Maybe The Economy Won’t Return To Normal

What if this is the new normal?

Economy Heartbeat

While the economy is certainly in better shape than it was when President Obama took office in January 2009, there’s no denying that the recovery we’ve been in for the past six years has been less than ideal and certainly less robust that previous recoveries from equally deep recessions. While one can point to many economic indicators, such as stock prices, corporate profits, and Gross Domestic Product growth, that show that the economy has been doing fairly decently over the past six years, there are plenty of other indications that things aren’t as good as they should be, at least based on prior experience. Perhaps the best example of that over time has been the jobs market, which has taken much longer to recover than virtually any other sector of the economy. Unemployment rates were persistently high for several years after the “recovery” supposedly began and, until very recently, average job growth has been anemic and sporadic. Even some of the good news, such as a lower overall unemployment rate, is merely a mask for the reality that participation in the labor force is at levels unseen since the early 1980s and that the retirement of the Baby Boom Generation can’t account for all of the people who have seemingly given up looking for a job.Wage growth has remained rather stagnant as well.

Both sides of the political aisle blame each other for all of this, of course, but as Tyler Cowen notes, the truth may be far more complicated:

In manufacturing, for example, Ford, Chrysler, General Motors, Caterpillar and Navistar (formerly International Harvester) all pay many of their new workers much less. In some of these two-tier structures, the new wage may be as little as half the old one. In addition to this rapid change, the companies also seem to be reducing the ranks of highly paid workers through slow attrition.

Here is another change that might be a broader sign of a pending reset: A heavy burden of adjustment in the overall labor market is being borne by the young. Wages for the typical graduate of a four-year college have dropped more than 7 percent since 2000, and the labor force participation rate of the young has been falling. One consequence is that young people are living at home longer and receiving more aid from their parents. They also seem to be less interested in buying their own homes.

All of these factors could indicate that our economy is evolving into one that will offer far less favorable long-run wage prospects. Much research has shown that the effects of a recession can be pernicious for decades: Earning a lower wage in earlier years is predictive of lower wages through the rest of one’s career. While we are seeing economic problems for the relatively young, they will eventually become dominant earners in the economy and the major force behind broader statistics.

In short, are these economic problems transitory, or are we glimpsing the beginnings of a grimmer future?

If a reset is underway, we might have to accept that public policy cannot reverse it easily. Once unsustainable economic structures begin to fail, it takes a significant improvement to make them viable again. Yet because of the difficulty of making major changes under our current political alignment, most new government policies today are no more than changes at the margin. Perhaps the most basic problem is that it is difficult to be sure when a reset is underway, and it is harder yet to raise public alarm about changes that seem to be gradual and slow.

Cowen goes on to note that trying to fight this kind of structural change in the economy may be counterproductive in the long run by citing the contrasting examples of Germany and France. Both nations were hit with the same kind of structural changes leading to lower wages that we seem to be going through now. The French responded by trying to fight that trend with government mandates that preserved high wages and generous benefits for workers. In return, they’ve gotten a mostly stagnant economy, high rates of unemployment, and a high degree of economic pessimism. The Germans, on the other hand, largely accepted the change and, rather than fighting it, adjusted fiscal and economic policy in a way that accepted its reality. Germany’s economic, of course, is among the most robust in Europe, and while there are far more differences between the two countries than this, it’s hard to deny the fact that France seems to have done more harm than good by trying to fight change while Germany has largely weathered the storm successfully. That, perhaps, should be a lesson for other nations.

Here in the United States, of course, the answer to economic problems largely depends on which party you’re listening to. Democrats will tell you that fiscal stimulus and direct government investment and target industries is what’s needed to turn the economy round. Republicans will tell you that tax cuts and cutting back on regulations are the answers. There may be some truth in both positions, although the value of further economic stimulus seems rather dubious given the measurable impact of the stimulus package that was implemented at the beginning of the Obama Administration. If it’s the case, though, that what we are seeing is a fundamental structural change, then there may not be much we can do that will have an impact. More importantly, as the French learned, fighting the tide may end up causing more damage.

FILED UNDER: Economics and Business, General
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. al-Ameda says:

    There may be some truth in both positions, although the value of further economic stimulus seems rather dubious given the measurable impact of the stimulus package that was implemented at the beginning of the Obama Administration.

    The Obama Administration’s policies that combined stimulus with job saving bailouts in the auto industry, and TARP capital to detox bank balance sheets, plus active quantitative easing by the Federal Reserve is exactly what prevented the economy from going into a deep recession in 2009.

    The 2008 crash caused the loss of nearly $18 Trillion, or 25% of the wealth of America’s households and businesses. It has taken nearly 6 years but we’ve finally recovered most of that loss. Anyone who thought that the Great Recession of 2008-09 would be over quickly, like previous recessions, and soon thereafter it would be business as usual was wrong – and that includes nearly the entire conservative economic establishment.

  2. Davebo says:

    there’s no denying that the recovery we’ve been in for the past six years has been less than ideal and certainly less robust that previous recoveries from equally deep recessions.

    You mention previous recoveries, which ones, from “equally deep recessions” are you referring to?

    Frankly your statement “one can point to many economic indicators, such as stock prices, corporate profits, and Gross Domestic Product growth, that show that the economy has been doing fairly decently over the past six years, there are plenty of other indications that things aren’t as good as they should be, at least based on prior experience.” is begging the question of what multiple prior experiences you are referring to.

  3. Slugger says:

    There are a billion people in China and a billion more in India. Do any of you think that there is no one in that two billion that can’t do your job and for less money? Learn to live a more spiritual and socially fulfilling life. You will not be getting more material stuff.

  4. Ron Beasley says:

    @Slugger: And there are millions of Industrial Robots that can outwork them all – that’s the real problem.

  5. C. Clavin says:

    You are over-thinking this. It isn’t rocket science. The public sector is off by well over 2 million jobs on net. Add 2 million to the job roles and see what happens to the economy. It’s not stimulus…it’s normal growth. If the public sector grew under Obama the way it always does under Republicans…we’d be back to normal. Period. End of story.
    http://www.nytimes.com/interactive/2012/05/04/business/economy/off-the-charts-shrinking-government.html?ref=economy&_r=0
    And that chart is old…so the problem is worse now.
    You Republicans want to shrink Government…but don’t like the effects. You got what you want. Stop complaining.

  6. michael reynolds says:

    The last time we had a downturn this significant we finally got out of it by war-profiteering on a massive scale that allowed us to largely strip the British Empire of its gold reserves. Then, eventually, we mobilized for the war itself and spent enormous amounts of taxpayer money. When the war was over we were the only intact major power on earth.

    So far we’ve avoided another WW2. So I’ll take this half-assed recovery over that robust one. And, as people have pointed out up-thread: what’s the other example of a massive downturn?Because in modern history theres been the Great Depression and the Great Near-Depression and nothing else has come close.

  7. Rob Prather says:

    there’s no denying that the recovery we’ve been in for the past six years has been less than ideal and certainly less robust that previous recoveries from equally deep recessions.

    This statement is the type that really irks. me. It is at best deeply misleading and at worst false.

    First, we haven’t had a recession as deep as the Great Recession since the Great Depression.

    Second, some incredibly important context is missing. I doubt anyone can name a single recession which was precipitated by a financial crisis that had a robust, v-shaped recovery. In fact, there appears to be some literature that suggests that this is indeed the case.

    As for v-shaped recoveries, the 1981-82 recession is the last one we’ve had. There’s a simple reason for it: the Fed, to kill inflation and inflationary expectations, had jacked short-term interest rates up close to 20%. When they dropped them the economy roared.

    As for whether additional stimulus would work, returning to normal levels of infrastructure spending would be great, and expansionary, right now but the Republicans can’t even fund the highway fund more than a few months at a time because they have to protect tax cuts for corporations and rentiers.

    Also, Doug, you seem too sure that the stimulus didn’t have a measurable impact. I disagree. If nothing else, providing aid to states stopped them from laying off more employees and the temporary cut in payroll taxes put money in peoples’ pockets.

  8. Jack says:

    There may be some truth in both positions, although the value of further economic stimulus seems rather dubious given the measurable impact of the stimulus package that was implemented at the beginning of the Obama Administration.

    Porculus did more to harm the economy than the recession itself. Beyond the occasional sign on a highway, there was no evidence to the average taxpayer that anything was being done.

    The only shovel ready project when the Porculus passed was Ted Kennedy.

  9. Tillman says:

    @Davebo: First thing I thought when I read that sentence: “Wait, isn’t the Great Recession always compared to the decade-long Great Depression?”

    The Germans, on the other hand, largely accepted the change and, rather than fighting it, adjusted fiscal and economic policy in a way that accepted its reality.

    Yeah, those moves were leftward changes to its social safety net. European politics is far more leftist than American politics. Our center is their right. I can assert this since you didn’t link to an article talking about Germany’s policy changes. You just asserted they did something right (not right right, but correct right), and I’m just going off my knowledge of European social policy in general.

    By the way, fairly certain the moves Germany made in response to recession were similar to moves the Obama administration wanted to enact into law, like the American Jobs Act which was filibustered into dust except for a few components that were watered down.

    By the way, Mr. Mataconis, you’re aware the main criticism of the stimulus is that it was inadequate to address the carnage of the Great Recession, right? Romer was the correct one in terms of the economics, but it was political expediency (and early hope for bipartisanship, now since more dust in the wind) that gave us a half-assed program full of unnecessary tax cuts.

    I’m really just repeating conventional wisdom here. No thought required.

  10. Just 'nutha ig'rant cracker says:

    @al-Ameda:

    The 2008 crash caused the loss of nearly $18 Trillion, or 25% of the wealth of America’s households and businesses. It has taken nearly 6 years but we’ve owners of capital have finally recovered acquired most of that loss.

    FIFY.

    Now, on to Doug’s amazing discovery of Austrian Economics: At the time of the Nixon Stagflation, economists on the right were saying that 6% unemployment was the new level of optimum production. It took 20 years, but finally we elected a Democrat (whom I did not support BTW) who either lucked out or was capable (don’t know which) creating some policies that lowered the unemployment rate to about half of the old optimum production number. Now we have the next generation of the Nixon band of economic idiot savants declaring that there are only bad days ahead and its best not to do anything lest we make things worse. Forgive me if I am not impressed.

    But with any luck for Doug, the GOP clown will become the next occupant of 1600 Pennsylvania Avenue and Doug will be able to explain the sagging employment numbers using the line used by the right back in the day:

    The people who are leaving the job market are gone because they never wanted to work in the first place.

  11. Tillman says:

    @Tillman: A note on the bipartisanship — at least three centrist Democratic Senators who saved the stimulus from cloture insisted that it be beneath $800 billion. Those three (Mark Begich, Mary Landrieu, Ben Nelson) are no longer with us (in office).

  12. Pinky says:

    All of these factors could indicate that our economy is evolving into one that will offer far less favorable long-run wage prospects. Much research has shown that the effects of a recession can be pernicious for decades: Earning a lower wage in earlier years is predictive of lower wages through the rest of one’s career.

    That’s just sloppy thinking. If we’re supposing a structural change in how the economy works, then we can’t rely on past decades’ patterns. That’s saying that the old rules don’t work any more except the bad ones. I’m not saying that there will be a new life-cycle earnings pattern, but if younger people are more educated and likely to be healthier for more years, it’s very possible.

  13. C. Clavin says:

    @Jack:

    Porculus did more to harm the economy than the recession itself.

    Please provide a link to a credible source that backs up this claim. Until you do I’ll just assume this is another stupid f’ing thing you believe that is dead wrong.

  14. Rafer Janders says:

    there’s no denying that the recovery we’ve been in for the past six years has been less than ideal and certainly less robust that previous recoveries from equally deep recessions.

    There have been no “equally deep recessions” since the Great Depression, so the above statement is nonsensical on its face.

  15. Jack says:

    @C. Clavin: Considering all of the “Green” companies that took stimulus money then folded like a cheap suit:

    “The Obama administration gave more than $700 million in grants and guaranteed an additional $500 million in loans to publicly traded green energy companies through its 2009 stimulus package. If Obama had invested all that money in a Standard & Poors index fund of the top 500 publicly traded companies, his investment would have seen a 73 percent return since he took office. In contrast, the Obama “green energy” stimulus portfolio has fallen by 78 percent — performing about five points worse than green energy companies that didn’t get subsidies.”

    http://www.washingtonexaminer.com/examiner-editorial-insiders-get-rich-on-obamas-green-energy-stimulus/article/2512237

    And that was just one example. There needs be no more evidence presented. If you don’t believe wasting billions, effectively throwing it down the crapper, did more harm than good to the economy than the recession itself, then you are not intellectually honest, cupcake.

  16. Stan says:

    Every time I read Cowen’s blog I’m amazed at the difference between economics and physics. F = ma and PV = nRT in the Netherlands, Germany, the US, Canada, and Australia, but somehow economics works differently in the US. The immigration rates for the first two countries in my list are only slightly less than ours and Canada and Australia actually have higher percentages of foreign born residents than we do. All of the countries I’ve listed face competition from China and India, and all face the challenges posed by the revolution in information technology. All are mature, developed economies. Yet only in America do we see fast food workers who need government assistance to survive and corporate executives who make 300 times the median pay in their companies. Why is the Australian minimum wage twice as large as ours? Why do McDonald’s workers in Copenhagen make more than twice as much money as their brothers and sisters in Chicago? This ain’t economics, folks, it’s corporate greed. And people like Tyler Cowen are enablers.

  17. Ebenezer_Arvigenius says:

    And that was just one example. There needs be no more evidence presented. If you don’t believe wasting billions, effectively throwing it down the crapper, did more harm than good to the economy than the recession itself, then you are not intellectually honest, cupcake.

    Your economic illiteracy is showing.

  18. Rob Prather says:

    @Jack: It’s telling that all of the comments leading up to yours discuss economics and you fall back on talking points that make no sense. Saying the stimulus was worse than the Great Recession (we had a 9% annualized drop in GDP one quarter) is idiotic.

  19. C. Clavin says:

    @Jack:
    That is nonsense which doesn’t begin to back up your claim. Plus its an editorial from the uber right wing Washington Examiner…hardly credible. Are you capable of understanding the difference between editorial content and fact based Journalism?
    In other words…you failed.
    Go back to Red State or Hot Air or some other place that believes this crap.
    What a dumb fwck.

  20. Jack says:

    @C. Clavin: If only you could think for yourself instead of spewing left wing rhetoric, you pussy.

  21. Rafer Janders says:

    @Jack:

    If Obama had invested all that money in a Standard & Poors index fund of the top 500 publicly traded companies, his investment would have seen a 73 percent return since he took office.

    You know, you’re right — the stock market has done extremely well under Obama!

    On the other hand, if you’d invested in the same S&P 500 index the day when George W. Bush took office on Jan. 20, 2001, you would have seen your investment drop 40% by the time he left office eight years later.

    You heard it from Jack first; for superior stock performance, vote for the Democrats.

  22. Jack says:

    @Rafer Janders:

    You heard it from Jack first; for superior stock performance, vote for the Democrats.

    Correct, if you still have a job, and can still afford to invest after Democrats have destroyed the economy for the middle and lower class, the stock market is the bomb!

  23. Rafer Janders says:

    @Rafer Janders:

    Actually, let me update: as of the first quarter of 2015, the S&P 500 index has returned approximately 160% since Obama took office. The 73% figure Jack cites is outdated.

  24. Rafer Janders says:

    @Jack:

    Correct, if you still have a job

    When Obama took office the unemployment rate was 7.8%. It is now approximately 5.6%, which is slightly below the historical average (since 1948, the jobless rate has averaged 5.8%).

    The U.S. has 6,400,000 more people employed now than it did when Obama took office, and overall, the economy during his presidency added nearly five times more jobs than it did during the entire eight years under President George W. Bush.

    So what do you mean “if you still have a job”? Just how ignorant are you? Aren’t you ashamed about how easy it is to show you up? And if you’re not, shouldn’t you be?

  25. al-Ameda says:

    @Rob Prather:

    Saying the stimulus was worse than the Great Recession (we had a 9% annualized drop in GDP one quarter) is idiotic.

    Jack and other conservatives believe that if they repeat this – the stimulus and QE were bad, and we should have taken the austerity medicine – long enough, that people will finally come to believe that, at that moment, economic growth was not preferable to an extended recession.

  26. Jack says:

    @Rafer Janders:

    When Obama took office the unemployment rate was 7.8%. It is now approximately 5.6%, which is slightly below the historical average (since 1948, the jobless rate has averaged 5.8%).

    90% of which has gone to illegal/legal immigrants.

    “Government data show that since 2000 all of the net gain in the number of working-age (16 to 65) people holding a job has gone to immigrants (legal and illegal). ”

    http://cis.org/all-employment-growth-since-2000-went-to-immigrants

    Meanwhile 94 million US citizens are no longer in the workforce.

    “Even some of the good news, such as a lower overall unemployment rate, is merely a mask for the reality that participation in the labor force is at levels unseen since the early 1980s and that the retirement of the Baby Boom Generation can’t account for all of the people who have seemingly given up looking for a job.”

  27. Rob Prather says:

    @al-Ameda:

    Jack and other conservatives believe that if they repeat this – the stimulus and QE were bad, and we should have taken the austerity medicine – long enough, that people will finally come to believe that, at that moment, economic growth was not preferable to an extended recession.

    Conservatives these days are a case study in a lack of self awareness. They don’t seem to understand that asking for contractionary monetary and fiscal policies are basically Herbert Hoover’s policies. They have no sense of history — or economics.

  28. Jack says:

    @Rafer Janders:

    The U.S. has 6,400,000 more people employed now than it did when Obama took office, and overall, the economy during his presidency added nearly five times more jobs than it did during the entire eight years under President George W. Bush.

    It’s funny how you cherry pick data. How about looking at the half-million additional jobs lost under Obama for each of 75 months as President compared to newly unemployed Americans under Bush.

    Or maybe we should look at the number of government workers under Obama compared to Bush. Maybe you think making everyone a government worker will somehow improve the GDP.

    No, you want to use every speck of data you can find that presents Obama as your Liberal Messiah, the giver of life, and the taker of wealth…unless you are an Obama donor, of course.

  29. Rob Prather says:

    @Jack:

    Meanwhile 94 million US citizens are no longer in the workforce.

    I don’t know where you got that number from but this link contains a graph showing the changes in the size of the labor force since 2005. It’s gone up.

    Incidentally, we have a labor force of about 160m (civilians only) and a population of about 320m. The difference is retirees, people in school and those who have dropped out. Can you provide a link for that 94m?

  30. Rafer Janders says:

    @Jack:

    Meanwhile 94 million US citizens are no longer in the workforce.

    For god’s sakes, the innumeracy — the US population, total, is something like 318 million people. Take out children under 18, people in grad school and college, the severely disabled, the retired and senior citizens, stay-at-home parents, and poets, and the percent of the population even elibigle to be in the work force is only about 65%, give or take a few percentage points.

    65% of 318 million is 206.7 million. That’s the grand total of people in the US who could conceivably have a paying job. So, according to you, with 94 million out of 206.7 million no longer in the work force, we actually have an unemployment rate of…wait for it…45%?!?!

    Well,that’s an astonishing discovery. You’d think that an effective unemployment rate of 45% would have made the news, somewhere. Hell, even at the height of the Great Depression the unemployment rate never went past 25%. But I guess the MSM just doesn’t want us to know, huh?

  31. Rob Prather says:

    @Jack:

    Or maybe we should look at the number of government workers under Obama compared to Bush.

    We have fewer government employees under Obama than under Bush. You should really provide links for this stuff. People might actually believe you.

    Also, linking to an anti-immigrant group for a employment study is a joke.

  32. stonetools says:

    So Tyler Cowen, a libertarian economist, believes there’s been a reset and cites Germany as the best model for economic recovery and development, eh? Well, let’s see what Germany did in response to the 2008 crisis , as opposed to what you and Tyler Cowen thought they did.
    1. They enacted a substantial fiscal stimulus. It’s important to realize that only a few benighted and illiterate right wingers still believe that fiscal stimulus was not the right response to the 2008 crisis and that it wasn’t helpful. I presume that now Doug has embraced Germany as the right model, he now accepts that fiscal stimulus was the right thing to do.

    2. They established The “Short Work” program. What was ” Short Work?”

    Kurzarbeit literally means “shortwork.” The government compensates part of the wage of an employee when his employer needs to reduce wages and working times in periods of economic distress.

    With its “short-time allowance plus” (Kurzarbeit) and its economic stimulus packages the German government has introduced additional measures to stabilize the labor market.

    This seems to be the opposite of Tyler Cowens ” wage flexibility idea and indeed the opposite of most libertarian remedies at all.
    3. They insisted a ” Cash for Clunkers” program which was larger, In context, than the much derided US program.

    So Germany’s response doesn’t look anything like Cowen’s “reset” idea, in which the government allowed wages to fall sharply as a matter of policy . That just didn’t happen,
    Of course, all this happened within a German economic model that would be a Democrat’s dream-national health insurance, generous welfare benefits, paid family leave,a highly unionized work force, apprenticeship programs for youngsters who want to do vocational work, etc. AFAIK, not once since 2008 did Merkel ever threaten to scrap these benefits as too costly or try to pit the needs of the poor and minorities against the rich and the majority.
    So hey , maybe American libertarians and conservatives could learn something from Ms. Merkel.It’s not what they think, though.

  33. Jack says:

    @Rob Prather:

    I don’t know where you got that number from but this link contains a graph showing the changes in the size of the labor force since 2005. It’s gone up.

    “In what was an “unambiguously” unpleasant April jobs payrolls report, with a March revision dragging that month’s job gain to the lowest level since June of 2012, the fact that the number of Americans not in the labor force rose once again, this time to 93,194K from 93,175K, with the result being a participation rate of 69.45 or just above the lowest percentage since 1977…”

    http://www.zerohedge.com/news/2015-05-08/americans-not-labor-force-rise-record-93194000

  34. David M says:

    @Jack:

    You don’t see the contradictions between complete ignorance about the jobs the stimulus provided, wishing the government had cut more jobs than it has over the last 6 years and then complaining about the declining labor force participation rate? It’s like a greatest hits list of GOP economic incoherence.

  35. Jack says:

    @David M:

    You don’t see the contradictions between complete ignorance about the jobs the stimulus provided, wishing the government had cut more jobs than it has over the last 6 years and then complaining about the declining labor force participation rate? It’s like a greatest hits list of GOP economic incoherence.

    The stimulus did not show a net increase in jobs. That’s why the government kept using the “net jobs increased or saved”, BS line.

  36. stonetools says:

    @David M:

    Arguing with Jack about economics is like arguing mathematics with a guy who believes 2+2=orange.There is no real basis for agreement there. To all those who take up the challenge, though , I salute you. :-).

  37. C. Clavin says:

    @Jack:

    Or maybe we should look at the number of government workers under Obama compared to Bush.

    And the hits just keep on coming…
    First you can look at how past Presidents grew the Government in the link I provided above. Note how the graph for Clinton is flat…Obama declines.
    http://www.nytimes.com/interactive/2012/05/04/business/economy/off-the-charts-shrinking-government.html?ref=economy&_r=0
    As for Federal workers per capita…
    1982 (Reagan) 2.77 million workers 232.1 million population = 11.9 federal workers per thousand
    1990 (Bush41) 3.06 million/249.6 million/12.3 per thousand
    1994 (Clinton) 2.9 million/263.1 million/11.1 per thousand
    2002 (Bush43) 2.63 million/287.8 million/9.1 per thousand
    2010 (Obama) 2.65 million/310.3 million/8.4 per thousand
    Jack’s wrong again. What a surprise.

  38. David M says:

    @Jack:

    The stimulus did not show a net increase in jobs.

    Care to explain how that would even be possible? That a tax cut of almost $300 billion combined with a spending package of around $550 billion would not result in a net increase in jobs?

  39. Rafer Janders says:

    @David M:

    Because argle-bargle, that’s how!

  40. Jack says:

    @stonetools: Arguing with you about economics is like playing basketball with a retard and calling him for double dribbling.

  41. Jack says:

    @David M: Because the government could not find a single job that was created as a result of the stimulus. They couldn’t or they would have touted it to the heavens!

  42. Jack says:

    @C. Clavin: The pederast finally responds.

  43. David M says:

    @Jack:

    You did not answer the question. How would it even be possible for the stimulus not to create jobs?

  44. Jack says:

    @David M: I cannot prove a negative. The stimulus did not create any jobs. The Stimulus web page used the “Jobs created or saved” line. The administration never found a single job created by the stimulus.

    The money was simply wasted.

    Let me guess, I suppose you believe the unemployment percentage never got over 8 percent, like Obozo promised either? Less people believe the stimulus did anything than believe Elvis is still alive.

  45. David M says:

    @Jack:

    I’ll take your continued lack of an actual response as an admission you know your claim that the stimulus did not create any jobs is a flat-out lie.

  46. C. Clavin says:

    @Jack:

    The pederast finally responds.

    Moderators.
    This is beyond the pale. If I knew where to find him I would sue for slander.
    In any case you should ban this guy.
    In the past he accused me of bestiality and called “grumpy realist” a cum dumpster.
    Seriously…get rid of him.

  47. Jack says:

    @C. Clavin:

    What a dumb fwck.

    You poor simple minded fool. You can’t keep your hands off animals and children, yet I should be banned?

    You can’t sue me for slander you idiot. I cannot ruin the reputation of someone lower than whale chit.

  48. Jack says:

    @David M: And I’ll take your simple response as that of yet another Obamabot who truly believes the king has clothes on.

  49. michael reynolds says:

    @Jack:

    I cannot ruin the reputation of someone lower than a glow worms belly.

    You understand that a glow worm is a firefly and the fireflies I’ve encountered (used to get huge numbers when I lived in Tuscany) float along over head level, so that a glow worm’s belly would be several feet over your head. Right?

    I don’t mean to be pedantic, but everyone else has already taken care of eviscerating you.

  50. Jack says:

    @michael reynolds: Ah, yes. The bald geezer wants to jump on the bandwagon. Speaking of pederasts, you still writing kiddie books?

  51. David M says:

    For the non-trolls: Did the stimulus work?.

    For the trolls: even if the stimulus was “wasted”, wouldn’t it still create jobs? The GOP is always saying how tax cuts fix everything, so shouldn’t a tax cut that was almost $300 billion create quite a few jobs?

  52. Rafer Janders says:

    @David M:

    The GOP is always saying how tax cuts fix everything, so shouldn’t a tax cut that was almost $300 billion create quite a few jobs?

    No. Due to some complicated rules of economics, which are entirely to complex to go into here, tax cuts only create jobs under Republican administrations, not under Democratic ones.

  53. Hazelrah says:

    Why do any of you respond to Jack? Seriously. I have never seen the guy argue in good faith. About anything. Yet most of you respond to him with facts or insults. Do you really think either matter to him? Man, thats disappointing.

  54. David M says:

    @Rafer Janders:

    You may be onto something there. I’m not sure it’s possible for tax cuts to cause job growth if the President is a Democrat, as the job creators are probably paralyzed from the liberal economic insecurity and their fear of taxes increasing.

  55. Jack says:

    @Hazelrah: You are wrong. I will debate, just about anything in good faith, right up until others begin personal attacks. Then, and only then do I respond in kind.

  56. David M says:

    @Jack:

    Your first post in this thread was not a good faith argument:

    Porculus did more to harm the economy than the recession itself. Beyond the occasional sign on a highway, there was no evidence to the average taxpayer that anything was being done.

  57. C. Clavin says:

    @Rafer Janders:
    @David M:
    Yeah…kinda weird tax cuts are decimating the economy of Kansas. Whodathunkit.

  58. Jeremy R says:

    @Jack:

    Ha. That Washington Examiner editorial leaves out the best part of Romney’s 2012 green energy investment rhetoric:

    “I had a friend who said, ‘You don’t just pick the winners and losers,’ ” Mitt Romney told President Obama in the first presidential debate. “You pick the losers.”

    In the preceding sentence he predicted Tesla to be a “loser” investment.

  59. LC says:

    Meanwhile, I’m SHOCKED, just SHOCKED, to see Doug ignore every single substantive criticism of his hackneyed post (and not just this post). What is the point of having comments? We get a bunch of people with actual brains and the ability to do basic research debunk everything Doug writes, then a few trolls, then everyone feeding the trolls, then people scolding everyone else for feeding the trolls. It’s become a really predictable cycle. I really wish James & Steve had more time to contribute because the current state of this blog is just dismal.

  60. C. Clavin says:

    @Jeremy R:
    The fact is that the DOE program from the stimulus (which was begun by Bush43) is in the black, financially speaking. That probably hasn’t been on Fox News, Red State, or the Daily Caller so the trolls don’t know about it. How a Government program that has at least broken even hurt the economy is beyond me.

  61. Rob Prather says:

    @Jack: Zerohedge, really? A bunch of gold bugs? You need better sources.

  62. michael reynolds says:

    @Jack:

    I love that you think that will work.

    Here’s every Jack thread:

    1) Jack makes bold statements.
    2) Jack is thoroughly refuted.
    3) Jack begins calling people names.

    This clearly marks you as a mainstream Republican. A Democrat might weakly assume he should check his facts before opening his mouth. But not you. No, you don’t need no stinkin’ facts. You just regurgitate whatever horsesh!t you were fed and then get furious and start flailing around like a panicky toddler who can’t find his binky.

    Proceed. By all means. More Jack, because you know what the purpose of these comment threads are, right? They are a tool used to remind wavering voters that nope, Republicans have not returned to sanity. Every time you open your mouth another undecided voter says, “Yeah, I guess I can stand Hillary after all.”

    Proceed with your valuable contributions.

  63. Jack says:

    @David M:

    Your first post in this thread was not a good faith argument:

    ‘So, I am not allowed to disagree with the stimulus because it differs from your opinion?

    Regardless, it wasn’t a personal attack unless you consider any disagreement with King Obama a personal attack.

  64. stonetools says:

    Krugman on the “structural adjustment” issue:

    A few notes, largely to myself, regarding the renewed push by conservatives to declare our problems “structural”, not solvable just by increasing demand.

    1. That’s what Very Serious People said in the 1930s too. Then the approach of war finally delivered the stimulus we needed, and all those structural difficulties turned out to be imaginary.

    2. Ireland was praised for its wonderful flexibility; it was a shining example of the art of the possible, declared George Osborne. Then, when things went wrong, it was told that it must fix its deep structural rigidities.

    That column was written in 2012. Essentially, “structural issue” is the default position that conservatives fall back on , as opposed to simply admitting that the proper response to the 2008 recession was fiscal stimulus and that the fiscal stimulus should have been greater.
    Apparently, for conservatives, if its a structural issue, then the government can do nothing, either then or now, to accelerate the recovery. That’s wrong, really,even if its a “structural issue”, but it does fit in with the do nothing approach of conservatives for dealing with recession.

  65. Jack says:

    @michael reynolds: And every time you open your mouth you prove you are another Obamabot.

  66. David M says:

    @Jack:

    Good faith arguments: The stimulus would have been better if ‘X’, I would have preferred the stimulus did more of ‘Y’, links to credible news sources talking about how the stimulus could have been more effective or what the impacts were

    Bad faith arguments: porculus, the stimulus did not create any jobs, the stimulus was more harmful than the recession, forgetting about the tax cuts in the stimulus, the stimulus failed b/c the unemployment rate went above 8%, using anecdotes about tiny spending programs to indict the entire stimulus program, etc

  67. michael reynolds says:

    @Jack:

    How did I personally attack you, other than pointing out you’d been eviscerated by others? Your response to that was to call me an old geezer and presumptive child molester.

    So, once again, you’re lying.

    You lose and then you start screeching and flailing and throwing your toys around. Was kindergarten a bad experience for you, is that it? You just never learned to cope with frustration? Or are you just a particularly unimpressive rage-o-holic?

  68. HarvardLaw92 says:

    @Jeremy R:

    In the preceding sentence he predicted Tesla to be a “loser” investment.

    Over the longer horizon he may prove to be correct. I don’t dispute that the company makes some interesting vehicles, but financially it’s held together with duct tape, hemorrhaging cash and exceedingly vulnerable to competition. We won’t even get into the massive (from a potential dilution standpoint) convertibles exposure looming out there just beyond the horizon in 2018 – 2021.

    It remains in business due to the willingness of investors to keep throwing money at it, and they’re willing to do so largely because there are other investors in line behind them willing to throw it back at them. It’s a classic MOMO.

  69. michael reynolds says:

    @David M:
    They never know the difference. We’re getting people who apparently got a lot of certificates of attendance and blue ribbons for showing up, and who moved from that coddling environment right into the paternalistic, condescending but comforting rightwing echo chamber. So guys like Jack don’t know how to actually debate. They’ve never had to. He regurgitates the usual b.s. and when challenged he panics and throws a tantrum.

  70. michael reynolds says:

    @HarvardLaw92:
    That plan seems to work for Amazon. I’m not sure how, but every day Amazon gets a little more of my business and the brick-and-mortar world gets less.

  71. Davebo says:

    @Jack:

    Now now Jack. Only Doug is allowed to proclaim politicians “royalty” on these pages. I’m pretty sure he’s trademarked it already.

    Wait… Doug?? Is that you?

  72. HarvardLaw92 says:

    @michael reynolds:

    Amazon is somewhat of a unique animal, but even they have only achieved sporadic profitability by becoming the online equivalent of Walmart.

    Tesla has some very big competitors, who are both profitable and who have pretty deep pockets. When/if they move into what Tesla now mostly has all to itself as a niche market, the company’s reality will change very quickly. Even if that doesn’t happen to any material degree, the company can’t survive without regular infusions of investor cash (even they admit on investor conference calls that true profitability is at least a decade away, if not longer).

    My concern with them is that convertible load they’ve saddled themselves with combined with the short-term nature of the bulk of their debt. S&P has dropped them into junk bond territory. Everything related to their CFO’s ongoing juggling match has to go perfectly, or the music stops. If it does, it won’t be pretty.

  73. stonetools says:

    Meanwhile, I’m SHOCKED, just SHOCKED, to see Doug ignore every single substantive criticism of his hackneyed post (and not just this post)

    Doug really files these posts to explain the state of the economy according to his libertarian economic ideology. For him to admit that libertarian economics got the 2008 crisis and the response to it dead wrong is something he can’t do, really. It would be liking losing his religion.
    Here he is arguing once again that the slow economic recovery was really due to something that can’t be solved because it fits in with his ideology better than admitting conservative economics got it wrong.

  74. stonetools says:

    @David M:

    Good faith arguments: The stimulus would have been better if ‘X’, I would have preferred the stimulus did more of ‘Y’, links to credible news sources talking about how the stimulus could have been more effective or what the impacts were

    Well, for him to make those arguments, he would have to understand something about economics rather than cutting and pasting from right wing web sites and thinking up more names for Obama.
    Can’t ask him to do what he can’t do.

  75. Jack says:

    @michael reynolds: Yeah, no personal attacks there. You and I have debated before, and besides the typical liberal drivel, you rarely have anything worthy to say…especially on articles critical of liberal policies and Obama.

  76. michael reynolds says:

    @Jack:

    I see, so all disagreements are personal attacks in your mind. Good, that validates my theory about you.

  77. David M says:

    @stonetools:

    Yes, it’s a symptom of something someone else mentioned a while ago here. Arguing policy isn’t possible with conservatives anymore, the liberal side just ends up acting as snopes.com and debunking nonsense. Just the other day I was listening to how awful Obamacare was, because it was done with Enron accounting (6 years of benefits, 10 years of taxes) and how the costs had massively increased since it was passed.

  78. wr says:

    @Slugger: “There are a billion people in China and a billion more in India. Do any of you think that there is no one in that two billion that can’t do your job and for less money?”

    Well, I’m currently doing my job in China because someone is willing to bet that there is no one in that billion who can do it, and I’m being paid much closer to American $ than Chinese…

  79. wr says:

    @stonetools: Kurzarbeit — what a great word! I do love that language.

  80. wr says:

    @HarvardLaw92: “I don’t dispute that the company makes some interesting vehicles, but financially it’s held together with duct tape, hemorrhaging cash and exceedingly vulnerable to competition. ”

    That may well be true, and Tesla may turn out to be a footnote. That still won’t make it a bad investment for the government (and I’m not saying you said it was, by the way). Because if Tesla goes under because other businesses figure out how to do what they do better and cheaper, we’re going to have a much stronger electric vehicle market which would not exist (I believe) it not for Tesla.

    That’s exactly the kind of investment a government can make that a VC or other private investor can’t — one that’s not about immediate profit but a better future.

  81. wr says:

    @michael reynolds: ” I’m not sure how, but every day Amazon gets a little more of my business and the brick-and-mortar world gets less.”

    It’s Prime. Once you’ve shelled out the hundred bucks then you can have everything you want delivered in two days for free. At some point you realize that waiting two days is preferable to schlepping around to six different stores.

    I had to go to a medical lab to have blood drawn the other day before a checkup, and while the experience was fast and efficient — if you want good medical care, move to a place with a lot of rich old people! — I kept thinking I should just be able to hold my arm up to the Amazon app…

  82. grumpy realist says:

    @HarvardLaw92: It took Toyota a LOONG time before they started breaking even on the Prius (and there’s questions whether they’ve been able to do it.)

    The problem with Tesla is that it’s got major technological problems (coming up with a safe battery that has the range of ICE vehicles), plus the whole recharging issue. Elon obviously has enough money to throw at the problem right now, but it’s questionable that he’s got enough to handle the problems. Just getting a network of rechargers out there–that’s a problem you can solve by throwing enough $$ at it. The battery problem….is more complex. Whether they want to admit it or not, they’re still really at the basic research stage which means you still don’t know whether it will ever pay off.

    Heck, if Elon wanted to piss away the amount of $$$ he’s doing now with a much higher chance of payback, he would have shoved it ALL into basic research on new battery materials and carbon technology. Mega-capacitor research. Diamond production. Carbon sequestration.

  83. grumpy realist says:

    @wr: One of the reasons most of my shopping for clothes is via Ebay. When I want to purchase something, I usually have a pretty coherent idea in my brain as to what I want: short-sleeved black knitted top with square neck, for example. If I go to department stores, I have to visit a bunch and then go investigate each one of them going through the entire bloody store because they always sort stuff by designer which means that what I want could be anywhere if they actually have it. Ebay? I just stuff a description into the search engine and poof, I’ll get page after page of options.

    Unless you’re a teenager or someone with a lot of spare time who likes to browse stores, department stores are a huge headache.

  84. stonetools says:

    @David M:

    Yup. Getting back to this post, its difficult to argue that the German government wanted real wages to go down as a matter of policy. I’ve Googled “German real wages” and its unclear that they even did go down during the recession.

    Cowen seemed to have simply decided “Germany did well during the recession, therefore it must have followed the libertarian policies I liked, or else they wouldn’t have succeeded.” The reality, of course, is that they did no such thing.As usual, conservatives create their own reality.

    Fun fact: The US unemployment rate is 5.6%. The unemployment rate of that conservative exemplar, Germany? 6.5%.

    So maybe Obummer didn’t do badly after all…..

    I’d even go on to argue that even if you did believe that the high unemployment rate in the USA was structural, the solution is not to do nothing or force down real wages, but to invest in infrastructure and worker retraining, but frankly , that would just go over the heads of folks like Doug and Jack…

  85. HarvardLaw92 says:

    @wr:

    I’m not certain, but I believe that TSLA has exited what governmental financing positions it once had. At this point, it’s all private money being tossed in. To what extent the trending is driven by MOMO profit taking and to what extent it’s driven by the green true believers is debatable. What I’m seeing is essentially a MOMO bubble, and the back-end of that is that their borrowing costs are incrementally moving upward (their 2021 1.25 convertible is moving at $86.5).

    I think that it’s an interesting proposition, overall, but I also think that it’s likely to remain a niche market for a long time going forward. That’s neither good nor bad; it just reflects the reality that buyers like internal combustion and are likely to continue to do so until it is no longer a viable option for them.

    With that said, I like what they are motivating in terms of change, but investing in them as anything more than a very short-term MOMO flip is a no go. Their risk profile is through the roof.

  86. stonetools says:

    @wr:

    Yup! We have to thank them for schadenfreude, too, which has become practically an English word in the last 10 years. It’s not a nice word, but it did fill a gap.

  87. stonetools says:

    @wr:

    That’s exactly the kind of investment a government can make that a VC or other private investor can’t — one that’s not about immediate profit but a better future.

    Indeed. I also prophesy that if the electric car industry succeeds, in 20 years we’ll have libertarians telling us that the federal government had nothing to do with its success and that it would have been even more successful if it hadn’t been for interference from “Big Gumint.”

  88. HarvardLaw92 says:

    @grumpy realist:

    Understood, but the scenario that plays out at the end of that game is likely to be a lot of individual investors who’ve been wiped out sitting around and saying “but how can this be? Their cars are so cool and they were trading over $200 a share!”

    From my desk, they are another Calpine waiting to happen.

    Toyota, like the other players in this market segment (GM, Daimler-Benz, BMW, etc.) has the luxury of a very profitable and mature ICE manufacturing segment to subsidize their costs. Tesla has a mix of investors – some of which want to believe in the company for ideological reasons and others which are cheerfully relieving the first group of their cash. Without the ability to keep floating new debt or keep issuing grossly overpriced equity, it goes *pouf* in a hurry.

    The bond guys are just playing the spreads – buying the bonds, offsetting the risk via swaps and shorting listed options against the positions. They cover at convergence. Nobody institutional (to my knowledge) is holding these bonds long-term.

  89. grumpy realist says:

    @HarvardLaw92: Yah. I imagine that’s what Uber is trying to work towards: creating enough of a bubble that they can do an IPO and sell out to a whole bunch of fools, then scamper with the loot.

    I think Elon Musk actually believes in what he is doing, but that doesn’t mean it’s going to work out. I’ll wait until they stop being on the bleeding edge of things. (“You can always tell the pioneers by the arrows in their backs.”)

  90. Ben Wolf says:

    @Jack: Jack, that isn’t really true:

    https://m.whitehouse.gov/administration/eop/cea/Estimate-of-Job-Creation/

    It isn’t (or shouldn’t be) controversial that a spending increase creates jobs; spending is incomes is employment. The ARRA couldn’t fail to produce paid work.

  91. stonetools says:

    @Ben Wolf:

    I’ll be honest with you, you might as well try to explain relativity theory to your cat. Jack will never admit the ARRA created jobs ( largely, because his trusted authorities Hot Air and Twitchy told him that the ARRA couldn’t create jobs).

  92. David M says:

    @Ben Wolf:

    It isn’t (or shouldn’t be) controversial that a spending increase creates jobs; spending is incomes is employment. The ARRA couldn’t fail to produce paid work.

    This. The idea that the government can spend that much money but not any create jobs is absurd.

    For the trolls: Observing that the stimulus was able to create jobs has no relation to whether or not it was a good policy, it’s just a basic statement of fact. It should be no more controversial than noting the sky is blue or grass is green.

  93. michael reynolds says:

    @wr:

    It’s Prime plus the way Amazon removes every possible impediment to making a purchase. When I go to Macy’s half the time is spent just looking for someone to ring me up. There’s never a line at Amazon, never a sullen clerk, never a beeping theft alert system, never a problem parking.

  94. Ben Wolf says:

    @David M: It’s an economic dark age with one of two parties endlessly repeating macroeconomic fallacies Keynes identified eighty years ago. Democrats have the opposite problem of knowing better and producing shoddy policy anyway — but they aren’t denying what everything tells us is reality. I’m at a loss when knowledge itself depends on what party in which one claims membership though I fear it will come to a bad end.

  95. wr says:

    @michael reynolds: Here’s the trick at Macy’s — most of the stores (and certainly one near where you live) have personal shoppers. It’s a free service… and for some reason they don’t publicize it. If you hooked up with your local MBA (Macy’s By Appointment, although I think they’re changing the name), she’ll have your sizes and a good idea of your tastes (after a first appointment) and then you can just call and say “I need some Polos and some pants,” and she (or he) will pull a bunch of possibilities and have them in her office (with private dressing room).

    And I know this because my wife is one of them — and her clients love her. If you’re ever shopping in Palm Desert, let me know and I’ll put you in touch with her. But if you’re in a different Macy’s, just ask…

  96. anjin-san says:

    @Jack:

    Or maybe we should look at the number of government workers under Obama compared to Bush.

    Ok. Why don’t you post a link?

    Perhaps because it will show government is shrinking under Obama?

    Seriously dude, just have “I am a moron” tattooed on your forehead and save yourself all the typing you do to prove it.

  97. michael reynolds says:

    @wr:

    Are you actually in China? Did I see that right? Because then I’m jealous. My daughter’s Chinese and I got screwed out of the trip to pick her up because SARS was just hitting and we figured one of us should stay home for the kid we already had. I’m still bitter. Obviously.

  98. Matt says:

    @michael reynolds: He’s mentioned it a few times in the past.

  99. wr says:

    @michael reynolds: I’m back in SoCal right now, but I’ve been spending about two weeks out of every two months there — mostly Beijing, which has all the charm of Houston with none of the oxygen, but also really beautiful places like Shanghai and Chonqing.

    I probably won’t go back until August, which I’m surprised to find is really troubling me. I have an open offer from my partner over there to come back and stay in the lovely Crowne Plaza Lido Beijing while I do my work, and have to remind myself I’ve got scripts to write for him and that since morning are my best writing time, going back to a lifestyle where I’m out late every night carousing is not going to get the job done…

  100. Davebo says:

    @wr:

    This is where you should have your client put you up in Beijing!

  101. grumpy realist says:

    @wr: I’ll have to remember that: “Beijing, which has all the charm of Houston but none of the oxygen.”

    I visited back in 1997 and even then felt Beijing was pretty grim. Dusty grey with slashes of heart-attack red. Half of it had glass and steel skyscrapers getting built and the other half looked like a crumbling dump. I’m not going to even try to imagine what it looks like at present. If I want a megametropolis I’ll visit Tokyo instead.

  102. Barry says:

    @Stan: “Every time I read Cowen’s blog I’m amazed at the difference between economics and physics. F = ma and PV = nRT in the Netherlands, Germany, the US, Canada, and Australia, but somehow economics works differently in the US. ”

    Another way to say it is that if for example you are trying to move a car, F=MA, but one car might be stuck in mud, and the other at the top of a hill, on a smooth road. Big difference.

    Also, by now Tyler Cowen counts at just another George Mason hack.

  103. michael reynolds says:

    @wr:

    We are both too old for the staying out all night thing. But I was mostly too old for that even when I was young. I’m jealous. I’m trapped in mostly one place for four more years til my daughter is out of high school.