One economist tries to show stimulus didn't work

I've written about the 2009 stimulus for as long as I've had this blog. The conservative talking point is that the stimulus was a giant waste of money that added at least $800B to the national debt with little or no benefit. I believe that the stimulus helped lessen and shorten the recession. I have just a tiny bit of evidence, but the con forces have never provided even a scrap of evidence... until commenter John Riggins pointed to this study by economist John Taylor. (All graphs from this study.)

Taylor's conclusions are that that the stimulus was ineffective because the money went to spending that didn't help the economy:

The federal government only increased purchases by a small amount. State and local governments saved their stimulus grants and shifted spending away from purchases to transfers. Counterfactual simulations show that the stimulus-induced decrease in state and local government purchases was larger than the increase in federal purchases. Simulations also show that a larger stimulus package with the same design as the 2009 stimulus would not have increased government purchases or consumption by a larger amount. These results raise doubts about the efficacy of such packages adding weight to similar assessments reached more than thirty years ago.

Now, I suppose I try to look at the evidence without his conclusion in mind. When I do this, I see the evidence painting a somewhat different picture. Here is the most significant graph:

Actual data from that time (green dashed line) shows that spending by states went down, even with the stimulus support. Taylor runs some sort of model that shows without the stimulus (red/dashed blue line), states actually would have increased spending. He writes that they would have done this through borrowing.

This sounds like a load of bullshit to me. When I look at this graph, focusing on the area in the red square, I see state spending dropping significantly. After Obama's election, the drop in spending mediated somewhat, but didn't reverse until the stimulus was passed. My interpretation is that states were tightening their spending significantly as revenues dropped. Then, when help seemed imminent, they moderated that policy and started spending somewhat more due to the promise of federal funds. Without the federal funds, the drop would have continued and many more workers would have ended up unemployed, worsening the recession.

Taylor posits that, for some unknown reason, states would suddenly substantially increase their borrowing, and spend the borrowed money immediately:

Is that what most states were going to do when revenue plummeted? Somehow I don't think so. I think they'd make some cuts, and maybe try to borrow more. The results that Taylor gets from his model are counterintuitive, and probably dubious when you think of how most states deal with revenue shortfalls.

I've expressed my opinion that payments to states were "very effective at reducing massive public job losses," and thus probably the most effective part of the stimulus. I see support for this opinion in the historical data presented by Taylor. A major drop in state spending was slowed and reversed due to stimulus funds.

Of course, I'm not an economist. Much of the verbiage in Taylor's report is meaningless to me. But it is clear that Taylor's model and his rosy conclusion depend on a huge and anomalous increase in states' borrowing.

Taylor's other conclusions, that tax rebates and other direct grants probably didn't help--I find that much more believable, though even then it's hard to know.

However, now I have one other data point that supports my contention that the stimulus helped. Thank you, John Taylor.

Extras. Summaries of nine studies. I got bored and didn't read the whole thing. A critique with some of the same complaints I had, but from a real economist. A more readable critique explaining how hard it is to figure out a model.

Update 8/3/17. I'm still defending the stimulus against conservative dogma that it didn't do anything but increase the national debt tremendously. However, today's argument spurred me to seek more sources, and I found some interesting ones. How states fared. Idiosyncratic review. I'm not the only one who says it would have been worse. A round-up of studies, which I'll read sometime.

Too many workers

We've come to a major turning point in history. Our economies, throughout most of the world, can no longer absorb our population increases and provide an increasing number of jobs. While there have been periods of high unemployment before in history, they've been reversed. I don't foresee that happening at all in the future. We are permanently in a situation where we have many more workers than we need, and there's no way for the extra workers to join the regular economy at the full-fledged rate.

Looking just as the US, we have the lowest worker participation rate in 36 years.

Labor Force Participation Rate 1948 - 2013

Image: businessinsider.com

We have high unemployment among our young people, and that's a worldwide problem. It's certainly possible for jobless people to be productive (cleaning, doing small repairs, gardening, teaching, etc.), but not at the going rate. So this extra labor force can work in the gray economy, work at home or in family businesses, or can volunteer, but they must be supported by others--those who are working at market rate jobs.

Why don't paying jobs exist for these people? Because our economies have become much more automated. It's been a goal in innovation to automate actions instead of having workers perform them. I go to an ATM machine instead of the human bank teller earning a wage. An ATM costs $2k (according to the ads on Google). That's a lot less than a teller's yearly salary. Ordering is automated online, saving the cost of a order entry clerk. Crops are planted and harvested with the help of huge machines, shrinking the number of farmers to 2% of the US population.

Too many workers? Yes, and too many people.

With all this equipment, we just don't need as many workers. So what should we do? There's a logical answer, but most people don't want to admit it: we need fewer workers, thus we need fewer humans. We should be shrinking our birth rates. Our birth rate should be lower than the replacement rate--yes, lower. Not zero growth, but negative growth, meaning contraction of the human population. If we don't do this, we will continue to have too many workers for the rest of foreseeable future, barring global cataclysm.

What are the downsides of fewer children and lower human population? Many people don't like the policy. Their cultures emphasize having children to carry on their legacy and take care of elders. It's hard to counter the cultural norms, but that doesn't mean that the cultural norms are logical or well-adapted to our current situation.

We'll have fewer people paying into Social Security, but we have to face that anyway. The huge baby boom generation is an anomaly that shouldn't become the norm just due to worries about how pensions are going to be paid. Besides, if there aren't enough jobs, those unemployed people aren't contributing anyway.

Suppose we underestimate the number of workers we need, and we create labor shortages due to a labor pool that's too small? That's not a big problem. We can either import workers or we can increase our birth rate to correct the problem. As we've seen, we can increase our population very quickly when we want to.

I'd like every country to decrease their birth rates, and they are. Two decades ago, few countries were reproducing below replacement rate. At that time it was considered a dire situation, but it no longer looks that way. Now many more countries are running below replacement rate. That's a good thing ... especially if we want to avoid more of this.

The lucky one has a metal roof (Bangladesh).

Image: paveldospodinov.com

They pray for a rectangular shack instead of a lean-to (Bangladesh).

Image: theguardian.com

Apartment blocks don't solve the problems (Cairo).

Image: ahlu-sunnah.com

Update 12/26/14. An article from The American Conservative pointing out that no one (despite political parties' claims) seems to know what to do about these economic problems.

Still arguing about the stimulus

The stimulus of 2009 is still a point of argument on this blog. I've argued that the stimulus helped stop the unemployment spiral and that parts of the stimulus, such as support for state workers, were quite helpful in softening the downturn.

The general argument against the stimulus is that it doesn't do any good for the economy, increases the national debt, sucks money out of the private sector, and the economy would correct itself in the same timeframe without one.

Evidence for this viewpoint isn't generally provided by those making the argument. It's a hypothetical, not even close to proven. Part of the problem is that economies don't let you do controlled experiments, where you apply stimulus and measure the result, and then reset, don't apply stimulus, and look for the difference. This problem equally affects both sides of the argument.

So what evidence can there be for one side or another?

If the economy returns to normal soon without stimulus, that would be good evidence that stimulus wasn't necessary. We could also look at how dismal metrics like unemployment go, how long the job slump last, and other factors.

Here's a graph of estimated or measured unemployment since 1890:

Image: wikimedia.org

The Panic of 1893, which caused a spike in unemployment lasting until 1900, stands out, as does the Great Depression. Unemployment spikes since 1945 have been much milder, so we need a different scale for them. Here's a chart of the more recent recessions:

Image: calculatedriskblog.com

I thought it would be helpful to see the first derivative, or the rate of change, of unemployment. Here it is, the 4-week moving average of new unemployment claims:

Image: calculatedriskblog.com

Here's what I see in these graphs:

• The middle graph shows that the peak of the 2009 unemployment was blunted--not as high or sharp as one might expect. It's impossible to be sure what shape the peak should have, but if it was blunted, that means that unemployment may not have peaked because of the stimulus.
• The bottom graph shows that the rate of job losses were as severe as the 1982 recession. The recessions between 1982 and 2008 were considerably milder.
• Since 1982, the period it takes for employment to recover is getting longer.

A commenter arguing against the 2009 stimulus said these things, which I believe are refuted:

• It is entirely normal for the "leveling off" of employment to occur 24 months after the fall, the time period shown in your graph. My reply: It's not a slam-dunk that employment will stop falling in that short a period, as the 1893 and 1929 downturns show.
• The fact that other sectors were not (net) creating jobs while the government was sucking an extra $800 million out of the economy is not evidence that that $800 million wouldn't have created at least as many jobs were it spent/invested in the private sector. My reply: This point ignores how much the private sector was contracting and how private businesses that had cash were sitting on it, not reinvesting it. [Not refuted in the charts, but in this post.]

Commenters who are against the stimulus often claim or imply that the economy would do better without the stimulus, yet they offer no evidence for that assertion. Again, clear evidence is difficult to find because you can't run controlled experiments on an economy. But it's been hard to glean whether proponents have any evidence for this view. It's a belief without evidence--meaning that it's a dogma. On the other hand, it would be particularly hard to find evidence against stimulus because the government has run stimulus programs during recession after recession, so we don't have good comparison cases without stimulus. 

There will probably not be definitive evidence for or against stimulus packages. It's not possible in the nature of economies and how governments respond. However, the dogma against stimulus goes further than healthy skepticism. It replaces a belief in stimulus (with marginal evidence) with a bias against stimulus based on ... what, exactly? That's the problem. It's turned into an article of faith despite having no foundation. 

Perhaps the animus against stimulus is part of the rejection and vilification of all things related to Obama. The idea of stimulus now carries Obama-taint. That's bad because it's hard to make a case against stimulus and the damage it can do (increased deficits, increased budget baselines forever after) if you're just reflexively against it, and you can't put together a coherent argument. 

It's not as though there isn't an argument to be made. Opponents of stimulus can point out that a stimulus may not be necessary in the short term since the economy can correct on its own. Also the deficit spending to support a stimulus may be harmful in the long term.

I suspect there's a good reason that the federal government rarely votes against a stimulus during a downturn. In harder economic times, those in power don't want to argue that they are ineffectual (unable to do anything), so "doing something" has the edge. "Doing something" is also supported by the people who will benefit from the stimulus.

The biggest problem with the Obama stimulus is not that it happened, or that it's unclear whether it was helpful, but that the spending is staying so high for so long. The following chart shows that GDP started improving in 2009 Q2 and returned to 2007 levels in 2010 Q3:

Image: businessinsider.com

Yet the expanded federal spending, which should have been tapered starting in 2010, continued to grow and became the defacto new baseline:

Image: downsizinggovernment.org

The spending reduction in 2012 occurred because the Tea Party pushed budget cuts--it wasn't part of the stimulus plan that spending levels dropped back down. In fact, the supporters of the stimulus, Obama and the Dems in Congress, resisted budget cuts.

So if the government is reluctant to back off increased spending as recovery strengthens, what should we do? Should we forfeit the possible benefits of stimulus due to the drawbacks? I'd like to see a lighter hand on stimulus with definite cool-down features enacted with the stimulus itself. There should be no long-term stimulus, which also means that any tax cuts enacted as stimulus must have expiration dates no more than a couple years away. I'm thinking in particular of the Bush tax cuts that were enacted as a stimulus, but were scheduled to last 10 years.

The severe recession starting in 2008 definitely warranted stimulus measures though many of those measures weren't targeted in effective ways. The stimulus was too large, lasted too long, included too much spending for favored political groups, and was an excuse for higher spending for the foreseeable future. However, complaints about the stimulus are scattershot and politically motivated rather than being analytical.

Extras. Long analysis of stimulus measures from a Koch-supported think tank. Lots of data and good questions. See especially the three hurdles on p. 54. Apply the questions raised to all stimulus programs, not just the Obama stimulus.

Update 1/12/18. I found a graph that shows the severity and depth of the 2007-10 recession with astounding clarity.

Image: calculatedriskblog.com

A redundant member of society (Takers)

I'm afraid that's what I am--a redundant member of society. If society is separated into 'makers' and 'takers,' I'm someone who ministers to the 'takers.' My career in healthcare has given me the opportunity to work with all sorts of 'takers' including: long-term nursing home residents, short-term Medicare rehab patients, residents (inmates) of locked psych units, seriously handicapped children, children from foster homes and wards of the state. It's been the rare occasion when I take care of someone who has a job.

So if we manage to rid our society of takers, I won't have a job. That's probably true for a fair number of people. Perhaps our takers provide employment for many people who are otherwise redundant. If we tried to shrink our society to only the productive people, we'd have a much smaller society, say 40% of the current size. When you get rid of the takers, you can probably get rid of 80% of the doctors, maybe 35% of the farmers, 40% of the teachers, 80% of the police, and 95% of the lawyers (ha, just exaggerating... maybe).

It's not that I advocate increasing the number of takers so that there are more social service jobs. I understand the budget implications of that, which is blowing an even larger hole in our state and federal budgets.

No, the reason I write this is to reflect on how many excess people we have in society. There are so many extra people and so much extra labor in this country and in the world. Industrial and computer automation has made many millions more redundant. If we are going to despise the 'takers' and respect only the 'makers,' we're going to hate much of humanity, and we should be working to reduce our numbers by a significant amount. 

I guess once all my 'taker' clients are gone, I'll be scheduled as redundant too unless I'm lucky enough to get a healthcare position ministering to the generally healthy. There will be so much competition for those positions I probably won't succeed. Oh well. 

It's not all that bleak. Maybe one of the makers will let me live on his crumbs and table scraps. I can always hope.

Image: usmanvakil-beggars.blogspot.com

Is Obamacare ALREADY a train wreck?

Everyone has heard this. Obamacare is a train wreck. Well, I don't take anyone's word for it. As I frequently tell other internet commenters, your assertion doesn't make it true. So what is the evidence that Obamacare is already a train wreck, even before exchanges crash, subsidy costs balloon, and healthcare providers are so pissed off that they give surly care?

The evidence:

1. In a Gallup poll of small employers, 40% are holding back on hiring because of concerns about the employers mandates in Obamacare. Well, maybe this is true, or maybe it's like the polls showing how many people thought that Obama wasn't born in the US. Some of the respondents will have political reasons for complaining about Obamacare. Refuting data: see the graph below showing trend in full time employment. Or maybe the sluggish job growth is due to a combination of Obamacare and poor sales and demand. On the whole, I think there's some validity to this complaint.
2. People are losing their satisfactory healthcare plans and being dumped into exchanges or forced to pay more for plans they don't want. This is true, but for how many? This tweeter says "After over 5 yrs of no group health ins I finally get a job that offers it and here's the thanks I get [a cancellation notice]. If you think about it for a minute, that tweet isn't a slam-dunk against Obamacare.
3. Here's a rehash of reasons from Heritage Foundation, including job losses due to taxes on medical devices and lower Medicare reimbursements. They mention less than 3000 jobs lost, not a horrifying number considering that the US lost 524,000 jobs in December 2008. 

No, Obamacare isn't a train wreck at this point. It's not as though no one knows how to implement it, what the rules are, or when they will have that information (might describe Dodd-Frank, but not Obamacare). It may turn out to be a train wreck, but it's politically motivated jumping-the-gun to call it a train wreck at this point.

Image: oops, lost the link

Graph above:  theatlantic.com

Extra. Obamacare will explode medical spending, just like Medicare did. I have a few obvious questions about this, including asking about the effect of covering mostly the healthy instead of the elderly. But the kicker in this article is that Medicare didn't positively affect mortality rates. Um, does that means Medicare is an expensive failure? Please defund Medicare immediately and see how that turns out.

The only fan of the sequester

It's hard to be for the sequester if you're an elected official. After all, the sequester will send pink slips to somewhere around 600,000 employees in defense-related jobs, both in the Defense Department and Defense contractors. If you have a military base or a military contractor in your district, you can hardly support the sequester. So politicians don't express enthusiasm for it.

So who is this lonely fan of the sequester? Howard Dean, expressing his support from the safety of private citizenship with no official post in government or the Democratic Party. I loved some of the Dean quotes:

About defense cuts: "This is a chance to cut Pentagon spending. We haven’t done it for 30 years... This would not be my favorite timing. I don’t think this is a great solution. I just think it’s the better of any of the ones that are on the table... There are going to be some jobs lost. The fact of the matter is that we will not get this chance again."

About Medicare cuts: "I’m not in the least worried about Medicare provider cuts... Whether this comes from drug companies or provider cuts, we’re going to do those anyway as soon as they get around to doing what really has to be done, which is paying by the patient, not by the procedure." [Wow--how clear and how true]

About the risk of recession: "It will be a short term, light, small recession. Look, we’re in deep trouble financially in this country... You can pay me later or you can pay me now, but paying later is going to be much worse and it’s going to hit much more vulnerable people than this does."

The GOP is generally pro-sequester at this point because it's better than the other alternatives currently being floated. Those alternatives are objectionable because they contain tax increases and fewer spending cuts. However, the GOP can't be whole-hog supporters due to the military jobs in each district, as I said above. Some are trying to connect the sequester, and subsequent job losses, to Obama. The usual phrase is the sequester is "the president's idea."

I'm confident that the sequester will happen. I'm also a fan for reasons similar to those of Howard Dean, though I support broadly cutting jobs in the federal workforce, not just in defense. I also think we shouldn't miss this chance, and I'm willing to weather the consequences. Think of the sequester as the cuts we should have had in the 90's and the 00's, but didn't. We shouldn't put them off any longer, or it's "going to be much worse" as Dean says.

Image: newrepublic.com

Short: Annoying, but right?

I read this piece by David Frum. Actually, I forced myself to continue reading it, even after the blather about how the election could be/should be about Obama's "dismal" record. But the column gets better:

"Romney has instead chosen to bolt himself to the House Republicans."

There's plenty solid analysis after that. Then came this bombshell insight:

"Conservatives ardently believe that big future deficits are the cause of today's unemployment. They feel it. They know it. And they don't want to hear different."

I'm thinking, wow, maybe that really is the summation of the Republican stance. And the statement also shows how ridiculous the view is. Wow. Other impressions, anyone?

Short: Romney promises...

... 6% unemployment. Cheers and wailing of joy.

Except Obama promised no more than 8% unemployment. Gingrich promised $2.50 a gallon gasoline and a moon colony. Please, shelve the promises and show us a fiscal plan with plenty of specific numbers.

A plan that fits on a bumper sticker

 Photo: legalinsurrection.com

The pulse of Republican regret 2008

In researching the roots of the Tea Party movement, I read many blogs. More illuminating than the posts were the comments. This is a selection, but often they are best read in context, with counterpoints, insults, and disagreements aired in a long stream. One comment can be egregious, next a thoughtful one. Most comments come from HotAir, a conservative multi-blogger site that excludes casual commenters. I highly recommend clicking on the links to get the flavor of discussions.

Here are some of the comments I found significant.

Disappointment with McCain as Nominee Apparent

When we lose in November it will teach us a lesson. We need to nominate a candidate who represents all 3 legs of the stool next time, none of our candidates did that convincingly this time around, not even Fred in reality... We need to get behind guys like Coburn and Demint, they are the future. - HotAir comment 2/5/08

Dirty Tricks on Hated Dems

The Dems are faced with two fantastic options:  If he wins, they will run this boob against an experienced, established, generally liked Senate leader. And The Obama will lose. If the Super Delegates back Hillary they will face riots and that will make me so happy I’ll have to dance around my front yard.
I’ll vote for Hill-rod on the 5th! - HotAir comment, 5/24/08, when Hillary was staying in the race.

Traitors

I DO question his Patriotism, his Judgement, his Americanism, etc. I consider him, and most of the “Democratic” “leadership”, nothing but out, and outright Traitors for their disgraceful conduct during the past 7 years, against this President, the Troops, etc. But Hey, what would I know, I just served in Iraq the first time around in the Marine Corps, lived over their, speak their language, and have analyzed them for the last 30 years. - HotAir comment 7/25/08

Bailout Mania

Harry Reid’s statement shows me that the DEMS are scared $hitless. They don’t have the confidence to say we are/or are not voting for this and Barack believes this and he’s voting this way. NO! He’s telling us what McCain is going to do. He has no idea what McCain’s going to do! Someone else above said it right… I’ll believe it when McCain or at least someone from his own party or campaign tells us he’ll support it.
I repeat… the problem is, we don’t know the details. Who among us has read the bailout plan and would understand it if we read it? I would appreciate getting the chance to read it however. - HotAir comment 9/23/08

Same Story, Different Names

There is already a strong vocal populist opposition, Gingrich adds to it, and the democrats are instictively inclined to not do anything Bush wants done. The democrats have been effective in deflecting any responsibility for their own actions, and the democrats have so effectively destroyed the Bush Administration’s credibility that the democrats could just adjourn congress without being blamed for the results.[emphasis added] - HotAir comment 9/23/08

 The Long Confidence Game

Obama's 'Organizer' Buds Pushed for Bad Mortgages - NY Post 9/29/08

Obama and the Strategy of Manufactured Crisis
... He can be tied directly to a malevolent overarching strategy that has motivated ... the most destructive radical leftist organizations in the United States since the 1960s.... I submit to you that they [Democrats] understand the consequences... the goal is more malevolent - the failure is deliberate. Don't laugh. This method not only has its proponents, it has a name: the Cloward-Piven Strategy. - James Simpson, blogger and former White House economist 9/28/08

The Irony of a 2008 Dream Candidate

My Dream: President Bush appears on national television to give a speech. Standing next to  him are Dick Cheney, Mitt Romney, and Warren Buffett. Dick Cheney says, “I resign.” President Bush says, “I thank Vice President Cheneyfor his service. I appoint Mitt Romney to be Vice-President. He is a skilled financial manager. Just the guy we need right now.

Romney is sworn in as Vice President. President Bush starts talking again. “Right now America needs a leader. Due to my standing in the polls, regretfully, I have lost credibility with the American public. I hereby resign.

Romney is sworn in as President. Mitt Romney starts talking. “Secretary Paulson has done a good job, but people just aren’t listening to him. I hereby fire him. In his place, I appoint Warren Buffett as acting Secretary of the Treasury. I thank Mr. Buffett for serving his country in its hour of need.” Romney and Buffett then get the Paulson plan passed and FDIC insurance limits increased. Romney appoints Ed Morrissey as Vice President. America is saved." - HotAir comment 9/30/08

Too Late to Criticize

Oh, and NOW you want McCain to criticize GW Bush? Where were you when McCain bashed Bush and Rumsfeld in 2004 and 2005? Saying that was proof of what a horrible guy he was, for daring to criticize Bush? How about a few months ago when McCain visited LA with Gov Jindal, and (correctly) said that the Bush administration civilian response to Katrina was incompetent? How about when McCain criticized Chris Cox? Were you one of the people calling McCain a traitor for those criticisms? But you now expect him to take your advice and go on a full on crusade against Bush/Paulson/Pelosi?
Yeah, you want him to win." HotAir comment 9/30/08

Doomed

McCain seems to be resigned not to win. Just this morning, I woke up with the realization that he will not win this thing, no matter what we do. But we MUST vote for him nonetheless. The enemy is too strong to overcome. The Big Temptation of the Pied Piper is too strong to break. And America will follow him to the cave, and then, to Marxist servitude. Yet, we still have to make a stand. We MUST make a stand. - HotAir comment 10/5/08

Equal Opportunity Delusion

Why do the libs always believe that voting out irresponsible repubs automatically means wholesale acceptance of every whackjob democrat plan ever devised? Guess what, Rahm, 2000 and 2004 also saw two consecutive elections where the people “voted for change”, yet you and the rest of the left cried foul.
The libs ALWAYS make this mistake, this time it will cost us plenty before they are done.
Bend over, here it comes. - HotAir comment 11/19/08

Their Mess Now

And just what are you going to say when it all falls apart? “It’s all George Bush’s fault”? What is striking is how smug and clever these people sound right now. Come January, we’ll see how they face reality when it comes up and kicks ‘em right in the nuts.- HotAir comment 11/19/08

The Trouble With Voters

Remember that the voting public are practically brain dead zombies with an average 70 IQ... they go by impressions alone not policies.  - HotAir comment 11/19/08

Pre-Emptive Blame, Before Inauguration

High unemployement.
Low dollar value.
Low consumer confidence.
Gob’ment control of corporations.
I blame Obama. And on 1.20.09, I’ll blame him even more." - HotAir comment 1/9/09

Bambi’s got lots of super lefty ideas to choose from, we’ll all be up to our armpits in a glorious economy before long, I tell you. - HotAir comment 1/9/09

I wonder if the Obama supporters understand that the “you” might include your boss or employer whose company makes over $250,000? ...Wrap that all up in a pretty socialist bow and it’s no wonder that with the messiah in control the pink slips are flying out in record numbers. - HotAir comments 1/9/09

Extra. Over the top Tea Party video. Long on fear, very short on policy.

Hollow America

I only just realized that it's terrible we've lost so much manufacturing and so many factory jobs. Of course I was aware the manufacturing was moving out of the country--I see plenty of empty factories here in Massachusetts. But I didn't see it as a problem because it seemed like people were getting new jobs. Foreign goods, like my reliable Toyota, were a great benefit, and the competition seemed good for American products. Ford cars in the 70's were crap, but they were a whole lot better by the mid-90's. So global trade looked like a win-win situation.

As for our trade imbalance, I didn't think the statistics were true. Surely we'd be having worse economical problem if we were doing that badly. I honestly thought that the metrics were missing huge software sales or other exports of intangibles like movies or financial services. Please don't roll your eyes or wonder why you should waste any more time reading my posts, but I thought that we'd be suffering like Argentina did when they'd have one of their terrible crises, and that obviously wasn't happening.

I don't know when I finally wised up and realized that the trade imbalances were THAT BAD. It's amazing that we could get away with it, and still people would loan us money and sell us oil. And they still do.

Strangely, I don't think the biggest problem is all the debt. Instead, I think it's that we no longer make enough stuff. That makes it so much harder to strengthen our finances through exports, rebuild our economy, and get people back into work. A smaller country could devalue its currency, cut way back on the imports it could no longer afford, pay its workers less, and then export the cheaper wares to other countries. We don't seem to have that option, so I don't know how we'll lift ourselves out of this hole. Suggestions, anyone? Quick, before they turn off the electricity!

Two other questions: Could we have avoided this, and how?

History for Amnesiacs: The stimulus was a waste

I can't believe I have to repeat myself, but I've read too many comments like this:

"The last stimulus didn't help. Why would we raise taxes to do it again?"

If you measure the effects of the stimulus against the political promises (like employment won't go above X), you would be disappointed. But that's not much different from believing your new toothpaste is going to get the gorgeous girl to kiss you, or a business plan will play out perfectly.

In this case, the economy was sicker than economists thought. The stimulus medicine, while effective in stopping the unemployment spiral, didn't live up to all the predictions. I could blame Obama, or the provisions of the stimulus (called Porkulus in a lot of comments pages). But I'm a fact-based kind of person, so I look at this graph and say "thank God for the stimulus."

Anyone arguing that the stimulus did nothing, you better be able to refute this graph. Until someone refutes it convincingly, I call bullshit on "the stimulus did nothing."

Post-speech score card

Obama gave an energized speech last night. He definitely seems to have grabbed the ball:

1. He wants to continue the Security Security Tax partial holiday and extend it to small businesses.
2. He wants to use a Republican state program and go national with it to help the unemployed.
3. He promises to strip back regulation that chokes small business, but only small business.
4. He wants to do a batch of infrastructure projects.
5. He wants Congress to act now, not wait 14 months until after the election.

The Republicans didn't have any ready responses today. Maybe they're stunned that he's taken the initiative on tax-cuts/regulation/small-business/job-creators away, and even started a countdown clock on them.

But Obama still has to deliver on two promises: the jobs bill itself, and the deficit reduction plan promised for Sept. 18. There will be a lot to pick apart there, since specifics are a bitch. That could very well put Obama back on the defensive.

I'll be watching the developments as closely as I watch a hurricane headed up the coast.

P.S. My opinion is still that no stimulus or policy change is going to make a big dent in the unemployment rate. I did hear some pundit quote a 1% reduction. Maybe that can be delivered, but will it be too small for the price tag?

BIG REVERSAL: (9/15/11) I made a big mistake in this post. The tone is wrong, in that it's quite partisan, too close to cheering on a political leader for a superficial good performance rather than taking a hard look at the policies. It's fine to comment on the performance, but as an analyst, not a fan.

In that light, Obama gave a very strong delivery of a plan well crafted to neutralize an opponent's arguments. At first glance, it is not greater than the sum of its parts, and each of the parts should be considered for its cost/benefit balance.