'Stimulus Now': Economists Including Joseph Stiglitz, Alan Blinder Call For More Government Spending

The Daily Beast:

As in the 1930s, the economy is suffering a sharp decline in aggregate demand and loss of business confidence. Long experience shows that monetary policy may not be enough, particularly in deep slumps, as Keynes noted.

The urgent need is for government to replace the lost purchasing power of the unemployed and their families and to employ other tax-cut and spending programs to boost demand. Making deficit reduction the first target, without addressing the chronic underlying deficiency of demand, is exactly the error of the 1930s.

Read the whole story: The Daily Beast

Comments

[Sundialsvc4]

05:47 PM on 07/20/2010

There is no amount of "guv'mint provided stimulus" that can remedy thirty years of systematically dismantling the industrial infrastructure of what used to be the number-one industrial nation on this planet. All of the "ee-zee mo-nee" that would thus be provided, can only be "borrowed" (sic), and even so, there are about 120 million Americans so far (out of 309 million) who find themselves ... able to work ... willing to work ... possessed of considerable skills ... and with no jobs to be had.

# WIRE TRANSFER 074 OF 100 COMPLETE: SENATOR XXX = $573,056.57 COMPLETE
# WIRE TRANSFER 075 OF 100 COMPLETE: SENATOR YYY = $775,305.19 COMPLETE

Oh, never mind. Of COURSE the right thing to do is to 'borrow more money' (from you know who?) to provide millions of people with wonderful careers "on the guv'mint dole" doing (what?) stuffing envelopes? Yeah, sure. If they're stuffing envelopes they're "employed" and that will make the numbers look real good.

Ahem.

Maybe you folks should go and ask your grandpa's what America used to be; what America used to take for granted. Maybe you should ask them what America STILL IS.

# WIRE TRANSFER 076 OF 100 COMPLETE: SENATOR ZZZ = $803,255,69 COMPLETE

While you're at it, why not examine the fourth section of the second article of the US Constitution, and contemplate the twenty-fifth word. And the twenty-fourth.

Could it be that "somebody knew?"

[santiago sherwood]

04:19 PM on 07/20/2010

We are suffering from a big corrupt empire syndrome america is dying and we are in denial. That is why these fixable issues seem impossible and our government is self serving not serving the public. With all that in mind Emigrate.

[LunaPark]

02:11 AM on 07/20/2010

Over 200 economist including 3 nobel prize winners signed an open letter opposing stimulus. Stimulus didn't work for Japan and didn't work for England.

http://www.philly.com/inquirer/opinion/20100719_The_problem_with_stimulus.html

http://www.cato.org/special/stimulus09/cato_stimulus.pdf

[silverstreet]

12:20 PM on 07/21/2010

It worked for Germany.

[FR713]

04:18 PM on 07/19/2010

The authors have absolutely no understandng of ecomonic history. We were able to escape the owrldwide depression of 1920 because of tax cuts that increased our economic activity. Then the Progresive True Racist Collectivists under Roosevelt came to power and continued the uncontrolled tax and spend and kept us in the throws of depression until WW II.
Social security was created in this time period as was the WPA ... How these supposedly educated folks can characterize Roosevelts first 8 years a failing to spend enough is insulting to any person who can read.

[Jannsmoor]

04:32 PM on 07/19/2010

Let us say you need to buy a car. The cheapest car that really runs is $500.00. But you can buy a car that doesn't run for $200.00.
It is foolish to buy the $200.00 car and then scream "See, it doesn't work."
You either spend enough to solve the problem or you don't. Spending too little and then complaining that the problem isn't solved is hysterical thinking.

[Y3rMawm]

07:51 PM on 07/19/2010

ah, but if you have no money, and must go into debt to buy either car, only the banker's wallet is fattened. This is OK if it actually enhances productivity, and if outstanding debt is not more than 3x income.

When government buys the car, they will require smog equipment, automatic seat-belts, licensing fees, 26 inch rims with run flat tires, a new paint job, and will of course need a MilSpec motor. Total bill for your $500 car? $50,000.

The gas NOT in the tank, and the oil NOT in the crank, because they forgot what makes it all go?

Priceless

[Jannsmoor]

04:35 PM on 07/19/2010

What is your definition of a "True Racist Collectivist?" Just curious.

[gerald4]

03:41 PM on 07/19/2010

How about changing the Free Trade laws and the environmental laws in order to bring the industries with their associated jobs back to the USA so that the unemployed could find a job.

There is a limit to the amount of money that the USA economy can borrow from industrial nationms and then give this borrowed money away without self destructing the US economy.

Greece did print and sell a lots of paper bonds to provide their population with all sorts of free government provided services, place almost everybody onto government payroll jobs or government retirement payrolls, and then pay for all of these government expenses with "borrowed" funds (actually selling freshly printed paper Greek Bonds)? I believe that the Greeks stopped working to generate any net national wealth (Trade Deficit), and then decided to start deficit spending to mimic the US financial operations that appeared to be very successful? Will the US face similar consequences when foreign individuals will no longer purchase any of the freshly printed paper US Bonds at the periodic US Federal Reserve (FED) auctions to continue our US government operations. Germany is asking Greece to sell some of its islands to pay off some of their (worthless) paper bonds. A gold standard would not let the USA and other countries print and sell paper bonds to raise funds for the government expenses (to buy votes).

[FR713]

04:02 PM on 07/19/2010

Gerald, be careful. You make some sense. There is no possible way we could move to a precious metal backed monetary system from the fiat system we have today. The economic dislocation would devasatate ou nation for decades.

In the end it really does not matter. We had the Gold standard during the first 25 years of Progressive dominance and the tax and spend guys just kept taxing and spending.

[gerald4]

04:13 PM on 07/19/2010

Dear FR713

We would not need a gold standard if the USA was accumulating wealth, that could be grain, coal, jewels, hotels, casinos, factories, and other things of value.

But the US government is just buying some more paper and printing more US Bonds in whatever quantities are needed to cover the US government expenses and auctions these off at FED auctions to get US dollars back from industrious working individuals that are creating wealth in their own foreign industrial lands.

Did Greece provide their population with all sorts of government provided services, government payroll jobs, and pay for all of these government expenses with "borrowed" funds? Did the Greeks stop generating national wealth, and decide to start deficit spending to mimic the US financial operations that appeared to be very successful?

Will the US face similar consequences when working individuals will no longer purchase any of the freshly printed new paper US Bonds at the periodic US Federal Reserve (FED) auctions to continue our US government operations, or purchase these freshly printed US bonds at for the equivalent of a fraction of a penny on the dollar?

[Siebenstein]

03:22 PM on 07/19/2010

Or unemployment extension?

Oh wait, they want unemployed people to sleep under a bridge, I forgot for a moment.

[gerald4]

03:57 PM on 07/19/2010

There are no real jobs in the USA for the unemployed.

There are only government jobs paid for with money borrowed back from the individuals that US citizens paid to make the things that we used to make for ourselves.

After the unemployment benefits run out, there will still not be any jobs for the unemployed.

The US government free trade and environmental laws have destroyed the jobs that these enemployed US citizens had and used to provide a living for their families.

[FR713]

04:07 PM on 07/19/2010

Yes, Obama does want them under a bridge. Progressive True Racist Collectivists will not be happy until all of the hoi polloi are equal and living under a bridge... But those guys will live lavish lifestyles because they know better what is best for the rest.

[Sundialsvc4]

06:01 PM on 07/20/2010

That's fairly simple-minded, actually.

The root cause of our ills is disarmingly simple: "bribery." Oh, you can call it "campaign contributions" if you prefer, or "lobbying" if you prefer, or even "corporate freedom of speech" if you're feeling REALLY daring, but it is what it is what it is:

"Bribery."

When a Senator or a Congressman or a Justice or a Commissioner or "any civil officer" knows that he or she can collect millions of dollars a day(!) without being caught, well, "human nature will be." And so, those who would commit gigantic crimes know that they can do so with impunity. Therefore, whether you like it or not, that's what they WILL do.

Republican? Democrat? Independent? What the hell is the difference? No matter what color my shirt happens to be, during the time it took you to read this, I made more money than you will make all year. Perhaps more money than you will make in two years.

Every vote, every committee action, every ruling, quickly turns toward a single goal: doing the things that cause that money to keep gushing in.

[FR713]

03:21 PM on 07/19/2010

The Chinese bond rating agency announced this morning that US Government bonds were being down-graded from AAA. The reason given was the level of spending by the Obama admin.

Moody and the rest will follow.. Many who buy US Bond require the AAA rating. Those folks will have to sell... If all the bond raters follow suit, China may be the only source of selling US bonds.

That is a really scary thought.

[gerald4]

03:35 PM on 07/19/2010

Why is the US Bonds and different from Greek Bonds.

The Greek economic system of borrowing money for government expenses is similar to the US government Ponzi financing system. The US and the Greek governments have obligated their children and their unborn future generations to work harder than we are working to produce enough wealth to repay these loans (actually freshly printed bonds sold to pay for government expenses) in addition to supporting themselves.

Maybe the US government should hire Jeff Skilling, Bernard Madoff, Scott Rothstein, Eddie Fastow, and Sir Allen Sanford plus some of the lesser known Wall Street Geniuses and financial wizards as consultants to advise the US treasury department and the Federal Reserve Board concerning "How to operate a Ponzi Scheme"! These gentlemen might be the very best qualified individuals in the USA with the specialized knowledge and skills required to run the US Treasury department.

[kdallas999]

03:46 PM on 07/19/2010

You forgot to mention that the agency that downgraded it (Dagong) did so in their "debut" report and that many see it as propaganda in response to the US's pressure on China about their yuan policy.

And Moody's says they have no plans to change the US's ratings.

[Siebenstein]

03:21 PM on 07/19/2010

How about terminating the Iraq and Afghanistan oppression and using that money for nationally necessary projects, huh?

[Y3rMawm]

07:59 PM on 07/19/2010

OK then, let's not talk about it, let's do it. But it still won't fix the deficit, by a long shot.

[Siebenstein]

06:29 AM on 07/21/2010

I don't care about deficit, since there mostly is one .
It could have solved the housing crisis for sure.But, who cares ?!

[Mig Gonzalez]

03:11 PM on 07/19/2010

Erm, haven't we already tried this stimulus stuff? The housing bubble was a "stimulus" and like any stimulant it doesn't last and leaves you feeling more depressed when it's effects wear off.

The idea of government spending creating jobs and growing the economy is a fallacy that has been repeated over and over throughout history. Read this great book by economist Henry Hazlitt in the 1940s:

Economics in One Lesson
http://jim.com/econ/

PS - it's free.

"Stimulus" simply borrows productive output from the future because it always has to be paid back. This should be obvious to anybody that doesn't believe in the free lunch or perpetual motion machine.

A true free market without government intervention reaches a stable equilibrium of economic activity. When the government pumps in trillions of borrowed or printed money it results in misallocations of capital. When the stimulus inevitably ends those misallocations of capital fail and lead to recessions.

It is analogous to the circus visiting a town. The circus brings increased economic activity to a town and sends false signals to business owners in the town. A restaurant owner may expand the size of his restaurant and hire additional employees to meet the new (temporary) demand but when the circus leaves town the restaurant will see layoffs and he may go out of business if he took on too much debt to expand the restaurant.

Get it?

[FR713]

03:25 PM on 07/19/2010

It is so refreshing to encounter someone on these pages who has the intellect to understand just how dangerous the slugs really are. They seem to actually believe this tripe and have many "fans."

[gerald4]

03:31 PM on 07/19/2010

WOW

You nailed it.

US importers, US retail distributors, and US retail outlet stores pay foreign manufacturers in the industrialized foreign countries with US Dollars to manufacture the products that US consumers purchase at US retail outlet stores.

These foreigners in the industrialized foreign countries do not buy very many US dollars worth of anything from the USA because US manufactured products are much more expensive than foreign made products, and sometimes US manufactured products are not as good.

US citizens are racing to sell title to everything in the USA of value that was created by previous working generations of US citizens to pay foreigners in order to keep from working.

This will keep the USA from re-industrializing and allow US citizens to not work as required to produce the things that US citizens consume.

This is "sort-of like" US citizens selling our body parts to keep from working! The US government calls this "Investing in America". US citizens are racing to sell title to everything in the USA of value that was created by previous generations in order to keep us from working today.

The day will come when there will be (almost) nothing of value left to sell to foreigners, and then the USA will then have to re-industrialize because US citizens will then no longer be able to print paper currency to pay industrialized foreigners to work and make the things that US citizens consume.

[mjeffn]

02:43 PM on 07/19/2010

We spend trillions on intelligence gathering and the military protecting what we used to have by stimulating memories of the past in the hope of stimulating the future. Is it just me or, does our entire society seem to have gone nuts?

[gerald4]

01:57 PM on 07/19/2010

I hope that our US government does not make Communist China and/or any of the other industrialized nations mad, because they might not loan our US government any more US dollars to pay for our US government expenses.

But wait a minute, these industrialized foreign nations do not loan the US dollars that US citizens paid for the imported products that US citizens consumed back to the US government, these industrialized nations buy freshly printed paper US bonds at Federal Reserve Auctions (at a discounts less than face value and/or present worth) in return for the US dollars that they earned buy making and selling consumer goods to US citizens.

But wait another minute, these freshly printed paper US Bonds and other security instruments that the US government printed on fresh paper and then sold to people in industrialized nations HAVE ABSOLUTELY NO VALUE, except that they are redeemable for title to privately owned businesses, factories, casinos, hotels, farms, land, ports, breweries, refineries, forests, ports, breweries, refineries, and other privately owned assets located in the USA that were created by previous US generations instead of redeeming these US dollars with Gold from Ft. Knox. The US Government only has $11B of gold left in reserve at Ft. Knox according to the AP Dec. 21, 2009, 3:44PM.

[gerald4]

02:00 PM on 07/19/2010

After the industrial foreign entities have redeemed their freshly printed paper US Dollars and Bonds for title to everything of value in the USA, these foreign industrial entities will not buy any more of these freshly printed paper US Bonds, or they will only pay a tiny fraction of a penny on the dollar for these freshly printed paper US Bonds.

This will cause the US dollar to lose all of its purchasing power, and then your life savings in US dollars might only last you a few weeks, and your paycheck might only buy one loaf of bread!

[Jannsmoor]

02:15 PM on 07/19/2010

Better to deal with our reality the way it is NOW than craft economic policy based upon imaginary scenarios.

[LMPE]

01:52 PM on 07/19/2010

And then the far right wing is going to say "We don't want no gubmint money!"

[gerald4]

02:10 PM on 07/19/2010

I want as much "gubment" money as I can get without working for it.

Why should I work for it?

The government just bought some paper, printed up some US Bonds, and sold them to individuals and compqanies in the industrial nations, so this is free money anyway.

[FR713]

03:36 PM on 07/19/2010

When are the Progressive True Racist Collectivists and the liar in chief going to get the message. Even though Mao is the envy of many of his administration, those who have seen the failures first hand know this tax and spend and spread the wealth is the road to financial catastrophe.

The Chinese used to applaud this kind of myopic stupidity, now that they have such a heavy financial investment there is a dichotomy with the Collectivists and those that have embraced free enterprise.

[LMPE]

04:43 PM on 07/19/2010

Racism and progressivism are anathema to each other.

Can you even define collectivism, or do you just parrot Glenn Beck all the time?

[curiousasheck]

01:33 PM on 07/19/2010

One thing is certain if wages start going up to much in China and Asia American Industry will pack up and move to the next cheaper alternative. I mean, these guys didn't even offer to sell American plants and factory's to locals who could have carried on an employee owned and operated company when they first started moving operations off shore and over seas.

[gerald4]

02:05 PM on 07/19/2010

All US manufactruing plants have always been for sale to anyone!

[FR713]

03:51 PM on 07/19/2010

Selling to employee owned and operated companies?

WHAT DON'T YOU UNDERTAND WHEN A COMPANY CANNOT COMPETE FINANCIALLY BECAUSE ITS COMPETITORS CAN PRODUCE THE PRODUCT AT A LOWER PRICE THEY CAN'T SELL TO ANYONE BECAUSE IT IS NOT ECOMONICALLY VIABLE.

You children's, childrens, children will be dust before the cost to Chinese owned or operated facility is no longer financially viable. They control imports and use slave labor. If a plant is short on employees they go arrest some political dissidents and "re-educate" them at the factory.

[monthofmay]

04:58 PM on 07/19/2010

You are spot on here...a democracy with human rights beliefs cannot ever compete with a ruthless regime. This has been a growing thorn for more than 100 years.
The only option is strong tariff protection with high standards for allowed exceptions...there is no other option unless western democracies want to become a anthill of slave labor. I'm sure there are plenty of plutocrats who would be happy to sell every word of our constitution and bill of rights today...and their souls thrown in!
Whenever possible buy American and/or Fair Trade. Strike a blow for "Of the people".

Will Rogers said we will be the first country to drive yo the poorhouse in a car...and with a digital camera and laptop. We're in trouble, people!

[Rosewren]

01:18 PM on 07/19/2010

The economy is in serious trouble. Please read and look at the charts below.

http://www.incrediblecharts.com/tradingdiary/trading_diary.php

[Siebenstein]

03:25 PM on 07/19/2010

I knew months ago that we are in a depression. The government just tries to avoid the word like the devil avoids the church.

[mmonarch]

01:10 PM on 07/19/2010

Hear how much those nifty stimulus road signs cost? FL decided not to post the. One sign cost as much as $10K. http://abcnews.go.com/Politics/signs-stimulus/story?id=11163180

It is nauseating to see this. NO MORE STIM. They don't know how to spend what they have and much of it still hasn't been spent yet. This is nothing more than a midterm ploy for votes.

[Jannsmoor]

01:14 PM on 07/19/2010

Actually we need at least $1 Trillion in MORE stimulus spending. We need to put 20 million unemployed and underemployed people back to work.

[Cwalshjr]

02:55 PM on 07/19/2010

That money will not create real jobs though. Only temporary jobs. Government needs to give incentives for hard working people to create jobs themselves. And not those green jobs that cost more than it produces, real jobs.

[Mig Gonzalez]

03:14 PM on 07/19/2010

You and anybody else that follows Krugman Keynesianism really need to read this:

Economics in One Lesson
http://jim.com/econ/

[gerald4]

02:13 PM on 07/19/2010

But the government borrowed a lots of money from to individuals and companies in the industrial nations to pay for these signs.

The government might as well borrow money to pay US citizens to digg holes today and then re-filling the same holes tomorrow!