20 thoughts on “Does Stimulus Spending Work?”

  1. Actually it does work or could work or would work.

    The idea is that a recession of this magnitude is kind of like one of these mass blackouts on the power grid. There is some small overload somewhere on the net, not enough design margin, a breaker trips (to protect equipment), which shifts the overload to somewhere else, which trips more breakers until the whole grid goes dark.

    You can’t just recover from the blackout by throwing some switches. You have to bring up enough power to supply some subset of loads and then start switching on power and loads in an orderly manner so the thing just doesn’t trip out and collapse all over again.

    Stimulus is kind of like that. People are out of work because there is no demand, but there is no demand because people are out of work. Stimulus is providing some kind of make-work through government or government subsidized jobs or providing demand through food stamps or unemployment compensation so you can get the economic grid back up and running — it is not meant to be a permanent feature, rather, an emergency measure to restore the economic net after collapse.

    The only thing is that on top of Stimulus, you have the overhangs of Health Care Reform with tremendous uncertainty in the cost of hiring someone, a War on Fossil Fuels, essentially the electrons in the wires that someone wants to do without and replace with ion currents in particle beams or whatnot, and the threat of a massive tax increase in 2013, not just on “the rich” but on everybody.

    What is happening is as the Stimulus brings back the net, there are new and added overloads and ground faults that threaten to take it back down again.

    I sometimes hang out in the belly of the beast of Leftyism (cough, the Wisconsin Stage Historical Society, cough), where they have paens to various righteous and Progressive causes, a recent exhibit giving homage to the New Deal, including the TVA.

    The TVA? It may have been Socialism, but it for-real generated large amounts of electric power, and it brought WW-II to a swift conclusion by powering the uranium isotope concentration of the Manhatten Project.

    Do I actually see with my very eyes the Historical Society celebrating the TVA? Is this a joke or something, that they are celebrating non-Green electric power? In today’s environment, the TVA would be a Crime Against the Environment.

  2. I know. It doesn’t work (or rather, it does work to make us poorer.) All the gobblygook in the world does not change that.

    A multiplier applies to every dollar, however spent. Stimulus dollars are in no way special in that respect. The unseen must be taken into account. Stimulus is not new wealth, it’s a transfer of wealth. Which means any consideration of a multiplier must take into account the multiplier taken away by that transfer. Dollar for dollar it’s the same multiplier.

    Therefore stimulus is just arrogance. It’s money spent by those with less knowledge by definition. It will always result in less wealth. Advocates for stimulus are beyond stupid (I’m voting evil.)

  3. Paul, the trouble with the electric grid analogy is that even bacteria are vastly smarter than electrons. Perhaps an analogy with electrical engineers? ^_^

    As for the TVA, most of the dams were already in operation or under construction by private firms when they were seized by FDR. Dewey was one of FDR’s opposition candidates, and some of the dams seized were his.

    It’s a bit like if FDR nationalized Boeing, North American Aviation, Seversky, and Lockheed in 1944 and then claimed that their aircraft were an example of what big government could produce, as opposed to being a customer with deep pockets.

  4. I have a hard time taking a discipline seriously when its practioners can’t grasp the concept of algebraic sign. Note that the author had no way of saying “private sector shrinking” — the only real instance of “negative multiplier” in the article — other than by description, having used up the word “negative” erroneously…

  5. “As for the TVA, most of the dams were already in operation or under construction by private firms when they were seized by FDR. Dewey was one of FDR’s opposition candidates, and some of the dams seized were his.”

    The thing is, the real-life Henry Rearden is the dude profiled in the Wall Street Journal who thinks North Dakota can become the next Saudi Arabia, not those rent seekers who are the object of the Wall Street protest.

    The oil man in question approached Mr. Obama with the proposition that the U.S. could indeed become energy independent in 10 years if the regulators got off his back, when Mr. Obama blew him off by saying that his Nobel Laureate whiz kid Dr. Chu assures him that in 5 years we will have workable electric cars and won’t need oil. Huh? I couldn’t make this up if I wanted to — I am paraphrasing the Journal article.

    I just wish the gummint would “TVA” the Bakken oil fields and go full bore on fossil fuel development instead of tilting at wind mills as they are.

    Everyone at the “U” has drunk the Kool Aid on “the environment”, meaning fossil fuels are Evil and we have to follow the road to economic development taken by . . . Spain. And this includes the STEM people, most noteworthy the PhD electrical engineers who are bending the ears of the policy people. And the Obama Administration is indistinguishable in philosophy, temperment, and degree of mismanagement of any of a number of Colleges at the “U” because it is all the same people.

    You guys are screaming Socialism! Socialism! Socialism, indeed, one can always wish because Socialism would be a vast improvement over Chu-think on energy policy.

  6. I just wish the gummint would “TVA” the Bakken oil fields and go full bore on fossil fuel development instead of tilting at wind mills as they are.

    If you want those oil fields developed, the last thing you’d ever want was for the government to take control of them. The government is like an incompetetent handyman who screws up every job he’s ever done but wants to be a contractor who builds houses.

  7. C’mon, enough of the Conservative Party Line that the TVA is the equivalent of Hugo Chavez. Spare me the snark as if I haven’t been a member of the Conservative Movement since before you were born.

    No, government intervention in the economy is not the ideal situation. But the problem at hand is not government intervention but rather Extreme Green. Everyone at the “U” has bought into it, even the few deep-cover Conservatives we have around here.

    I am telling you guys what the problem is based on a half-century of life experience, and I get patronized by talking points.

    1. No, government intervention in the economy is not the ideal situation. But the problem at hand is not government intervention but rather Extreme Green.

      Your argument seems to be, “get rid of obstructionist lunatics and institute socialism,” when it’s not obvious that the latter isn’t superfluous once the former is done.

  8. Let me give you an example of what I am talking about.

    In response to the Macondo Prospect-BP-Gulf Oil Spill, President Obama could have given some speech (people say he is good with speeches) to the effect “Our long term future is in wind, solar, and yes, even nuclear as carbon-free energy sources. Our immediate concern is providing enough oil and natural gas that is the lifeblood of our economy and necessary for our economic recovery. I am convening a blue ribbon panel to investigate the cause of this unfortunate accident to prevent a recurrence in the future. I am also charging the United States Coast Guard to develop a Rapid Spill Response Capability and contain an spill of this magnitude should it occur again despite our best safety efforts. But the effort of Deep Water Drilling that is necessary for our prosperity will continue.”

    Now if Bizarro Obama made that speech, that is, calling upon a government-industry partnership to obtain safer deep water drilling, would you guys be hopping up and down going “Socialism!” “Socialism!” “Oh no, the government is getting entangled in the oil industry, Hugo Chavez!” Yeah, I guess. But if Bizarro Obama did that, don’t you think that the Bizarro oil prices would have taken that as a “signal” of U.S. seriousness on oil supplies, and that the economy might be recovering right now?

    1. If Obama never again gave another speech it would not change the fact that he and his fellow travelers promote Marxist thought. He is a socialist with a socialist agenda. Joe the plumber wasn’t the only revelation; just a popular example.

      The government is too big and too intrusive. Period. The important thing is not the labels, it’s the consequences.

  9. Imagine a scene in the Old West. Jake collects a $50 bounty after bringing in a rustler. He buys a few things here and there about town, and takes some friends out to the saloon to celebrate. Also celebrating at the saloon is Cole, who just got the big publishing house in Kansas City to publish his “Whiplash LaRue” pulp novels.

    Jake’s boon is like a modern stimulus package – a one-time injection of cash. Jack is a cowhand, not a professional bounty hunter, so his extra contribution to the town’s economy is just as fleeting. After the saloon closes his spending habits go back to what they were.

    Cole was not given wealth. He created it, and he found a buyer who will purchase his commodity on a regular basis. His weekly income has grown, while Jake’s remains static. One dime novelist might not be enough to create new jobs in the town, but several entrepreneurs like Cole will.

    Stimulus packages simply shuffle around cash. They are especially ineffective when they target consumers – trickle-up demand-side economics fails because the new cash runs out and ends the trickle. Supply-side stimulus packages might work, but only if government is good at figuring out which businesses are best at creating wealth – and government is consistently incompetent at this task (coughenronsolyndracough).

    Economies grow only when business concerns are able to create new wealth. Government can help by refraining from doing stuff that imposes unnecessary costs on commerce.

    1. I’d suggest in that scenario that Jake is getting paid for a service to the community. The real stimulus isn’t from Jake getting the $50 but from removing the negative influence of the rustler.

      Similarly, for stimulus to really work what is produced must be worth the price paid. The free market does that fairly well. Simply transferring wealth for make work, as the current regime tends to do, is a drag on the economy.

  10. The sad reality is that the twice-bitten economic actors presently on-stage will not pull the economy up by its boostraps irrespective of how much cash is thrown about. The next generation of producers & spenders will need to come of age and start taking risks again.

    1. Businesses were responding to Obama before he was even elected. That’s because they have the info to make such judgements where the government doesn’t.

      1. That’s because businessmen are racists. They’re greedy, too, but their greed is only overhsadowed by their racism. The installation of Wise Socialist Philosopher-Kings would solve everything!

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            I’m going to overlook your abuse of that declension because I know you’re not from around here, and it’s your custom…

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