...that any of the administration's economic initiatives are actually going to work?

I realize that for some proponents, actual success doesn't matter -- or more accurately, success is DEFINED as the mere fact of confiscating, allocating, and regulating, so that the "success" of such a policy is automatic. Such a policy is also brilliantly unfalsifiable -- it can never fail, and if it is ever accused of not accomplishing more meaningful results, the inevitable rejoinder is that more of the same is needed, because obviously there wasn't enough the first time. Certain interest groups have built their existence on this very theory.

But for most of us, the proof of the pudding is in the eating.* Does anyone -- in Washington, on Wall Street, in California, anywhere -- have a sincere belief that any of the stimulus/spending/tax/regulation efforts will actually produce growth and prosperity?

I recognize that occasionally some policies may be useful purely for their placebo effect. A famous example is the war-time scrap metal drives -- pots and pans may not be all that useful for building ships and planes, but the morale effect is worth something. But placebos should at least do no harm.

*Perhaps reflective of the age we live in, this time-honored saying usually gets shortened to the largely meaningless "the proof is in the pudding." But the mere existence of pudding proves nothing -- at least, nothing relevant. What matters is whether it tastes good, and the proof of that is in the eating -- which is what people used to say.

I don't.

I think there may be the referenced placebo effect at some point, although I had thought it would have started by now and that doesn't seem to be happening. I originally thought the markets would crest around 12 before the end of the summer, then fall back to 6 by year-end, hang around 6 for most of 2010, and then crater in 2011. By mid-2011, if we continue with these plans, I expect to see the rest of the world start to come back. We will lag behind, as once Obamanomics are fully in place, I can't imagine any reason why anyone would choose to manufacture anything here, except for itms to be sold in the domestic market. We will be out of the export sales business entirely, as the extra tax and overhead load being placed on our businesses and entrepreneurs will simply make us uncompetitive with other countries for export sales. The impact of losing the export business should push unemployment somewhere in the 20 to 50 million range by mid 2011. The impact of the dollar drain to pay for imports (which we will still need), plus the dollar outflow to service the debt we incurred to finance the "stimulus," will start to tank the dollar, and I expect to see inflation in the 20% to 50% range by late 2011 to 2012. The falling dollar won't help export sales, because nobody will be making anything here to export, and that will enable high rates of unemployment and high rates of inflation to coexist.

What happens next? I really don't know. These seem to be the options that I can see. You may be able to foresee others.
1. Anarchy, as roving bands of unemployed marauders terrorize the streets in search of food. This does not strike me as desirable, but other options might be worse.
2. A breakup of the US as various regions blame each other for the problem and feel that they could do better going alone. This is probably the best of the avaialable outcomes, IMO. Not a good outcome, but better than the rest. At least parts of the country could support some semblance of an economy and a life.
3. Some kind of totalitarian government takeover. I think this one would be hard to push onto the American people, but not impossible.
4. A military coup. Impossible, we'd like to think. But if dissatisfaction runs as high as I anticipate, it might slip into the realm of possibility. Would it lead to 3? I hope not.
5. Stay the course, and watch the American lifestyle decline until we are Nicaragua. I actually think this is the most likely case. "Not with a bang, but a whimper."

The whole approach is prefaced on Keynesian economics. There are a few problems with that approach:
1. Despite what proponents say, there is no clear-cut case that Keynesian economics has ever worked. FDR's ending the Great Depression with the New Deal is claimed as a triumph by Keynsians, but modern research suggests it's a mixed bag at best.
2. Keynesian economics assume something of a closed system. Their big talking point is the mulitiplier effect. Government gives me money, I spend it. The guy I spend it with buys something else. The guy he spends it with buys something else. That dollar turns into multiple dollars of economic activity. When I took Eco 200, the literature of the day suggested that the multiplier could be as high as 7 times the original expenditure. In today's global economy, there is no closed system. This model doesn't work as well to help the US economy if, by the third iteration, the money is in China. There was a lot of economic debate about multipliers and spending while the "stimulus" was under consideration. Proponents of the "stimulus" took great pride in pointing out that various studies suggest that the greatest multiplier effect comes from direct government spending, as opposed to tax cuts and other measures. To me, the most telling part of that analysis was that most of the multipliers hovered around 1, and none of them were higher than 2.
3. Keynesian economics assumes that supply and demand are in some reasonable balance. Since at least the 1960s we have been overstimulating demand and understimulating supply to the extent that supply and demand are now so far out of balance that we have to be the largest net importer in the world (with greater net imports than the other 100 importing countries combined) in order to meet demand. It's supply that needs stimulating, not demand. Shrub didn't help with tax cuts that didn't do much to stimulate supply. So long as other governments adopt tax and regulatory approaches designed unabashedly to stimulate domestic industry, and we view the main function of domestic industry as providing tax revenues to run our government, we'll remain in a supply deficiency. That means fewer jobs, which means higher unemployment, in case you have trouble connecting the dots.
4. Americans save less, and consume more, of their incomes than any other people in the world. Our government sucks up a disproportionate share of what we do save to finance its budget deficits. We ship dollars overseas at a rate that challenges the size of the federal budget deficit. This means there is no money going into the market. That's why stocks are tanking. Without investment capital, domestic industry cannot grow. It's a shortage of investment capital that sank the banks, and it will sink one industry at a time over the next few years until we fix this (auto industry next? airlines after that? who's after that?). Stimulating demand without stimulating supply just means that we will import more.
5. The increased debt to finance the federal budget deficit, plus the increased debt to finance our imports, will eventually put a huge strain on the dollar. Worse, the creditors are all overseas, which puts some incredible strains on our foreign policy. When the dam breaks, the dollar may well start to free-fall. We could easily become Argentina, very easily.

That's my take. It's long enough as is, but in an attempt not to write War and Peace, I may have skipped over some things that need further explanation--or discussion. I would like to hear what others think.

I'd really like for someone to give me a compelling analysis indicating that this thing will work. Because otherwise I really don't see any alternative for me personally but to leave the country, and that's something I'd rather not do if I don't have to.

I don't. I never did. I think his policies are like trying to put out a fire by throwing gasoline on it.

But I expected this, and that is why I opposed him from the git-go, and voted against him. Interesting that nobody wants to defend him, when just a few months ago there were lots of people ready to jump to his defense on this board. Have we driven them away (hope not) or have they started having second thoughts (hope so, but too late)?

RE: 69's outcome #1 (anarchy) I have already been contacted by a big city dweller who asked if she could bring her extended family and live on my farm when it gets really bad in her city. She didn't say if, she said when. Apparently she is is one of a large group who are stocking up on freeze-dried food, buying guns/ammo, getting medical supplies, etc, as though her city would be turning into a war zone. I don't agree with this scenario, but if enough people do, it becomes a self-fulfilling prophecy. It worries me that 69 even brought it up.

The break up idea is intriguing. I have no problem with the Northern and Western States going their own way. I'm tired of them cramming their values down everyone's throats. I know we had a war already over this, but that doesn't mean the principle of secession is wrong, just that it could not be enforced by military means in 1860-65. I have always wondered why a state or states could not freely leave a union it freely entered. Marriages and partnerships break up all the time.

Obama has pleasantly surprised me in some ways, usually by breaking his campaign promises. Unfortunately, his economic measures are not among those that have been pleasant surprises.

I had a long answer though out, but it doesn't matter. Those "happy" with sharing the wealth and taking from those who have to give to those who don't will never be able to show that doing so increases the total amount of anything available to share...

Interestingly, the most obvious example is this stimulus bill... supporting companies who have failed at the expense of taxpayers, or other companies who have not failed. Where is their incentive to do significantly better? How are we motivating those who DIDN"T take unreasonable risks to continue to be prudent managers of their capital?

I could go on, because most of the projects in this stimulus bear SOME level of stupidity... but the bottom line is... When you encourage behavior, you get more of it. When you discourage it, you get less. What are we encouraging?

Not going to work at all. I do not even think its proponents believe it will work. The crisis gives them perfect cover to pass long cherished spending programs.

(03-10-2009 02:00 PM)Ranger Wrote:  Not going to work at all. I do not even think its proponents believe it will work. The crisis gives them perfect cover to pass long cherished spending programs.

That is my sense, as well: that even the supporters of Obama's programs (perhaps even Obama himself) neither believe NOR CARE if they produce prosperity, as long as they achieve spending and redistribution. Of course, any idiot can achieve spending. And redistribution without prosperity has many examples throughout history, including most of the Eastern Hemisphere for most of the last century. Every one of those examples involves large degrees of bureaucracy, authoritarianism, environmental degradation, stagnation, and misery; none of them involve large degrees of liberty, innovation, or hope.

(03-10-2009 10:31 AM)georgewebb Wrote:  ...that any of the administration's economic initiatives are actually going to work?

I genuinely believe they stand more chance of working than the whole lot of nothing offered by the GOP.

(03-10-2009 06:35 PM)texd Wrote:  

(03-10-2009 10:31 AM)georgewebb Wrote:  ...that any of the administration's economic initiatives are actually going to work?

I genuinely believe they stand more chance of working than the whole lot of nothing offered by the GOP.

Not exactly a yes.

Nor am I exactly an expert in economics.

Let's put it this way... Odds are not insignificant that no matter what we do or don't do, we're all just kind of screwed for a good decade or so, but if there is something that can be done to legitimately accelerate the healing (i.e. without creating simply a bubble yet another sort), I trust the current administration to find it and do it -- even if it is something that was not originally proposed by them.

(03-10-2009 06:35 PM)texd Wrote:  

(03-10-2009 10:31 AM)georgewebb Wrote:  ...that any of the administration's economic initiatives are actually going to work?

I genuinely believe they stand more chance of working than the whole lot of nothing

Actually, it seems more and more that a "whole lot of nothing" would have been exactly the right prescription. After all, it took deliberate government policy to turn the panic of October 1929 into a worldwide depression -- and it took 15 years and 100 million deaths to bring the world out of it. Right now our government seems hell-bent on sending us down the same bloody path.

If, as you suggest, we are in for a full decade of misery, it will be because of, not in spite of, the policy reactions of governments. There is perhaps a slim hope that the price of those policies will not be as murderous as it was the last time. I suspect that even the most ardent redistributionist cannot think of 100 million people that he would like to kill -- though I would not bet much on that proposition.

(03-10-2009 06:35 PM)texd Wrote:  

(03-10-2009 10:31 AM)georgewebb Wrote:  ...that any of the administration's economic initiatives are actually going to work?

I genuinely believe they stand more chance of working than the whole lot of nothing offered by the GOP.

I seriously believe that doing nothing would work better than what is being done.

There are things that could work, but NEITHER political party is talking in those directions. So I think it's just going to be a disaster. I really see the US becoming a non-livable country. That's why I'm checking out some overseas moves.

(03-10-2009 06:35 PM)texd Wrote:  

(03-10-2009 10:31 AM)georgewebb Wrote:  ...that any of the administration's economic initiatives are actually going to work?

I genuinely believe they stand more chance of working than the whole lot of nothing offered by the GOP.

Why? What is going to make them work? What part of them has any potential positive impact? How will any positive elements manage to overcome the negative impact of the debt load we are taking on?

Serious questions, very serious.

I wish you guys would have voiced these concerns before the election.

(03-10-2009 09:51 PM)At Ease Wrote:  I wish you guys would have voiced these concerns before the election.

I did. Repeatedly. Moreso in the Spin Room than here.
Obama is an engaging personality, but I have always feared that his recipe for the economy would bring on unmitigated disaster.
After his performance in mid-September, I lost any belief that McCain would handle the economy any better.

(03-10-2009 07:13 PM)texd Wrote:  if there is something that can be done to legitimately accelerate the healing (i.e. without creating simply a bubble yet another sort), I trust the current administration to find it and do it

"First, do no harm".

I think that Doctor O has violated this precept.

I have no faith in him. You do. We shall see.

(03-10-2009 09:51 PM)At Ease Wrote:  I wish you guys would have voiced these concerns before the election.

I always voiced my beliefs that his tax and fiscal policies would be damaging to us. I didn't know then that we would be starting from a crisis, but i always knew and said that his planned actions would be damaging to our economy.

(03-10-2009 07:13 PM)texd Wrote:  if there is something that can be done to legitimately accelerate the healing (i.e. without creating simply a bubble yet another sort), I trust the current administration to find it and do it

I don't.

Sorry, that was a joke. You guys have made your distaste for Obama abundantly clear over the last 18+ months.

(03-11-2009 12:49 AM)At Ease Wrote:  Sorry, that was a joke. You guys have made your distaste for Obama abundantly clear over the last 18+ months.

I believe that folks on this board are opposed to current policies not because the policies are Obama's, but because the policies appear to be destructively stupid.

The fact that not even the proponents are arguing that the policies will actually work is telling.

Paul Krugman, one of the reigning lunatics in the press, was at it again this week with a column admitting that belief that the administration's initiatives will succeed "isn't backed by any data or model I'm aware of." (NYT, 3/09/2009, p A21). Of course not -- and in fact, most of he history of the 20th century proves the exact opposite. Amazingly, Krugman's solution (did I mention that he is a lunatic?) is to demand a lot of more of the confiscate/regulate/reallocate initiatives that he just said won't work. Note that he doesn't even wait for failure to materialize before proclaiming that we need more of what fails. Brilliant!