Did Obama Really Prevent A Second Great Depression?

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    Jun 21, 2011 10:17 PM GMT
    Short answer: No. Glad you wasted all that (borrowed) money?

    WEBa1stim0621.jpg.cms

    It has become a common refrain at the White House and among administration supporters that President Obama's aggressive efforts to stimulate growth prevented an economic catastrophe.

    "We had to hit the ground running and do everything we could to prevent a second Great Depression," Obama told supporters last week.

    Politically, the claim makes sense. Casting the challenge Obama faced as immense can help explain the economy's lackluster performance in the two years since the recession officially ended.

    But is it an accurate portrayal of what really happened?

    IBD reviewed records of economic forecasts made just before Obama signed the stimulus bill into law, as well as economic data and monthly stimulus spending data from around that time, and reviews of the stimulus bill itself.

    The conclusion is that in claiming to have staved off a Depression, the White House and its supporters seem to be engaging in a bit of historical revisionism.

    Economists weren't predicting a Depression.

    White House economists forecast in January 2009 that, even without a stimulus, unemployment would top out at just 8.8% — well below the 10.8% peak during the 1981-82 recession, and nowhere near Depression-era unemployment levels.

    The same month, the Congressional Budget Office predicted that, absent any stimulus, the recession would end in "the second half of 2009." The recession officially ended in June 2009, suggesting that the stimulus did not have anything to do with it.

    The data weren't showing it, either.

    The argument is often made that the recession turned out to be far worse than anyone knew at the time. But various indicators show that the economy had pretty much hit bottom at the end of 2008 — a month before President Obama took office.

    Monthly GDP, for example, stopped free-falling in December 2008, long before the stimulus kicked in, according to the National Bureau of Economic Research. (See nearby chart.) Monthly job losses bottomed out in early 2009 while the Index of Leading Economic Indicators started to rise in April.

    The stimulus timing is off.

    When the recession officially ended in June 2009, just 15% of the stimulus money had gone out the door. And that figure's likely inflated, since almost a third of the money was in the form of grants to states, which some studies suggest they didn't spend, but used to pay down debt.

    Other programs Obama often touts — Cash for Clunkers, mortgage help, homebuyer tax credits, the auto rescue plans — either came as the recession had ended or was ending or were widely deemed to be busts.
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    Jun 21, 2011 11:44 PM GMT
    One should just forget that Bush had a stimulus package too of $152 billion in 2008.

    I'm no economist, but there are so many things wrong with this chart though:

    Monthly GDP annualized but not seasonally adjusted. (Christmas is shopping season, remember? Explains the upward tick around December/January)

    Arbitrarily superimposed scale on the right (%)--what would be more informative is the actual dollar amounts spent compared to monthly seasonally adjusted GDP (not annualized).

    Or you can do it quarterly:

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    Jun 21, 2011 11:46 PM GMT
    And you got to make up your mind.

    First it's BAD BAD ECONOMY (the mantra for the better part of these past 2 years) and it's all his fault!

    Now it's "it wasn't so bad to start with" so he can't take any credit for saving us from the big bad depression.

    Which one is it?icon_rolleyes.gif
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    Jun 22, 2011 1:05 AM GMT
    q1w2e3 saidAnd you got to make up your mind.

    First it's BAD BAD ECONOMY (the mantra for the better part of these past 2 years) and it's all his fault!

    Now it's "it wasn't so bad to start with" so he can't take any credit for saving us from the big bad depression.

    Which one is it?icon_rolleyes.gif


    Lol - it's remarkable how you bend over backwards to defend the economic policies of Obama and how you seem to repeatedly think that by default that must make me a supporter of Bush's policies. Nevertheless, here' my view - I disliked Bush's domestic policies and spending. I don't think stimulus generally works/worked based on almost every historical attempt - that it tends to be too late - and it appears this is no different.

    Obama has been claiming in the last year that we have been emerging from a recession - which is I think technically true though the jobs do not reflect this. The problem is that he's also attempted to claim that it is because of stimulus. That being said, given that I also think that the recovery has been tepid, I also think that existing policies and uncertainty are making things worse.

    That these policies are killing jobs and because stimulus in part papered over some of the problems and kicked them out into the future, we are either resolving them in slow mo, or we will ultimately need to resolve them (e.g. housing prices and underwater mortgages by some people who shouldn't have received mortgages to begin with).

    Stimulus was an exceedingly bad waste of money with little if anything to show for - worse, it will likely help to drive up interest rates given debt levels and fears well into the future that will have a larger negative anti-stimulative impact on business.
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    Jun 22, 2011 1:12 AM GMT
    OK, would you like it better if we call it a tax cut (which makes up a major part of the "stimulus")?
    http://www.usnews.com/opinion/blogs/robert-schlesinger/2009/02/12/is-obama-stimulus-plan-also-the-biggest-tax-cut-everAre the tax cuts in the stimulus bill the largest is U.S. history?

    Yes, sort of.

    Steven Waldman, a former U.S. News editor (well before I wandered these halls), makes an interesting case that the coming tax cut will indeed be the biggest ever.

    The compromise stimulus plan includes $282 billion in tax cuts over two years.

    According to the Wall Street Journal, Bush's first two years of tax cuts amounted to $174 billion. A second batch in 2004 and 2005 cost $231. And those were thought to be bigger than the tax cuts offered by Reagan, Kennedy, or others.

    But wait, you say, wasn't Bush's 2001 tax cut, at $1.35 trillion (funny how the GOP didn't mind draining one trillion dollars from the government coffers then), the largest in history?

    Yes, over the full 10 years of its existence. But over the first two years, as Waldman points out above, the price tag was much smaller. So the Obama stimulus tax cut would be the biggest ever for the first two years. Or something like that.


    Obama is a Republican after all. icon_lol.gif

    http://www.washingtonpost.com/business/economy/obama-revealed-a-moderate-republican/2011/04/25/AFPrGfkE_story.html?hpid=z2
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    Jun 22, 2011 2:35 AM GMT
    q1w2e3 saidOK, would you like it better if we call it a tax cut (which makes up a major part of the "stimulus")?
    http://www.usnews.com/opinion/blogs/robert-schlesinger/2009/02/12/is-obama-stimulus-plan-also-the-biggest-tax-cut-everAre the tax cuts in the stimulus bill the largest is U.S. history?

    Yes, sort of.

    Steven Waldman, a former U.S. News editor (well before I wandered these halls), makes an interesting case that the coming tax cut will indeed be the biggest ever.

    The compromise stimulus plan includes $282 billion in tax cuts over two years.

    According to the Wall Street Journal, Bush's first two years of tax cuts amounted to $174 billion. A second batch in 2004 and 2005 cost $231. And those were thought to be bigger than the tax cuts offered by Reagan, Kennedy, or others.

    But wait, you say, wasn't Bush's 2001 tax cut, at $1.35 trillion (funny how the GOP didn't mind draining one trillion dollars from the government coffers then), the largest in history?

    Yes, over the full 10 years of its existence. But over the first two years, as Waldman points out above, the price tag was much smaller. So the Obama stimulus tax cut would be the biggest ever for the first two years. Or something like that.


    Obama is a Republican after all. icon_lol.gif

    http://www.washingtonpost.com/business/economy/obama-revealed-a-moderate-republican/2011/04/25/AFPrGfkE_story.html?hpid=z2


    The problem was that the tax cuts weren't permanent - so it amounted to short term spending rather than a change in behavior - especially the payroll tax cuts. So yes, I'd say that these temporary measures were useless. It's odd that you consider that not taking more taxes from people somehow amounts to the government spending money. It's a sad ideology that believes that the money that people have is not theirs but by the benevolence of government rather than the other way around.
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    Jun 22, 2011 2:41 AM GMT
    "It's odd that you consider that not taking more taxes from people somehow amounts to the government spending money."

    I don't think that. In fact, since you don't believe it either, the stimulus didn't spend $282 billion that was attributed to it, according to you. icon_lol.gif
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    Jun 22, 2011 2:45 AM GMT
    q1w2e3 said"It's odd that you consider that not taking more taxes from people somehow amounts to the government spending money."

    I don't think that. In fact, since you don't believe it either, the stimulus didn't spend $282 billion that was attributed to it, according to you. icon_lol.gif


    That wasn't the only part of stimulus and I assume you recognize that.
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    Jun 22, 2011 2:58 AM GMT
    So go ahead and correct all your posts, cut out $282 billion from your quoted stimulus numbers.

    And please give Obama the credit of the single largest tax break in the history of the US, while you're at it. icon_lol.gif
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    Jun 22, 2011 3:11 AM GMT
    It's impossible to prove whether or not the stimulus prevented the 2007-2009 Bush recession from becoming another Great Depression.
    But, we do know who to blame for the 2007-2009 Bush recession.
    Former President George W. Bush - and the six solid years of failed Repub economic policies that preceeded the onset of the 2007-2009 Bush recession.
  • Webster666

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    Jun 22, 2011 3:16 AM GMT
    rickrick91 saidIt's impossible to prove whether or not the stimulus prevented the 2007-2009 Bush recession from becoming another Great Depression.
    But, we do know who to blame for the 2007-2009 Bush recession.
    Former President George W. Bush - and the six solid years of failed Repub economic policies that preceeded the onset of the 2007-2009 Bush recession.




    ...plus, the gradual erosion of all the regulations and oversight (started during the Ronald Reagan years) that allowed the Wall Street bankers to turn Wall Street into Las Vegas. The Savings and Loan crisis should have been a big red flag that we were going down the wrong path.
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    Jun 22, 2011 3:28 AM GMT
    q1w2e3 saidSo go ahead and correct all your posts, cut out $282 billion from your quoted stimulus numbers.

    And please give Obama the credit of the single largest tax break in the history of the US, while you're at it. icon_lol.gif


    So long as you acknowledge that the stimulus failed. I didn't even quote any numbers above. Do try again ;)
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    Jun 22, 2011 3:31 AM GMT
    rickrick91 saidIt's impossible to prove whether or not the stimulus prevented the 2007-2009 Bush recession from becoming another Great Depression.
    But, we do know who to blame for the 2007-2009 Bush recession.
    Former President George W. Bush - and the six solid years of failed Repub economic policies that preceeded the onset of the 2007-2009 Bush recession.


    Except that if you bothered to look at the numbers being forecast with and without stimulus, stimulus has left the US actually worse off given that the additional debt burden that has resulted.

    As for blaming on the 2007-2009 recession? Where the economy hasn't improved appreciably for the past 3 years under Obama? And where the US has been left with ever increasing deficits, more regulation and at the precipice of another recession? The policies and institutions that resulted in the recession far preceded that of Bush.
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    Jun 22, 2011 3:36 AM GMT
    riddler78 said
    So long as you acknowledge that the stimulus failed. I didn't even quote any numbers above. Do try again ;)


    I'm talking about rectifying the numbers in the many, many posts of Barack-nophobia (new Olbermann coinage) and FOO (Fear of Obama--Krugman coinage) that you've had in the past 2 years.

    OK, I acknowledge the stimulus failed in creating jobs because:
    1. It contained tax cuts (shown again and again not to work to stimulate job growth but fine for GDP growth), and
    2. It wasn't big enough in its non-tax cut portion that actually did something useful and durable, like building infrastructure and stimulating nascent industries like green energy.

    That better?icon_lol.gif
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    Jun 22, 2011 3:43 AM GMT
    q1w2e3 said
    riddler78 said
    So long as you acknowledge that the stimulus failed. I didn't even quote any numbers above. Do try again ;)


    I'm talking about rectifying the numbers in the many, many posts of Barack-nophobia (new Olbermann coinage) and FOO (Fear of Obama--Krugman coinage) that you've had in the past 2 years.

    OK, I acknowledge the stimulus failed in creating jobs because:
    1. It contained tax cuts (shown again and again not to work to stimulate job growth but fine for GDP growth), and
    2. It wasn't big enough in its non-tax cut portion that actually did something useful and durable, like building infrastructure and stimulating nascent industries like green energy.

    That better?icon_lol.gif


    Yeah - figures that you get your talking points from a toupee. I mean the word might work if any of us were actually afraid of Obama. The problem is that there's nothing to fear - America's enemies don't really fear him, America's friends get abandoned by him and his economic policies don't work.

    There have been forms of tax cuts that have worked in creating jobs - tax cuts on capital. heck, capital gains cuts have even brought in even more revenues in the past (one of the few revenue positive forms of tax cuts).

    Stimulus and spending in the past however? Have a very miserable record beyond enriching friends of those in power. As for Krugman - there's no fear, it's a man in an empty suit who rants and is so easily dismissed. It's laughable how out of touch he is. Recently he said "A liberal can talk coherently about what the conservative view is because people like me actually do listen. We don’t think it’s right, but we pay enough attention to see what the other person is trying to get at. ...One side of the picture is open-minded and sceptical. We have views that are different, but they’re arrived at through paying attention. The other side has dogmatic views."

    The only problem is that he has stated repeatedly in the past he doesn't bother listening or reading conservative views. Let me know when you find something relevant.
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    Jun 22, 2011 3:44 AM GMT
    Stimulus or tax break?
    http://www.nytimes.com/2011/06/20/business/20tax.html?_r=1(T)hat’s not how it worked last time. Congress and the Bush administration offered companies a similar tax incentive, in 2005, in hopes of spurring domestic hiring and investment, and 800 took advantage. Though the tax break lured them into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research.
    ...
    Indeed, 60 percent of the benefits went to just 15 of the largest United States multinational companies — many of which laid off domestic workers, closed plants and shifted even more of their profits and resources abroad in hopes of cashing in on the next repatriation holiday.


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    Jun 22, 2011 3:47 AM GMT
    riddler78 said
    rickrick91 saidIt's impossible to prove whether or not the stimulus prevented the 2007-2009 Bush recession from becoming another Great Depression.
    But, we do know who to blame for the 2007-2009 Bush recession.
    Former President George W. Bush - and the six solid years of failed Repub economic policies that preceeded the onset of the 2007-2009 Bush recession.


    Except that if you bothered to look at the numbers being forecast with and without stimulus, stimulus has left the US actually worse off given that the additional debt burden that has resulted.

    As for blaming on the 2007-2009 recession? Where the economy hasn't improved appreciably for the past 3 years under Obama? And where the US has been left with ever increasing deficits, more regulation and at the precipice of another recession? The policies and institutions that resulted in the recession far preceded that of Bush.



    LOL
    There's plenty of graphs and charts that show that if the Bush tax cuts for the rich had never been implemented, the economy would have done better and the National Debt would have continued to shrink instead of ballooing.
    Instead, Bush passed the tax cuts for the rich and doubled the National Debt.
    Bush passed a prescription drug bill that's 100% unpaid for - the full cost of which gets added to the National Debt, unlike the Dem's HCR bill that's mostly paid for.
    The Bush recession and the doubling of the National Debt happened on Bush's watch and Bush gets the blame for what happened on his watch - as all president's do.
    Period.

    To suggest that the economy hasn't "appreciably improved" since Obama took office is BS.
    The JOBS picture hasn't appreciably improved - but the economy has clearly and unmistakeably improved.
    To deny that - is just BS.
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    Jun 22, 2011 3:49 AM GMT
    q1w2e3 saidStimulus or tax break?
    http://www.nytimes.com/2011/06/20/business/20tax.html?_r=1(T)hat’s not how it worked last time. Congress and the Bush administration offered companies a similar tax incentive, in 2005, in hopes of spurring domestic hiring and investment, and 800 took advantage. Though the tax break lured them into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research.
    ...
    Indeed, 60 percent of the benefits went to just 15 of the largest United States multinational companies — many of which laid off domestic workers, closed plants and shifted even more of their profits and resources abroad in hopes of cashing in on the next repatriation holiday.




    Again - shocking - what;'s wrong with letting people keep the money they earn? It didn't work as intended. I'm not sure what your point is.
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    Jun 22, 2011 3:51 AM GMT
    Just showing you that tax breaks on capital has not proven to be very reliable in creating jobs...if that wasn't clear to you already.

    And if you don't like the Olbermann and Krugman words since you keep on being ad hominem, how about one from the Economist: "partisan regime uncertainty."
    http://www.realjock.com/gayforums/1604066/
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    Jun 22, 2011 4:23 AM GMT
    Yes. That is all.
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    Jun 22, 2011 5:22 AM GMT
    q1w2e3 saidJust showing you that tax breaks on capital has not proven to be very reliable in creating jobs...if that wasn't clear to you already.

    And if you don't like the Olbermann and Krugman words since you keep on being ad hominem, how about one from the Economist: "partisan regime uncertainty."
    http://www.realjock.com/gayforums/1604066/


    You have yet to post anything that would remotely resemble insight from either of them - and it's not ad hominem to use their own words against them. But then again, that goes for the blather you've noted yourself. All this money was wasted on "stimulus" that didn't work - and the best that you can do is point to the other party as if that makes it ok.

    Tax breaks on capital has been shown to be very reliable in creating jobs - but what is even more reliable is profitability given that profitability comes before jobs - and further, providing a good environment for people to create new companies. It's new companies above all else that create jobs and the formula for doing that is known. Instead, what we got were a crop of half measures that didn't actually solve any problems but created a new one (more debt) while kicking existing ones into the future.
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    Jun 22, 2011 7:18 AM GMT
    I know the change he gave Americans is in their pockets.
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    Jun 22, 2011 11:29 AM GMT
    Isn't Mankiw like your fav econ hero?
    http://mediamatters.org/mobile/research/201106170009Bush CEA Chair Mankiw: Claim That Broad-Based Income Tax Cuts Increase Revenue Is Not "Credible." Economist Greg Mankiw, who also served as chair of the Bush Council of Economic Advisers (CEA), wrote on July 2, 2007:

    I used the phrase "charlatans and cranks" in the first edition of my principles textbook to describe some of the economic advisers to Ronald Reagan, who told him that broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue. I did not find such a claim credible, based on the available evidence. I never have, and I still don't.
    [...]
    My other work has remained consistent with this view. In a paper on dynamic scoring, written while I was working at the White House, Matthew Weinzierl and I estimated that a broad-based income tax cut (applying to both capital and labor income) would recoup only about a quarter of the lost revenue through supply-side growth effects. For a cut in capital income taxes, the feedback is larger--about 50 percent--but still well under 100 percent. A chapter on dynamic scoring in the 2004 Economic Report of the President says about the the [sic] same thing. [Greg Mankiw, 7/2/07]


    OK, so you don't lose as much with taxes on capital when you do taxes on income, but it's still a LOSS of revenue.

    There are like 5 or 6 more quotes from Reagan and Clinton economists saying practically the same thing on that page.
    --------------
    Just an aside: I've never used words like "blather." Your tendency (not just with me) is denigrating the other guy first before you attack their arguments. I'm sure you're a nice guy in real life, but please try not to insult the other guy when you debate people, it just really makes things a little more civil.

    This is a great article from my old Western Civ teacher (who still teaches in the same school), especially the part about "to respect persons but not necessarily the ideas they hold; to expect to have what one says taken seriously and, as need be, seriously taken apart."
    http://thejokeblog.blogspot.com/2006_05_01_archive.html
    Scroll down to the entry "How I got this way" May 19, 2006.

    Oh, BTW, I use the terms Barack-nophobia and FOO for their lulz impact, not to insult your intelligence.
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    Jun 22, 2011 11:33 AM GMT
    riddler78 saidTax breaks on capital has been shown to be very reliable in creating jobs - but what is even more reliable is profitability given that profitability comes before jobs - and further, providing a good environment for people to create new companies. It's new companies above all else that create jobs and the formula for doing that is known. Instead, what we got were a crop of half measures that didn't actually solve any problems but created a new one (more debt) while kicking existing ones into the future.


    Tax breaks on capital do not create jobs, demand does. In fact, I guarantee that you cannot provide one tangible example of this being the case.
  • rnch

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    Jun 22, 2011 12:42 PM GMT
    "you can prove ANYTHING with statistics"--- Homer J. Simpson






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