of Fed employees since then. Probably more.

Between cutting all non-military fed gains, the EPA and the DOE, I would bet we would cut 20% off our Fed budget automatically.

Oh...put the Medicare drug benefit back to where it was before Bush doubled it...or at least means test it.

Cut the Medicare and social security rolls within the next 5 years ...effective today, anyone 60-55 has to wait until they are 66 to retire..50-54 waits till 67, and 45-49 waits till 68. I would venture a guess that we could keep pushing this back until we have to wait until 70 to retire. Given that at the time of Social Security enactment the average folks didn't live past 65, we have to get our benefit age to at least "average" years of life, or close to it. Right now our average rate is about 75..we should push ourselves rapidly toward govt benefits not starting until at least 70 years old.

Posted by More suggestions, a resident of ,
on Feb 21, 2010 at 6:43 pm

oops..I meant anyone 60-65, not 60-55, has to wait until they are 66 to retire on govt bennies..


Posted by Gene, a resident of ,
on Feb 22, 2010 at 1:57 pm

Reagan cut marginal tax rates ("supply side", something Keynes did not believe in), he restricted the money supply (Paul Volcker), and he increased defense spending in a time of war...that he won.

If this makes him a Keynsian, then I would say that definitions have expanded beyond the rational, not to mention a misinterpretation of history.

OK, so if the cold war was not being fought, and Reagan had no particular reason to expand the militaary budget, would he still have been successful in expanding the economy? I would say "yes", because he allowed private individuals to pool private capital. These pools of money drove the personal Internet revolution. However, I am also mindful that DARPA research created the early version of the Internet (not Al Gore), and DARPA may not have gotten into the business, if the cold war was not driving its mandates.

The notion that Reagan defeated stagflation through deficit spending is curious, at best.

Posted by stephen levy, a resident of ,
on Feb 22, 2010 at 3:36 pm

stephen levy is a registered user.


Your love for Reagan is admirable--a true believer.

But the fact that he used deficit spending and ran up the national debt is a fact--look at any history of the deficit and debt. What is curious is that you allow your ideology to block out simple data. Can you say biggest peacetime deficits in history--yes, it's Ronald Reagan.

But he is in good company, which was the point I was making. Deficits are the right policy to increase spending at a time when there is a shortage of customers.

Look at the bipartisan support for the current deficit spending.

David Walker, President and CEO of the Peter G. Peterson Foundation: ?I think it?s very important to separate
the short term from the structural. It?s understandable to run deficits when you have a recession, a depression or
unprecedented financial services and housing-type of challenges and crises that we?ve had. That?s not what I?m
concerned about.?

Gene Steuerle, Senior Fellow, The Urban Institute, and co-director of the Urban-Brookings Tax Policy
Center: ?Contrary to much debate, getting the long-term budget in order does not require avoiding stimulus in bad
times; it only means reasonable reductions in those levels in good times.?

Greg Mankiw, Harvard Professor and Former Chairman of the Council of Economic Advisors under George
W. Bush: ?It is a textbook principle of prudent fiscal policy that deficits are an appropriate response in times of war
and recession.?

Isabell Sawhill, Senior Fellow, Brookings: ?It is important to stimulate the economy now and not worry about the
deficits needed to do this but we should simultaneously be enacting legislation that will gradually phase in spending
cuts and revenue increases over the next decade.?

Concord Coalition: ?It may be appropriate for government to spend more than it taxes during downturns in
the business cycle. The Concord Coalition has always recognized the importance of fiscal stimulus, so long as
the stimulus is timely, targeted, and temporary.?

Reagan did the right thing in running deficits and the wrong thing in not reducing the deficit in good times. He joins bipartisan wimpiness in fighting long-term deficits.

Posted by Gene, a resident of ,
on Feb 22, 2010 at 5:20 pm

"Can you say biggest peacetime deficits in history--yes, it's Ronald Reagan."

Stephen, your problem is that we WERE at war. Reagan spent enough to win that war. It was not "peacetime". Were you living in an alternative universe?

The "peace dividend" that was abundantly availaible to Clinton, and constrained and focused by Gingrich, served to balance the federal deficit.

I think your eseential problem, Stephen, is that you are too ideological.

Posted by Agree with Gene, a resident of ,
on Feb 23, 2010 at 6:25 am

I agree with you, Gene. Connecting dots from past, current and future is a very difficult skill set, and thus "ideology" can get in the way.

And, to try to propose that deficit spending, no matter on what nor in what manner, is Keynesian shows, again, either a lack of understanding of what Keynesian economics is, or a deliberate attempt to obfuscate.

In this case, trying to claim both Reagan AND Obama are "keynesian", ( that is the subtext of the entire thread) is a breathtaking assumption. Keynesian is so much more than simply "deficit spending", as you explained.

In addition, simply put, "keynesian" assumes a (proven false during FDR, Johnson, Carter and now again in the last 2 years) multiplier factor of 1.5 for every deficit tax dollar taken from a producer and "put" into a non-military government job. The purpose and results are completely different from military spending for a purpose. Please note where Reagan put the dollars, and where Obama ( and Carter, Johnson and FDR in the first term) put the dollars and the results.

One, keynesian, has an end-point of simply "jobs"...which unfortunately sounds good but fails every time because of the way millions of individuals react.

The other has an end-point, which works, of increasing the security of our nation so we can prosper. In the second, the producers don't slow producing, because the rules are still in their favor, the rewards are still worth the risk of investment and growth, the risk of moving for a different job, etc. The result can be government deficit spending, yes....but everyone knows this too shall end, and once it does, we explode in economic activity, the "peace dividend" you mentionned.

The other, keynesian, is a never-ending growth of taking from proven producers and distributing it to either non-producers or "the chosen" producers who may, or may not, actually produce again. In the midst of this particular model we see also a strong tendency to change the game rules of business so that those who have risked lose what they have already put into their businesses, and clamp shut their wallets as they wait to see what the new rules of the game are going to be. The producers give up risking, knowing we have lost control of our outcome risk management. This is a simplistic explanation, but it rests on the mindset of those who actually drive the economy...individuals who risk and invest and grow ( or not) creating ( or not) jobs.

Obviously I speak as a producer, and perhaps more obviously, I don't have a PhD in economics. However, 30 years producing, in various businesses, risking, winning and losing, with a strong interest in history, including the history of economics, combined with tracking down each new or re-emerged govt rule which has hurt me in the last 30 years, ...and here I am.

Unfortunately, every new rule in the last 2 years has done nothing but drive us further down the rabbit hole, much like Alice where up is down, and nothing makes sense anymore.

Bottom line, economies are driven by everyone looking after his own best interest, and in so doing, the economy thrives or destructs. When the rules are constant and reward risk and work, everyone wins, the poor get richer, the rich get richer, the tax coffers takes a couple years, but business friendly laws and taxes that we can count on for at least 8 years work every time. When the opposite rushes in on a tidal wave of populism and fear...this is the result.

Back to the point..I doubt it is a deliberate attempt to obfuscate in this case, but it can still be just as destructive because so many people believe in the omnipotence of the degree "PhD", and don't understand that a PhD means a strong study of one small area of one small subject ...

Posted by Anon, a resident of ,
on Feb 23, 2010 at 9:00 pm

"Agree with Gene": Interesting Wikipedia articles on Keynes, including the famous Milton Friedman/Nixon phrase "We are all Keynesians now":

Web Link

You might say, along the same lines, that all Physicists are Galileans now, as opposed to, e.g., Aristotelians. Economics has come a long way from Keynes, but, he was the first to analyze things in a particular way that everyone takes for granted now.

Posted by Gene, a resident of ,
on Feb 23, 2010 at 9:25 pm


You should at least try to be honest about the links you provide.

"The phrase was first attributed to Milton Friedman in the December 31, 1965 edition of Time magazine.[1] In the February 4, 1966 edition, Friedman wrote a letter clarifying that his original statement had been "In one sense, we are all Keynesians now; in another, nobody is any longer a Keynesian."[2]"

This is a direct quote from your link (Wikipedia). Do you even bother to read the content of your links?

Posted by Anon, a resident of ,
on Feb 25, 2010 at 7:50 am


Of course I read it. That's why I posted the link. I'm sorry that you missed the point about economic analysis-- everyone, including Friedman, learned from and built upon Keynes. Friedman disagreed with certain of Keynes policy recommendations. Keep reading.

Posted by Gene, a resident of ,
on Feb 25, 2010 at 2:57 pm


Keynesianism did not work in the Great Depression. If you may recall, there was a depression within the Depression in 1937-38. We know Keynesian true belivers, like Paul Krugman, who think that Morgenthau is at fault for not spenidng even more money. In a certain way, Kurgman is right, because it took a world war of immense cost, in blood and treasure, to restrict individual rights, in order to get demand built up...then unleashed after the war.

If you think a world war is the way to go, then just say so. I think we can overcome this current crisis without a world war. I have already mentioned some specific examples.

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