The Stimulus Is A Failure

[Drake Tungsten]

That's much more succinct than the reply I almost posted.

[Felch]

Could you point me in the direction of these models, or at least some sort of synopsis that a layman could understand? I usually concede the short-term benefits of economic stimuli, but regard the use of them as a long-term distortion. Like heroin, it works, but that doesn't mean it's good for you.

[Darius871]

I don't think you can seriously deny that spending billions of dollars has "a" positive effect on domestic economic activity

There are actually serious macro models which do precisely that.

What? I was only distinguishing between gross and net to make fun of Oerdin. You can have a $1B positive impact and a $900B negative impact, which involves "a" postive impact but results in a net negative impact. That's not denying that the downside could be immediate.

[KrazyHorse]

Nonsense. In describing the "burden" you used the adjective "eventual". You are also only thinking about budgetary constraints (fiscal effects), and are completely ignoring the monetary response to spending.

[Darius871]

Nonsense. In describing the "burden" you used the adjective "eventual". You are also only thinking about budgetary constraints (fiscal effects), and are completely ignoring the monetary response to spending.

I could note that "eventual" can mean days instead of years and a fixation on "only budgetary constraints" is a figment of your imagination, but I'll just dump the word if it confuses you. The only point was that Oerdin laughably ignored how the good can be outweighed by the much less visible bad, be it fiscal or inflationary. Oh well.

[Kuciwalker]

Darius, what you're missing is that it's possible that no distinguishable components of the economic results are positive.

[Darius871]

Darius, what you're missing is that it's possible that no distinguishable components of the economic results are positive.

What am I missing? Uncle Sam pays Joe Schlub $1000 for his otherwise unutilized labor in the widening of a highway. Joe Schlub uses that $1000 to buy more widgets than he would have bought on $500 of welfare, which in turn increases production at the widget factory, the employees of which get to stay employed and buy more widgets, etc. Meanwhile the asphalt company also gets more demand, people save on gas from the decreased traffic congestion and spend those savings on more widgets, etc. etc. etc. That theory always seemed straightforward enough to me.

I'd certainly agree that the $1000 that started this chain of activity were an illusory mishmash of interest costs, taxation, inflation, borrowing's depletion of available investment capital, etc. with a negative impact that more than outweighs the above, but why that's not "distinguishable" escapes me.

If I give you a dime while sneaking a benjamin out of your pocket, there's a "distinguishable" $0.10 gain to you even if your net loss was $99.90. If we agree in net terms, why quibble about semantics?

[KrazyHorse]

Because you obviously have a problem admitting when you don't know what you're talking about.

[Darius871]

Because you obviously have a problem admitting when you don't know what you're talking about.

I'll be the first to admit I don't know what I'm talking about. When did I pretend to know jack**** about economics? Why are obvious cries for help like 1) "[X] theory always seemed straightforward enough to me" and 2) "why that's not 'distinguishable' escapes me" equated in your mind with 1) "X theory is correct" and 2) "that is distinguishable"?

FFS, I'm only dragging this on so someone might bother to explain it eventually. Since Felch asked politely and was predictably ignored, I figured the only way to get a straight answer was to deliberately invite a smackdown. And still no luck.

[KrazyHorse]

Good lord. Google "fiscal multiplier research" and go from there.

[Darius871]

That sounds like a lot of work.

[KrazyHorse]

Like I said: 18 hour days. Sorry.

[Kuciwalker]

What am I missing?

Uncle Sam could pay Joe Schlubb $1000 to leave his healthy job building office buildings so that he can build a bridge to nowhere. Net wealth destruction from a single act.

[Ramo]

Darius, Felch: Cogan-Taylor is the paper the stimulus skeptics typically refer to these days. However, i.e. Romer-Bernstein and Eichenbaum suggest higher fiscal multipliers.

[Felch]

Thanks, Ramo.