The Congressional Budget Office on Tuesday downgraded its estimate of the benefits of President Obama’s 2009 stimulus package, saying it may have sustained as few as 700,000 jobs at its peak last year and that over the long run it will actually be a net drag on the economy.
CBO said that while the Recovery Act boosted the economy in the short run, the extra debt that the stimulus piled up “crowds out” private investment and “will reduce output slightly in the long run – by between 0 and 0.2 percent after 2016.”
The analysis confirms what CBO predicted before the stimulus passed in February 2009, though the top-end decline of two-tenths of a percent is actually deeper than the agency predicted back then.
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the entire concept ofo government spending “crowding out” the private sector is patently false. And again, thats not a wild opinion and crazy radical viewpoint, its just a fact.
who the fuck are you check? the clams personal slave? its all just voodoo right? digits and what not. no actual money in hand or services rendered.
Not at all. Check the links below, or make some Molotov cocktails, its your day.
Austerity will fail in Europe and badly. It will eventually, if they continue on the path they are on (zero currency creation, so zero net savings assuming a flat trade deficit/surplus for the Eurozone).
The Eurozone as it exists allows for literally no currency creation. Even a gold standard has constant “money printing” as new gold is found, mined, etc.
I have certainly never posted anything akin to that. Sorry to not jump on the pep rally “the bernank” panic fest. Itd be alot more fun, I’m sure, … Always taking the hard road, am I.
my head will explode trying to comprehend all that stuff. so… in your mind jimmy rogers is a dumbass, right? serious question. would like your opinion if available.
Check, I’m pretty sure I could search google scholar and find dozens of studies that prove otherwise, but I’m done googling for tonight.
And, which, of those, apply to a non convertible currency? A true fiat currency issued by one nation?
Government will crowd out private investment in some circumstances and won’t in others.
The current circumstances qualify as “others”. Interest rates are low, capacity utilization is low, and businesses are choosing to park large amounts of cash rather than put it to work.
The CBO analysis describes a stimulus plan working exactly the way you’d want it to – a noticeable (though inadequate) boost to growth and output in the near term, when the contraction was deepest, and little to no negative impact further out, when the economy is at least healthy enough for crowding-effects to occur.
The problem at this point is that while stimulus spending is still providing output and employment that would not be occurring without the stimulus, the fact that it is tapering down makes it a negative factor in overall GDP growth. It wouldn’t be noticeable if private economic activity was rapidly recovering, but we don’t have such a recovery now and don’t have good reason to expect one very soon.
http://modernmoney.wordpress.com/2010/09/20/the-myth-of-crowding-out/
http://pragcap.com/the-austrians-are-intrigued
Murphy’s comments about coconuts are simply summarized as this: we can save in coconuts only because the coconut tree “deficit spent” them.
http://pragcap.com/nomuras-chief-economist-does-mmt-almost
“In the case of neither Japan nor the US, did the behavior of long-term bond yields indicate that anything resembling classic government “crowding out” was going on.”
For ten years “smart money” econo-experts have been predicting a sudden and epic surge in japans interest rates. Hasn’t happened. Their latest theory is that “yeah, but thats just because Japan has super saver citizens and they own all the debt”. Hasn’t happened in the US either (exact opposite, actually).
The entire concept of a limited pool of “loanable funds” is similarly, well, silly.
Nobody will ever be able to understand what is happening in the world or what the heck is going on or why their pep-rally screeching, and impassioned, speeches and wild theories about economics don’t ever work out… until they understand how the monetary system actually works.
If anybody is interested, this is a nice place to start: http://pragcap.com/resources/understanding-modern-monetary-system
Focus on these facts to get interest piqued;
1. the US government does not first borrow and then spend, (in fact the money needed to buy government bonds comes directly, and to the penny, from deficit spending)
2. the US government has run huge surpluses like 7 times in history (6 depressions and what we have now were the result. How does that work with these magical “crowding out” theories?)
3. the net savings of US citizens is exactly equal to government deficit – trade deficit. This is just a fact of accounting not a wild theory of pragcap.com
So how are all of the US citizens going to get rich even as the government drops the debt to zero? We would be massively in net debt, as a whole, BY SIMPLE ACCOUNTING FACT.
So how is Italy going to “tighten its belt” and run a massive surplus when it runs a trade deficit? Its not. Because this will force considerable negative savings on its citizens, which will damage the economy PLUS the reduction in gov’t spending and/or increase in taxes will damage the economy leading to a … roughly… 99.9999% chance of one hell of a recession in any of the Eurozone countries who try to go austerity while running a trade deficit.
It literally can’t work. And it hasn’t, and it won’t. Giving a gigantic “hyperinflation nation”, “austrian school” economic pep rally speech that rallies that masses won’t change reality. It’ll just cause problems.
All of whats wrong in the world can be solved, and those government deficits don’t impamir the working citizens of a country and aren’t a burden to the taxpayers, they are literally THE NET SAVINGS OF THE TAXPAYERS (well, less the trade deficit).
Where do dollars come from? Magicness?
How many super soakers exist in the world? No way to know because super soakers come from magicness? No, we could count them, because we can go to where they are made.
In the case of the USA and its dollar, how many exist in the world? Exactly, to the penny, the amount of the national “debt”. And in all honesty if we simply stopped paying interest on the amount of dollars created…
Check, I respect you and like your thinking, but PragCap is a joke. That is not what I meant by research. I still take a look at it though.
Take a look at these: http://scholar.google.com/scholar?hl=en&cp=36&gs_id=5y&xhr=t&q=does+government+spending+crowd+out+private+investment&gs_sm=&gs_upl=&bav=on.2,or.r_gc.r_pw.,cf.osb&biw=1280&bih=669&um=1&ie=UTF-8&sa=N&tab=ws
And of course I’m speaking of the U.S., who has the ability to print.
trees deficit spend? Wtf?
When the government is paying negative real interest rates on its debt, it isn’t crowding out private investment.
is the magic GREEN futures machine revving up…
You know, before arguing about this you guys really should read the CBO report. It a “on the one hand and on the other hand report”.
It’s takes a really twisted read to come up with the conclusion that the Washington Times does. Looks like a classic Econ hit piece.
Specifically:
ARRA’s long-run impact on the economy stems primarily
from the resulting increase in government debt.14 To the
extent that people hold their wealth in government securities
rather than in a form that can be used to finance
private investment, the increased debt tends to reduce the
stock of productive private capital. In the long run, each
dollar of additional debt crowds out about a third of a
dollar’s worth of private domestic capital, CBO estimates.
(The remainder of the rise in debt is offset by increases in
private saving and inflows of foreign capital.) Because of
uncertainty about the degree of crowding out, however,
CBO’s range of estimates of ARRA’s long-run effects
reflects the possibility that the extent of crowding out
could be more or less than one-third of the added debt.
Over the long term, the output of the economy depends
on the stock of productive capital, the supply of labor,
and productivity. The less productive capital there is as
a result of lower private investment, the smaller will be
the nation’s output over the long run.
The effect of the crowding-out of some private investment
under ARRA will be offset somewhat by other
factors. Some of ARRA’s provisions, including its funding
for roads and highways, may add to the economy’s potential
output in much the same way that private capital
investment does. Others, including its funding of education,
may raise long-term productivity by enhancing
people’s skills. Still other provisions create incentives for
increased private investment. According to CBO’s estimates,
the provisions that potentially add to long-term
output account for between one-fifth and one-quarter of
ARRA’s budgetary cost.
ARRA’s long-run effect on output also depends on
whether it permanently changed people’s saving or their
ability or willingness to work. For example, to the extent
that ARRA reduced long-term unemployment during the
2009–2011 period, it might improve participation in
the labor force, employment, and productivity in later
years. However, CBO’s estimates of the long-term effects
of ARRA do not incorporate any effects of that sort.