I have started asking people I encounter whether they think government spending a trillion or so extra dollars is going to be good for the economy. The front desk clerk at my hotel—a marketing major—gave me a very honest, "I don't know." The other four people I asked, all under the ago of 30, said they thought it wouldn't help. My favorite response: They wasted the other money [me: a reference to the TARP, I think]. Why will this be any different."
I encourage you to start asking people. Do you think the stimulus will help? Ask without malice. Without sarcasm. Without an edge. Pure curiosity. See what they say. I think most people are very skeptical. The people in favor of this plan are some economists (calling Bryan Caplan), governors in states that are broke, and the politicians who will spend the money.
Maybe it can be stopped if enough people think it's a waste.
I have an idea on how to proceed. In the meanwhile, start asking and educating.
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"The people in favor of this plan are some economists (calling Bryan Caplan), governors in states that are broke, and the politicians who will spend the money."
Actually, 43% of Americans in a new WSJ/NBC poll think the plan is a "good idea." Only 27% think it's a "bad idea," with 30% undecided. In other words, you'll need to convince an overwhelming share of the undecideds that the plan is a waste in order to command a majority for your position.
So what do ordinary citizens understand that Nobel-prize winning economists don't? Can it be that our point-headed elites know that this "stimulus" is designed to wreck the economy further, which is what they really want?
And the headline for the pool says: "Solid support for Obama's economic plan"
Can you say spin?
Minus Ten,
In the fall of 2006 I happened to be in Colorado on vacation and saw a headline in the Denver Post. It was something like "87% of Coloradans in favor of amnesty for illegal aliens" or something very close to that effect. Just out of curiosity I conducted my own, very unscientific, poll for the rest of the day with every person I met while walking around town and taking in the sites. My guess is I probably talked to 40 or 50 individuals. You think I would talk to at least one person who voiced agreement with amnesty. Not one.
I became convinced that the paper had dropped off someone on the UC-Boulder campus for the poll and surprise!!, they found that 87% of the students and faculty supported amnesty. Then they just extrapolated from there.
What's the adage about statistics and lies?
" I think most people are very skeptical."
Russ
Of course the average person is very skeptical. The Obama stimulus is equated with the TARP bail out at the level of attention and understanding of the average person. This is a very unfair juxtaposition that is a reality of the average persons attention to the basic details of the current situation.
If we asked the average person to sit down and listen to the excellent discussion you and Steve Fazzari had on Econtalk and it was discussed further as it applies to the current situation I think you'd find a lot of people thinking the stimulus might not be such a bad idea .
Most people I would argue would understand the nature and concept of the government being the spender of last resort when consumers, investors and trade have all frozen up.
Hmmmm, the government has a golden opportunity to extend its grasp, and you think they're gonna let it go just because a few voters disagree?
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"You never want a serious crisis to go to waste," Rahm Emanuel, Mr. Obama's new chief of staff, told a Wall Street Journal conference of top corporate chief executives this week.
He elaborated: "Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before."
RickC,
I can't vouch for the Denver Post. By way of comparison, however, the final WSJ/NBC poll for the Presidential election predicted an 8 point win for Obama – the actual margin was 7.2 points.
Certainly, one should be skeptical of polls, but all I have to go on currently is the WSJ/NBC poll on the one hand, and Professor Roberts' queries to five individuals on the other. And I only brought the poll up because of his absurd claim that only governors, politicians, and economists support the plan – a group probably numbering less than 5000 persons in a country of 300 million.
Has anybody else noticed that the U.S. Government has been "stimulating" the economy consistently for years.
Basic Keynesian economics. When in a recession the government should decrease taxes and increase spending. But what should the government do when not in a recession? They should, according to Keynes, increase taxes and decrease spending. However, such policies do not get anyone elected, so politicians decrease taxes relative to spending all of the time (creating an ever expanding deficit). The second stage of Keynes's advice is just ignored, and so the economy is consistently "stimulated", both monetarily and fiscally.
Those in Washginton are not ideological Keynesians, or simply miseducated about economics. If they were, then perhaps they would consider that stimulating the economy some more after 20 years of "stimulus" might not be a good idea (even Keynes understood the need to stop stimulating and pay off debts). Politicians do not understand nor care about Keynesian economics. All they know is that some academic has given some intellectual credibility to something they always want to do: spend with impunity.
It has been endless "stimulation", in the form of government spending and suppressed interest rates that has got the U.S. into this mess. It is ludicrous to think that more of the same, delivered by the same people, is going to suddenly make everything alright.
Lee – I agree that they are not ideological Keynesians. However they just might be closet Bolsheviks with another agenda – to wreck the last vestiges of our free market system.
Doug,
I do not even give most politicians enough credit to be thinking about such lofty– albeit misguided–goals. They are simply responding to the ordinary incentives of being a politician, and see the recent crisis as an opportunity to make power grabs. Access to power is what politicians sell to further their careers, and it is in their self-interest to increase the power they have available to sell.
Most politicians are not principled enough to be Bolsheviks.
Here's another fun game to play.
Find an executive at a small commercial bank (not one of the big ones) that has applied for TARP funding through their regional FED branch.
Then ask that person the number of days between when they submitted their TARP funding request and when they got their check. They'll tell you the clock is still running on two months.
Yippee! Government efficiency in action!!! It only gets better from here! and more populated with the self righteous… Mmmm, tasty!
Only a nihilist could believe in the mantra that "government is the profligate, hooked-on-cheap-credit, irrationally-exuberant, conscious-less-risk-taking, big spender of last resort".
Lee Kelly,
"Has anybody else noticed that the U.S. Government has been "stimulating" the economy consistently for years."
Yep. Make that decades. Seems the government is the spender of first resort as well.
Randy – the only "stimulation" government spending achieves is at the ballot box – which was the intention all along. It's the evil curse of "we must appear to doing something" and a majority seems to swallow it forever.
Lee Kelly,
Keynes suggested that governments shoudl run surpluses in the good years. It is as utopian as the Marxist philosophy. I think it was Reagan who said, "there is nothing more permanent than a temporary government program".
Oil Shock – are you seriously invoking Ronald Reagan? That would get you ridiculed at a NYC social part.
Quote from muirgeo: "Most people I would argue would understand the nature and concept of the government being the spender of last resort when consumers, investors and trade have all frozen up."
I think most people understand that anything the government spends, has to be taxed out of somebody. It's not like there is a trillion dollars sitting in a back room somewhere and they finally decided to spend it. Its all made up, an illusion. People understand that.
The people that still support the "stimulus" are probably just not expecting to be the ones that end up paying for it (but when the inflation starts, they will pay).
I don't know if there is any merit to asking around. It's not the case that the opinion of the majority is correct, at least on technical matters. Otherwise, we could advance Economics or Mathematics by referendum on specific claims and theorems.
There are plenty of common-sense objections to the stimulus. There also are very serious arguments in favor of the stimulus, and they are contingent on the form and size of the stimulus. "Stopping the stimulus" via a grassroot campaign is a way of trivializing the problem, or worse. It's demagogy in the original meaning of the word.
Bill James wrote the following in regards to understading baseball:
But perspective can only be gained when details are lost. A sense of the size of everything and the relationship between everything — this can never be put together from details. For the most essential fact of a forest is this: The forest itself is immensely larger than anything inside of it. That is why, of course, you can't see the forest for the trees
He was talking about the fact that sports writers would tell you about this player's alcohol addiction, what the locker room smelled like, what was said on the plane coming to the game, the inside view. James was going to write about the outside view. This difference between insider and outsider views may be relevant to why some economists, especially the ones with access to the upper levels of government or the ones angling for access, can support the stimulus. I think it also serves Lee Kelly's point that where are those economists when times are good calling for surpluses and shrinking government expenditures. They are too busy looking at a few individual trees to really take in the whole forest.
Okay well the other bail out money never "trickled down". So why dont we try a trickle up effect? Do you know that the bail out money alone they gave AIG would have put over $400,000 in to the pockets of every legal US citizen over the age of 18…..
I wonder how many houses that could have saved from foreclosure. Or even how many new cars people would have got out to buy.
Um maybe give us the money and let us "the people" spend what we need to on ourself and taking care of our families. That way the big business does not get bigger with our goverment money.
I find that positive views of stimulus are general and unthinking. "Spending money must be good", "We must do something", "The free market has failed, so we must rely on the political market".
Questions and doubts about stimulus are supported by facts, history, and a simple question: "When has it ever worked?", and "Did it work last February?. Remember the significant, short-term improvement in people's lives from the $150 billion stimulus plan Feb 2008? Uh, we don't remember, because it wasn't noticeable.
The stimulus proposition: "Give me your savings, and I'll improve your lives and give you sustainable careers in a brighter future. [psst, aide talks into ear of politician] Uh, I mean, I'll either do that, or I will prevent things from getting any worse than they really have to be. Trust us to try really, really hard, and if things don't work out, at least you know that we tried hard."
Ask people, and also point them to some information.
Why Spending Stimulus Plans Fail via WSJ.com.
Other articles about stimulus
The current expansion of corporate welfare is demoralising, and its support by those who have for years decried Bush's corporatism is sickening.
Some people seem to think about the economy like the hull of a ship, and these failing companies are holes which need to be plugged. The implication is that unless such action is taken the entire ship will eventually sink. But this is nonsense. The U.S. Government has undermined the hull's integrity. It is like a sponge with water seeping in everywhere. Pressing down to stop the flow of water in one place will just redirect it to come out somewhere else.
Prices are messengers about economic realities. When reality changes, prices change to convey a new message. But this relation does not work in both direction: changing prices does not create a corresponding change in reality. When the government stresses the importance of "stabilising prices", they are trying to prevent prices from signalling a change about the real economic situation.
The discrepancy between reality and prices will keep growing, and create even more malinvestments and misallocation of resources. By way of these bailouts to auto industry and banking institutions, they are sending the false signal to hire more people and redirect more resources toward these failing industries. It is the economic equivalent of going insane, as your perception of reality grows ever more distant from the actuality.
I bet the 43% that think it is a good idea are not thinking any further than the fact that they might get a fat check from Uncle Obama 'Who cares what it does to America…I just want my money.' Uncle Obama can keep his check I don't want it.
Lee Kelly wrote:
"Prices are messengers about economic realities. When reality changes, prices change to convey a new message. But this relation does not work in both direction: changing prices does not create a corresponding change in reality. When the government stresses the importance of "stabilising prices", they are trying to prevent prices from signalling a change about the real economic situation."
Excellent post, man!! This belongs in the cafe hayek hall of fame.
Prices indicate relative scarcity of a good/service. However some utopians think that nothing should have a price. Now, the only way to enforce that is the gulag.
I think the Rodney Murray post after it belongs in the Hall of Fame!!
I wish I could stop it, because if you ARE going to do it then do it right – the most stimulative manner for immediate results.
Unfortunately, the first pass of the plan just released (1/15) does not seem very stimulative with public works projects accounting for only $43-85 of $825 billion. The biggest chunk goes to tax rebates, a lot will go to states to close budget shortfalls, and Medicaid.
Much of the money appears to be targeted to items that might reduce some need to cut workers, maintain state wage increases, provide some increased benefits to the unemployed (extra $25 per week) but not much to increase employment – which was supposed to be the main goal.
Maybe this changes, but the first pass looks weak.
"Do you know that the bail out money alone they gave AIG would have put over $400,000 in to the pockets of every legal US citizen over the age of 18….."
Wow! I mean there are about 225 million Americans over the age of 18 and if we gave each of them $400,000 that would be stupendous! I had no idea that the bail-out of AIG cost $90 trillion. No wonder people are pissed off.
Um, you don't by any chance work for the government do you?
As more anecdotal pointers, though I live in the home state of Nancy Pelosi, one of the biggest driver of these bailout plans, the responses I get to my own comments lean between curious and sceptical.
I don't meet anyone who will voice support of the plans to my face, but perhaps they support it anyway and are willing to disclose the support in anonymous polls.
The economist I trust above all others is Paul Volker. Does anyone know what Mr Volker "really" thinks of this $800+ Billion spending plan?
Most people I would argue would understand the nature and concept of the government being the spender of last resort when consumers, investors and trade have all frozen up.
Posted by: muirgeo
Time to dispel clueless muirgeo economic myths/misconceptions:
1) The government is the LENDER of last resort, and apparently spender of last resort, too. Gee, how come?
2) Democrats created the modern Social Security welfare state, see here and here;
3) Confusing “spender” with “lender” above is mildly linguistically humorous, but expected from far-below average intellects like muirgeo;
4) Blaming modern managerial capitalism for the current financial market distress is like pyromanics complaining about fire dept. response time (perverse incentives);
5) There is no economic philosophy/history/genre extant which deals with half-socialist state economic failures, which is what we currently find ourselves in, mostly thanks to muirgeo & his/her friends.
Public choice theory, to it's credit, and to our foolish detriment, says we should have made this choice long ago, in a public forum. Unfortunately, that forum was corrupted long ago, again by foolish, pseudoeducated people like this "doctor."
This long march through the institutions (including the Clintons and their corrupt friends) has resulted in our current fiscal position: on the brink of a major financial catastrophe, incented by government requirements dictated by foolish liberals, with a socialist time bomb on the doorstep.
It's time to ask yourself, what do you really believe in? What do you think is right? Who should bear responsibility?
Most people I would argue would understand the nature and concept of the government being the spender of last resort when consumers, investors and trade have all frozen up.
Posted by: muirgeo
Time to dispel clueless muirgeo economic myths/misconceptions:
1) The government is the LENDER of last resort, and apparently spender of last resort, too. Gee, how come?
2) Democrats created the modern Social Security welfare state, see here and here;
3) Confusing “spender” with “lender” above is mildly linguistically humorous, but expected from far-below average intellects like muirgeo;
4) Blaming modern managerial capitalism for the current financial market distress is like pyromanics complaining about fire dept. response time (perverse incentives);
5) There is no economic philosophy/history/genre extant which deals with half-socialist state economic failures, which is what we currently find ourselves in, mostly thanks to muirgeo & his/her friends.
Public choice theory, to it's credit, and to our foolish detriment, says we should have made this choice long ago, in a public forum. Unfortunately, that forum was corrupted long ago, again by foolish, pseudoeducated people like this "doctor."
This long march through the institutions (including the Clintons and their corrupt friends) has resulted in our current fiscal position: on the brink of a major financial catastrophe, incented by government requirements dictated by foolish liberals, with a socialist time bomb on the doorstep.
It's time to ask yourself, what do you really believe in? What do you think is right? Who should bear responsibility?
My wife says I repeat myself a lot…..
Mesa – the general problem I believe throughout America is incompetence at all levels. I see it every day in business and of course government is 99% incompetent. I'm wondering if there was ever a time America used to stand for excellence as a principle.
Excellence has nothing to do with this.
Who controls your interests now, you, or the state?
And who did we just elect to tend to our national affairs? A collectivist? Not that he’s any different than the previous guy….
I think the whole idea of government stimulus runs counter to the common sense notion that you cut back during the lean times. I think the mass of the people could be pursuaded by this "common sense" argument if it came from the mouth of somebody they trust and respect. Unfortunately, there aren't any such figures around today to make it. Instead you've got Obama, whom they do trust and respect, telling them to trust him on stimulus, that it will work even if they don't understand exactly why. I think at this point people are going to let their trust and admiration of Obama supercede their common sense skepticism.
mezzanine: "the general problem I believe throughout America is incompetence at all levels. I see it every day in business … "
And yet, somehow, the U.S. with 5% of the global population produces 25% of the global manufacturing GDP. Somehow, the U.S. GDP per capita is matched by no other nation with a diverse economy. Somehow, the U.S. standard of living is the envy of the world.
John Dewey – the US economy has alot of intertia built up. It only took 5 years of irresponsibility and incompetence to wreck it.
Could be that the stimulus is a show of "overwhelming force" somewhat like the Colin Powell Iraqi strategy and break the ice jam of frozen capital hanging out there. Perhaps dome of the money will not enter the economic main stream to tempt inflation. It may be "sterilized" operationally and turn out to be still-borne. If it produces some true jobs and investments that are supportable now and in the future, good on. If, however, it produces consumption with no prospect of repayment through future growth, productivity and income, it will turn out to be a Madoff con. Obama can than use the Greenspan line. "I made a mistake."
Let's cut government spending and cut tax rates by 50%. I think it would be cheaper than TARP and do more good.
jorod – there are too many entrenched interest groups that want big government. We will never see decreases in government, only increases.