February 28, 2011

‘Keep Spending Like Mad or Else’ Chorus Grows; Stanford’s Taylor Responds; Expect Press to Ignore

Late last week (covered at NewsBusters; at BizzyBlog), a Goldman Sachs economist issued a dire warning cutting current-year federal spending by a measly $61 billion, or about 1.75% of the administration’s full-year projected spending total, would significantly reduce economic growth in the coming quarters. If this were so, the economy would booming beyond belief right now, given that the Obama administration ran a $800-plus billion so-called stimulus plan during the past two years, and is on track to run up over $4 trillion in reported budget deficits in a three-year period by the end of the current fiscal year. Readers will note that the economy is not booming beyond belief.

The Associated Press chimed in on Friday after the latest report on the nation’s Gross Domestic Product (GDP). Expert, presumably including some geniuses at Goldman, thought it would be revised up from an annualized 3.2% to 3.3%. Oops; it came in at 2.8%. Befuddled AP reporters claimed incorrectly that reductions in state and local government spending seriously held back reported growth during the final quarter of 2010. Zheesh; the impact was only -0.29 points. The real problem is that private investment is seriously lagging, and has really never stopped lagging since the recession began in 2008.

The “Keep spending like mad or else” chorus got more help today from chief economist Mark Zandi of Moody’s Analytics. This morning, the Washington Post’s Lori Montgomery dutifully relayed the pile-on (bolds are mine):

GOP spending plan would cost 700,000 jobs, new report says

A Republican plan to sharply cut federal spending this year would destroy 700,000 jobs through 2012, according to an independent economic analysis set for release Monday.

The report, by Moody’s Analytics chief economist Mark Zandi, offers fresh ammunition to Democrats seeking block the Republican plan, which would terminate dozens of programs and slash federal appropriations by $61 billion over the next seven months.

Zandi, an architect of the 2009 stimulus package who has advised both political parties, predicts that the GOP package would reduce economic growth by 0.5 percentage points this year, and by 0.2 percentage points in 2012, resulting in 700,000 fewer jobs by the end of next year.

His report comes on the heels of a similar analysis last week by the investment bank Goldman Sachs, which predicted that the Republican spending cuts would cause even greater damage to the economy, slowing growth by as much as 2 percentage points in the second and third quarters of this year.

Zandi also had bad news for liberal Democrats who are resisting sharp spending cuts: Bringing deficits down to sustainable levels will require more than a growing economy. Even if the economy recovers as expected, he writes, lawmakers will have to cut about $400 billion a year through the rest of this decade to narrow the gap between spending and revenue, and stop adding significantly to the national debt.

Maybe Ms. Montgomery and others who are relaying the “spend or else” warnings should look at what the stimulus accomplished. The answer, per economists John F. Cogan and John B. Taylor in the Wall Street Journal in December was a big fat “nothing”:

The Obama Stimulus Impact? Zero

… data covering the first year and three quarters of the 2009 American Recovery and Reinvestment Act (ARRA) show that, despite the large size of the program, the dollar volume of additional government purchases that it has generated has been negligible.

… The bottom-line is the federal government borrowed funds from the public, transferred these funds to state and local governments, who then used the funds mainly to reduce borrowing from the public. The net impact on aggregate economic activity is zero, regardless of the magnitude of the government purchases multiplier.

This behavior is a replay of the failed stimulus attempts of the 1970s.

… The implication of our empirical research and Gramlich’s is not that the stimulus of 2009 was too small, but rather that such countercyclical programs are inherently limited. The lesson is to beware of politicians proposing public works and other government purchases as a means to stimulate the economy. They did not work then and they are not working now.

Stanford Professor Taylor has published a rebuttal to Goldman’s gibberish and Zandi’s eye-candy aimed at politicians desperately looking for an excuse not to act. I’m excerpting here, because I expect the establishment press either to largely ignore it, or to completely ignore it:

Goldman Sachs Wrong About Impact of House Budget Proposal

Some claim that House budget proposal H.R. 1 to reduce the growth of federal government spending will cause a slowdown in the economy and even increase unemployment. Consider, for example, a recent report by Alec Phillips of Goldman Sachs which claims that the House proposal would reduce economic growth in the second and third quarters of this year by 1.5 to 2 percent if enacted into law next month. Nothing could be more contrary to basic economics, experience and facts. Unfortunately, the report has been widely cited by those wanting to hold back on this first step to restore sound fiscal policy. And the Washington Post reports this morning that Mark Zandi of Moody’s is starting to make similar claims, which should be questioned for the same reasons.

There are several things wrong with the analysis used in Goldman Sachs report. First, it does not take account of the beneficial effects of starting now on a credible plan to reduce the deficit. Basic economic models in which incentives and expectations of future policy matter show that a credible plan to reduce gradually the deficit will increase economic growth and reduce unemployment by removing uncertainty and lowering the chances of large tax increases in the future. The high unemployment we are experiencing now is due to low private investment rather than low government spending. By reducing some uncertainty and the threats of exploding debt, the House spending proposal will encourage private investment.

The analysis in this Goldman-Sachs report is based on the same type of “large multiplier” theory that predicted that the stimulus package of 2009 would stimulate economic growth. Research by me and my colleague John Cogan finds that more up-to-date theories, which bring important incentive and expectations effects into account, show far smaller multipliers. In these models a reduction in the growth of spending will immediately crowd in private investment. Moreover, by following the stimulus money, we found that in actuality the stimulus package of 2009 had no material positive effect on economic growth or employment. The same economic theory which said the stimulus would increase economic growth in the past two years, says that reversing that spending will reduce growth now. It was wrong in the past and it is highly likely to be wrong again.

It takes a special brand of chutzpah for status quo defenders like Zandi to worry about 700,000 lost jobs, when the Obama “recovery” since the recession officially ended in June 2009 still shows 228,000 jobs lost (that’s right, lost).

Bill Clinton’s 1992 campaign stump speeches (scroll to the bottom at the link) frequently employed the bromide that “The definition of insanity is doing the same thing over and over again and expecting a different result.” In more polite terms, Taylor is telling Goldman and Zandi that their fear-mongering about slower growth, which in light of the deficits the government is running amounts to an endorsement of continued stimulus, is nuts. So is the press for swallowing it and relaying it without question.

Cross-posted at NewsBusters.org.

Reaganomics v. Obamanomics Update

Filed under: Economy,Taxes & Government — Tom @ 1:47 pm

ReaganomicsVobama022511The graphic seen at the right is also in the far right column of the blog, and is a constant reminder of how pathetic the “Rebound? What Rebound?” alleged recovery on President Barack Obama’s watch has been.

The score through six quarters (Reagan, 4Q82 through 1Q84; Obama, 3Q09 through 4Q10) is:

  • Reagan — 39.3, representing 9.91% in actual growth, or a 6.5% compound annual rate.
  • Obama — 17.4, representing 4.37% in actual growth, or a 2.9% compound annual rate.

As noted in previous posts, the six-quarter scoreboard is misleading, in that the early 1980s recession, according to the National Bureau of Economic Research, dubious as its pronouncements are, ended in November 1982. Reagan’s 4Q82 growth rate of 0.3% is handicapped by two months of NBER-defined recession.

Though imperfect, a more meaningful comparison would involve looking at the most recent four quarters. That scoreboard wipeout is even more obvious:

  • Reagan — 33.9, representing 8.47% in annual growth.
  • Obama — 10.8, representing 2.70% in annual growth.

Most important to the average person, Reagan’s stellar growth generated jobs. Obama’s mediocre growth hasn’t. Here’s the scoreboard for seasonally adjusted jobs after 19 months:

ReaganVsObamaJobPostRecMonth19

The economy under Reagan generated 4.6 million jobs during the 19 months noted. If you look only at Reagan’s 17 post-recession months as defined by NBER (i.e., excluding October and November of 1982), it’s really a bit over 5 million.

Pending future single-month and comprehensive revisions, the majority of which have been in the downward direction during the past two years, the Obama economy since the recession ended in June 2009 is STILL in the hole by 228,000 jobs.

It gets worse for those in the public sector who still believe that the president is their savior. Here are the components of that net job loss:

  • Private sector — 94,000 jobs added
  • Federal government — 36,000 jobs added
  • State government — 31,000 jobs lost
  • Local government — 327,000 jobs lost (1.56% of the sector’s workforce)

For public sector employees who don’t work for Uncle Sam — With “friends” like Obama, who needs enemies?

Heritage and Reason, With Sound Reasoning

Filed under: Activism,Economy,Taxes & Government — Tom @ 10:35 am

Watch:

30-Minute Drill: Quick Hit Headlines and Highlights (022811, Morning)

Filed under: Lucid Links — Tom @ 8:46 am

30 minutes, no timeouts:

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From a Wall Street Journal editorial that really shouldn’t be behind its subscription wall, a reaction to a DC court’s decision claiming that Obamacare is constitutional (bold is mine):

Judge Gladys Kessler of the D.C. district court says in her 64-page opinion that this power (the federal government’s power to regulate interstate commerce — Ed.) includes regulating even “mental activity, i.e., decision-making.”

The distinction between activity and inactivity is “of little significance,” Judge Kessler writes. “It is pure semantics to argue that an individual who makes a choice to forgo health insurance is not ‘acting’ . . . Making a choice is an affirmative action, whether one decides to do something or not do something. They are two sides of the same coin.”

Whoa. In other words, there is no constitutional principle that limits federal coercion.

And they wonder why the Tea Party movement has so much traction.

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At NewsBusters (“Media Ignore Muslim Brotherhood Role in Fomenting Anti-Jew Hatred and Pro-Hitler Sentiment”), Brad Wilmouth has a good rundown of the Muslim Brotherhood’s history, and the establishment press’s whitewash of it.

The admiration for Hitler is not part of “ancient” history; his admirers include Muslim Brotherhood spiritual leader Yusef Qaradawi, whose return to Eqypt was supposedly a milestone on the road to representative rule.

Three years ago, al-Qaradawi was denied entrance into the UK. That’s largely because in 2004:

… the cleric defended suicide attacks on Israelis during a BBC interview, saying: “It’s not suicide, it is martyrdom in the name of God.” He added that it did not matter if women and children were the victims of such attacks.

The cleric is also said to preach that husbands should beat disobedient wives.

Charming.

The justifications for serious concern over the direction of post-Mubarak direction of Egypt continue to grow.

Related: Via Brian Fairchild at Pajamas Media: “WikiLeaks Cables Reveal Muslim Brotherhood Ties to Iran”

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From Ed Morrissey at Hot Air: “One reason why Wisconsin needed union reform: captive benefits” —

Wisconsin Education Association has (a big stake) in forcing individual school districts to negotiate benefits — because they can demand that their own WEA Trust have a monopoly on health insurance.

And school districts overpay compared to other plans available. What a racket.

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Climate activists as the new survivalists. Read this if you need to be disabused of the notion that paranoia is limited to certain militia types.

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Ann Althouse,on the “entertainment” at the Madison Pro-Big Labor protests:

Why weren’t there better celebrities? Perhaps there are inside polls on how this protest is playing out around the country and people don’t want their names dragged into it.

Something I didn’t know about Yarrow, from Wikipedia:

In 1970, Yarrow was convicted of, and served three months in prison for, taking “improper liberties” with a 14-year-old female fan. He has since apologized for the incident: “In that time, it was common practice, unfortunately –– the whole groupie thing.”

Uh, no it wasn’t, Pete.

Althouse has been the go-to-place for onsite insights and unscripted video coverage of events in Madison.

Positivity: Dr. Bernard Nathanson remembered for his profound pro-life conversion

Filed under: Life-Based News,Positivity — Tom @ 7:38 am

From Denver:

Feb 23, 2011 / 09:26 am

After the recent death of abortionist turned pro-life advocate Dr. Bernard Nathanson, his close friend Fr. C. John McCloskey said that the doctor’s conversion to the faith was “one of the great Catholic moments of the 20th century in the United States.”

The 84 year-old doctor, who was responsible for close to 75,000 abortions during his career as an obstetrician before undergoing a profound change of heart, died from cancer on Feb. 21.

Fr. McCloskey, a prominent Opus Dei priest, was instrumental in Nathanson joining the Catholic Church – a step the physician took 15 years after renouncing his role as one of the most staunch abortion advocates in U.S. history.

In a Feb. 22 interview with CNA, Fr. McCloskey remembered the late doctor as “a great, very intelligent man” who had made “a big sacrifice personally in order to change his opinion on a very important issue.”

The two met in the early 1980s and bonded over a love of great literature, soon after Nathanson had abandoned the abortion industry. During the course of their friendship, the repentant abortionist would make the second great decision of his life – to be baptized into the Catholic Church.

In 1996, he was baptized and confirmed on the Feast of the Immaculate Conception in the crypt of St. Patrick’s Cathedral in New York City by then Cardinal John O’Connor. Fr. McCloskey called the event “one of the great Catholic moments of the 20th century in the United States.”

He noted that although Nathanson knew that “he was completely forgiven of his sin by the waters of Baptism,” the doctor “realized the great evil that he was involved in” and worked to rectify his mistakes “over the course of several decades.”

Part of the “great evil” that Nathanson took part in before his conversion involved performing or sanctioning abortions on tens of thousands of unborn babies.

A successful gynecologist who followed his father’s career path, Nathanson eventually worked to co-found the National Association for the Repeal of Abortion Laws in 1969. Now known as NARAL Pro-Choice America, the organization would become one of the strongest advocates of legal abortion in the nation.

By the mid-1970s, however, Nathanson began to undergo a drastic interior change and eventually declared himself to be pro-life in 1979.

“The more and more he went into the question of abortion the more he realized he was killing human beings,” Fr. McCloskey said, “and so he publicly came out and said I’m going to the other side – the light side away from the dark side.”

Nathanson soon after produced the 1985 film “The Silent Scream,” which shows sonogram images of a child in the womb attempting to move away from an abortionist’s instruments.

Although Nathanson was “vilified by the secular press,” after the release of the film, Fr. McCloskey said the movie “had an enormous impact on the country.”

The doctor would later release the documentary called “Eclipse of Reason,” which explains various abortion procedures in graphic detail. Nathanson also wrote several books.

“From that time on, he went to get a degree in ethics from Vanderbilt University,” and traveled “all over the world giving talks on pro-life issues,” Fr. McCloskey said. Nathanson would also serve as an expert witness in state legislatures and “continued to practice medicine for a good many years.”

Go here for the rest of the story.