Over the past three years opponents of President Obama's economic stimulus plans have argued that America can't spend any more money because it has entirely too much debt. Fiscal austerity, you know.
Citing studies like "Growth in a Time of Debt" opponents of spending more to spur economic growth claim that when a country reaches a debt level that is more than 90 percent of what it produces every year (GDP) economic growth will stall and then collapse. With the national debt of the United States hovering around 90 percent opponents of President Obama's spending and jobs proposals have had a field day opposing his policies, arguing we don't have the money to spend.
Unfortunately for the people Paul Krugman calls the fiscal "austerians" (those who preach fiscal discipline today) this argument has fallen flat on its face. Here's why.
It turns out that studies like "Growth in a Time of Debt" had some serious flaws. Specifically, the study ...
Paul Krugman does a good job of going after the austerians and explaining the errors of the study here and here.
Faulty methods aside, there's a stronger argument for spending more to create jobs. In real simple terms the stimulus worked.
In fact, the more data we look at the clearer it becomes that there is no doubt that the stimulus worked. In addition to adding about 1.9 percent to GDP the stimulus also added about 2.9 million jobs to the economy (blue line represents unemployment with stimulus money, red dots represent unemployment without).
For your friends who like to claim that unemployment is still high, or that the results were so meager that it wasn't worth the effort here's your meat and potato response: Because the recession was far worse than we expected we could have added at least a million more jobs to the economy if we had spent more.
Seriously. Take a look at the before and after stimulus spending charts (and, for kicks, ask yourself who benefits politically if the economy stagnates and the position of labor is undermined). So, yes, we need to spend more money.
One more thing. Keep in mind that when Wall Street almost bankrupted the nation we found more than $4 trillion in loans, guarantees and other financial backstops for their incredibly stupid market bets. Today we're on the hook for trillions more. For all this we got little more than record foreclosures, soaring unemployment, and record personal bankruptcies.
If we can find $4 trillion for ingrates who almost bankrupted the nation, and think they're above paying taxes, we can find one-tenth of that to create at least a million tax paying jobs.
- Mark
Citing studies like "Growth in a Time of Debt" opponents of spending more to spur economic growth claim that when a country reaches a debt level that is more than 90 percent of what it produces every year (GDP) economic growth will stall and then collapse. With the national debt of the United States hovering around 90 percent opponents of President Obama's spending and jobs proposals have had a field day opposing his policies, arguing we don't have the money to spend.
Unfortunately for the people Paul Krugman calls the fiscal "austerians" (those who preach fiscal discipline today) this argument has fallen flat on its face. Here's why.
It turns out that studies like "Growth in a Time of Debt" had some serious flaws. Specifically, the study ...
1. Excludes countries in the post-war years who experienced significant growth while carrying debt to GDP ratios over 90 percent.
2. Allows New Zealand's single year of terrible growth with a 90 percent debt to GDP ratio to count as much as Britain's 19 years of healthy growth.
3. Included a sloppy coding error.
Faulty methods aside, there's a stronger argument for spending more to create jobs. In real simple terms the stimulus worked.
In fact, the more data we look at the clearer it becomes that there is no doubt that the stimulus worked. In addition to adding about 1.9 percent to GDP the stimulus also added about 2.9 million jobs to the economy (blue line represents unemployment with stimulus money, red dots represent unemployment without).
For your friends who like to claim that unemployment is still high, or that the results were so meager that it wasn't worth the effort here's your meat and potato response: Because the recession was far worse than we expected we could have added at least a million more jobs to the economy if we had spent more.
Seriously. Take a look at the before and after stimulus spending charts (and, for kicks, ask yourself who benefits politically if the economy stagnates and the position of labor is undermined). So, yes, we need to spend more money.
One more thing. Keep in mind that when Wall Street almost bankrupted the nation we found more than $4 trillion in loans, guarantees and other financial backstops for their incredibly stupid market bets. Today we're on the hook for trillions more. For all this we got little more than record foreclosures, soaring unemployment, and record personal bankruptcies.
If we can find $4 trillion for ingrates who almost bankrupted the nation, and think they're above paying taxes, we can find one-tenth of that to create at least a million tax paying jobs.
- Mark
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