GOP Whip Cantor says stimulus has not created jobs - it has, to the tune of several million, per CBO

Cantor via ThinkProgress:

[W]e have seen the stimulus dollars that have been spent have not produced jobs. The stimulus was designed to lower the unemployment rate, to keep it from going over 8 percent. We know nationally now, it still hovers around 10 percent; here in our area, it’s 7 1/2 percent. So, obviously, government spending money doesn’t create jobs.

Cantor is too smart to know that what he just said isn't true. First off, CBO already said the stimulus created and/or saved millions of jobs. Second, the fact that unemployment remains at 10% does not mean the stimulus did not create jobs. Unemployment might have been at 12% without the stimulus, for example. Did the stimulus create enough jobs? No. Simply because it wasn't big enough. But to suggest it hasn't created any is a lie.

The fact that the GOP House Whip is still saying that the stimulus hasn't created any jobs, well, it's bad. The White House should come down on Cantor like a ton of bricks. Tell him to come to the White House tomorrow, and you'll have the cameras there, and he can explain to the American people exactly how the stimulus hasn't created any jobs, when CBO says it's created millions, when other GOP members of Congress have held press conferences with companies whose jobs have been saved/created by the stimulus.

Do what the GOP would do. Burn Cantor so bad that neither he, nor any other Republican, dare use this talking point ever again. Read More......

Confidence in Obama reaches new low in ABC/Wash Post poll

Wash Post:

Public confidence in President Obama has hit a new low, according to the latest Washington Post-ABC News poll. Four months before midterm elections that will define the second half of his term, nearly six in 10 voters say they lack faith in the president to make the right decisions for the country, and a clear majority once again disapproves of how he is dealing with the economy.

I do think the President has finally realized that he needs to fight, at least use fighting words, which is a step forward. But the albatross around his neck is the economy, and specifically, the unemployment rate. That rate is directly attributable to the President's decision not to push for a full stimulus, but rather cut the stimulus in half and then give 35% away to the GOP in the form of useless tax cuts. The result is exactly what Krugman and Stiglitz predicated at the time: high unemployment and a limping recovery, mixed with a threat of a double dip recession.

It may seem like beating a dead horse to note that we're in this current mess because the President screwed up, but until he shows that he's learned his lesson, and is willing to fight for things, from the beginning, and full-bore, it's worth repeating. Bad decisions have consequences, and they tend to come back and bite you in the ass. Read More......

Ryan Grim: 'Mayberry Machiavellis: Obama Political Team Handcuffing Recovery'

Ryan Grim at the Huffington Post argues what a lot of us have been saying: The White House's decision to embrace deficit reduction over economic stimulus is wrong-headed politically and economically. And I know they're going to claim that they haven't embraced one over the other, but here's the rub: Even President Obama, expert as he is at embracing all sides of a conflict, can't square increased spending and cutting it back at the same time. That message might fool the people, but it doesn't fool the economy.

Under the leadership of President George W. Bush, science, empirical evidence and expert advice struggled to be heard above the din of politics. It's one thing to prioritize politics over good policy; it's quite another to let bad politics drive the agenda. But that's what the Bush administration did during its Terry Schiavo era and his congressional majorities paid the price.

Today, a new band of Mayberry Machiavellis has gained control, counseling President Obama to ignore the advice of his economic team and press forward with deficit reduction ahead of job creation.

Academics Benjamin Page and Lawrence Jacobs, in the recent paper, "Understanding Public Opinion on Deficits and Social Security," have identified an additional reason that the deficit continues to rank high in polls as a prominent concern. "The 'most important problem' question responds heavily to whatever is being emphasized in the media, apparently because many respondents interpret it as asking what other people consider important," they write. "They look to the media for evidence. So a well-organized and well-funded campaign against deficits (like the one led by Peter Peterson) can grab the attention of pundits and politicians, win coverage in the media, and produce a temporary spike in responses that deficits constitute our 'most important problem.'"

The more that the president highlights deficit concerns, the more concerned the public gets, and the more his advisers warn him that the public is concerned.

The Obama political team's focus on the deficit raises the question: Just who is this hypothetical midterm voter who was leading to the GOP because of deficit concerns, but will vote Democratic if only Congress trims a spending bill from, say, $250 billion down to $80 billion? Most voters -- and most reporters, for that matter -- can't guess within a few hundred billion what the budget deficit is, and would struggle to put a dollar figure on the latest jobs-bill proposal. So how is it, then, that a voter would cheer saving a few billion dollars by cutting off COBRA subsidies?

Despite all of that spending, unemployment has hovered around ten percent, leading voters to assume and leaving Republicans to argue that the stimulus didn't work. The reality is that it did save or create hundreds of thousands of jobs, if not millions, but was too small -- as economists warned at the time -- to fill the economic hole left by the housing collapse and financial crisis.

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Krugman on how screwed up it is not to pass new unemployment benefits

Interestingly, as Krugman notes, unemployment benefits are a form of stimulus.

Paul Krugman:

When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there.

Wait: there’s more. One main reason there aren’t enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending. That’s why the Congressional Budget Office rates aid to the unemployed as a highly cost-effective form of economic stimulus. And unlike, say, large infrastructure projects, aid to the unemployed creates jobs quickly — while allowing that aid to lapse, which is what is happening right now, is a recipe for even weaker job growth, not in the distant future but over the next few months.

But won’t extending unemployment benefits worsen the budget deficit? Yes, slightly — but as I and others have been arguing at length, penny-pinching in the midst of a severely depressed economy is no way to deal with our long-run budget problems. And penny-pinching at the expense of the unemployed is cruel as well as misguided.

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Ian Welsh on the Afghan War as stimulus

Nice catch by Ian Welsh regarding Michael Steele, Obama, and Afghanistan. He begins (my emphasis):

Michael Steele’s comments on Afghanistan remind me of my favorite definition of a gaffe: “saying the truth in the worst way possible.”

To whit, Steele said that Afghanistan is a war of Obama’s choosing, and that everyone who’s occupied Afghanistan has come to grief over it.  Now one can quibble a bit over the details of who came to grief and who didn’t, but basically he’s right.  Afghanistan went badly for the Russians and the British, most recently.  There’s a reason Afghanistan is called the “graveyard of Empires” and if the US isn’t careful it’ll be the graveyard of the US empire.

Likewise, yes, this is a war of choice for Obama.  He could have done his review, said “hey, there are almost no al-Q’aeda fighters in Afghanistan anymore, so we won, let’s go home.”  He could have said “fighting in Afghanistan is seriously destabilizing Pakistan, which is far more important than Afghanistan, so let’s go home.”  He could have said “yes, if we leave, some al-Q’aeda camps might spring up but we can always bomb them and anyway there are plenty of failed states where al-Q’aeda can set up camps and we can’t occupy all of them.”

Ian then makes a second point I'll bet many of us hadn't considered (again, my emphasis):

Now here’s a truth that Steele didn’t tell.  Obama has to stay in Afghanistan because war spending is one of the only reliable forms of stimulus he has.  The economy is in bad shape, and it needs that stimulus.  Since he can’t get a new large stimulus through Congress that means he MUST keep the Afghan war going if he doesn’t want an economic disaster, which would then lead to an electoral disaster. . . . Instead of hiring tens of thousands of teachers, building a high speed rail network across the country, refitting every building to be energy efficient and doing a massive solar and wind build-out to reduce dependence on oil, well, the US would rather turn Afghans and Pakistanis into a fine red mist.

A fine red mist designed to keep the "good guys" in office, as Ian points out.

I hadn't considered our many unfunded permanent wars as stimulus, but that's obviously the case — just as WWII was the stimulus that kicked the U.S. out of the self-imposed 1937 slump. Sad, but true. Good catch.

GP Read More......

Obama urges Europe not to drop stimulus, but hasn't he dropped it himself?

I remain confused as to what the Obama administration actually thinks about the current need and efficacy of stimulus spending. Last year, they were, frankly, more interested in getting any bill passed than in getting the right bill passed (that's why the White House never pushed for more than $800bn or so, and it's why they gave away 35% of the bill to near-useless tax cuts). Then, earlier this year, after relentless "the deficit is going to kill us all!" drubbing from the Republicans, the President reversed course and started embracing "deficit reduction" just at the time that economists were saying we needed a second stimulus to make up for the fact that the first one was half the size (or less) of what it needed to be.

So, what is the President now doing lecturing Europe about how they shouldn't drop their own stimulus measures?

Now, I'm sure the White House will argue that they never abandoned the current stimulus measures, they simply gave up on any future stimulus legislation. Fair enough. But, as is often the case, the President's nuance is lost on the public, and often has the opposite effect of what the White House says was intended. From the NYT:

President Obama signaled on Friday that countries in Europe should not withdraw their extraordinary spending programs too quickly.

In a public letter to other leaders of the Group of 20 nations in advance of a summit meeting in Toronto next week, Mr. Obama wrote, “Our highest priority in Toronto must be to safeguard and strengthen the recovery.”

There's more:

The United States is trying to pare its own substantial deficit. Mr. Obama reiterated a pledge to cut the deficit, now about 10 percent of gross domestic product, in half by the 2013 fiscal year, and to 3 percent of G.D.P. by the 2015 fiscal year, a level he said would “stabilize the debt-to-G.D.P. ratio at an acceptable level” by then.

But American officials are concerned that fiscal retrenchment by too many countries at once could imperil the global recovery.

Mr. Obama warned of the risks of a double-dip recession, which most economists consider unlikely but not impossible.

“In fact, should confidence in the strength of our recoveries diminish, we should be prepared to respond again as quickly and as forcefully as needed to avoid a slowdown in economic activity,” he wrote.

Do as we say not as we do?

President Obama is arguing that, should the economy take a turn for the worse, we should all be prepared to pass more stimulus? Good luck with that. The President already killed nearly any chance at passing a second bill by signing on to the deficit-reduction brigade earlier this year, rather than taking the Republicans on, blaming Bush for the majority of the deficit, and explaining to the public that the Democrats just saved their asses from another Great Depression by passing the first stimulus bill - and that if more was needed, he sure as hell was going to move full steam ahead with more.

The President is still trying to have his cake and eat it too - be for deficit reduction and stimulus at the same time. It doesn't work - and in fact, they cancel each other out. Rather than playing semantic gymnastics, the President ought to pick a side and defend it. His desire to be all things to all people is screwing things up yet again. Read More......

Insufficiently stimulated

I wonder if Ezra will get yelled at too. Somehow I doubt it.

Ezra Klein:

[F]or stimulus, a dollar that's spent, say, building a museum about Woodstock is as good as a dollar spent building a bridge to get people to a museum about Woodstock. From a stimulus perspective, waste happens when a dollar is saved rather than spent, as that dollar doesn't immediately stimulate the economy. That's why tax cuts are often ineffective: If you give a middle-class worker a tax break at a time when he's not unable to pay the bills but is trying to replenish his gutted 401(k), he'll save it. And that, from the stimulus's perspective, is waste.

One of the failures of the stimulus was that it included an enormous amount of tax breaks. Roughly a third of the total, in fact. And some of those breaks, like the $70 billion AMT patch, were not effective stimulus under any definition of the term. But they were there to get votes, and to show Obama was being bipartisan in his construction (though in Jon Alter's book "The Promise," Obama says that giving these breaks up-front rather than negotiating with the Republicans for them was a massive mistake). The problem is that they made the stimulus less effective than it could've been, and that made it easier for Republicans to attack down the road.

As we've written before, the stimulus wasn't big enough, the President knew it, but for some unknown reason he caved out the gate and agreed to a much less stimulating bill than was necessary.

(There's the argument that the President "knew" he couldn't get the votes by asking for a larger bill. Really? Did he try? The nation was on the verge of another Great Depression and there was one antidote, the stimulus bill. Did the President make an Oval Office address explaining this to the country, demanding that all 535 members of Congress join him in supporting the full legislation to stave off complete economic collapse? No he didn't. He simply did a vote count, saw that he didn't yet have the votes for the full stimulus that was needed, so he caved and didn't try to get them at all.)

Then he caved on the tax cuts, cutting the stimulative aspects of the bill even further, so that the bill ended up being about 25% of what it needed to be to make up the $2 trillion of GDP lost in the could-have-been-depression.

Let's not forget, this wasn't just another proposal. It was a proposal meant to stop another Great Depression. Who caves out the gate on how much you know will be needed to stave off that Depression? Calling it a mistake is putting it lightly. Every single Democrat is paying for that mistake, in terms of the higher unemployment rate they're having to defend going into re-election. Read More......

White House is pushing for more don't-call-it-stimulus money

Not very much, though. Only $50bn. Remember, as Krugman pointed out a year and a half ago, the economic crisis wiped out about $2 trillion of future GDP. The stimulus bill was around $800bn (and 35% of it was relatively useless tax cuts). That leaves another $1.2 trillion lacking. $50bn won't make much of a dent. Though it may help some states in particular, since the money is apparently targeted at states and cities. Read More......

Krugman was right about the stimulus not being enough

Jed Lewison at DailyKos reminds us of Paul Krugman's words of January 6, 2009:

This really does look like a [stimulus] plan that falls well short of what advocates of strong stimulus were hoping for — and it seems as if that was done in order to win Republican votes. Yet even if the plan gets the hoped-for 80 votes in the Senate, which seems doubtful, responsibility for the plan’s perceived failure, if it’s spun that way, will be placed on Democrats.

I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.”

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What's more important, the deficit or unemployment

A pair of dueling articles that show, I think, the tension between cutting the deficit and reviving the economy. It's never been terribly clear that it was wise to shift the focus away from the economy and on to the deficit until the economy has recovered (and that won't be for years). Unemployment is still near 10%, and just as Krugman and Stiglitz predicted, it isn't moving down very quickly in part because the stimulus was too small. Shifting attention away from unemployment, and towards deficit reduction, is all the more perilous because cutting the budget is, per se, an anti-stimulus.

I've never heard of a politician losing an election because the deficit was too high. I've heard of lots losing because of high unemployment. Read More......

Krugman revises his opinion on what's motivating the G20 economic ministers

A quick follow-up to yesterday's post about Paul Krugman and the "mad" G20 ministers. In a series of posts, Krugman has lately noted with dismay that the G20 economic ministers have publicly called for budget austerity in Europe, similar to what the deficit hawks here are calling for.

His view is that budget austerity now will kill the infant recovery, and he doesn't understand why the economic ministers are asking for it. His attempt at an explanation — they're crazy. That's it — the whole of his explanation. They're "mad." (For the full Krugman on this, see "Madmen in Authority").

Krugman now appears to have changed his mind. Madness is no longer the answer. In a new post, he offers that economists who are aggressively advising this course of action are motivated by … ready? … a fit of misplaced morality. Krugman:

What’s going on here? I don’t think you can resort to class-warfare arguments. What I think is happening is that we’re seeing the deep seductiveness, for many economists (and others), of taking what sounds like a tough-minded position in favor of inflicting pain on the economy — and the people who make up that economy.

Keynes knew all about this. Writing about the peculiar appeal of classical economics even in a world in which it had manifestly failed, he argued

That it reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue.

Maybe. Krugman concludes:

[W]hat’s so striking is that in all three cases I’ve cited you had highly trained economists — that is, people who have spent their whole lives arguing in terms of carefully laid out models — making arguments that aren’t backed by any model I can see.

And may I say, I think that by giving in to the seductiveness of calls for pain, some of my colleagues are doing a lot of damage; at a time when we really need clarity of thought, they’re adding to the intellectual murk instead. [my emphasis]

Or maybe not. Consider — world-class academic economists, people who serve up reasons for those in power to act in certain ways, are now offering noticeably un-academic arguments why Europe should jump on the Pete Peterson bandwagon and stop feeding the new-born recovery, just when the recovery needs its next drink of milk. And the reason is — virtue?

Instead of settling for inexplicable reasons, let's look at a much more likely one — our old friend power. If big-time G20 economists are violating their oath of office (so to speak) to serve Shinola to their superiors and call it Wheetabix, they're not doing it on their own. The pressure can only be coming from one of two sources:

• The G20 ministers themselves, who want this analysis served to them; or


• The Pete Peterson Marching Band and Firing Squad, which wants to export the suffering to Europe as well.

Krugman is clearly struggling here, and I don't fault him. But his struggles are instructive. Again, he's asking the right question, and on the pages of the NY Times at that. But I think his blind spot is in not recognizing that the Venn diagram that maps "Those Who Are Hot-Shot Academics" and "Those Who Suck Up To Power" is not two separate circles. There's a huge overlap.

Just one indicator of that overlap: How often have you heard corporate necropolises (sorry, "multi-building cubicle warehouse spaces") called "campuses"? And how many university campuses have corporate "campuses" on them? Owners and owned.

This is just an observation — I still have no answers as to where the push is coming from, or why. What's in it for the G20 ministers if they kill the recovery? But the push is on indeed — thanks, Paul, for saying so — and the American disease is starting to metastasize.

As Krugman suggests, this will not end well — here or in Europe.

GP Read More......

CBO: Stimulus created up to 3.4m jobs, boosted GDP by up to 4.6%

I wish it would have been larger, but it's now categorically true that the stimulus created jobs. The GOP, and their leaders, Rush Limbaugh and Glenn Beck, have been definitively proven wrong. Reuters:

The massive U.S. stimulus package put up to 3.4 million people to work and boosted GDP by up to 4.6 percent in the first three months of 2010, the nonpartisan Congressional Budget Office said on Tuesday.

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'If he was a Republican, we would hear a never-ending drumbeat of news stories about markets voting in favor of the president'

Bloomberg:

One year after U.S stocks hit their post-financial-crisis low on March 9, 2009, the benchmark Standard & Poor’s 500 Index has risen more than 68 percent, and it’s up more than 41 percent since Obama took office. Credit spreads have narrowed. Commodity prices have surged. Housing prices have stabilized.

“We’ve had a phenomenal run in asset classes across the board,” said Dan Greenhaus, chief economic strategist for Miller Tabak & Co. in New York. “If he was a Republican, we would hear a never-ending drumbeat of news stories about markets voting in favor of the president.”

[M]onthly job losses have abated, from 779,000 during the month Obama took office to 36,000 last month. Corporate profits have grown; among 491 companies in the S&P; 500 that reported fourth-quarter earnings, profits rose 180 percent from a year ago, according to Bloomberg data. Durable goods orders in January were up 9.3 percent from a year earlier. Inflation is tame, and long-term interest rates remain low.

The U.S. may add as many as 300,000 jobs in March, the most in four years, David Greenlaw, chief fixed-income economist at Morgan Stanley in New York, said in a Bloomberg Radio interview.

Zandi said the economic rebound is largely a result of the policies of the White House and Federal Reserve. He cited the bank bailout, the Fed’s low-interest-rate policy and support for credit markets, and the Obama administration’s stimulus plan, bank stress tests and backing of Fannie Mae and Freddie Mac.

“When you take it all together, the response was massive and unprecedented and ultimately successful,” Zandi said.

This is rather compelling evidence that the administration brought us back from the brink. No, people won't entirely believe it until they see their own bottom line improving - but, if Democrats did a better job reminding people of how dire things were a year ago, how we were on the verge of another Great Depression, and how Republicans were claiming that there was no economic crisis at all, I think voters would be more appreciative of the gains we've made to date. Read More......

Stimulus created 2,000 jobs in New Hampshire

From the conservative NH paper, the Union Leader:

New Hampshire has used its $708 million in federal stimulus funding to create more than 2,000 jobs, pay for scores of road projects, upgrade health centers, fund research projects at universities and provide public schools with computers and supplies.

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Shouldn't stimulus money for green technology benefit Americans?

Why is this even a debate? The stimulus money is American taxpayer money that is being used to help build the US economy. Last year when countries around the world (joined by the GOP) complained about "buy American" clauses, not a single one of those countries wasn't doing the exact same thing at home. Comparing it to the isolationist policies after the Great Depression is too extreme. When you look at the high growth potential (and lack of job growth in the US) green technology is an area that the US needs to promote. China is investing heavily in this area as are most industrialized countries.

Joined by Sens. Robert P. Casey Jr. (Pa.), Sherrod Brown (Ohio) and Jon Tester (Mont.), Schumer said at a news conference that the Obama administration has ignored concerns about foreign involvement in the clean-energy program and should halt funding until Congress can pass legislation to deal with the problem.

Schumer and the other lawmakers focused particular criticism at Cielo Wind Power of Austin, which has said it may apply for up to $450 million in stimulus funding for a massive wind farm that would be powered by turbines built in China.

"It is a no-brainer that stimulus funds should only go to projects that create jobs in the United States rather than overseas," Schumer said. "These wind projects have a lot of merit, but the manufacturing should be happening here, not in China."

Of course the GOP teabaggers are against this. They don't see anything wrong with the environment as they suck from the teet of Big Oil. Of course, once these businesses are generating money, the GOP will be first in line to take credit for them and ask for campaign contributions. Read More......

Bunning drops filibuster, benefits bill passes 78-19

GOP Senator Bunning has dropped his filibuster, finally. The final vote to pass the bill was 78-19, a rather extraordinary margin, suggesting that Republicans were not pleased with Bunning's ongoing charade.

It seems to be beyond the ability of political reporters to wrap their minds around it, but there was an important matter of principle involved in opposing GOP Senator Jim Bunning's filibuster of unemployment payments. Reporters can't see beyond the political optics of the situation - clearly good for Democrats - but there is an economic principle that was reason enough not to cave to Bunning's temper tantrum.

The bill that Bunning was filibustering extended the provisions of the stimulus package for another month to fund various transportation bills, unemployment benefits, COBRA, etc. What Bunning wanted to do is pay for this extension with taxes or spending cuts taken out of... the stimulus bill!

In other words, he was trying to eliminate the stimulus effects of this spending. Deficit spending is what a stimulus IS. If we fully offset stimulus spending then WE DONT HAVE A STIMULUS!!! So what Senator Bunning was trying to do was undermine the very ability of the govenment to stimulate the economy, and thus undermine economic recovery itself.

The Republicans were wrong when they wanted to do this in the 1930's and they are still wrong today. Channelling Herbert Hoover is not a good way to run our economy. Read More......

What it means to lose $1 trillion in economic growth

Paul Krugman wrote yesterday about what the economy has lost as a result of the recession - $1 trillion worth of growth. Krugman was upset that official Washington is acting like the crisis is over, and thus isn't interested in trying to close the $1 trillion gap with more stimulus spending. I was curious what $1 trillion lost actually means, so I asked our resident economist, Professor Steven Kyle of Cornell, to weigh in. Here is what Steve sent me:

A trillion dollars lost means that GDP is a trillion dollars lower than it would have been without a recession, or could have been with an adequate stimulus package. While it is fashionable in some quarters to mock GDP as a measure of anything useful it is worth remembering that GDP growth is highly correlated (in fact very highly correlated) with every measure ever proposed of things that ARE considered useful by these critics (including things like life expectancy, literacy, infant mortality, etc.)

A trillion dollars is a lot when the total GDP is a little more than 14 trillion. Especially when the losses are concentrated among those who can least afford them. What people don't connect is that these numbers mean millions of people are without incomes. That ruins lives. For others it means they never fulfill their potential because, e.g., during their younger years they don't go to a good college or perhaps don't go to college at all. Many will go hungry or sick as a result. Many marriages won't survive. Crime will go up. You get the picture. You can tell endless stories but these are real people. Millions of them. Our fellow citizens. It is sad enough that it happens but when you think that we have it easily within our power to prevent it, but don't do it for political reasons, it is enough to make your blood boil. These are the people the Dems are supposed to be fighting for.

It is in my opinion immoral to do nothing about this when we have the tools at our disposal to fix the problem, by passing another stimulus. Yes, it will result in bigger deficits and bigger debts. But acting would not only address the humanitarian problems now, but, if we add the trillion dollars back to our output now, in the future we will have more than enough revenue to pay back the debt (and then some). It is win-win, and is the main lesson we learned from Keynes and the Great Depression.

What is depressing from a political point of view is that we have exactly the same teams lined up pro and con on this issue, and they are using exactly (and I do mean exactly) the same language to argue the point. Both the Republicans and the Democrats are now arguing that deficit reduction is more important than growing the economy out of the current crisis. Unfortunately, the Dems in this era seem not to have the courage of their convictions - which is far less excusable now that we KNOW the tools work, as opposed to the 1930's when it was the first time we tried to do it. But maybe the Dems will find their courage soon - a big win would help a lot, but it will take some unambiguous leadership from the President.

I'd add that even for those of us who aren't unemployed, a lot of our paychecks went down drastically last year (I won't know for sure until April 15, but I'll bet my income last year was cut at least in half by the recession). That means we spend less money than we would have - on food, things for our home, travel, medicine, education - which sucks that much more money out of the economy, hurting those businesses we would have frequented, but aren't, which hurts their profits, which hurts their employees, which sucks even more money out of the economy when they cut their spending. The ripple effect is quite large. And it's why stimulus matters - you turn that ripple effect to your advantage. Read More......

Stiglitz on the need for a second stimulus

Nobel economist Joe Stiglitz talks about the stimulus - the first one, and the need for a second.

ZC: We've talked a lot about banks so far, but there is more to the economy than banking. It's been a really bad year for American households. Do we need a second stimulus? If so, what should it look like?

JS: We clearly need a second stimulus. There are a couple of ways of seeing this. When the Obama administration first moved on the stimulus, it posed a scenario that was not really rosy, but one that proved a little too optimistic. It expected unemployment without the stimulus it would be around 10 percent, with the stimulus it would be brought down to 8 percent. Others like me thought things were going to be much worse, that without the stimulus, unemployment would be around 12 percent and with the stimulus, it would be about 10 percent. And the pessimists were right. Well, when the world turns out to be worse than you thought it would, you have to adjust what you do.

But even a much bigger stimulus would have only brought the unemployment rate down to about 8 percent, which is still totally unacceptable. So right now I am very much in favor of a second round of stimulus. Hopefully, it will be better designed and more targeted to job creation and actually stimulating the economy. The tax cuts in the first round weren't designed really to stimulate the economy very much and didn't work very effectively.

ZC: And what do you do to create jobs? Are we talking fiscal aid to states? Unemployment benefits? A new WPA?

JS: The first thing I would do is aid to the states. The states have balanced budget frameworks. The revenues are down by around $200 billion because of the recession. If they don't get aid, they have to either raise taxes—which is very hard in the current environment—or cut back expenditures. And what they inevitably cut are teachers, nurses, firefighters and a whole set of crucial public services which are all the more important in an economic recession.

So the first thing is to provide states with money, and that spending goes right to the economy very quickly. You don't have to set up new programs and it really does save jobs. I would also do one of the things that Obama is pushing now which are job credits to encourage companies to hire more workers. Focus a little bit more direct attention on jobs. We don't know how effective these are going to be. There is some debate, but it seems to me that if we don't try we're not going to get anywhere.

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McCain's new threats, and the perils of missed messaging

As you know, GOP Senator Bunning is currently conducting a filibuster of a bill to extend unemployment benefits. The current benefits expire Sunday, and they're going to be cut off - because of the GOP filibuster, there's not enough time to pass the bill before the benefits run out. Bunning wants to take the remaining stimulus monies and use them for the benefits instead.

At the same time, John McCain is now saying that there will be "cataclysmic effects" if the Democrats use Reconciliation to break a GOP filibuster of health care reform.

Why are the two events related? Because they're both happening because of bad Democratic messaging come back to bite us in the behind.

Bunning's filibuster is really a two-fer. First, he's taking advantage of the fact that the administration did a bad job selling and defending the stimulus, so that now only 6% of the public thinks the stimulus created any jobs, when in fact, CBO found last week that the stimulus has created up to 2.1 million jobs. Remember what it was like just one year ago. Banks weren't lending. The stock market had plummeted. Even George Bush's outgoing cabinet warned that the country was in dire straights. The stimulus saved us. It wasn't big enough, and that's why our recovery is still relatively flat, but it saved us from another Great Depression. But because the public doesn't think the stimulus worked, after the GOP lied for a year about it, Bunning feels comfortable demanding that the rest of the stimulus be scotched, risking our entire economic recovery.

Second, Bunning is taking advantage of the missed messaging on the budget deficit. Democrats rightly passed a nearly $800 billion stimulus in order to stop the country from plunging into a second Great Depression. But, because they didn't adequately defend it, Democrats are now talking about the need to massively cut the deficit above all else. That kind of talk is dangerous while the economy is still teetering. Cutting spending now would reduce demand, and reduced demand in a weak economy could force the economy to contract again, i.e., another recession or worse. Mind you, economist are still worried that the economy may contract again this fall in any case. So cutting spending will only risk making it worse. But, Democrats decided to agree with the GOP talking about, so now we're all about cutting spending. Thus, Bunning is on a crusade to make sure we stop spending the "wasteful" stimulus monies, and we "cut spending" at the same time. He's doing this because our messaging enabled it.

Then there's McCain. Why does he feel comfortable blasting reconciliation? Because Democrats did a bad job selling health care reform, and selling the use of reconciliation for passing it. On health care reform, a recent Newsweek survey found that Americans tend to oppose President Obama's health care reform plan until they find out what's actually in it, then they like it. A lot. McCain feels comfortable trying to block reconciliation, and thus block health care reform, because of bad messaging on HCR over the past year. Second, on reconciliation itself, we found out only last week that the congress, and particularly the GOP, had used reconciliation repeatedly in the past to pass major health care reform bills. The Democrats have been talking about possibly using reconciliation, to get around the never-ending GOP filibusters, for almost a year now. Why did it take a private think tank to do the research that Democrats should have done a year ago? As Joe would say, that's pretty pathetic.

And finally, McCain feels comfortable arguing against reconciliation because Democrats have done a poor job educating the public about the incessant GOP filibusters. When the Democrats blocked far fewer GOP court nominees than the Republicans are blocking bills today, the GOP went ballistic and it was all the national news how the Dems were abusing the filibuster. Now that the GOP is abusing it far more than the Dems ever did, it's not that big a story. And blame the media all you want, but if you feed them the right story, very often they run with it. But you have to feed them the right story.

And actually, there's one more reason that John McCain feels comfortable threatening legislative armageddon if the Democrats use reconciliation to pass HCR. Republicans have learned that if you threaten a Democrat, they usually cave. Conservative Democrats have learned the same lesson. Democrats have turned legislative appeasement into an art, especially in the last year. So, McCain knows that if he threatens to be really really mean, a lot of Democrats, including the President, will feel an uncontrollable urge to make nice, in the hopes of averting the imminent mean-ness by caving outright to the GOP's demand. Of course, as a result, McCain and the Republicans will continue to loose armageddon on the Democrats regardless of what the Democrats offer to make it stop. The appeasement won't work. But history tells us that the Democrats don't learn their lesson.

My point in this post is to show you how political actions have consequences. Everything the Republicans are doing to us today is based on bad moves Democrats made in the past. Every time the Democrats screw up their messaging, or cave to a GOP (or conservative Dem) demand, they set the stage for even more problems in the future. Nothing happens in a vacuum. It's all cumulative. And that is why a lot of us complain about every Democratic mis-step. Because we know that the error will come back to haunt us, sooner rather than later. Read More......

GOP now filibustering unemployment benefits - current benefits will run out before bill can be passed because of Republicans

And the Democrats are forcing Bunning to launch a real filibuster. About time. Show the American people what selfish, uncaring extremists the Republicans really are.

Retiring Sen. Jim Bunning (R-Ky.) late Thursday launched a one-man crusade to block an extension of unemployment and COBRA insurance benefits, vowing to allow the benefit programs to expire Sunday unless Democrats agreed to pay for them with unused stimulus funds.

Bunning’s quixotic pursuit of deficit offsets at the potential expense of payments to unemployed or uninsured citizens enraged Majority Whip Dick Durbin (D-Ill.) and other Democrats, who vowed to keep the chamber in session until Bunning relents or collapses.

A senior Democratic leadership aide said Durbin would ask for unanimous consent to pass the extensions without Bunning’s payment scheme every half hour for the foreseeable future. “We’re going to keep doing it until we break him,” the aide said.

Did you get that? This idiot wants us to use the stimulus funds that haven't yet been spent, but are about to be spent. By CBO's estimate, up to 3.5 million jobs are depending on the stimulus for their existence this coming year. This moron wants to wipe that out. The economy isn't out of trouble yet. A lot of economist worry that the economy may contract again the fall. Taking back the remaining stimulus funds while the economy is still teetering, i.e., decreasing demand, is insane. I hope the Democrats are pointing this out, in addition to the inhumanity of taking away people's unemployment benefits. We cannot let the GOP propose economically dangerous, but populist, solutions and let them get away with it. Read More......