The American Spectator

Derek Leaberry| 1.29.10 @ 10:43AM

Wow! Could this be Obama's El Alamein, Stalingrad and Guadalcanal all wrapped up into one political package? Could it be that Keynesianism works? Giant government spending and enormous deficits for as long as the eye can see works. I love Big Brother. I love Big Bamy.

Indiana Alex| 1.29.10 @ 12:23PM

More likely the result of the Fed actually being stimulative for the past15 months or so, but we should look for clarification from "Bob".

stuart horton| 1.29.10 @ 1:55PM

First, you can't trust their numbers. Second, some merchandise is needed after all of these months of no orders. Third, remember the crowing after the slight increase in unemployment, which has since increased. And let's remember that this increase was accomplished with less workers. Do they need to be hired back? NO

MJK| 1.29.10 @ 2:42PM

Is the GDP even an indicator of economic health? I think not. Yes it can be manipulated among other factors. Yes it can be politically motivated. I think those out of work, of who there are many could give a rats but about the GDP.

OUT OF WORK DUE TO OBAMA!| 1.29.10 @ 5:33PM

WHERE ARE THE NEW JOBS? NO NEW JOBS=OBAMAFAILURE! NO NEW JOBS MEANS THAT THIS GDP "GROWTH" THING IS A FRAUD. WHERE ARE THE JOBS?

Bob| 1.31.10 @ 8:30AM

OK, Indiana, you want a clarification?

As I've said on numerous occasions, the economy is driven by private enterprise, not the government. That's why neither government spending nor tax cuts have virtually any effect on GDP. Here's the chart of inflation adjusted GDP in case you want to look at the data:

http://www.data360.org/dsg.asp.....oup_Id=230

When you have a recession, certain things occur. There is a business slowdown and they become more efficient by cutting out waste and firing people. Usually, they take this opportunity to cut more than necessary because inventories at that time are usually bloated. After inventories are worked down and demand begins to rise again, they don't hire people or expand production immediately. Instead, they add shifts and hire temporaries since they don't know whether this growth is permanent or temporary. That's why jobs are a lagging indicator.

Did the stimulus add jobs? Certainly. But the question really is how much did that stimulation costs. In my opinion the stimulus bill was necessary, but there was a lot of waste in the bill and no good way to manage that spending. Of course, 1/3 of the stimulus were tax cuts -- but most of you don't seem to know that. As we learned with Reagan and Bush, more tax cuts would not have helped -- they only would have increased the debt further:

http://zfacts.com/p/318.html

Indiana, you are right about the Fed being stimulative, however. We know from previous recessions that monetary policy is more effective as stimulus than government spending or tax cuts -- that has been proven. However, some of the GDP recovery is a false indicator as banks make money on the spread between the fed funds rate and what they charge consumers and businesses. This, by the way, is a hidden way that government gives unearned money to the banks. Reagan did this, Clinton did this, Bush did this, and Obama is doing this. And we should be complaining about it.

The issue here is how long this uptick will last. Every analysis I've seen says that this will be a very long job recovery cycle because we no longer produce as much in the U.S. 70% of our economy is consumer spending. If people aren't working, then spending can't recover quickly. That's why developing a good industrial policy is important to our longer term future.

OK, Indiana?????

RWinks| 1.31.10 @ 11:58AM

"Did the stimulus add jobs? Certainly." Yeah, mostly government jobs, hundreds of thousands of them. All it did, besides increasing our debt, is to increase the amount of government to be supported by private business. No government has ever been able to support itself without parasitizing the private activities of it's subjects. The larger the government, the less available for it's support and the poorer the people.

Economically, government should be looked at as a business looks at janitorial, maintenance and security expenses. They are necessary for the operation of the business but generate no profit. If the business is to grow and prosper they must find and deliver more or improved goods or services. Expenses must be kept to a minimum. No business ever grew by increasing their security and janitorial expenses.

"The government gives unearned money to the banks." Why only go back to Reagan? The Federal Reserve has been a corrupt and pernicious outfit since it's inception.

Since 2007, the economy has been turned into a ponzi scheme. They can only keep it going as long as they can continue to borrow money---Probably no more than a few years. Government now accounts for about 40% of the economy. You say consumer spending accounts for 70%. I presume you mean of the private "sector". These are bad numbers. Unless Federal outlays are drastically reduced and soon, we are headed for very hard times.

Industrial policy is usually a code for the government picking winners and losers. When has that ever worked out well? OK, Bob?

Bob| 1.31.10 @ 2:19PM

RWinks -- I don't disagree with much of what you say. Yes, the stimulus added mostly government jobs -- both at the state and federal levels. And yes, these jobs are temporary and except for infrastructure, of no multiplier effect. I also stated that the problem with this from an economic perspective is that you don't have much of a payout from this -- it ends up, as you say, increasing debt, just as tax cuts increase debt.

As for a smaller government, I also strongly agree and have said so on numerous occasions. However, making the government smaller means attacking where the money is spent, on Medicare, Medicaid, Social Security, the military, and interest. Discretionary non-military spending only accounts for 1/6th of the federal budget. To make government smaller, you have to follow the money. That means that we will have to reduce the entitlement programs and tell seniors that many of their future Medicare and Social Security benefits will be reduced primarily through rationing of care to elders. I'm in favor of doing that because that is the only way to solve the debt problem.

Unfortunately, the Fed is necessary in our economy as a stabilizing factor. However, like government in general, its power should be limited to what is necessary which means a much smaller mandate.

Regarding government and the economy, I think you need to look at the numbers again. Government is a rather small part of GDP as government doesn't produce anything of consequence and there are about 2 million federal workers which is a rather small group. Perhaps you're talking about the cost of government as a percentage of GDP. That is an entirely different argument. The problem is that people here, like you, don't understand the difference. But I agree with your conclusion that we must reduce spending. Furthermore, it is fiscally irresponsible to cut taxes BEFORE we cut spending as we have proved with Reagan and Bush.

Regarding industrial policy, the government does a poor job picking winners and losers and that is not what I meant. Industrial policy protects intellectual property rights and promotes creating jobs in the U.S. Currently, we promote the creation of jobs in other countries and allow unfair competitive dynamics with other countries. I would not propose a Chinese type of industrial policy. There is a tendency to throw out the baby with the bathwater when we talk about any topic. You've made that mistake here.