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The Myth of Shovel Ready Jobs, Again

A while back I posted about how Obama was unhappy with the problems surrounding the notion of “shovel ready” jobs. At the time I was taken to task since it was reported as something Obama said but there was no other information such as a date, time, etc. Here is the quote,

The biggest frustration involved infrastructure. Obama said later that he learned that “one of the biggest lies in government is the idea of ‘shovel-ready’ projects.” It turned out that only about $20 billion to $40 billion in construction contracts were truly ready to go. The rest were tied up in the endless contracting delays and bureaucratic hassles associated with building anything in America. [E.A.]–Link

Well now we get this story. Obama is joking about the problems with shovel ready jokes.

While meeting with his Jobs and Competitiveness Council today in Durham, N.C., President Obama cracked wise about one of his administration’s early catchphrases.

Remember “shovel-ready projects.”

Those were construction projects in the 2009 stimulus bill that were supposed to get moving right away — but jobs council members told Obama today that some got held up because of elaborate government regulations and permitting procedures.

“Shovel-ready was not as shovel-ready as we expected,” Obama said.

Whoops. Sorry Brummagem Joe. More here,

President Obama handed GOP operatives everywhere a gift at the Jobs Council meeting today. With a big grin, he noted, “Shovel-ready was not as — uh — shovel ready as we expected.” His remark prompted hearty laughter from others on the panel, including GE’s Jeffrey Immelt.

This was, by the way, one of the complaints about fiscal stimulus spending. That the idea of getting that money spent quickly and on shovel-ready jobs is more of a myth than fact.

Related Posts:

About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research.

Comments

  1. mantis says:

    Some of them were ready to go. There were several projects near where I work, mostly transportation related, that started right away in 2009 and have been completed for a while now.

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  2. jwest says:

    I’m not going to say a word until I see if Steve gets banned for exposing another liberal myth.

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  3. James Joyner says:

    Yeah, there’ve been quite a few of those construction projects in the DC Metro area. Then again, we’ve hardly been hit by the financial crisis.

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  4. PD Shaw says:

    mantis, I have no basis to doubt your story, but one of the key conditions on much of the stimulus spending was the ability of state/local government to document that the projects weren’t already going forward. The feds didn’t want stimululs money to be used to help states cut back on spending.

    My state foresaw these issues and began (months before Obama’s innauguration) to advance and cancel projects so that they could transfer as much of the state budget onto the feds as possible. I assume other states “cheated” the system as well. But that was the reality, a shovel-ready project had to be not “too ready,” but completable within the time frame.

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  5. Tsar Nicholas says:

    Funneling a trillion (devalued) dollars into Democrat districts so union droids can fill in potholes in between coffee and cigarette breaks is not exactly the recipe for sustained economic growth. You didn’t need to be Ludwig von Mises to figure that out. You just needed to have a modicum of common sense.

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  6. mantis says:

    mantis, I have no basis to doubt your story, but one of the key conditions on much of the stimulus spending was the ability of state/local government to document that the projects weren’t already going forward. The feds didn’t want stimululs money to be used to help states cut back on spending.

    It indeed may be the case with some of the projects that they were already in the works. The one I was involved with through my job, however, only happened because of the stimulus.

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  7. hey norm says:

    So apparently the President of the United States is resposible for the inherent “…endless contracting delays and bureaucratic hassles associated with building anything in America…”
    I guess it’s better just to cut taxes – the answer to every single possible economic condition.

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  8. James says:

    Our governator was one of the most prominent governators to hype the “shovel-ready” catch phrase. And for the past 6 – 9 months, we have been getting almost all of our freeways repaired, repaved, repainted, cleaned up. A huge undertaking, as you might imagine, here in Southern California. And very much needed and appreciated. The crews work all night long every night on this huge undertaking so as not to exacerbate undue traffic tie-ups during the day.

    We also had a 20,000 pothole fixing weekend here in LA. Nice!

    In order to get these “shovel-ready” projects going, the plans have to be drawn up — an assessment of the need to repave OR rebuild the roadbed and repave, the sequence and manpower involved in each subproject, the material must be procured through a bidding process, manpower and equipment must be allocated, with additional hiring and training (which is the point of the stimulus) of labor, and procuring or leasing of additional equipment (with a competitive bidding process), and whatever else I’m not thinking of off the top of my head that is involved in managing major infrastructure projects of this magnitude.

    As for “shovel-ready” I imagine that CalTrans had a priority list of California Highways that needed work for the next 20 years. But that doesn’t mean that crews are ready to roll out the next day or the next month to do the actual work. And you really wouldn’t want it any other way, right? You’d want them to procure the right kind of material for the roads, through competitive bidding process? It takes a while for the winning bid to produce the material. You’d want an extensive assessment of the roads because you wouldn’t want to pave over roads where the roadbeds are bad, right? Or you wouldn’t want to rebuild roadbeds on freeways that just needed repaving and repainting, right? And you’d want a fair hiring process and adequate training for the crews, no?

    People, including Obama evidently, don’t really have an idea what is involved in getting a major project rolling. I guess it’s easy and facile to shake one’s fist at delays due to government “contracting delays” and “regulation” and disparage all this and call it a big lie, a big waste of time and all the rest. But tell me what the alternative is to planning and prioritizing the projects, sending non-governmental procurement out to competitive bidding, hiring and training qualified crews.

    And please, dispense with the red herring of government boondoggles and ineptness. I acknowledge and know it happens. Most times, it doesn’t happen. Those are the ones you don’t hear about, you just drive along on your freshly rebuilt freeway to your job on pot-hole free streets, and don’t think about how that all came about.

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  9. mantis says:

    you just drive along on your freshly rebuilt freeway to your job on pot-hole free streets, and don’t think about how that all came about.

    It’s all the magic of the free market, baby! Unicorns and rainbows!

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  10. Hey Norm says:

    James….
    Well played.

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  11. James Joyner says:

    @jwest: “I’m not going to say a word until I see if Steve gets banned for exposing another liberal myth.”

    Note that most of the OTB authors either opposed the stimulus outright or expressed very serious misgivings about how it was deployed. I don’t think any of us thought that a WPA-type approach was applicable to a modern economy that competes with low-wage imports.

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  12. mantis says:

    I don’t think any of us thought that a WPA-type approach was applicable to a modern economy that competes with low-wage imports.

    Can we import highways?

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  13. Steve Verdon says:

    People, including Obama evidently, don’t really have an idea what is involved in getting a major project rolling. I guess it’s easy and facile to shake one’s fist at delays due to government “contracting delays” and “regulation” and disparage all this and call it a big lie, a big waste of time and all the rest. But tell me what the alternative is to planning and prioritizing the projects, sending non-governmental procurement out to competitive bidding, hiring and training qualified crews.

    Actually I do, and that was one of my complaints. It is not unheard of for say a transmission line in CA to take years of siting, planing, and such before ground is even broken. So, you go into recession in 2007, by Summer of 2009 the recession is over, and a year after that then you start construction on the transmission project…if you’re lucky. A bit late to keep unemployment from rising well past the projected 7% to over 9%.

    The lie is that people were spewing this nonsense about shovel ready jobs in the first place. This isn’t a freaking state secret, in fact, I’d argue most people know this.

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  14. mantis says:

    It is not unheard of for say a transmission line in CA to take years of siting, planing, and such before ground is even broken.

    You might want to wait until ground is broken to do any planing.

    Sorry, couldn’t resist.

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  15. ponce says:

    It’s not “shovel ready” jobs that are in short supply, it’s talented American managers.

    How long will America have to suffer with the current crop of nepotism hires and dimwitted “executive” herd animals?

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  16. James says:

    This isn’t a freaking state secret, in fact, I’d argue most people know this.

    I actually don’t believe they do know it. And mainly because they have no experience with major projects, and don’t think through all of the necessary steps of a project before spouting off. When you walk someone through it, they get it — at least those who are not wedded to their rigid ideology.

    Of course, in your example, the siting, planning, and engineering also requires human labor — surveyors, geologists, project managers, engineers. The pole-climbers and cable layers are just the end of the line. Most of that is contracted work, but you need contract monitors and rfp developers and reviewers too. That’s stuff that people don’t see, but it’s necessary work.

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  17. You have pot-hole free streets? I wonder what they would cost in the Midwest?

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  18. PD Shaw says:

    @mantis, I certainly wouldn’t argue that there were not good projects advanced with stimulus money; I just don’t think the conditions and the window of time (shove-ready, but not-too ready) were ever conducive. In my state, we largely went with re-surfacing existing roads, even those as I’m told by a roads supervisor, didn’t reallly need it. We prioritized money over long-term value.

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  19. James says:

    It’s not “shovel ready” jobs that are in short supply, it’s talented American managers

    I don’t think there is a shortage of talented managers in our country. Not at all.

    You have a good point about the nepotism, but that’s dependent upon whom you are electing to office at the local level. It doesn’t have to be that way. I’d venture to say that most voters don’t pay any attention to who is on the ballot at their local level, and go into the vooth with blindfolders on, too lazy to do their due diligence. It helps to have a decent local news source. But ultimately, voters get the local government they vote for.

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  20. James says:

    You have pot-hole free streets? I wonder what they would cost in the Midwest?

    Yeah we commie liberals lurves us some good infrastructure!

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  21. James Joyner says:

    @mantis: “Can we import highways?”

    No. But I don’t think the solution to our economic turmoil is to turn large numbers of people into semi-skilled laborers doing temporary, make-work jobs. That made sense in the 1930s, when most of the economy was based on low education, low skill labor. An out-of-work manual laborer was well utilized in a WPA job. A laid-off white collar worker isn’t exactly advancing his future in doing make-work road construction.

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  22. john personna says:

    Ah, but wasn’t one of the complaints about “shovel-ready projects” that the recession would be over before they got done?

    Now in our true, and not fictional, June 2011, we have a soft spot in the economy, contracting spending, and no hope whatsoever of new stimulus.

    If a project were hitting the streets now, would it be so bad, and if so why?

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  23. PD Shaw says:

    @James, you make several good points on the limitations facing these projects, though I think they ultimately support Steve Verdon’s basic premise. I would add that compliance with prevailing wage laws also slowed the process.

    Also, I don’t think one has to conclude it’s all government boondoggles and ineptness. I think a country this size and with it’s structure is going to have a problem spending a lot of money quickly and effectively. I think the reason my state was resurfacing roads that really didn’t need it is road construction is supervised by regional departments and the decision was made to spread out the projects to max out each regional department, as opposed to decide which projects were most needed and move the needed employees to the jobs (with either increased overtime/mileage costs or union issues).

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  24. James says:

    @PD Shaw:

    Please explain exactly how compliance with prevailing wage regulations “slowed the process.” I can’t see how.

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  25. jwest says:

    “Can we import highways?”

    Why yes, yes you can.

    Not the actual highway, but the technology and methods that could make roads that last 100 years instead of 5. The Autobahn is an example of how roads should be built, with proper drainage, the correct base materials, slope, compaction, etc. We could have roads that last virtually forever except for one thing – government.

    Politicians want as many miles of new looking road as possible, especially prior to election time. Bureaucrats need to please the politicians, engineers take their cues from the bureaucrats. Lay it down fast and dirty and have the barrels put away by Election Day.

    Years ago I purchased the patent and tooling for highway expansion joints that operate at a 45 degree angle to the direction of traffic. It allowed each concrete slab to slide during expansion instead of crunching into the adjacent slab. Would any highway department try it? Not on your life. In a conversation with one of the country’s largest road builders, he told me about a proposal he had made in Illinois to pay for an entire freeway himself, from initial construction to ongoing maintenance, with the state making payments each year for its use. The overall cost to the state would have been a substantial savings in the long run, but the politicians recognized that they could patch and duct tape what they had to avoid immediate expense and wait for someone else’s administration to take the big hit.

    This story can be duplicated on every expenditure throughout every government entity from the feds to your local township. The only thing standing in the way of doing things in the best interest of the taxpayer is the character of the people we put in office.

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  26. ponce says:

    I don’t think there is a shortage of talented managers in our country. Not at all.

    Can you imagine the great American managers who put together, say, the Normandy landings, looking at the today’s group of entrenched cockroaches who spend their days figuring out how to keep their jobs and boost their salaries?

    China executes corrupt executives after very short trials.

    How can we compete against a system like that?

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  27. Rob in CT says:

    jwest,

    That’s an interesting story. All I can say is that type of short-term, penny-wise/pound-foolish thinking is alive and well in the corporate world too. It may be a cultural thing more than a government vs. private sector thing..

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  28. jwest says:

    Rob,

    Although I agree that the same type of “cover your ass” and “it’s not my money” attitude exists in the corporate world, in government the problem is greater by orders of magnitude.

    The difference is that even in the largest corporations there exists a culture that still understands the risk/reward concept, which is unknown in government. Because of this, there is absolutely no incentive in the public sector to do anything differently than in the past. In fact, no rational person working in government would ever contemplate, let alone propose changes that might jeopardize their next scheduled promotion, their pension or the possibility of getting their son-in-law an entry level job.

    People rarely work actively against their own self interest.

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  29. Steve Verdon says:

    mantis,

    You might want to wait until ground is broken to do any planing.

    Sorry, couldn’t resist.

    That is the point mantis, but either you don’t realize it or something. These things all take time. The very notion of shovel ready jobs was a lie. Even speeding things up it would probably take a year at least for sizable projects.

    James,

    I actually don’t believe they do know it.

    Right, government turns on a dime. It is fast and efficient. Sorry no. People know that. That is why the phrase, “I’m from the government and I’m here to help,” is considered a snarky comment. They may not know the details, but they know government is slow and ponderous.

    And Obama, et. al. absolutely know it, and I’d even wager that the knew it back when they made the claims. Hence the lie.

    No. But I don’t think the solution to our economic turmoil is to turn large numbers of people into semi-skilled laborers doing temporary, make-work jobs.

    No kiddin, look at Japan. Small fishing villages with enormous suspension bridges with virtually no traffic. Mid sized towns with multiple international airports. They did all this and still had a lost decade. So….lets copy it? Really?

    Look, over there, they are doing something. It ain’t working, but f*ck it lets do it too!

    Ah, but wasn’t one of the complaints about “shovel-ready projects” that the recession would be over before they got done?

    Now in our true, and not fictional, June 2011, we have a soft spot in the economy, contracting spending, and no hope whatsoever of new stimulus.

    Like I said, Japan had lots of public works programs. In fact, I’ve seen comments it doesn’t matter what we build. We could build 5 pyramids out in the middle of nowhere that serve no purpose and it would be a good thing.

    China executes corrupt executives after very short trials.

    Yeah, if only we had an authoritarian form of government everything would be swell.

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  30. James says:

    @Steve,

    Pardon me. I thought you posted this to host an intelligent debate. My mistake. Rant on.

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  31. mantis says:

    That is the point mantis, but either you don’t realize it or something.

    No, I was just making a typo joke. Planing vs. planning.

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  32. mantis says:

    Not the actual highway, but the technology and methods that could make roads that last 100 years instead of 5.

    Someone still has to build it.

    The Autobahn is an example of how roads should be built, with proper drainage, the correct base materials, slope, compaction, etc. We could have roads that last virtually forever except for one thing – government.

    You do realize the German autobahns are built and maintained by their government, right?

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  33. hey norm says:

    “…Years ago I purchased the patent and tooling for highway expansion joints that operate at a 45 degree angle to the direction of traffic. It allowed each concrete slab to slide during expansion instead of crunching into the adjacent slab. Would any highway department try it? Not on your life…”
    now we know the source of jwest’s blind inexplicable rage – the government wouldn’t put him on the dole. it’s proto-typical far right extremism…they are not really for small government at all…it’s just that they are only willing to pay for the government that benefitsthem. finally it is clear. thank you.

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  34. hey norm says:

    mantis – the autobahn is also extremly regulated.

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  35. wr says:

    jwest — The risk/reward calculation in corporations? Quick, name three CEOs who have actually faced any risk in the last decade. They gamble their stockholders money, when they lose they cash out with a golden parachute in the tens of millions. Unless they work in the banking industry, in which case they merely stick the taxpayers with the losses.

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  36. wr says:

    hey norm — You don’t understand. The only proper role of government is the one that will shovel cash at the “conservative” who is speaking. That’s in the Constitution. So if jwest has the rights to the fountain pen that writes under whipped cream, the only proper role of government is to write documents under whipped cream.

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  37. john personna says:

    Like I said, Japan had lots of public works programs. In fact, I’ve seen comments it doesn’t matter what we build. We could build 5 pyramids out in the middle of nowhere that serve no purpose and it would be a good thing.

    We never went that far, and now we are pulling back.

    In fact, we get to see how it works the other way, with a fall in aggregate consumer demand coinciding with a decline in government spending.

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  38. mattt says:

    Along my regular commute in the SF Bay area we have at least one major project – an expansion of the Highway 24 tunnel through the East bay hills – that’s been touted as a stimulus success story.
    http://en.wikipedia.org/wiki/Caldecott_Tunnel

    But we also had several other major rebuilding and repaving projects in the area – such as the sorely needed repaving of 20-odd miles of 6/8 lane I-80 – that were already underway when the economic crash hit, that had been halted or were reportedly about to be halted as the state ran out of money. Federal money got those projects restarted or kept them going, and I bet those don’t get counted in the $20 billion. Likewise, the jobs of workers on those projects already underway probably don’t get counted as being “created” by the stimulus, but they certainly were saved by it.

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  39. Eric Florack says:

    So in reality, Obama’s lie is two-fold;

    1: The jobs were far from shovel ready, and thereby created almost no jobs at all, even in the government paid positions…

    2: Being the government jobs Obama was really talking about, it doesn’t help the economy, which is what the whole thing was supposed to be about to begin with. Government handouts don’t boost the economy as a whole, period. Only private sector jobs do that.

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  40. Drew says:

    Steve Verdon made the single most important point in this whole thread: we are following the Japanese policy model. It didn’t work there, its not working here. Bang our heads on the wall some more? Super.

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  41. Duracomm says:

    The stimulus did a very good job of preserving government jobs. What it failed at was actually stimulating the economy.

    Who is The Stimulus Money Stimulating? Teachers

    Based on the Recovery.gov data, more than two third of the 594,754.3 jobs “created or saved” with the stimulus funds were “created or saved” in the Department of Education (see chart).

    Basically, what the administration meant by shovel ready projects was funding for your next door teacher.

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  42. Duracomm says:

    Obama and the democrats regulatory bloat is causing worse damage than their failed stimulus.

    A good example of this is the regulatory orgy by Obama’s FDA.
    Actions by Obama’s bureaucrats in the FDA is going to get people killed.

    The best thing obama could do for the economy would be to rein in his regulatory goons before their actions:
    1. Cause more damage to the economy
    2. Start getting people killed.

    Drug Shortages

    Doctors, hospitals and federal regulators are struggling to cope with an unprecedented surge in drug shortages in the United States that is endangering cancer patients, heart attack victims, accident survivors and a host of other ill people.

    Several drug shortages (e.g., concentrated morphine sulfate solution, levothyroxine injection) have been precipitated by actual or anticipated action by the FDA …Other regulatory barriers include the time for FDA review of Abbreviated New Drug Applications (ANDA) and supplemental applications,

    For example, a drug manufacturer must get approval for how much of a drug it plans to produce, as well as the timeframe.

    If a shortage develops (because, say, the FDA shuts down a competitor’s plant), a drug manufacturer cannot increase its output of that drug without another round of approvals.

    Nor can it alter its timetable production (producing a shortage drug earlier than planned) without FDA approval.

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  43. john personna says:

    We were all talking about the Japanese example in 2008, Drew. And as this example shows, the Fed thought it was taking a different path:

    Japanese banks were the biggest victims of the country’s real estate bust. They were in danger of insolvency, yet Japan’s central bank was slow to intervene. Eventually, in 1995, the Bank of Japan began to cut interest rates, and today they are near zero percent. But by then the economic damage already had been done.

    Among the Bank of Japan’s critics was a prominent Princeton University economist, who blamed “exceptionally poor monetary policymaking” for the country’s protracted malaise. The central bank’s failure to lower interest rates in the early 1990s ultimately drove the economy into a deflationary death spiral, according to the Princeton academic.

    That economist was Ben Bernanke, now chairman of the U.S. Federal Reserve. Bernanke has clearly taken the lessons of Japan to heart. The Fed has twice cut short-term interest rates sharply, lowering its benchmark rate to 3 percent, and suggesting that it is prepared to lower rates yet again. In addition, the Bush administration hopes the government’s economic stimulus package — including tax rebates for families and tax breaks for businesses — will help boost the faltering economy.

    It seems odd, at this late date, to choose some other “bit of match” and call our solution Japanese on that basis.

    (Duracomm, if one third of 594,754.3 jobs were lost in education, would the country be better off?)

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  44. john personna says:

    BTW, Drew and Steve, how aggressive were you on requesting action in 2008?

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  45. john personna says:

    Also, a pretty fair summary by Tyler Cowen of where we really are in June 2011:

    Another look at why both AD and AS matter

    I suggest a slightly more complex model. During the financial crisis the American economy took a big AD [aggregate demand] hit due to debt overhang, falling asset prices, unemployment, imperfect monetary policy, credit contraction, and several other factors. After the peak of the crisis there were massive layoffs, largely because of these AD problems, toss in an increase in the risk premium and perhaps higher fixed costs of employing people. A lot of the labor market problems from this hit still have not been cleaned up, and furthermore with lower net wealth many of these jobs are never coming back, with or without monetary stimulus.

    Now fast forward. These days, the layoffs are no longer so frantic, but the rate of new job creation is slow. Some of the unemployed (not all) could find new work by moving to North Dakota or Australian mining communities, but few of them will do so, mostly for the obvious reasons. They are waiting for good, new jobs in areas they are willing to live in. But slow underlying rates of innovation mean slow job creation and so many of these unemployed continue to wait. It also means a very low quit rate, which we have observed too, because employed workers can’t so easily step into new jobs.

    The economy still has a problem with weak AD. The economy also has an ongoing problem from weak AS. Both are true, though you won’t see this if you think those two AD and AS [aggregate supply] curves sum up the whole picture.

    So, this whole thread is talking about the slowness of shovel ready projects, while Cowen (hardly Krugman) tells us that we still have a problem with AD.

    Go figure.

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  46. Duracomm says:

    John Personna said,

    (Duracomm, if one third of 594,754.3 jobs were lost in education, would the country be better off?)

    That just shows that “shovel ready jobs” was a convenient myth obama and his supporters used to sell his spending program.

    It would have been politically toxic for obama and his supporters to tell the truth.

    That they were going to use federal tax dollars to bailout fiscally irresponsible states.

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  47. john personna says:

    So … you think we should have fewer people working in education?

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  48. Steve Verdon says:

    You don’t understand. The only proper role of government is the one that will shovel cash at the “politician” who is speaking.

    There fixed it for you wr.

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  49. Drew says:

    “So … you think we should have fewer people working in education?”

    Yes, but I digress.

    The Japanese economy is an excellent empirical test (as good as it gets in the imperfect world of an economic lab) in that it is 1) large, 2) modern, 3) it suffered a credit bubble collapse in public equities and housing, 4) it attempted very robust spending stimulus, primarily infrastructure – dare I say, “shovel ready projects” – to the point of bankrupting its economy…………….

    Guitner was in Japan when all this happened, and its obvious he’s running the Japanese Student Body Left model here.

    We know how it worked out in Japan. We see how its working out here. If not for massive monetary (and inflation producing) stimulus, our equity (better: risky asset) markets here would be in the tank as well.

    You can go narrow on me if you like JP. But back in the real world where really only a couple things matter: GDP growth, unemployment rate, inflation and personal income growth matter, this really sucks, with no end in sight.

    Better to take our medicine, rev up the private sector engine and grow out of this problem. As the phrase goes: leaning on government as the solution is a weak read indeed.

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  50. Duracomm says:

    john personna said,

    So … you think we should have fewer people working in education?

    Do you think the stimulus would have passed if it was sold as what it turned out to be?

    A bailout of profligate, irresponsible state governments who spent far beyond their means.

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  51. john personna says:

    The main thing I’m objecting to, Drew, is this idea that some wake up in June 2011 and notice certain things, and only those things, to build a narrative.

    I asked you and Steve about 2008, principally because 2008 was important … though I’m sure you and Steve were too ;-)

    In big picture we had a property bubble and credit crisis that echoed Japan, and we were all talking about this as it happened, through the 2007 crest and into early attempts to address it.

    Duracomm, I sense contradiction. The economic conditions of the states cause them to reduce spending, reducing the effective size of the federal stimulus. Like many on the right, you seem to the federal stimulus both for being smaller, and for existing. So strange.

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  52. john personna says:

    you seem to [fault] the federal stimulus both for being smaller, and for existing. So strange.

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