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Stimulus Spenders and Their Silly Excuses

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This past week the government announced that existing home sales plunged 27.2 percent in July while new home sales were down 12.4 percent. The numbers surprised most “mainstream” economists who expected more modest losses. Of course, with the housing market still in shambles the value of homes is expected to drop further than the $6 trillion already lost by American homeowners. This development coupled with continuing high unemployment and low consumer confidence is making many economists predict we are headed for a double-dip recession.

Now, naturally, proponents of the government’s failed stimulus policies have their excuses for why it didn’t work all lined up. They are not even waiting for the double-dip to officially hit. They are already claiming that the stimulus wasn’t spent on the right things and was simply “too small” to actually make any difference in “stimulating” the economy.

Here are the facts. First to address the issue of sinking home sales, no one should be surprised by the numbers. Home sales are way down for several reasons. First of all, Obama’s first-time home buyer’s tax credit expired in April. Folks are now waiting to see if Congress will enact a new credit before they buy. Second, all the signs are there that housing prices will continue to drop, so why rush into purchasing a property that in a few months might be gotten at an additional discount? Lastly, given the number of people in America who are unemployed, underemployed, and just downright broke it is no wonder that a huge expense like homeownership is not high on many people’s minds.

So the massive drop in home sales in July should not be surprising. Anyone who understands human behavior and even the most basic fundamentals of economics knows the president’s housing stimulus program was doomed to failure. During the time it was effective there was an increase in home sales and a leveling off of home prices, but once the program ended the bottom fell out. No lasting growth ensued. Additionally, many first time buyers who took advantage of the tax credit used it for a down payment. Essentially, the government was once again encouraging folks to buy houses who didn’t have the ability to save for a down payment. This probably represents a misallocation of scarce resources and we can expect to see many of these homebuyers on a list of foreclosures in the future.

But, the president’s homebuyer tax credit is just a small part of the overall massive stimulus Washington has injected into the economy since 2008. The entire stimulus “invested” by the feds has had a similar effect on the whole economy. It stabilized things for a while and then wore off. Because economic priorities are determined by politics and not the free market, we are left with a whole lot of mal-investments and possibly new bubbles. So when stimulus proponents say the money was not spent on the right things they are technically correct. After all, stimulus money has been spent on things like converting an abandoned train station into a museum, the development of interactive dance software, new windows for a visitor’s center that closed 3 years ago, and a study to determine the effects of cocaine on monkeys. If these expenditures are not mal-investments, I don’t know what is.

But this is one reason why government stimuli never work. Bureaucrats and elected officials don’t operate in a world of profit motives, competition, and the consequences of failure. Ultimately, the allocation of taxpayer funds is doled out based on what they think is needed and to feather their own nests with the folks back home. This is obvious given the aforementioned stimulus expenditures.

Besides the stimulus wasn’t spent on the right things argument, proponents of the policy are also saying the government’s effort was not big enough thus rationalizing its failure. They always only point to the president’s $850 billion program passed by Congress shortly after he took office. But, there is a lot more that has been “invested” in the economy since the depression began. Federal spending has included everything from the Troubled Asset Relief Program (TARP) to Cash for Clunkers to GSE mortgage-backed securities purchases by the Fed. The total of all federal stimulus spending as of December 2009, exceeded$3 trillion! This represents more than 20 percent of annual gross domestic product. $3 trillion actually spent and all we have to show for it is sustained high unemployment, sinking home sales, low consumer confidence, foreclosures through the roof, food stamp expenditures at all time highs, and a looming sovereign debt crisis. The problem is not that we haven’t spent enough. The problem is that we spent the money in the first place.

At the end of the day, government spending, quantitative easing or whatever the political establishment wants to call it simply doesn’t work. As economist Robert P. Murphy has written, we have a great comparison between the depression of 1920-1921 and the Great Depression of the 1930s to prove this point. In the former, government cut its budget and the Fed raised interest rates. The crisis was over within two years. In the latter, Hoover increased government spending and the Fed slashed rates to all time lows at the time. The result was the beginning of 15 years of economic misery. Given the amount we have spent this time, get ready for a long rocky economic ride.

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About Kenn Jacobine

  • Mark

    Get ready for revolution or/and war.

  • John Wilson

    Yes, the housing credit made no permanent improvement. It was a ‘hail mary’ which might have worked in a better economy, but not this one. But it had to be tried just so we could say it’s been tried.

    These little patchwork measures will not correct an economy that has been seriously abused and neglected for 30 years by both republicans and democrats. We need deeper changes and I’m not sure that this generation of fumblers and opportunists is up to the job, especially the senate.

  • Kenn Jacobine

    John, I completely agree with you it has been a bipartisan bungling of the economy since at least the early seventies. It seems politicians in America don’t want to make any hard choices about anything.

  • Glenn Contrarian

    Yes! Hard choices just like when we (very nearly) paid off the even greater national debt we had after WWII! How?

    Higher taxes – including the 91% top marginal tax rate we had through the Truman and Eisenhower years. The top marginal tax rate was lowered in the early Kennedy administration to 70% (or 74%, can’t remember which)…where it largely stayed through the Carter administration. Reagan slashed the tax rate by HALF…and not long afterward we got what was then the worst recession since the Great Depression.

    Kenn, if conservative dogma were right, then the much higher taxes we had from the early 1950’s through the 1970’s should have been a time of crushing depression…but it wasn’t. Why is that? Why is it that since Reagan took office, we’ve had the three worst economic crises since the Depression? Why is that?

  • Kenn employs the common rhetorical tactic of cherry-picking a few weird-sounding things that stimulus money was spent on, without explaining exactly why those monies were misspent.

    Undismayed by Kenn’s dud link, we at Dreadful Investigations decided to investigate those disbursements a little closer. (Well, actually, Newsweek and CNN did the investigating and we just took the credit.)

    In our opinion, all of those projects have some merit in their own right, and might not have been undertaken had it not been for the availability of stimulus funds. But that’s just our opinion. Take a look for yourselves.

    Whatever you conclude, I hope we can all agree that a particular project isn’t money down the drain just because Kenn and/or a bunch of witless senators say it is.

    We report, you decide. Or something like that.

  • “we at Dreadful Investigations . . .”

    Nice touch, especially when applied to Kenn’s “investigations.”

  • Glenn Contrarian


    (Does that make me a ‘dittohead’?)

  • Kenn Jacobine


    You are taking a page out of Obama’s playbook. Develop a distraction when you can’t defend a policy. The main thrust of the article is that stimulus spending doesn’t work. Glenn, you said on another thread last week that it is because we haven’t spent enough. $3 trillion is not enough for you? How much would be enough?

  • Glenn Contrarian

    Kenn –

    It’s not just me who said not enough was spent on the stimulus – Nobel Prize-winning economist Paul Krugman was saying the same thing as early as last December. A year ago economists were upbeat because they could see clear signs of the stimulus working…but now we see it simply wasn’t enough.

    Kenn, it comes down to this – and I’d REALLY like you to answer the conundrum at the bottom of the following list (no BC conservative has yet done so):

    When the economy goes into a recession, what do companies getting hit by the recession do to protect their bottom line? They cut costs. Right? Right.

    What is the single quickest and most effective way those companies can cut costs without hurting future material infrastructure? Cut personnel costs (layoffs). Right? Right.

    When tens (or hundreds) of thousands of companies nationwide lay off people, there’s a significant uptick in the unemployment rate…and that’s bad news for the economy. Right? Right.

    When hundreds of thousands of newly laid-off people hit the streets, do they spend more than they did when they had jobs? No. They spend LESS. Right? Right.

    Which means that the nation’s business sector is making even LESS money than they were before the aforementioned round of layoffs. Right? Right.

    So NOW the nation’s business sector has to cut costs even more to stay in the black (or at least stop the bleeding)…and guess where’s the easiest place to cut costs – personnel! As in MORE layoffs. Right? Right.

    And suddenly even MORE people are spending less and less…and the cycle continues. How do we stop this cycle?

    Do you see the vicious circle I’m describing, Kenn? DO YOU SEE IT? Of course you do. So how do you propose to stop the vicious circle I described without using a taxpayer-funded stimulus to get people back to work?

    And don’t try the fantasy that “the market will take care of itself”, because it’s the market that’s stuck in the vicious circle. You and I had a discussion before about the actions of the Hoover administration after the Crash of ’29…and you know that Hoover tried austerity measures (w/no stimulus) for three years. Was he successful? Did the “magic of the marketplace” take hold and make everything better? Or did this lead to the fact that 5000 banks closed the day before FDR took office?

    So how to break out of the vicious circle, Kenn?

  • Kenn Jacobine

    Please answer this first and then I have a long answer for our question which I will answer tonight at home. We’ve spent three trillion. How much do you and Paul think we should or should have spent? How do you know?

  • Kenn Jacobine

    Even wrongly assuming that Hoover employed austerity. Why is it that the Great Depression still didn’t end until sometime near the end of WWII? It took FDR about 13 years to end it with big stimulus!

  • Kenn Jacobine


    What you explain is insanity – that is doing the same thing over and over again and expecting a different outcome. Ask yourself this question – why are all these people loosing their jobs? It is because monetary policy of the Fed for a long time encouraged America to over invest in goods (this time houses, during the 1920’s general goods and stocks). Then when the Fed decided to bring the economy in for a smooth landing by raising rates, people could no longer afford their debt payments. So they defaulted and stopped buying other stuff as well which then caused the unemployment we experience. Why would you want to do the same thing that got us into this mess in the first place (gov’t spending and cheap money)? This only re-inflates the bubble. Bwcause we have gone down this path to the tune of $3 trillion we are now headed for an even larger fall and a long road back to economic normalcy.

    A good economy is built on savings and investment, not debt. Stimulus spending has never worked because it is just a re-inflation of the bubble that started the downturn in the first place.

    If 1974 Nobel Prize winner Friedrich Hayek were still alive he would disagree with Krugman.

    He would have recommended that the gov’t raise rates and cut spending to allow the market to liquidate the mal-investments made during the bubble. It would have been brutally painful in the short-term but we would be in recovery by now. The greatest historical comparison we have is the difference between what the government did during the 1920-1921 depression and what it did during the Great Depression? In 1920 Harding cut spending and the Fed raised rates – recovery came within 2 years. In the 1930s first Hoover then FDR primed the pump and the Fed initially lowered rates and depression lasted for over 15 years.

    It is no wonder you hate the free market, because given your remedy on how to fix this latest crisis, you have no idea how it works.

  • John Wilson

    Nobody likes the ‘Free Market’, especially the business community, for they are the ones most prominent in constantly manipulating and dominating ‘The Market’. Free Markets represent competitive threats to established power and riches.

    One can argue that the business community is responsible for our current distress by it’s twofold manipulation of government policy: by increasing fiscal expense spending government money on business favorites like war, and using monetary (Fed) policy to artificially restrict inflation on behalf of vested interests.

    The ‘Stimulus’ is a poor relative by comparison. And, had it worked as bridge financing, it would have looked good, but the banks failed to do their part by extending the credit that would have replaced the Stimulus. And you can’t blame the banks because the (crooked) Fed lent them money at 0.5% that they could put in US Treasuries at 2.5% and make buckets of money with no effort and no risk, while selectively making a few 5% showcase loans. Better yet, just leaving the money at the Fed earned them a 0.25% for not using pre-allocated money.

    Yes, we should have Nationalized the banks when the crisis hit (planning to sell them off and re-establish private banking later under New Management and better banking regulations) but our politicians (of all stripes, apparently) failed the test.

    Of course, the Fed should also be re-structured with less monetary power to prop up corrupt political empires with irresponsible fiscal policies as Greenspan did when he propped up Bushes extravagant fiscal acts.

  • Kenn Jacobine

    Banks and business don’t mind the inflation (increase in dollars) as long as they are first in line to use the new money or credit before higher prices set in. Of course, printing new money hurts the working poor the most because they are the last to see the new dollars and by that time prices have already risen.

    I agree with most of what you said, but instead of nationalizing the banks, they should have just let them go under. Anybody with money in them would have been covered through FDIC. I realize pensions would have been negatively affected, but I think all the spending and coming inflation is going to wipe out those plans anyway. The good assets of the irresponsible banks could have been bought up by responsible banks and this would have helped recovery.

  • Dreadful Investigations


    I am stealing that for my book. Hope you don’t mind.

  • It is no wonder you hate the free market, because given your remedy on how to fix this latest crisis, you have no idea how it works.

    “But it is hardly surprising: in other countries around the world where the agro-industrial model has been adopted and expanded to greatest extent, we can see how the system works. At first farmers are persuaded to increase their production using unsustainable methods, replacing native varieties and breeds with products preferred by the industry. Then the economic benefits dwindle and many small to medium size farms are forced to close, being bought out by those able to achieve greater economies of scale. We are then left with the same pattern of concentration that has taken place in all countries of the global north: the country areas become depopulated; there is an increase in machinery and decrease in people. In the end, even the large farms begin to struggle. They grow monocultures or farm intensively, and depend on the only customers who can take their produce – the large dealers and large retailers – who gradually begin to dictate prices due to their market strength, and reduce prices even further. The free market is bringing food into the hands of a few and is destroying the spirit of our countryside.”

    from The Plight of the Modern Farmer
    12 Aug 10 – Carlo Petrini – Slow Talk

    What do you have to say about Alan Greenspan’s admission that he was wrong about how free markets work, Kenn?

    Do you think it’s possible that they don’t work as advertised? Why did Greenspan change his mind?

  • Baronius

    Kenn, you may think the stimulus money was wasted, but clearly you’ve never seen the damage that monkeys can do when they’re tweaking. You think that bad monetary policy can damage home value? That’s nothing compared to a couple of chimps on blow. They can destroy the structural integrity of an entire block of row homes in one night. And if they’re doing meth, it’s even worse, because they try to fix the damage, and what does a meth-head ape know about construction? And they always go for the electrical or the plumbing first, and end up knocking out power to the neighborhood or causing major water damage. And sure enough, one of them is going to electrocute himself sooner or later.

    In summary, this was a good article.

  • Be my guest, Cindy!

  • I’d be the first to say the stimulus program has failed and that to ask for more of the same, Paul Krugman or no Paul Krugman, is sheer insanity. Not the idea of course, but the inept application of it – most of which consisted of enabling the crooks and thieves. So as far as the American people are concerned, it did amount to a diddly squat.

    As to the remainder of Kenn’s knowledge of economic theory and his assertions as to what works and what does not work, let each person decide for themselves.

  • Hmmm, Kenn inspires me to write a column, maybe I’ll call it A View From A Broad.

    Sorry! DrD started it! Now I am in a silly mood. 🙂

  • Lol.

  • Mark Zandi and Alan Blinder [and for that matter Paul Krugman] have considerably more credentials than Kenn, Roger, myself, or most likely anyone at Blogcritics to assess the effectiveness of the stimulus.

    What they basically said is that, although it’s virtually impossible to prove a negative, without the goverment intervention of late 2008-early 2009 we would very likely have faced a complete market meltdown [instead of the scary but brief panics we did have] and would have lost 2 to 4 million more jobs than we have already.

    So 12-15% unemployment and a paralyzed financial system.

    I do not claim TARP and the stimulus were perfect or that there is nothing else to be done. Just that to call them a complete failure is facile nonsense.

    What Krugman and others are calling for is temporary aid to state governments, which are in big trouble. This would include funds to prevent layoffs of teachers, cops, and others, prevent cuts in social services, and also money for road and other infrastructure construction.

    It’s easy to sit on the sidelines at Blogcritics, with partial [or zero?] knowledge of the complete picture, and say, “You stink! You’re on the side of the criminals!” or whatever.

    Have fun, but you are not doing anyone any good. At least back up your claims with something more than, “We have 9.5% unemployment and the housing market sucks. This proves Obama knows nothing!”

  • Bette Midler once wrote a book titled “A View from a Broad.” Considerably more entertaining than Kenn’s articles, believe it or not.

  • Again, credentials are impressive only to those who feel a need for some kind of authority instead of relying on thinking for themselves. It is, in that respect, akin to a religious kind of belief.

    Consequently, any kind of argument to that effect, an argument from authority, that is, is bound to fall on deaf ears, especially the deaf ears of this “dumb Pollack.”

    So yes, I would iterate and reiterate the same old point, namely that Glenn Contrarian and people of his ilk are all too apt to transfer their religious beliefs to the so-called “experts.” In Glenn’s particular instance, it’s quite understandable since Glenn is a believer. What’s far less understandable, or excusable, is the selfsame attitude and uncritical approach on the part of self-proclaimed atheists.

    But then again, the faulty premises of the Enlightenment are still with us to this very day. We’ve been so intent on getting out from under the shackles of religion that we have embraced an unshakable faith in man – be they bureaucrats, technocrats, or Nobel-Prize-winners economic experts.

    Thus the world turns.

  • Mark

    Kenn, re your dates: In 1920 Harding cut spending and the Fed raised rates – recovery came within 2 years.

    I believe Edith Wilson was still president in ’20 when much of the post-war heavy lifting that you describe was done.

  • Sounds like quite a lady, as Napoleon was said to aptly remark, surpassing perhaps the qualities usually attributed to the college professor.

  • Mark

    Kenn, it seems to me that there are problems with your (and Murphy’s and Woods’) take on the 20-21 recession.

    For example, Woods summarizes:

    Instead of “fiscal stimulus,” Harding cut the government’s budget nearly in half between 1920 and 1922. The rest of Harding’s approach was equally laissez-faire. Tax rates were slashed for all income groups. The national debt was reduced by one-third. The Federal Reserve’s activity, moreover, was hardly noticeable. As one economic historian puts it, “Despite the severity of the contraction, the Fed did not move to use its powers to turn the money supply around and fight the contraction.” 2 By the late summer of 1921, signs of recovery were already visible. The following year, unemployment was back down to 6.7 percent and was only 2.4 percent by 1923.

    But trolling around I find —

    On hardly noticeable Fed policies:
    Fed begins to sharply raise rates in late 1919 (April through Oct – 4%, Nov – 4.5, Dec – 5, Jan ’20 – 6, July – 7%)
    [Friedman/Schwartz thesis: this rapid rate increase is a major factor causing the severity of the 20-21 deflation and recession]
    Fed begins lowering rates at 1/2% per month in July 1921 (reaches 4.5% in Nov)
    [as rates fall credit loosens, growth picks up, employment rises]

    Harding’s inauguration: March 1921
    Harding’s tax cuts pass in 1922 (top rates in 1921 = 73%; in 1925 under Coolidge = 25%) too late to directly impact the course of the 20-21 event.

  • LOL Cindy, A View From A Broad

    Can I submit a few articles to your column?

    That’s a great title!

  • Well you can say/assert/declare whatever you want to. But why should we take your word on economic matters? And how do you know Krugman, Zandi, and Blinder are wrong? Clairvoyance? Magic beans?

    We can all spout opinions all day, but economic policies do have to be based on something, and opinions alone [or in Kenn’s case, inflexible ideology] do not cut it.

  • Kenn,

    The stimulus package was too small according to a leading economist, Paul Krugman.

  • Baronius

    Handy – Consider this possibility: that the current economic difficulties were triggered by, and are still caused by, a credit crisis. That’s a reasonable theory, right? We know that credit markets overextended into risky investments, and got the door slammed on them. That triggered a panic and a stock market freefall, followed by unemployment. That’s happened before.

    If the current economic problems are a typical business cycle pattern, as a lot of economic models will tell you, then the stimulus will/has had the usual effect.

    If the lack of credit is still causing the economic weakness, then the models are wrong. If it’s all about credit, then past and future fiscal stimuli would have no effect (except to the extent that they affect the availability of credit). Likewise, in this scenario, the Bush tax cuts weren’t part of the problem (with the same caveat). I’m not asking you to believe this scenario, just to see that it’s plausible.

  • Again, Baronius, you’re just saying stuff. “It’s all about credit.” It’s like saying, as Kenn does, “Keynesian stimulus will always fail,” as if this is a law of physics.

    Blinder and Zandi are not leftist, partisan economists. This doesn’t make them right or wrong in itself. But their analysis has been widely praised and quoted, and negative comments have primarily come from ideologues on the right.

    Forgive me if I trust their analysis more than your back-of-the-envelope speculation:

    “If the Bush and Obama administrations hadn’t acted, GDP would have fallen 7.4 percent in 2009 instead of 2.4 percent, the economists said in the report, titled “How We Ended the Great Recession.”

    “By the time employment hits bottom, some 16.6 million jobs are lost in this scenario — about twice as many actually were lost,” they wrote.

    The government’s fiscal stimulus alone will boost 2010 GDP by about 3.4 percent and add almost 2.7 million jobs to U.S. payrolls, Blinder and Zandi said.”

  • Baronius

    OK, Handy, I’ll forgive you for it. But it doesn’t make them, or you, right.

  • Or wrong.

  • Glenn Contrarian

    Kenn –

    Please answer this first and then I have a long answer for our question which I will answer tonight at home. We’ve spent three trillion. How much do you and Paul think we should or should have spent? How do you know?

    First, Obama’s stimulus package was $787 billion and NOT the 3 TRILLION amount you claimed. Even if we add in Bush’s $350B TARP bailout, it doesn’t even add to HALF the number you apparently pulled out of the air.

    FACTS, Kenn – not made up figures, please.

    Even wrongly assuming that Hoover employed austerity. Why is it that the Great Depression still didn’t end until sometime near the end of WWII?

    Apparently you don’t remember the long discussion we had before, where I pointed out (using credible references, as usual) to you that Hoover’s Fed Chairman was a big fan of austerity, and that Hoover tried NO form of stimulus until his last summer in office…nearly three years after the Crash of ’29. Do I really need to dig up all this stuff again to show it to you?

    It took FDR about 13 years to end it with big stimulus!

    WRONG! If you’ll go back and do a bit of research, Kenn, you’ll find that by the last quarter of 1936, we were largely OUT of the Depression. What happened? FDR listened to the Republicans and cut spending and jobs programs…and we sank back down into the Depression.

    Why conservatives rail against taxpayer-funded stimulus jobs programs when the biggest stimulus taxpayer-funded jobs program in U.S. history (World War II) got us out of the worst economic disaster (the Great Depression) in our history…is beyond me!

    What you explain is insanity – that is doing the same thing over and over again and expecting a different outcome. Ask yourself this question – why are all these people loosing their jobs? It is because monetary policy of the Fed for a long time encouraged America to over invest in goods (this time houses, during the 1920’s general goods and stocks). Then when the Fed decided to bring the economy in for a smooth landing by raising rates, people could no longer afford their debt payments. So they defaulted and stopped buying other stuff as well which then caused the unemployment we experience. Why would you want to do the same thing that got us into this mess in the first place (gov’t spending and cheap money)? This only re-inflates the bubble. Bwcause we have gone down this path to the tune of $3 trillion we are now headed for an even larger fall and a long road back to economic normalcy.

    One, you didn’t even attempt to answer my question. I suspect it’s because you have no answer…but you DID pull that “$3 trillion” number out of the air again.

    A good economy is built on savings and investment, not debt. Stimulus spending has never worked because it is just a re-inflation of the bubble that started the downturn in the first place.

    “Stimulus spending has never worked”? Then explain World War II…and our economy from WWII through the following 35 years, with ten years of 90%-plus top marginal tax rates, and the remainder at 70%-plus top marginal tax rates.

    If 1974 Nobel Prize winner Friedrich Hayek were still alive he would disagree with Krugman. He would have recommended that the gov’t raise rates and cut spending to allow the market to liquidate the mal-investments made during the bubble. It would have been brutally painful in the short-term but we would be in recovery by now.

    Would he now? The libertarian economist Walter Block has observed critically that while [Hayek’s most influential work] The Road to Serfdom is “a war cry against central planning,” it appears to include a lukewarm support for a free market system and laissez-faire capitalism, with Hayek even going so far as to say that “probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all of the principle of laissez-faire capitalism”. In the book, Hayek writes that the government has a role to play in the economy through the monetary system, work-hours regulation, and institutions for the flow of proper information.”

    If you’ll look more on Hayek’s beliefs, you’ll see that while he was strongly against Soviet-style collectivization and centralized planning, his support of laissez-faire economics was (as stated above) merely lukewarm. In other words, Kenn…Hayek was a proponent of “moderation in all things”. Frankly, today’s Right Wing would probably brand Hayek a socialist since he said that government had a role to play in work-hours regulation.

    The greatest historical comparison we have is the difference between what the government did during the 1920-1921 depression and what it did during the Great Depression? In 1920 Harding cut spending and the Fed raised rates – recovery came within 2 years.

    In 1920 Harding cut spending NOT because of economic troubles, but because of the END of World War I…and the drastic cuts in defense spending by all belligerents as a result of the Treaty of Versailles in 1919.

    In the 1930s first Hoover then FDR primed the pump and the Fed initially lowered rates and depression lasted for over 15 years.

    Kenn, I think you’d better inform all the history teachers of the world that the Depression lasted 15 years rather than the ten years or so that it actually did.

    It is no wonder you hate the free market, because given your remedy on how to fix this latest crisis, you have no idea how it works.

    “By their fruits shall ye know them”, Kenn. I’m more interested in FACTS than in dogma.

    FACT: FDR’s monetary policies lasted till Reagan took office.

    FACT: Since Reaganomics took hold (and are STILL in effect), we’ve had the three worst economic downturns since the Depression. We had NO such downturns in the forty years from our recovery from the Depression till Reagan took office.

    FACT: The greatest taxpayer-funded economic stimulus in American history (WWII) followed the greatest economic downturn in American history (the Great Depression)…and (economically-speaking) it WORKED.

    Keep your dogma, Kenn – I’ll stick with the facts. But I’d still like to see you directly answer the conundrum I originally presented. I don’t expect you will, but I’d like to see you try.

  • Kenn Jacobine


    You are correct about Mrs. Wilson. Harding came in 1921.

    Cindy #16

    Greenspan has lost all credibility – he is responsible for the crisis with his 1 percent rates for three years!

  • Kenn Jacobine


    #30 So what? Did Krugman see the crisis coming? No. Austrian Economists Peter Schiff and Ron Paul did. And what they have said is the stimulus was wrong policy and the economy will deteriorate further. Even “mainstream” economists are predicting a double dip. Again, my question is, was $3 trillion not enough? if not how much?

  • None of my links work on this page! Click on my name for the site that has the same article but with working links – $3 trillion in stimulus is there and Robert Murphy’s article on the handling of the 1920-1921 depression.

  • Glenn Contrarian

    Kenn –

    As above, I’d really like to see where you keep getting $3T since the stimulus was $787B and Bush’s bailout was $350B.

    Now I know you’ll just ignore the New York Times – after all, any good conservative knows that the NYT tells only lies – they know this because the pundits on Fox News told them so! All those guv’mint numbers – they must be lies!

    So here’s a more recent one from Time (reprinted on Yahoo) giving greater detail on the effects of Obama’s stimulus package…effects which the boys over at Fox News don’t seem to have time to cover after they’ve told you all about the recession that was all Obama’s fault anyhow.

    But both articles are a tough slog for conservatives to read – not that the language is difficult, but the facts presented just don’t quite mesh with Fox – oops, I meant conservative – dogma.

  • Glenn,

    Hoover did indeed increase spending and the Fed lowered rates.

    “Stimulus spending has never worked”? Then explain World War II… and our economy from WWII through the following 35 years, with ten years of 90%-plus top marginal tax rates, and the remainder at 70%-plus top marginal tax rates.”

    I am not sure how high taxes explain how stimulus spending works. I can tell you that stimulus spending forced Nixon to shut the gold window to foreign governments thus essentially defaulting on our debt – in 1971. Otherwise we would have lost all of our gold reserves.

    Glenn, the bottom line is that we disagree. We have invested $3 trillion according to CNN into the economy in this depression. It hasn’t worked. If the Fed continues with quantitative easing and the president spends even more (a proposition that scares even many members of his own party)I personally will be o.k. because my money is in foreign currency and gold. But, my concern is for the country. You can blame Republicans all you want for 1929 and 1936 and 2008. It doesn’t offend me because I am not even a Republican. The fact is that we are in for a long haul because of the failed policies of both parties. Except for Ron Paul, no other politicians are giving the American people the bad news. They messed up. What we need is for the thing to collapse so the market can liquidate back investments made during Greenspan’s sweepstakes. That is not going to happen because folks like you would yell and scream. It will be a bloodbath for Dems in November, but I don’t expect much to change with Repubs. They don’t tell the truth either.

  • Glenn Contrarian

    Kenn –

    So I checked the CNN article you linked to…and that has to be the worst single piece of journalism I’ve ever seen by CNN. A simple glance shows me that at least half the total is neither stimulus or bailout, but loans and takeover of securities, things of real tangible value to the taxpayer. Also counted in the total were payouts to account holders in failed banks and credit unions – both required as part of FDIC regulations from the FDR era (which he enacted to ensure crucial depositor confidence after 5000 banks failed the day before he took office). There’s more spurious inclusions, but I don’t have time to list them all.

    Kenn, I strongly recommend you reread that article and see what was actually an Obama stimulus item, what was actually a Bush TARP item, and what was just shoved in there to make the total bigger to sell more CNN copy.

  • Glenn Contrarian

    Kenn –

    One more time – if taxpayer-funded stimulus doesn’t work, then explain (in economic terms) how WWII got us out of the Depression.

    And then explain how our economy stayed stable and relatively quite prosperous (with occasional big bumps in the road) between WWII until Reaganomics despite having 90%+ top marginal tax rates for ten years and 70%+ top marginal tax rates for the remainder…

    …because NONE of those ‘bumps’ equaled the 82-83 recession, the S&L crisis, or the Great Recession in terms of real danger to the national economy.

  • Yea,

    CNN is a part of the vast right-wing conspiracy against Obama!

    WWII did not end the Great Depression. As a matter of fact, it caused a munitions bubble in the economy. When the government cut spending to demobilize the economy went into a recession. It went into recession not because the spending ended but because the bubble was no longer being inflated. This is just like what Greenspan did when after three years he raised rates from 1 percent to 5 percent. The housing bubble burst.

    The problem with GDP is that it measures government expenditures. So while GDP rose during the war it rose because the government was buying war supplies like crazy. The ordinary American went through rationing and was not necessarily the beneficiary of the phony boom.

  • Glenn,

    Government spending is dangerous to the economy because politicians and bureaucrats aren’t listening to the market. A lot of mal-investments are made. Recessions are the economy’s way of correcting those issues. When you attempt to re-inflate a government induced bubble you end up with longer and more severe depressions. A lot of trouble is coming in the future and it is not because we spent too little, but because we spent.

  • Kenn,

    beg to differ

    Government spending is dangerous to the economy because politicians and bureaucrats aren’t listening to the market.

    With all due respect, this country is more than a MARKET!

    A lot of trouble is coming in the future and it is not because we spent too little, but because we spent?

    Please try to look at the *Human Bean* factor, Kenn.

    :9 sorry…

  • Here Kenn,

    Please read the morning paper.


  • Jeannie, everything is a market.

    Glenn, you are making a meaningless differentiation between the official stimulus and all the other excess spending Obama has engaged in. While the Stimulus Bill may only be $838 billion, the 3 trillion figure is a very conservative estimate of the spending which he has engaged in above and beyond what is necessary to maintain the necessary functions of government. It includes massive bailouts, subsidies, job incentives and various stimulus-style programs directing money to partisan slush funds and activist groups.

    If you want a good article on how out of control spending is and from a reputable source (not just because we went to the same high school), check out these frightening figures from The Motley Fool which estimates the total excess spending at $10 trillion. Of that at least 2.2 trillion can be classed as nothing but pure stimulus spending. The rest is bailouts and payoffs.


  • Dave,

    Maybe, everything is market in your opinion.

    Please, don’t throw entitlements and subsidies, that have plagued this country for years, in with OBAMA and your poor opinion of his administration’s spending.

  • Kenn Jacobine


    We are engaging in an economic discussion. The market is the number one issue and it can’t be fooled indefinitely.

  • Kenn,

    Well when you put it that way, yes. The market, however is not the number one issue in everyone’s opinion.

    😀 Is that better?

  • Kenn,

    Do you see why the *Market* is doing so poorly?

    A lot of wait, wait, and wait going on here until it’s election-time. What? You can’t see that the powers, that be, have enough cash and stash to ride out the Obama presidency?

    :)I am rooting for a second term!

  • Kenn Jacobine

    The powers that be have benefitted from his presidency like they do all presidencies. That is why they are the powers that be.

  • :Q Their biggest problem is finding a *plug-in president* that everyone will stomach.

  • The Motley Fool article Dave links to was published Feb 2009, less than a month after Obama was inaugurated. A huge proportion [$8.6 trillion] of the expenditures listed happened or began during the Bush administration.

    [And: not all this was cash that was actually spent — some of it is the estimated value of actions by the Fed; some of it is appropriations that were never spent at all, like nearly half of the TARP $700 billion; and much of what was spent has been repaid with interest to taxpayer — investments with a net profit!]

    Thank God some people were able to see beyond their own noses [and tunnel-vision ideology] to take action against the economic crisis in 2008-2009, or we almost certainly would have had Great Depression 2.0.

    Now the libertarian ideologues, who will tell you that no stimulus ever does anything good, believe they are justified in saying “I told you so.” They are only reinforcing their own stubborn ideological short-sightedness.

  • “The market is the number one issue and it can’t be fooled indefinitely.”

    Take it from the expert, Jeannie. The market is sacrosanct.

    Of course, markets are never made, manufactured, contrived, hyped, dissolved, etcetera and etcetera. None of that ever is a part Kenn’s world becomes markets a natural phenomena, nothing to do with what we humans do. They’re as natural as the air we breathe and the water we drink.

    And since this is an “economic discussion,” as Kenn had reminded us, you had better get a degree first in Austian economics, Jeannie, before you open your mouth. And that applies as well to yours truly. Because common sense and thinking on one’s feet are useless when dealing with such complex and inpenetrable matters. So either get your Phd degree in economics or forever keep your peace.

  • Glenn Contrarian

    Kenn –

    WWII did not end the Great Depression.

    Sooo…what did?

    I’m going to LOVE seeing you try to tap-dance your way around answeringing this one!

  • Glenn Contrarian

    Dave –

    As Handy pointed out, the Motley Fool article was from one month (minus one day) from when Obama was sworn in…and $8.6T of the $10.15T in that article was directly referenced in a Motley Fool article from Nov. 26th, TWO THOUSAND and EIGHT!

    But I get it – even though $10.15T magically appeared less than a month after Obama took office, and even though $8.6T of that amount was identified nearly two months BEFORE Obama took office, it’s all Obama’s fault, it’s all Obama’s stimulus…

    …and even if Obama wasn’t even in office, it was all geared towards “partisan slush funds and activist groups”…

    …and since Bush was still in office at the time, we can be safe in assuming that all these partisan slush funds and activist groups were certainly LIBERAL in nature, right?

    But in case you’re wondering, I do know to pay attention to the guys at The Motley Fool. They’re very good at what they do.

  • Glenn,

    It is quite simple

    First of all, because FDR needed big business to fight the war he backed off his New Deal program. Congress actually killed the WPA and the CCC.

    Secondly, Congress lowered the top marginal tax rate from 94 to 86 percent then to 82 percent by 1948. Congress also repealed a high excess-profits tax and lowered the corporate tax rate from 40 to 38 percent.

    Lastly, federal spending went from $92 billion (war spending) in 1945 to $55 billion in ’46 to $34 billion in 1947
    This is what ended the Great Depression – lower taxes, less government spending, and more certainties for business that they could operate in an unfettered fashion free of government intrusion (end of New Deal policies).

    Of course, today we are doing the exact opposite – huge spending, uncertainty from Obama (“at some point you have made enough money” speech), and the threat of the largest tax increase in U.S. history. Consequently, we continue to languish in the 33rd month of recession with no end in sight. It is the 1930s all over again.

  • Glenn Contrarian

    Kenn –

    Tap, tap, tapatap-tap-tap!

    No dice.

    FDR ended the CCC on June 30, 1942 because it was no longer needed. WPA was ended by Congress in 1943 because it was no longer needed. WHY were they no longer needed? Because of war employment and vast increases in military enlistment. Any serious student of WWII is well aware of the changes in military and war industry manpower during the late 1930’s through the end of the war.

    The Wikipedia is not a great reference in and of itself…but the references used normally are: “The common view among mainstream economists is that Roosevelt’s New Deal policies either caused or accelerated the recovery, although his policies were never aggressive enough to bring the economy completely out of recession. Some economists have also called attention to the positive effects from expectations of reflation and rising nominal interest rates that Roosevelt’s words and actions portended.[34][35] However, opposition from the new Conservative Coalition caused a rollback of the New Deal policies in early 1937, which caused a setback in the recovery.[36]”

    And you allude that lowering the top marginal tax rate from 94 to 86, then 82 percent a major effect? Gee, taxes were lowered by a whopping 13 percent? To 82%? So…when Truman took it back UP to 91% and Eisenhower KEPT it there for a total of eight years, then WHY didn’t this throw us back into a depression, or even a major recession? Hm?

    I’d also like to see where you get your numbers…because the total spending (according to this chart on usgovernmentspending.com) shows significantly different numbers. For instance, the lowest government spending went post-WWII was in 1948, at $55B. It was twice that in 1953 and nearly three times that in 1960. By comparison, the last year before FDR began gearing up America’s war industry was 1937…when our government spending was $17.22B.

    You’re wrong on the length of the Depression, on its causes, and on what brought us out of it. Why? Because you’re changing the history to fit your dogma instead of allowing the clear facts and numbers to determine your dogma. Your errors on the CCC, WPA, and the very temporary tax break of a whopping 13% should show you that!

    I don’t let my pride determine my belief. If the facts supported you, I’d agree with you in a heartbeat. But the facts don’t support you.

  • Glenn,

    Your question was, what ended the Great Depression? I gave you my answer and you even admitted that my facts were correct. You then went off on a tangent like you normally do about something irrelevant – spending under Truman. The bottom line is that you are the one with the dogma. You hate the free market and cannot admit that it has any utility.

  • Kenn Jacobine

    Sorry, previous comment should have been taxes under Truman and Eisenhower.

    Under your logic, we have spent too little, regardless of what the number is, it is now too late to spend more to make any difference, thus the U.S. should start WWIII in order to put us back to work and turn the economy around.

  • Mark

    Glenn brings up an interesting point: For instance, the lowest government spending went post-WWII was in 1948, at $55B. It was twice that in 1953 and nearly three times that in 1960. By comparison, the last year before FDR began gearing up America’s war industry was 1937…when our government spending was $17.22B.

    Here’s an interesting piece on the growth of the State in the 20s:

    “…this paper shows that it was not the New Deal or the nation’s response to the Great Depression that triggered the growth of the federal government. The seeds were sown in the Progressive era prior to World War I, and the 1920s served to reinforce those principles of government established during the Progressive era by continuing to expand the government’s reach. The 1920s did not represent a plateau in government activity that was reversed by the New Deal; rather, the foundations for the New Deal were established by the increasing scope of federal government activity during the 1920s.”

  • John Wilson

    WW2 expanded the economy by creating jobs directly (because WORK was required to build war machinery), not through normal market efforts, which would have involved making standard contracts with munitions makers, but through market-subversion by a command economy.

    Had FDR allowed normal market forces to prevail we would have lost the war (but munitions profits would have been high, which Hitler would have appreciated when he took over since his own economy had deteriorated to the point of simple thievery).

    Instead of nationalizing industry to produce munitions, FDR simply reduced profit margins to $1 per year, and paid his top businessmen $1 per year. Illustrative is the case of ships, which the Shipbuilding monopoly figured it could make about 4 ships per year at a 40% profit margin. But Henry Kaiser convinced FDR that he could build 400 per year and FDR offered him $1/ship profit.

    The same system prevailed across the munitions field.

    What was in it for business? Why would they agree? Because they expanded their facilities and revenues and became positioned for post-war prosperity (which we were not ready for after WW1, as we ‘returned to normalcy’).

    The FDR strategy resulted in direct creation of jobs, which is what we need now. The whole idea of ‘priming the pump’ by pouring money into business simply doesn’t work because they have no good use for extra capital (we are grossly over-capacity in the USA, more capital is counter-productive), so we need to apply any ‘stimulus’ money direct;ly to job creation and not leave it at the mercy of company managers (who can make better profits investing capital dollars in Treasuries).

    So maybe what we should do, for example, is have a government board of bridge remediation that lets contracts at fixed low profits to construction companies so they can hire-up workers and get going on repairing our falling-down bridges. There’s no risk for them because the payroll is backed by the government and they increase their capabilities at no cost.

  • Sorry guys I stand by my numbers which are from the U.S. Government Printing Office. Click on my name for the link.


    I thought the Cato article was interesting. The author pointed out that, “From 1929 to 1933, under President Hoover’s administration, real per capita federal expenditures increased by 88 percent. Under President Roosevelt’s administration from 1933 to 1940, just before World War II, they increased by only 74 percent.”

    So in only 4 years Hoover increased real per capita federal expenditures by much more than FDR did in 7.

  • Glenn Contrarian

    Kenn –

    I gave you my answer and you even admitted that my facts were correct.

    WHAAAAT? Gimme some of what you’re smoking! Kenn, are you referring to the fact that FDR and the congress ended the CCC and WPA? I didn’t dispute that – what I DID dispute was your claim that FDR did it to get Big Business on board.

    FDR did it because while the programs were ONCE necessary to keep Americans at work, they were NO LONGER necessary because the biggest taxpayer-funded economic stimulus in American history was gearing up – World War II.

    We went from one form of taxpayer-funded economic stimulus to another (much bigger) one. You cannot get around that FACT.

    Kenn, if you truly want a free market, go to China. Go to nearly any third-world country of your choice. In these places you will see capitalism unbound, unfettered by little things like regulations and ethics. What really gets me is that you should have already SEEN this in your travels…

    …and you should have already SEEN that every first-world nation has a healthy and enforced set of financial and ethical regulations.

    The proof is in all the world around you…but no one can help you if you refuse to see.

  • Glenn,

    #61 – should the U.S. start WWIII to get the economy going again? Of course, we are already engaged in a worldwide war against terror. Why hasn’t that kept our economy strong? It hasn’t because war is bad for economies. It diverts good resources into things that consumers do not demand. Look I admit that stimulus for a while seems to work, numbers improve and politicians can say there is a recovery going on (The Summer of Recovery). But, it is phony. It is nothing more than a government re-inflating of a previous government induced bubble. It is temporary relief with no long term progress. In short it is a way for pols to get votes without fixing the true problems.

    I’d say that this current crisis will prove me correct, but you and Paul will cling to your dogma and claim these silly excuses that $3 trillion was not enough and we spent the money on the wrong things.

  • Glenn Contrarian

    No, you’re missing the point completely. The point IS that economically speaking, WWII was a taxpayer-funded economic stimulus, and it brought us out of the Depression.

    That in and of itself is the cold hard proof that a massive taxpayer-funded stimulus – used in ways that puts people to work – is the single most effective way of pulling us out of a recession. A war is not the best way, but only one way. A far better way is to use the taxpayer money to put people to work.

    If an economic stimulus is ‘phony’ as you claim, then we should have fallen directly back to recession/depression after WWII, particularly since we had tax rates more than twice as high as we do now even after the little tax cut you ballyhooed.

    Think about it, Kenn – at the end of WWII, our national debt was higher in relation to GDP than it is now, and our tax rate even after the tax cut was well over twice what it is now…and those taxes were raised even higher for a period of eight years – and we STILL did not fall back into a depression!

    Here’s a clue, Kenn – the Republicans AGREED to have those massive taxes to pay down the obscene level of debt we had then…but will the Republicans do so now? They haven’t the guts.

  • Interesting point, Mark, that the expansion of federal government was ideological in basis rather than a matter of mere response to economic or other exigencies.

    One could make of course a similar argument with respect to origins, as per Hamilton-Madison debate.

    A case in point of how ideas (occasionally) forge the future.

  • Glenn,

    Apart from Kenn’s economic mumbo-jumbo, patent dismissal of the GDP index and generally speaking, his unparalleled ability to befuddle the issue by couching the subject matter in pseudo-scientific terms as though it were an inquiry into natural phenomena on analogy with nuclear physics, the fundamental fact is that WWII brought about nearly full employment: full “employment” on the part of those who fought the war; a nearly full employment on the part of those who stayed home (Rosie the Riveter); and full engagement on the part of the industry and the requisite administration (bureaucracy), i.e., the productive and administrative aspects.

    These were indeed the times of full cooperation between the government, the industry, and the people, all working “in tandem” and toward a common goal as it were. It is that which had gotten us out of the depression; and it is that what the dismal science of economics is all about. It’s a study of human activity, an aspect thereof, and statistics are but a measure, a consequent. The idea of curing the economy by manipulating the measurements is akin to the idea of trying to cure a feverish patient by manipulating their temperature; both are equally nonsensical.

    But such notions, the notion of human activity, have no place in the “Kennian world,” a world that is well-defined adequately describable in terms of particle movement a la Brownian motion. Indeed, Kenn’s approach to economics approximates the methodology of quantum physics.

    Which goes to show, Glenn, that it’s the conceptualization of the subject matter that is all-important; and whatever “facts” there are, they’re determined by that conceptualization. Your partner in crime might also take heed.

    These futile “discussions” with Kenn – and no, I don’t see the light at the end of the tunnel – should be proof positive.

  • Roger,

    The way WWII was fought and what it did for our employment is obsolete in this out-sourced and privatized wars we are in right now. Obama can say, “Iraq is over” but, that doesn’t make it true.

    WWII brought about nearly full employment: full “employment” on the part of those who fought the war; a nearly full employment on the part of those who stayed home (Rosie the Riveter); and full engagement on the part of the industry and the requisite administration (bureaucracy), i.e., the productive and administrative aspects.


  • Glenn Contrarian

    Roger –

    Which goes to show, Glenn, that it’s the conceptualization of the subject matter that is all-important; and whatever “facts” there are, they’re determined by that conceptualization.

    Didn’t you tell me that before? You were right then, and you’re right now. And I’m too stuck to the habit of presenting facts and accurate understanding of history to bear in mind what you’ve told me time and time again.

    Learn, Glenn, learn! I think there’s some cells over near the cortex that ain’t burnt out yet –

    Luke Skywalker never had to bend his brain like this….

  • Astute observations, Jeannie. Yes, these aren’t “comparable” and I haven’t intended them as such. Nor was I advocating war as a solution, you do understand that.

    I was merely addressing the historical question concerning the depression, WWII, and Kenn’s “double-vision,” which is for us, ordinary mortals, a “non-Kennian world.”

    And you’re right, too. WWII, apart from how you tend to assess it in moral terms, was an all-out effort (as I stressed); which is what got us out of the depression and got the economy going. The present ventures are not only limited in scope (insofar as everyone’s involvement is concerned) but also, because they’re privatized, as you say, they benefit only the profiteers. Great difference! I’m glad too you realize we’re not quite “out of Iraq.” It’s still business as usual.

    On a minor note, you don’t need a degree in Austrian economics, as Kenn or Baronius seem to imply, in order to participate in this debate.

    There is of course a reason, I suspect, why some individuals resort to mumbo-jumbo,
    trying to make the subject matter
    impenetrable, rather than speak sensibly. Since they’re short on the empathy/humanity quotient, they cover up the deficiency they well suspect by the veil of pseudoscience.

    My contention is – people aren’t born that way; only raised that way.

  • Roger,

    Yes, I do understand that you aren’t advocating war. Also, Iraq is not over. If anything we have sentenced 50,000 + soldiers to going back to a *sitting duck* position.

    Why can’t they see this? Because we are expendable…

    Remember, the number one mission is not over. We still have not secured the oil!

    If only I had an audio keyboard, then look out world! LOL 😀

  • Roger, I’ll be back, have to mow before it rains. 😀 bye

  • Mark

    Before going down the mumbo-jumbo path, I suggest a ‘sympathetic reading’ (wink to Rog) of Menger, Bohm-Bawerk and Wieser’s teleological/actor-based economics.

  • So you got to my comment, Glenn, good for you.

    Not knocking you down, BTW, only can’t help myself stating the obvious because I know that old habits are hard to break. You do seem to have a disciplined mind, but you keep on falling into the same trap over and over again.

    To wit, you can discuss a subject matter with Kenn, or with Baronius for that matter, until you’re all blue in the face, and there is not a chance in hell you’ll come to an agreement. And yes, even if you do concur on “basic facts.” Why is that, you should be asking yourself.

    As an aside, my latest BC article, “The China Syndrome, Take Two,” is a variation of that very theme.

    I’d be interested to hear what you think.

  • Will give it a quick look. And if it’s an extension of Bastiat’s political philosophy into economic thought, no thank you.

    Which brings me to a more serious question. What’s the value of becoming learned in the Austrian school of economics? I regard it as a semi-serious question since you do appear to place some value on the endeavor.

    I’m aware I don’t have to ask you to be brief and concise. Your oft-cryptic remarks pass muster.

  • I don’t want to prejudge the case before my court room is open for business, but if this is what I’m thinking, it would appear then that our Mr. Kenn had turn the science of economics into a form of religion (not unlike our Bob Lloyd, an equally capable interlocutor, who had managed the very same trick with the natural sciences). Denying the existence of God must manifest itself somehow, and the examples are myriad.

    Which only goes to show the power of (unexamined) emotions and their determinative influence on what passes all to often as rational and cogent thinking.

    And who says that humans are not interesting or dumb? Certainly not Sophocles.

  • Mark

    It, rather than the mathematical abstractions Jevons, Walras & co, is the anti-thesis.

  • Mark

    (…of Jevons, Walras…)

  • I’ll have to decipher this one. Of course, higher mathematics was “the mind of God” to Cantor, Hilbert, and the like – so at least some people (I don’t know whether it applies to Kenn) are in good company.

    I’m suspending my internet activities for an hour until I get to the public library.

  • Glenn Contrarian

    Roger –

    I really am trying to take your constructive criticism on board. It will take some time, but I’ll once more try to give a different approach…one that links more to emotion than to fact. Shifting paradigms isn’t easy for the best of us…

    …but come to think of it, look at Fox News. I noticed a long time ago that they tend to publish more stories of individual outrages, more “this one person died because” than the other networks. They give the big stories too (in their own way), but not quite as much. I connect this with my frequent observation that conservatives don’t like to look at the big picture….

    In the movie ‘Despicable Me’ that I just watched with my son today, when the main character Mr. Gru (Russian accent, joked about being a spy…GRU? Nah. But when he applies for a loan at the Bank of Evil, there’s a small sign that says “formerly Lehman Brothers”…), okay, start the sentence over. When the main character finally gets a good idea, he says, “light bulb!” I’ll follow his example:

    “paradigm shift!”

    Hey – that wasn’t so hard!

    Honest, Rog – I didn’t plan this comment this way. I’m just thinking things through using the keyboard and you’re getting the brunt of my ADD.

    I’ll read and review your article before I stop trying head shots and go for the gut instead. But it may be a few days because in about 36 hours I fly back stateside and I’ve got a few things left to do here.

  • Ideas and facts are not mutually exclusive. We do live in the real world, and verifiable reality [data or “facts”] is a necessity for a fully convincing and sound argument.

    Facts without ideas are dry and meaningless. Ideas without facts are vaporous, untethered, useless.

    We need both.

  • Glenn Contrarian

    handy –

    Understood – but not applicable to what I will be trying to do.

  • It’s a straw-man argument to refer to “the real world.” No one argues about exclusivity, but what is interesting is the nature of the relationship between ideas and facts, how exactly do they “interact.” What Glenn does all too often, thinking in his mind his arguments to be so self-evident and therefore convicing, is ignore the other person’s ideas/perspective. To simply call it “ideology” is to shortcircuit the dialogue, not giving due recognition that that very ideology makes selfsame “facts” tell a different story. Consequently, an “argument from facts” is never winnable in cases like that. To disarm your opponent, you have to expose his ideology for what it is and what it represents, and show how that very ideology makes the facts speak to them the way they do (which is to say, in support of it).

    I wouldn’t be resorting to this brief lesson in argumentation and the art of rhetoric it it weren’t necessitated by the frequency of drive-by commenters – sorry, couldn’t resist the temptation, it’s just too ticklish – unduly oversimplifying the matter.

  • Glenn Contrarian

    Rog –

    As in, look at Mr. A. Mr. A lost his job and his house in foreclosure because his job was shipped overseas. The CEO of A’s former employer is living high off the hog and has made X amount of dollars in tax breaks/rebates/incentives thanks to the Bush tax cuts, and is keeping his wealth in an offshore tax haven.

    And now Mr. A is homeless.

    I don’t have to make this up – there’s hundreds of thousands of people in this exact situation. But is this more along the lines of what you’re referring to?

  • Glenn Contrarian

    And if it is, do I get a “By Jove I think he’s got it!” straight from “My Fair Lady”?

  • If Roger’s own arguments were actually convincing, it might make sense to call on him as your Henry Higgins. But if your posts start to sound more like his, we’ll have a real mess.

  • Sorry, I am not the one who engages Mr. Jacobine in marathon arguments that always peter out. Let’s just say I know my limitations.

    Or to put it differently, perhaps, the prize ain’t worth the effort.

  • Thanks, Glenn. A little accolade is always a moral boost to a fading star.

  • It’s true that “arguing” with Kenn is a Sisyphean task. His ideology is utterly unbending, so all you can really do is point that out…over and over. It can make you dizzy, and to what purpose?

  • Yet he keeps on crancking ‘m out, selfsame articles as if there was no tomorrow, thinking somehow that repetition is the key to understanding.

    Ultimately, the one one whom he manages to convince is himself. Apparently, he must deem himself as in need of convincing.

  • Mark

    “In the 19th century Marx’s Capital was a critique of the political economy that underlay British Liberalism. 21st century Marxists must perform a critique of neo-liberal political economy comparable in rigour and moral depth to Marx’s 19th century critique. In particular we must engage with and defeat the ideas of the Austrian school: Boehm-Bawerk, Mises, Hayek, whose ideas now constitute the keystone of reaction.” Paul Cockshot

  • Well put. I’m not certain however about the extent to which Hayek et al – I’m speaking of course of the philosophy of political liberalism (and I believe the British philosopher, John Gray is a modern Hayek-interpreter) – is all that distinquishable from the essential tenets of political liberalism as expressed by, say, John Mill (unless there is a lesser stress on utilitariansm, so that part of it I’ll have to look up).

    So my thinking is, whatever the economic system which derives from Hayek’s “neoliberalism,” it should be analyzable in terms of that very neo-liberal political philosophy. If you dismantle the philosophy, you’ve dismantled the economic structure that has been built upon in.

    Do you disagree? What else should be needed?

  • Mark

    I’ll accept the philosophy as meaningfully dismantled when you convince Kenn and Dave to walk away from it.

    Might be easier to literally dismantle the economic structure brick by brick.

  • The latter is a practical task if if it isn’t here, it’s already happening elsewere.

    Dave I could convince off the net; Dave is a reasonable fellow, just has got a face to maintain (and his silly political ambitions stand in the way here).

    As to Kenn, it’s a hopeless case – moved by raw and unexamined emotions. And his ecocomic theories are the magnificent edifice he constructs to pay homage to his emotional immaturity and the resulting ignorance (in the Socratic, “know thyself” sense).

    Dave ain’t no Kenn!

  • Mark

    Dave, like many reasonable fellows, is on record with, “Hayek got it about right.” So I include him. Kenn, I think, has a deeper affinity with the kind of subjectivism found in Menger’s work which is at the root of Austrian ideas.

  • Let’s shelve for now this aspect; I’ll return to it later.

    Meanwhile, I think you oversimplifying the degree of the difficulty, in presumably having agreed with me that economic thought is structured upon and energized by the underlying political philosophy. If matters were as simple as that, it would be a piece of cake, a walk in the part, a Fourth of July. (As you see, I’m in my rhythmic mode.) Philosophy is my game and I would destroy these fallas.

    So let’s tackle the intrinsic difficulty first. Marx’s critique of capitalism wasn’t in terms of the liberal philosophy of the day but it was “internal,” in the very terms of capitalist economy and within said framework. He only used philosophy, dialectic, logic, whatever means at his disposal, and powers of analysis and observation, to demonstrate inherent contradictions (as well as offer an excellent description). In the “simpler word” you’re presenting, he could have simply disposes of the capitalist system (and theory) by dismantling the underpinning political theory. He didn’t, and it’s good that he didn’t, because Das Kapital wouldn’t have been the formidable work it is. Consequently, in the real world, something analogous is required – analysis and critique of the neocapitalist system (and theory) in its own terms – providing of course you’re correct in saying that the “new and improved” system and theory is sufficiently distinct from the classical one to warrant separate analysis. So that’s point number one.

    Other considerations are rather mundane and people-related. One could argue that the major proponents of an economic system (even theorists such as Milton Friedman) aren’t as “intellectually neutral” as political-philosophy theorists. There is much more at stake, the subject matter being too close to personal interests. I’m stretching my case, of course, but I think there may be an iota of truth to this. This is of course less true of “true intellectuals” – Adam Smith comes to mind as a person of real integrity – than of the common folk. Hence my argument: it is easier to convince Dave Nalle of the faulty premises of Hayek’s political philosophy than it would be to convince him of equally faulty premises of the thus-derived economic system and theory (again, provided that derivation is fairly uncomplicated and straightforward).

    Excuse the long exposition, but I suppose I’m marking time and exercising my rhetorical skills while ruminating on the next move in the Foucault paper.

  • Mark

    I think you oversimplifying the degree of the difficulty, in presumably having agreed with me that economic thought is structured upon and energized by the underlying political philosophy…the “simpler word” you’re presenting, he could have simply disposes of the capitalist system (and theory) by dismantling the underpinning political theory…

    I’m not sure who you’re talking to.

  • Simply put, Mark, does the neocapitalist system stand in its own two feet, requiring thus a separate and distinct analysis, or does it simply follow and is derivable from the political philosophy of the time?

    The reference is the quotation you cited from Paul Cockshot (#93).

  • Mark

    I suspect a bit of both.

  • In that case, economic analysis must proceed fairly independently.

    Next question: is the neoclassical capitalist theory sufficiently distinct from the classical one to warrant separate analysis. In what respect does Marxist critique fails when applied to capitalism evolved?

  • Mark

    Where are the workers, driven by historical forces and class interest, seizing the factories and markets around the world?

  • Mark

    Where are the revolutionary conditions emerging? Where is Les’ political party? Shit. When was the last communist (or actual Social Democrat) elected to Congress?

    Where is the expression of simple (class) consciousness necessary to prevent the destructive periods of war that capital requires?

    Where hasn’t the Marxist critique failed?

  • Aha, just as I thought. Well, most American “workers” are white trash. I’ll address the subject matter tomorrow.

    Good discussion today.

  • Mark

    When you address it tomorrow keep in mind that it’s an international problem with a long history.

  • Igor

    According to The Economist, the Obama Stimulus worked. Even the conservatives agree. Look here: Economist.

    Stimulus worked, austerity failed, just as Keynes said 90 years ago.

    Well, I guess we know whom to look to in the next financial crisis.

    Stimulus, austerity and the weltgeist
    Feb 1st 2012, 15:05 by M.S.

    … While independent economists generally agree that the stimulus saved or created somewhere in the neighbourhood of 2m jobs, it remains unpopular with the general public;…

    Now ProPublica’s Mike Grabell is out with a book-length investigation of the stimulus, titled “Money Well Spent?”

    …He subscribes to the general wisdom that unemployment probably would have hit 12% in 2009 rather than 10% without it. On the other hand, the administration had to drop an idea that almost certainly would have made sense, building a national electric smart grid, because the jurisdictional and red-tape problems made it impossible to implement fast enough. …

    So, here’s the thing. The debate we had about the stimulus probably should have been a lot like the book Mr Grabell has written: a detailed investigation of what does and doesn’t work in stimulus spending and whether the government really can jump-start a promising industry through investments, tax breaks and industrial policy. But that wasn’t the debate we had. Instead we had a debate about the very concept of whether the government ought to spend money counter-cyclically during a recession in order to keep the economy from collapsing,
    We had a debate about whether governments should respond to recessions with deficit spending or austerity.

    That was the debate we had. And what’s interesting about this particular moment is that while Mr Grabell is writing about what did and didn’t work in the stimulus, …the entire argument that governments should engage in austerity appears to be collapsing.

    Item 1: Over the past month, Paul Krugman, Brad DeLong, and Simon Wren-Lewis engaged in an interminable duel with Tyler Cowen, Scott Sumner, sort-of Karl Smith (…), over an old argument by John Cochrane claiming that the multiplier effect of government stimulus spending probably ought to be zero. The argument by Mr Cochrane was a critical document in the stimulus debate, because it was an articulation in more-or-less public discourse by a well-respected economist of a mechanism through which increased government spending could fail to raise GDP or increase employment at all.

    Essentially every working practical economist and forecaster believed that the stimulus, like any other government spending, would raise aggregate demand, GDP, and employment. Republican politicians were arguing that it would not, and Mr Cochrane backed them up.

    Two weeks ago, Mr Cochrane responded to the argument in a fashion that suggested that either he has changed his mind, or he never thought what the expansionary-austerity people claimed he did in the first place.

    Let’s be clear what the “fiscal stimulus” argument is and is not about.It is not about the proposition that governments should run deficits in recessions. They should, for simple tax-smoothing, consumption-smoothing, and social-insurance reasons, just as governments should finance wars with debt….

    But disliking “stimulus” is not the same thing as calling for an annually balanced budget.Nor is it about debt financing of “infrastructure” or other genuine investments. If the project is valuable, do it. And recessions, with low interest rates and available workers, are good times to do it…

    Okay. There’s a lot of nuance here. But as Noah Smith pointed out in response, if the basic gist is that governments should run deficits in recessions to smooth consumption, deliver social insurance, and take advantage of low interest rates to invest in infrastructure…then the policies Mr Cochrane is recommending here are to the left of anything Congress is contemplating passing right now.

    Item 2: Niall Ferguson has spent the last three years arguing, contra Paul Krugman, that America is courting disaster by allowing deficits to balloon its national debt to such high levels, and will have to reign in spending or face a crippling rise in interest rates. Last week, in an interview with Henry Blodget, he admitted defeat.

    BLODGET: … Are you conceding to Paul Krugman that over the near-term we shouldn’t worry so much?FERGUSON: I think the issue here got a little confused, because Krugman wanted to portray me as a proponent of instant austerity, which I never was. My argument was that over ten years you have to have some credible plan to get back to fiscal balance … I think the trend of nominal rates in the crisis has been the trend that he forecasted. And you know, I have to concede that.

    I could go on. This comes on top of criticisms of austerity policies from the IMF, intense pressure at Davos on the German government to countenance increased spending by northern European countries and looser monetary policy at the ECB, and so forth….If you think that the German-led European solution to the euro-zone crisis is deeply confused, and a lot of Americans do, then you have to be troubled by the ways in which it resembles what austerity proponents would have liked America’s response to the financial crisis to have been. Americans are starting to recognise that our recovery is further along than other advanced countries’ in part because the way we handled the financial crisis wasn’t really so awful. And that includes the stimulus.

    The presidential election this year is in large measure a referendum on Barack Obama’s economic policies. In the broad terms in which it is seen by the electorate, it’s a debate over Keynesian deficit spending versus expansionary austerity. The 2010 elections took place at a moment when people seemed to have lost faith in Keynesianism. The 2012 elections are taking place at a moment when people have lost faith in expansionary austerity.

    Read it and weep, o ye ‘conservatives’.

    Note: I elided things from my citation to try to protect The Economists Intellectual Property. Any serious fan of economics should subscribe to the economist.

    Then one must recollect that the Economic Multiplier is inversely Proportional to Marginal Propensity To Save, and wonder how Cochrane could possibly claim a value of zero.

  • Kenn Jacobine

    Tell it to the 15 million who are still unemployed and the millions more who are underemployed. The only things the stimulus did was help Wall Street and blow up the next financial bubble so Obama could get reelected. This crisis is far from over and anyone who argues otherwise is clueless.

  • Jordan Richardson

    I’m not seeing anyone argue that “the crisis is over,” Kenn, just that certain measures have been rather effective. And I’m willing to bet you didn’t even peruse Igor’s facts because your “argument” against them is simply an emotional appeal.

    Incidentally, can I also tell the 15 million unemployed that you think their unemployment benefits should be stripped away in favour of sending out for “charity?”

  • Kenn Jacobine

    The fact remains that stimulus was advertised as the fixer of the economy and it didn’t fix it. In fact, again, I am predicting the worst is yet to come because Washington did not allow mal-investments of the boom years to liquidate. Stay tuned.

  • The debate about the economy is really missing the point.

    Not only are the so called poor in the USA far better off than the poor practically anywhere else in the world, they are also far better off than the poor in their country at any time in the past.

    It may not seem like it to the doomsayers and pessimists amongst us but overall the US economy is doing okay. It even had a boost in GDP last year when many Western countries went sideways or contracted.

    In even broader terms, you miseries might like to know two fun facts: firstly, over 90% of all the wealth humans have created over the last 2,000 years was created since the start of the 20th Century; secondly, the 21st Century, less than 12 years old, has already created 23% of the wealth the 20th Century created.

    If these trends continue, poverty will disappear during this century.

  • Jordan Richardson

    Kenn, I already know the value of your predictions. I won’t be holding my breath.

    The fact remains that stimulus was advertised as the fixer of the economy and it didn’t fix it

    That kind of flies in the face of what The Economist report says, though – unless, of course, you’re just being unreasonable and suggesting that all American economic difficulties could be fixed in just a few years if only the “right method” were enacted. The stimulus does appear to be working. Hell, even our conservatives up here worked with a stimulus package (it worked hand-in-hand with our banking regulations to aid our somewhat swift recovery) to “spend our way out of the recession.”

  • @111

    So now it’s a trickled-down wealth argument, Christopher? Isn’t the growing income disparity, along with this “phenomenal” increase in “produced wealth,” the flip side of the coin?

    In the mid-sixties, Christopher, I had a hundred-dollar a week bank job, and was doing quite well. My GI bill helped me pay for undergraduate education and full scholarships (not athletic but academic) put me through years of graduate schools. What would it take today? What is the value of this wealth you’re talking about if it doesn’t translate into people’s lives? What kind of wealth is it, what counts as wealth in your terms? Don’t you think most of it is inflated, funny-money?

    Somehow, I just don’t end up with the kind of rosy picture that you do, eliminating poverty worldwide. If anything, and if things continue on their present course, I see a certain leveling of living standards – and that only means downward.

  • Roger, maybe the growing income disparity is a phenomenon of the growing affluence process?

    To avoid another series of revolutions in Western countries there obviously needs to be some kind of wealth re-distribution that is fairly balanced. Without that, the rich are exposed to the risk of riots and worse. Compassion for others is a survivalist strategy!

    As to the stats I referred to, you can read the original article here: #1 reason to be Bullish on the Global Economy.

    From the same site, another interesting article in this season of Spring and Occupy is this: How Swedes And Norwegians Broke The Power Of The “1 Percent” This latter article is reproduced from the not uninteresting site Common Dreams

  • troll

    Chris – references please so that we can take a look at the definition of ‘wealth’ used to get those Rosy results…

  • t

    thanks Chris – didn’t see your last before mine

  • Igor

    114-Chris: part of the growing income disparity is because the powerful are skimming any additional wealth off the top. Meanwhile, worker REAL wages are dropping.

  • troll

    Here’s an npr interview with Grabell on his study of the stimulus

  • Kenn Jacobine

    Real wages have stayed the same since 1971 while the price of goods has skyrocketed by over 400 percent because the Fed and big spenders in Washington have devalued the dollar. When the money supply inflates the rich, bankers and capital goods producers benefit because they use the new money first before price inflation sets in. The middle class gets the new money later after it has circulated through the economy and bid up prices. All this stimulus while right now appearing to be good, unemployment down today, will cause pressure on prices. Then the Fed will raise rates and stop quantitative easing. Then the next bust will come and the reaction will be the same – more stimulus and the next cycle will begin. Except, at some point we run out of borrowed time and the absolute bottom will fall out.

  • You’re forgetting, Kenn, another no less important factor, that for many different reasons (increased competition from Japan, Germany, etc), the rise (if there was any) of wages has not kept up with the increases in productivity and profitability of the businesses. Which, in turn, spurted the consumer credit phenomenon, whereby the working classes were forced to borrow to compensate for no increases in income (that is, if they wished to maintain lifestyles to which they were accustomed).

  • Kenn Jacobine

    Yes, and the Fed accomodated with below market rates which caused things like the housing bubble. Of course, Americans borrowed against their homes more than they were eventually worth because they were told that prices would never come down.

  • That’s statism for you, since the government feels obliged to come across as being a fair player, and that includes the working class, by going along, if not actively promoting, the scheme.

    Hence Bush’s “partnership in America” program, along with Freddie Mac/Fannie Mae abuses which have recently come to light.

  • Igor, I don’t think anybody is arguing that isn’t happening, are they? However, if the disparity is allowed to get too extreme, I believe there will be a correction.

    The question is whether it will be done intelligently and peacefully by the wealthy or stupidly and violently by the population at large. That’s why I added the link too the article about the Swedish and Norwegian experience…

  • Kenn Jacobine

    Yes, and Republicans are voting for Gingrich even though he profitted from Fannie Mae.

  • Igor

    The stimulus DID fix the economy and start the long road to recovery. In fact the stimulus would have worked better and faster if we had done 2 things:

    1-make it twice as big, as recommended by economists,

    2-not waste money on business handouts (about half the stimulus was business benefits which immediately went dormant in business and bank savings, to the tune of $5trillion; that’s $5trillion lying DORMANT, out of circulation). There is scant evidence that business handouts improve the economy, for the simple reason that they do not improve demand, which is what drives a consumer economy.

    If the stimulus had been twice as big and been directed at working people we’d be entirely out of the Bush Recession by now.

  • @114

    A helluva link, Chris, to the Sweden/Norway experience. Keep in mind, however, the critical factors which eventually translated to success: (a) a persistent, nonviolent struggle on the part of the working class; (b) the forming of co-ops and increased participation as owners of the means and processes of production; (c) parliamentary victories.

    Interestingly, this is not a socialistic model, whereby it is the State that runs the show, but more along the communistic/democratic lines (as Marx had intended).

  • Igor

    FNMA is an example of the failure of Privatization. It was begun in the 30s as a purely government company to create a secondary market in mortgages, which was something that NO private outfit wanted to do, in spite of solicitations by the FDR administration. The idea was to buy AAA mortgages from banks to liberate the money tied up in longterm mortgages (which were about 10 years in those days, often with 50% down) so that banks would have more cash to lend to home buyers and that would encourage the cash economy. It worked very well and contributed to Recovery. The FNMA kept a small rainy day fund from the slight profits, and for 20 years the bankers kept imploring FNMA to allow them to buy shares in FNMA, which they finally did in the 50s, so that private investors could participate in the small profits that FNMA made on their very secure holdings.

    FNMA was successful in the secondary market (FNMA doesn’t make primary loans) and it became a Big balance sheet item and in the 60s LBJ decided to privatize FNMA to get it off his balance sheet, even tho it made a small profit. Thus it fell into the hands of private investors who proceeded to loot FNMA and cash in it’s accumulated Goodwill.