LA Times: Fixing the economy, We got it wrong

Los Angeles Times ^ | August 15, 2011 | by James K. Galbraith

[Oldeconomybuyer]

In early January 2009 two White House-bound economists — Christina Romer and Jared Bernstein — predicted that if the stimulus bill were passed, unemployment would peak at 8% by midyear and then start coming down. If there were no stimulus, they said, joblessness might hit 9% and not peak until 2010.

Well it's now obvious that the push didn't do the job. Even with it, unemployment is higher than the Romer-Bernstein worst case. The optimistic forecasts now look embarrassing.

Let's examine that epic failure.

[Oldeconomybuyer]

[Mr. K]

In a related story: Pork wings spotted overhead...

[Mr. K]

yikes~! I thought the LA Times had a sudden blinding flash of the obvious- but their 'solution' is stunningly even more stupid:

"The solution is not another "stimulus" — a term that stinks of needles and quick fixes. The solution has to be a long-term strategy: both a new direction for economic activity and new institutions to provide the money. The proposed national infrastructure bank — a permanent institution — is the right sort of thing and would be a good place to start.

To go further, let's admit that our problem is not budget deficits or public debt — not now and not later. Let's agree that cutting Social Security and Medicare — inflicting pointless pain on the elderly — will not help. Let's build a new financial system to serve public purpose and private business. And let's start to act on our actual needs and problems: jobs, foreclosures, public investments, energy security and climate change.

Time is short, but at least in recent days it's becoming clear: We're getting it wrong and we must change.

In other words, the solution is 'fundamental change NOW (I assume to communism, from their 'central' explanation)

So their solution to big government failure is even bigger government

[Yardstick]

To go further, let's admit that our problem is not budget deficits or public debt — not now and not later. Let's agree that cutting Social Security and Medicare — inflicting pointless pain on the elderly — will not help. Let's build a new financial system to serve public purpose and private business. And let's start to act on our actual needs and problems: jobs, foreclosures, public investments, energy security and climate change.

This guy is of the "stimulus didn't go far enough" school. He wants a massive national inftrastructure bank that basically makes stimulus permanent.

[central_va]

Socialism doesn’t work so lets try communism instead.

[MulberryDraw]

, let's admit that our problem is not budget deficits or public debt — not now and not later

Oh brother. He calls it debt-deflation but it's not caused by debt. Good grief.

[AnglePark]

Here it is — the Leftist media is now howling for a lasting transformation of the US economic system.

A permanent infrastructure bank? No thanks.

[algernonpj]

Now obviously the stimulus wasn’t large enough /sarc

[listenhillary]

in 2008, the private sector economy shrunk by 15%. Yet the GDP declined by only 300 billion?

The government stimulus painted over this little fact with spending that shifted the government’s portion of the GDP from around 35% to 43%.

This was an attempt to hide the fact that this was a depression level decent of our economy. Our financial wizards have said that they can regulate away economic depressions. It kind of worked, but we sold our children into slavery to buy time.

The only real solution is painful reduction of all government services to 5% of GDP, allowing us enough funds to pay off the debt. This will allow the entrepreneurs to re-ignite our economy. We don’t have the will or the politicians with the backbone to do it.

[dblshot]

On last nights 60 minutes Leslie Stahl (SP?) interviewed a bunch of CEOs who have moved their ops overseas for tax reasons. Leslie actually said we couldn’t reduce coprorate tax rates in the US to meet those in Ireland and Switzerland becuase we’d lose trillions of dollars and make the deficit worse.

[Red Badger]

These egghead economisseds have never, actually worked in the real world. That’s why they ALL fled back to their ivy covered ivory towers where it’s safe and warm. It’s too scary in the real world for them...................

[bray]

Gee, wonder who this massive national bank will loan to and who it won’t loan to? Can you say unions?

Pray for America

[tcrlaf]

“Leslie actually said we couldn’t reduce coprorate tax rates in the US”

Push the meme, push the meme, push the meme. Even if it makes you sound like an idiot, push the meme....

[Doogle]

The optimistic forecasts now look embarrassing.

failure,again

[sickoflibs]

FROM LINK :”In fact, stimulus alone was never going to bring recovery. This crisis was caused by financial collapse, rooted in massive banking fraud. The financial system is our economic motor and when it fails it cannot be revived simply by pouring money on it, any more than a wrecked reactor can be restarted just by adding fuel. Team Obama faced a situation not seen since the 1930s — a worldwide banking meltdown. The financial system needed to be rebuilt — and it still does. But Team Obama chose to overlook this. The result was debt-deflation. Falling asset prices tipped more and more households into insolvency, business stagnated, tax revenues dropped, states and localities cut their budgets and deficits widened. The situation is similar in Europe, with countries rather than households in the deepest trouble, and wild rumors attacking the shares of even the biggest banks...
The solution is not another “stimulus” — a term that stinks of needles and quick fixes. The solution has to be a long-term strategy: both a new direction for economic activity and new institutions to provide the money. The proposed national infrastructure bank — a permanent institution — is the right sort of thing and would be a good place to start. To go further, let's admit that our problem is not budget deficits or public debt — not now and not later. Let's agree that cutting Social Security and Medicare — inflicting pointless pain on the elderly — will not help. Let's build a new financial system to serve public purpose and private business. And let's start to act on our actual needs and problems: jobs, foreclosures, public investments, energy security and climate change”
Fixing the economy: We got it wrong(pssst, he is still wrong)

Actually things are worse than he says. It's not just debt-deflation but it's debt-deflation-inflation-crunch, the result of Keysnian inflationary policy to fix the above. Economic Stimulus policy is just handouts to the voters for votes under the name of 'doing something'

debt-deflation-inflation-crunch is when food (and labor) cost the grocery stores more than customers are willing to pay for it, as they are unemployed, deep in debt and have worthless houses.

The real solution was a clearing of bad debt and a natural deflationary correction, something politically unacceptable.

[GreenAccord]

Yep, there she was, metaphorically staring at all those billions (rolls eyes) and the thought of reducing the corporate tax rates didn’t fire a synapse in her head that told her ‘then A LOT of that money would flow back into the US’ and instead, she thought about the dollars that wouldn’t come too if the rate was lower.

Hey, Leslie, here’s an apple pie. You can’t have half of it, like you want. You can have one third of it. But, if you get a third of it, will you only think about the sixth you didn’t get?

Because if all you want is half of it, you’re getting none.

[listenhillary]

Memes? CNN articles - The rich only account for 4% or 5%, lets tax the snot out of them to fix our economy.

[6ppc]

They still don’t get it. They just don’t realize that high corporate taxes, excessive regulation and uncertainty is preventing businesses from hiring. They recommend the “infrastructure bank” as a solution...yet another black hole in which to dump tapayer dollars.

[Arlis]

Yup, and there the incredibly brilliant Leslie (with her lipstick painted a good 1/4” beyond her lip line, looking like some sad, deranged old hag..unaware that the fad of big lips has passed) failed to ask,

“If the USA lowered our corporate tax rates, and all these corporations then decided to stay in the US (like the CEO of Cisco said he wanted to do), wouldn’t the US take in far more taxes than it would by keeping the high rates?????”

DUH!

[algernonpj]

in 2008, the private sector economy shrunk by 15%. Yet the GDP declined by only 300 billion?

The government stimulus painted over this little fact with spending that shifted the government’s portion of the GDP from around 35% to 43%.

This was an attempt to hide the fact that this was a depression level decent of our economy. Our financial wizards have said that they can regulate away economic depressions. It kind of worked, but we sold our children into slavery to buy time.

The only real solution is painful reduction of all government services to 5% of GDP, allowing us enough funds to pay off the debt. This will allow the entrepreneurs to re-ignite our economy. We don’t have the will or the politicians with the backbone to do it.

Now add in the fact that the CPI which is used to deflate the GDP and create 'real' GDP has been corrupted with soft metrics (such as quality adjustments, hedonics, geometric weighting) that suppress inflation!