Stimulus Helping Economy to Rebound

Scale matters. Just because I stubbed my toe once doesn't mean I know what it would feel like if I cut off my foot.

S&L crisis: we recovered from that via a government bailout. Not sure how that supports your case that government bailouts are bad.

Dot com bust: I'll grant you this one, and if the only thing going on right now was the stock market crash, I'd say let's just ride it out. I don't see any need to ever bail out stock market investors.

Clinton-era housing price decline: smaller than current situation.

9/11 and the airlines: Here again, you cite a case where the recovery was due to a government bailout. The government bailed out the airlines directly, and also spent (and continue to spend) huge sums of money making people feel safe to fly again.

Gulf War, Kosovo: much smaller in scope and duration than the current wars.

AT&T: not sure what event you are referring to here. I don't remember a sudden collapse of AT&T.

Enron, Worldcom: These aren't a good comparison for the car companies. Their failure was due to corruption, not macroeconomics and poor products. They also had assets that other companies were eager to acquire. Both those businesses are fundamentally divisable, whereas GM is mostly not - you can have a local power company (and in Portland, we do, our local power company used to be part of Enron) but you can't have a local car company.

The sad truth is that while buyers have been found for the GM appendages (Saab, Hummer, etc) no one wanted the main body.

Like saying that unemployment would top out below the current level? You've got a consistency problem here - on the one hand you claim he talks down the economy, and on the other hand you excoriate him for not admitting that unemployment and the deficits would be as bad as they actually are.

barfo

 

I think the neo-cons and conservatives and other republicans basically ditched Bush (see his approval rating) because he rubber stamped congress and allowed massive spending at the expense of huge deficits. Not as huge as we're seeing now.

Edsel went out of business in the 1950s. The country survived it.

AT&T was sold to cingular and bell south, basically sold for scraps when it was about to fail. Dot Bomb era.

I'm not all that upset about LOANING big companies money when they're in trouble. The airlines and related companies weren't loaned money, but banks were given loan guarantees by the government.

I am upset about blowing through $4.5T+ (that's this year's budget and the stimulus, etc.) when unemployment was at 6.5% and now it's 10%.

 

Scale matters. Edsel produced a total of 84,000 cars overall; GM produced more than 6 million in 2008.

barfo

 

Scale matters. $2T yearly deficits are insane.

 

Agreed, although the current forecast is $9T over 10 years, i.e. less than $1T on average. Still mighty big, of course.

But doing nothing would have been insane, in my opinion, because I don't have your faith that the economy will magically heal itself in all circumstances.

barfo

 

I'm not at all saying the economy is great. I think it's been made worse than it should have / could have been. I'm not the only one.

http://www.telegraph.co.uk/finance/...ma-accused-of-making-Depression-mistakes.html

Barack Obama accused of making 'Depression' mistakes

Barack Obama is committing the same mistakes made by policymakers during the Great Depression, according to a new study endorsed by Nobel laureate James Buchanan.


History repeating itself? President Obama has been accused by some economists of making the same mistakes policymakers in the US made in the Great Depression, which followed the Wall Street crash of 1929, pictured Photo: AP


His policies even have the potential to consign the US to a similar fate as Argentina, which suffered a painful and humiliating slide from first to Third World status last century, the paper says.

There are "troubling similarities" between the US President's actions since taking office and those which in the 1930s sent the US and much of the world spiralling into the worst economic collapse in recorded history, says the new pamphlet, published by the Institute of Economic Affairs.

In particular, the authors, economists Charles Rowley of George Mason University and Nathanael Smith of the Locke Institute, claim that the White House's plans to pour hundreds of billions of dollars of cash into the economy will undermine it in the long run.

They say that by employing deficit spending and increased state intervention President Obama will ultimately hamper the long-term growth potential of the US economy and may risk delaying full economic recovery by several years.

The study represents a challenge to the widely held view that Keynesian fiscal policies helped the US recover from the Depression which started in the early 1930s. The authors say: "[Franklin D Roosevelt's] interventionist policies and draconian tax increases delayed full economic recovery by several years by exacerbating a climate of pessimistic expectations that drove down private capital formation and household consumption to unprecedented lows."

Although the authors support the Federal Reserve's moves to slash interest rates to just above zero and embark on quantitative easing, pumping cash directly into the system, they warn that greater intervention could set the US back further. Rowley says: "It is also not impossible that the US will experience the kind of economic collapse from first to Third World status experienced by Argentina under the national-socialist governance of Juan Peron."

The paper, which recommends that the US return to a more laissez-faire economic system rather than intervening further in activity, has been endorsed by Nobel laureate James Buchanan, who said: "We have learned some things from comparable experiences of the 1930s' Great Depression, perhaps enough to reduce the severity of the current contraction.

But we have made no progress toward putting limits on political leaders, who act out their natural proclivities without any basic understanding of what makes capitalism work."