Friday, July 8, 2011

The Short List - July 8, 2011

International
Domestic
  • The unemployment rate sadly rose this month to 9.2% as the private sector added just 18,000 jobs despite having "record cash stockpiles and healthy profit margins."  Meanwhile the government sector cut 39,000 jobs in June.  CNBC's Maria Bartiromo was shilling the "uncertainty argument" on Morning Joe this morning, but doesn't point a finger at Republicans who are using the good credit of the United States as a pawn.  Meanwhile, Eugene Robinson has a sharp column in The Washington Post this morning.

  • Texas executed a Mexican national yesterday.  E.G. writing at Economist.com has two great pieces on the death penalty in the past couple days.

6 comments:

Colin said...

unemployment rate sadly rose this month to 9.2%...

Let's keep in mind that the Obama administration predicted that with passage of the stimulus bill we would currently have unemployment of about 6.5%.

Serious questions:

Do you now regard the stimulus as a failure? If not, why not? And what would have to occur for you to view it as a failure (ie is this a falsifiable hypothesis)? What should we make of the fact that unemployment declined by 1.6% 2.5 years after the April 1993 passage of a $4 billion stimulus package
, but has risen by 1.4% since passage of the January 2008 stimulus package that was more than 200 times greater?

Jason said...

A prediction that quite clearly is wrong, but I do not believe the stimulus was a failure. Did it deliver on all the promises the Obama administration made? No. But it did inject consumption into an economy that was lacking, and while the unemployment rate remains unacceptably high it should seem obvious that increased consumption staved off the elimination of even more jobs.

As to what we should make of 1993 versus 2008, I think we should conclude the two recessions were dramatically different in depth and structure making a direct comparison ineffective.

As to your citation of a $4 billion dollar funding of unemployment benefits (which you have previously decried) the article you note is a moment in time. Were there no other stimulative efforts made on the part of Congress? Or was this $4 billion just the first part of a wider effort? I'm not sure but it calls into question your "200 times greater" comment.

Colin said...

A prediction that quite clearly is wrong, but I do not believe the stimulus was a failure. Did it deliver on all the promises the Obama administration made? No. But it did inject consumption into an economy that was lacking, and while the unemployment rate remains unacceptably high it should seem obvious that increased consumption staved off the elimination of even more jobs.

So the generation of consumption is the sole criterion of whether success was achieved? So if Congress voted to give me $50 million -- something I pray for every day -- to go out and I spend as I saw fit to boost consumption, would that be worthwhile?

And again, what would have to have occurred for you to declare the stimulus a failure?

As to your citation of a $4 billion dollar funding of unemployment benefits (which you have previously decried) the article you note is a moment in time. Were there no other stimulative efforts made on the part of Congress? Or was this $4 billion just the first part of a wider effort? I'm not sure but it calls into question your "200 times greater" comment.

There were no other efforts. However, I was overly harsh with my 200 times greater comment. Adjusted for inflation the bill was $6 billion. Using the latest cost estimate of the stimulus at $821 billion (per the CBO), it was about 137 times greater.

Ben said...

re: Stimulus Failure

Bret said...

colin astutely points out the key here...what exactly is the falsifiable hypothesis here? keeping in mind blogger's lamentable lack of scientific notation, let's try to figure that out, from both sides.

pro-stimulus:

if
t(0)=implementation of TARP
x=percent unemployment at t(0)
y=percent unemployment without stimulus at t(0+2 years), and
z=percent unemployment with stimulus at t(0+2 years), and

the hypothesis would be z(or equal to) y.

the problem in terms of falsification of both of these is the difficulty in determining y, which is a counterfactual (i.e. the economy without the treatment of a stimulus). as far as i know, there's no comparable situation that would serve as a suitable counterfactual for this case (i can't comment intelligently on the suitability of 1993 for comparison, although it seems a major concern was not the collapse of the entire financial system). so the problem of determining failure lies not in the facts of the case, but in the messy (and subjective) business of prediction.

as far as that goes, it seems the administration was just stupid. i assume their point estimates of unemployment reduction were accompanied by confidence intervals, but even accounting for that, im sure it wasn't much more than + or - 1%. politicians, even in office, aren't in the business of analysis, so why would they even set their standards so high as to invite failure? why not just predict the minimal hypothesis above (z=y+1 job)?

in any case, i guess my point is that neither hypothesis is falsifiable. sure, if someone stated in 2008 that unemployment would be 7%, then clearly the administration failed. but we should not let the setting of perfect goals inhibit the achievement of pretty good ones. this is a more complicated rehash of the argument that the economy would have been considerably worse without the stimulus, but who's to say what the state of the economy would have been without it? i'm open to arguments for reasonable comparisons, but i just don't know that there are any. so i'm not sure this sort of counterfactual reasoning is useful for either side in this case.

Bret said...

sorry some of that didn't come through correctly.

pro stimulus: z<y
anti stimulus: z<(or equal to ) y