ARNOLD KLING
August 14, 2011
The Top Political Contributors
August 11, 2011
Gender and the New Commanding Heights
August 11, 2011
Jamie Galbraith Makes an Assumption
August 11, 2011
Macroeconometrics: The Science of Hubris
August 10, 2011
Real and Nominal Bond Yields
BRYAN CAPLAN
August 14, 2011
The Effect of Thumb Sucking on Income
August 12, 2011
The Voice of Cold, Hard Truth to All Would-Be Educators
August 12, 2011
Ability, Morality, and Prosperity: A Paper and a Report
August 11, 2011
The Theory of Time and Frittering
August 10, 2011
Male Variance and the Remnants of the Gender Gap
DAVID HENDERSON
August 9, 2011
Hayek in "Unbroken", Part Two
August 8, 2011
Hayek in "Unbroken"
August 5, 2011
James Bovard on the Peace Corps
August 4, 2011
Summers Way Off on FDR and 1941
August 3, 2011
The "Amazon" Tax
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Totally agree. Plus, one has to ask: what kind of output? a GDP number is not an end in itself.
Doug also reports:
"CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net."
But, there are very few data points.
Not being a macro guy, I'm not sure how to evaluate these figures. As a micro guy, numbers to the second decimal place leave me highly skeptical. What's their track record in predicting GDP?
As a scientist, I'd like to know if there is a suitable control estimate, i.e., what would growth be absent any 'stimulus'? Would it be 1.1 percent to 5.4 percent? Even if there were an incremental benefit to stimulus, would it be worth an extra trillion $ (Don is right; GDP isn't the whole game)?
Even if the aggregate GDP growth is provably, incrementally better, is that worth the massive exercise in state power that will eventually be needed to repay those sums? From our kids and grandkids?
Besides my epistemological, economic, and moral concerns, I think this sounds just great.
What you are failing to account for is how much the government will have to borrow even if it is not passed. Just because there is no stimulus package does not mean there will be no increase in borrowing. There will very likely be even more. This could quite easily pay for itself.
Could you explain what you mean by "this could quite easily pay for itself"?
The CBO does use crowding out effects and assumes a temporary zero net effect stimulus, mainly moving consumption forward. The variance in the estimates seem to correspond in magnitude to the variance in deflationary pressure as seen in Krugman's chart on price vs growth.
That variance is based on the uncertainty of goods elasticity, mainly energy and commodities. If critical supplies suddenly become short, then the whole stimulus result will move forward in time, more rapid rise, then a more rapid fall in GDP.
In other words, if we get the critical elasticities wrong then we get a double dip recession.
MHodak: "What's their track record in predicting GDP?"
That's an excellent point. Very few models can predict the next quarter of GDP with reasonable accuracy, let alone GDP for the next 2 years. But even more important, GDP increases do not mean increases in wealth. Because of the way GDP is constructed it is primarily a measure of consumption. GDP increased dramatically during WWII, as an extreme example, but wealth did not. GDP increased then because of state spending on war materials. Only spending on capital goods, that is, investment, can make us wealthier.
I'm not clear why a world distaste for US government debt would be the end of the world. It seems to me like the only thing that has any chance of giving us a balanced budget.
The effect of a change in inflation from 3% to -3% on the real debt is $800B alone. The effect of a longer deeper recession could easily mean a similar amount in reduced revenue and increased automatic spending (unemployment, etc.), both of which are the real drivers of debt.