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Saturday, September 10, 2011

The jobs thing, again -- plus: An unhappy anniversary

Let's look at a few more views of the Obama jobs proposal. The best short denunciation (from the left) comes to us from Ian Welsh:
The plan is supposedly 447 billion. By my count about 253 billion of that is in tax cuts. Corporations are sitting on a ton of money, tax cuts will not make them hire. Minor tax cuts for households will be used primarily for debt de-leveraging unless there is a general recovery with wage increases, since people will not spend in a depressionary environment. Most of the spending is on projects which are run by states, and the money is fungible and will be effectively diverted to avoid tax increases.

There are no structural fixes for what is wrong with the economy here. There is nothing to deal with the fact that even if it did work (it won’t) it would cause a run up in commodity prices, especially oil, which would crush the recovery anyway. There is nothing to deal with the fact that most US banks are still bankrupt, except some incentives for Americans to buy houses so securitization can continue. There is nothing to stop employers from calculation the tax rebates as effective raises, and thus not offering raises themselves (which is what they will do.) There is nothing to make any corporation which already doesn’t pay taxes (more than you want to think about) to pay those taxes.
 I'm trying to think of a serious reason to disagree with this. Well, I'm not so sure about the commodity prices. Otherwise, Welsh has offered a damning indictment: We really are dealing with the stim package all over again.

As you know, I do not favor tax cuts. That said, I think tax cuts to workers are more welcome than tax cuts to fatcats. On the other hand, a payroll tax cut now could endanger Social Security. So...there's that.

The only part of the tax cut plan that I like concerns aid to small businesses who make new hires.

And as for the aid to the states? Well, it will keep some teachers employed. That's good. But we're really just running faster simply to stay in place.

By way of amusing contrast, BooMan -- remember BooMan, the BDSM-flavored Obot froggie? -- seems to think that this jobs proposal will create, if not utopia, then the next best thing.
Moody's predicts 2% growth in GDP and 2 million jobs. The Economic Policy Institute is even more optimistic
So, uh, this euphoria is based on a forecast from Moody's -- the same folks who told us that crap securities based on crap mortgages were golden. Uh huh. That's reassuring.

The Economic Policy Institute -- specifically, a wonk named Heidi Shierholz -- predicts that the Obama initiative will boost employment by 4.3 million jobs. Her reasoning must be seen to be believed. She says 11 million jobs are gone and therefore this plan will put 4.3 million of 'em back.

Say what? How does that follow?

I'm not sure. But she has a chart, so it must be true.

Krugman seems chipper, though you can tell that his smile is forced:
And it’s unclear, in particular, how effective the tax cuts would be at boosting spending. Still, the plan would be a lot better than nothing, and some of its measures, which are specifically aimed at providing incentives for hiring, might produce relatively a large employment bang for the buck. As I said, it’s much bolder and better than I expected.
 I hope he's right. I don't think he is.

Finally, here's our favorite Kat:
The other thing that I really still don’t understand–except in pure political terms–is the fascination with decreasing spending to balance the budget while making the budget deficit worse by providing less productive tax cuts. It is still your basic Voodoo Economics. Yes, tax cuts can do some things, but the multipliers on tax cuts pale in comparison to direct government spending. I’ve mentioned this before, but putting money back to consumers and businesses via tax cuts means that a portion of that drains to unproductive things. That’s okay policy for a small recession, but it’s not good for what’s happened to us since 2007. Redirecting money from good spending to iffy tax cuts doesn’t make a lot of sense to me.
Moody’s must have a much more powerful computer program than I have intuition and understanding of macroeconomic theory. Direct government spending on infrastructure goes out full force and then starts multiplying by going additional rounds to businesses and consumers.
I think she's got it -- although she neglects to mention that people with jobs are saving again. Money in the bank is not money in circulation.

Her intuition matches what I said earlier: In theory, tax cuts may indirectly create jobs. But if you definitely want to create jobs, give people a paycheck for useful work.

As I mentioned in an earlier post, Reagan would have had a simple solution. He would have commissioned a few studies which "proved" that the military was under-equipped. ("Our boys are still wearing tri-corner hats and firing muskets!") And then he would talk the country into making a heavy investment in weapons manufacture. Military Keynesianism.

The fact that nobody in today's GOP is even considering Reagan's solution tells me that today's Republicans have given up on this country. They just want to fatten on the carcass.

Is Obama's plan better than doing nothing? No. If it fails, people will say -- once again -- that we tried "socialism" and it didn't work. Of course, this plan is actually about as "socialistic" as something Uncle Miltie might have cooked up for Pinochet.

Obligatory dig at libertarians: Lambert has a beautiful reply to those propagandists who try to convince Americans that businesses won't hire because regulations create an "uncertain" environment.
I thought that being an entrepreneur was all about uncertainty? Brave Galtians boldly dare, and so forth? So what's with all this blather about "uncertainty" and "confidence" and so on?
Remember the argument against the health care public option? The insurance industry said that private enterprise couldn't compete with a gummint plan. But...gee...I thought that private enterprise was always more efficient...

About those terror warnings: Part of me says that we shouldn't take them too seriously. Part of me is scared. I do have my paranoid side, as a few of you may have noticed.

Fox News has said that the plan involves vehicles laden with explosives detonating on a bridge or in a tunnel. The locales, we are told, are Washington and New York. There are a number of potential targets in NY, but not in DC.

However, if we allow ourselves to think in terms of a greater DC area...

Hm. Does that include Baltimore?

I've warned those around me not to use the "Car Strangled Spanner" on that day. As for the McHenry tunnel -- the very idea of an attack there is unimaginably horrifying. Best to make the long journey around the Chesapeake.

Am I being too paranoid? Perhaps. But for one day -- maybe two -- let's be paranoid. We can laugh at ourselves later, if (please God) the day passes uneventfully.
According to my math, $447 billion divided by 1.9 million comes out to $235,263.00 per job created.
If people bank their pay check doesn't that mean the banks will have capital to lend out to others?

The borrowers will spend it so it not like it's going to a Swiss account like Obama's friends have.
A few thoughts...

I have a great deal of respect for Krugman, but I can't help but wonder if his half-hearted support of the "jobs" initiative is partly due to drastically lowered expectations after the last few years. Also, since the initiative wound up being a bit more of what Krugman was prescribing than was widely expected, and he was given the details shortly before they were publicly available, I wonder if a message was delivered along the lines of "This is better than you were expecting, and it's got a little bit of what you've been harping on for the last 2 1/2 years, so how about you soft-pedal the criticism just a tad?" or "We're trying to do some of what you're advocating, so if you tear the proposal apart, you'd actually be eroding support for a plan that could achieve something (which is better than nothing)" Your own quote included the lines "better than nothing" and "better than I was expecting" - almost like qualifiers to his analysis.

The Lambert quote, and the whole "business uncertainty" meme, reminds me of Vegas gamblers who once played the house odds (competitive capitalism) but now don't want to sit down at a table without having their losses covered (monopolistic rent-seeking & corporate welfare).

On the possibility of a terrorist attack, I'd counsel mocking incredulity.

Finally, on your post re: civil war
& the chance thereof - I'd say that yes, the sooner the better. Reality is losing the propaganda war, and the more desperate people get the more inclined they'll be to embrace exactly the wrong politics at exactly the wrong time. I also sense that there is a real crisis/conflict coming - there is no conflict-free resolution to the economic, political & moral dysfunction we're living through. I suspect that the longer it takes for the conflict to manifest, the worse it will be.
Now, you've got me scared.

I have dear acquaintances in DC right now, scouting the area for a potential job with a government agency, one that rhymes with Schneff-Nee-Bye.
FYI: According to my dear acquaintances all flights out of Baltimore were cancelled or delayed at 9:15ish EDT. They were told it was runway construction.
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