The stimulus worked (video)

[_Gadianton]

This survey seemed to be geared towards giving conservative institutions equal representation

also notice some economists who didn't respond include the famous Keynesian Raj Chetty. No doubt had he got around to responding, he'd vote in the affirmative.

..our panel was chosen to include distinguished experts with a keen interest in public policy from the major areas of economics, to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars.

Suppose I say "Lady GaGa's latest album is considered by most of the music industry to be great musicianship." What is the assumption behind the word, "most"? One reading might be that the popular majority of the music industry considers the album great musicianship. But, because the majority of the music industry is pop oriented, there seems to be significant bias. Of course, it's possible that pop music is in the majority because it's the best music. But the statement is still disingenuous, because it's a point of trivia that the music industry is largely pop. The only new information we learn from the statement is that the album met the genre expectations. But if we further add "no doubt that leading voices in pop who haven't commented yet on the album will hold it in high praise" the statement becomes entirely useless -- all pop music is a success by default. The statement conveys absolutely zero non-trivial information.

If we interpret "most" a little differently, and assume a cross-section of the industry to filter out bias and refrain from the assumption that representatives of the albums genre merely toe the line, then the statemet actually means something. If you want to claim that most economists believe the stimulus worked because most economists are Keynesians who believe in stimulus, and all Keynesians will toe the line and agree that every stimulus works by default -- "the guy who was absent definitely would have voted yes, he's a Keynesian!" -- then you've made absolutely no claim whatsoever and are looking for the shallowest victory imaginable.

As you seem to realize, with a controversial matter like the stimulus spending, gathering support for its effectiveness from non-Keynesians is a special feather in the cap. Further, to maintain the credibility of your constituency, you shouldn't just assume they agree with the stimulus by default. Not all pop albums are great music, even by the biased standards of the pop industry. What if the stimulus wasn't enough? Some have said that. It's entirely possible for a Keynesian to disagree with the level and execution of the stimulus and maintain that it is therefore, not cost justified. If the stimulus was too weak, it's possible that we're temporarily elevated but will crash next year into a deeper recession than we would have been in without the spending.

[_Kevin Graham]

Let's reflect on what has actually happened in this thread, to see who is truly being "disingenuous."

I started a thread entitled, "The Stimulus Worked." I presented a link to a video explaining all the ways the stimulus has benefited our economy. In my second post I reasserted that the stimulus worked, and that this wasn't even a disputable point anymore.

Gadianton then jumps in with, "Fortunately, the University of Chicago has stepped up to the plate to address the question about what economists believe vs. what blogs and think tanks say economists believe. And they address this question. Did ARRA add jobs?"

Of course I never relied on any "think tank" or "blogs," when making my case, and Gad later said he never said I did, which doesn't exactly explain why he brought it up in the first place. After a couple of hyperlinks, Gad says, "The overwhelming consensus is that the stimulus worked, it created jobs."

Well, no kidding. That's what I said.

Gad then adds a follow up question: "..the natural follow up question produces more uncertainty, do the benefits of the stimulus outweigh the costs, all factors considered?" Good question.

Gad points out that only 46% of the economists surveyed, agreed that the stimulus was "cost justified." So at this point we have two questions. One which I raised, and another raised by Gad. Two different questions.

At this point Gadianton pretty much confirmed everything I said, but EAllusion decided to twist his comments to find evidence that I'm being "disingenuous":

I could've sworn I made this point to Kevin before, so I looked it up and I did. I don't think that was the first time it has been pointed out. I think at this point you just have to accept that Kevin is disingenuously interested in arguing by equivocation that the stimulus "worked" in the sense of its benefits justifying the cost by arguing it had positive economic effects. That the latter is uncontroversial and the former is highly questionable isn't some point he's failing to grasp. He doesn't care. It's a rhetorical talking point and nothing more.

Did you catch that? EA failed to keep up with what has been said and by whom. I never once addressed the issue of whether or not the stimulus was "cost justified." I believe that it was, and I believe Gad's data supports the proposition that a majority of economists agree that it was as well. But at this point EAllusion is attacking me for something I never once said. He's allowed himself to get confused by Gadianton's "follow up question," and decided he'd just go ahead and attribute it to me because, well, he's just in the mood for blood I guess.

But back to the follow up question. Gadianton's Chicago survey, which EAllusion failed to read, pretty much proves my second point that, yes, the stimulus was cost justified according a majority of economists. EAllusion was excited to point out that I was a whopping four percentage points away from a majority in Gad's survey, but what he doesn't tell you is that only 12% of them said it wasn't cost justified and five people didn't answer at all. Nor did he point out that the survey concluded 60% of the economists agreed with this, based on confidence levels.

But there were five economists who didn't respond to the survey. Aaron Edlin (Berkley), Joseph Altonji (Yale), Katherine Baicker (Harvard), Raj Chetty (Harvard), and Jonathan Levin (Stanford). All except the latter would have no doubt answered in the affirmative, and I say this based not only on where they teach, but also on how they answered in past surveys. For example, a recent survey asked if they felt like the bailout of the banks and auto industry was cost justified, and all of them answered in the affirmative, including the conservative from Stanford.

The point is, even if only half of them got around to responding in the affirmative, it would easily be enough to nudge that 46% into majority territory.

So to recap, my original point (the stimulus worked) is confirmed, much to EAllusion's chagrin. The second point (Most economists agree it was cost justified) would have been speculative alone, had it not been for Gadianton's survey. At the very least it is probably true, given the nature of this survey and how they clearly tried to give the Conservatives an equal voice (citing Stanford's "think tank" economists seven times out of forty!). Much appreciated Gad!

As for the distinction between Keynesianism and the New Keynesians, that's another issue that has nothing to do with the point I'm making. I mentioned Keynesianism because the stimulus was absolutely a Keynesian move. So I am speaking of Keynesianism in the context of deficit spending in times of economic crises.

Kevin, you are asserting that the majority of economists agree with that the benefits outweighed the costs. So a panel survey was cited where "I don't know", "maybe", and "no" outnumbered agreement with your assertion.

Wow, EAllusion, you STILL haven't read the survey? Five participants "did not answer." That doesn't mean "no opinion." It means "did not answer." If you knew anything about half of those economists who didn't answer, you'd know it wasn't due to lack of opinion. It was an emailed survey, so they probably never got around to reading it, or maybe it got caught in the spam folder. Who knows. The point is, you're the one leaping to conclusions here. "Did not answer" means nothing more than that. As I said before, it can safely be said that Baicker, Edlin (Clinton's senior economist), Altonji ("strongly agreed" the auto/bank bailouts were cost justified) and Chetty (proud Keynesian) would most likely answer in the affirmative given their other writings on this and other similar subjects.

[_cinepro]

Kevin, you should start a CPA firm that only looks at the left side of the balance sheet for your clients. Then you could always give them good news.

[_Kevin Graham]

Kevin, you should start a CPA firm that only looks at the left side of the balance sheet for your clients. Then you could always give them good news.

You haven't even begun to explain how the "costs" outweigh the benefits. You only assert, as if by some form of religious faith, that it must be true because...?

In the meantime, I concur with what the majority of economists believe.

[_Gadianton]

Kevin,

Gad says, "The overwhelming consensus is that the stimulus worked, it created jobs."

Well, no kidding. That's what I said.

Well, that's one thing you said. You also run this line together with the claim that the stimulus saved the economy from depression. Two totally different claims. The belief that the stimulus saved us from depression is about 100 times stronger claim. It's also a much stronger claim than saying the stimulus was cost justified. I wished EA would have made his point differently, it didn't help clarify whether or not you think these are separate claims or all naturally go together. Do you agree the stimulus creating jobs does not directly imply that it was cost justified? Assuming it created jobs and was cost justified, do you agree this still doesn't imply it saved us from a depression?

As for the distinction between Keynesianism and the New Keynesians, that's another issue that has nothing to do with the point I'm making. I mentioned Keynesianism because the stimulus was absolutely a Keynesian move. So I am speaking of Keynesianism in the context of deficit spending in times of economic crises.

So am I. Whether or not deficit spending will work in a recession depends on the model, the particular circumstances, and the execution. It's altogether possible to be a "Keynesian" and argue that the stimulus was not cost justified, for many, many reasons. It's also possible to be "freshwater" economist and believe that a stimulus can work, it's just much less likely, and far less predictable.

All except the latter would have no doubt answered in the affirmative, and I say this based not only on where they teach, but also on how they answered in past surveys. For example, a recent survey asked if they felt like the bailout of the banks and auto industry was cost justified, and all of them answered in the affirmative, including the conservative from Stanford.

What does the bailout have to do with Keynesian fiscal stimulus? What is the point of a stimulus in a Keynesian model? What was the argument for the bailout? The two have nothing to do with each other. I found two or three on that survey who voted for the stimulus but not the bailout (including Obama's employee). Stigltiz had all kinds of nasty things to say about the bailout even if in the end he agreed grudgingly, as many conservative economists even agreed with it. No macro model has a prediction for how to act in the case where several large firms have trillions in illiquid leveraged positions and are about to fail. This has nothing to do with macro economics as it's ever been taught; though, that may change in the future. It's one of the reason financial economists have weighed in, even though financial economics has little to say about macro.

.. and Chetty (proud Keynesian) would most likely answer in the affirmative

But you're not arguing all Keynesians vote pro government intervention (independing of kind and degree) because they are Keynesian, the majority of economists are Keynesian, and therefore you are right because the stimulus was government intervention and you've sided with the majority?

As you say,

...it would easily be enough to nudge that 46% into majority territory. So to recap, my original point (the stimulus worked) is confirmed

Even if you agree with 99.9% of economists, that doesn't confirm your point that the stimulus worked, it confirms your point that most economists agree the stimulus worked. And few of them, in my opinion, are anywhere near as enthusiastic about the victory as you are.

[_Kevin Graham]

Well, that's one thing you said. You also run this line together with the claim that the stimulus saved the economy from depression. Two totally different claims.

That doesn't change the fact that you and EA have been pounding me for a third claim I didn't make, at least not until you provided that survey data which supported it. So now you want to quibble about whether or not the stimulus averted a depression? Of course, it is impossible to empirically test what would have happened under circumstances that are no longer present, however I am not out of line for making that statement. There has been plenty written on this subject since 2009 and so, don't act like I'm pulling this stuff out of my arse.

The belief that the stimulus saved us from depression is about 100 times stronger claim. It's also a much stronger claim than saying the stimulus was cost justified. I wished EA would have made his point differently, it didn't help clarify whether or not you think these are separate claims or all naturally go together.

Clarity isn't EA's problem. His problem is that he spoke before thinking. He spoke before reading. He attributed something to me I didn't say and then continued to claim I was being disingenuous because of it.

Whether or not deficit spending will work in a recession depends on the model, the particular circumstances, and the execution. It's altogether possible to be a "Keynesian" and argue that the stimulus was not cost justified, for many, many reasons. It's also possible to be "freshwater" economist and believe that a stimulus can work, it's just much less likely, and far less predictable.

And yet the little complaining we do hear from Keynesians about the stimulus, isn't because of the model, execution or circumstances in which it was employed. No, their gripe is that it wasn't big enough.

What does the bailout have to do with Keynesian fiscal stimulus? What is the point of a stimulus in a Keynesian model? What was the argument for the bailout? The two have nothing to do with each other.

The two have plenty in common. For the purposes of this discussing, they both represent the government injecting capital into the system in order to save it. You seem to think I am out of line for neglecting to quibble over the distinctions between the bailouts and the stimulus, but the two are frequently mentioned in concert when economists debate the efficacy of modern Keynesian policies.

Take for example the following articles.

In Study, 2 Economists Say Intervention Helped Avert a 2nd Depression

The Economist:"Stimulus: The depression that might have been

Renowned Economist Warns Of Severe Depression Without “Massive New Stimulus”

Stimulus Averted Depression

What Would Keynes Do? ‘End This Depression Now!’

The reason both forms of legislation are frequently used in the same breath, probably has something to do with it being difficult to determine the effects of one without the other, since they both took effect within a four month window.

This isn't to say the two are equal in every way. TARP started under Bush and was essentially the government's way of healing the banking system. It did so by investing in toxic assets. In so doing, it injected hundreds of billions into the banking system so loaning and borrowing would continue. The Stimulus package was Obama's attempt to create jobs and stabilize the economy via the the injection of capital. It was well over $700 billion but something like $250 billion of that was in the form of tax cuts for consumers. The idea was to puts money into the hands of those who are likely to put it right back into the economy, and it worked.

Now we can sit here all day and speculate about how the "did not answer" economists would respond to the questions, so I'm going to email them individually and see if I can get an answer from them. If they respond like I hope they will, then I look forward to serving you and EA a healthy plate of crow. ;)

[_cinepro]

You haven't even begun to explain how the "costs" outweigh the benefits. You only assert, as if by some form of religious faith, that it must be true because...?

In the meantime, I concur with what the majority of economists believe.

I've only made two posts in this thread. In the first, I acknowledged that the stimulus did produce an effect, but pointed out that without considering the cost of that effect, it's impossible to judge whether it was worth it.

I then acknowledged that sometimes these things don't end in total disaster, and when that happens, I'm grateful (implying this could be one of those cases).

My second post only again pointed out that you were just looking at one side of the equation.

Nowhere did I assert that the costs outweigh the benefits. I was only pointing out that you never even brought the costs up in the first place.

You sound like my wife when she gets home from shopping all excited with a bag full of new shoes, and after she shows them to me gets mad when I ask how much she put on the credit card. I'm not disagreeing that we bought a new bag of shoes for the country. I just want to know what I'm going to be paying for it when the bill comes.

[_Kevin Graham]

Again, are you going to bring up the costs and provide a cost-benefit analysis or not? If you're unable to explain what the costs were and compare them to the benefits, then how can you claim it is a question worthy of debate? I mean seriously. Make an argument already. What do you think the costs actually were?

And your shoe analogy is ridiculous to compare with the near collapse of our economy. It would be more appropriate to question the cost of paying for a bucket of water used to dump on a lit match, in a house made of TNT.

Your problem is that you're so short sighted on this issue, focused only on one thing. "Oh the debt the debt the debt!" Suddenly Conservatives are running around pedantically raving about the impending doomsday caused by the debt but when pressed they can't seem to form a coherent argument based on any reliable data that would suggest the stimulus was a bad idea.

Well I have already discussed this with you and you dropped the ball when it was in your court. The debt is irrelevant in times of economic crises. You have to have your priorities straight, and priority #1 is job creation. That doesn't come from cutting spending and cutting already low taxes even further (the only proposed solution from the Right). This doesn't create jobs and never has. Even if we could do it with a magic wave of the hand, how the hell does reducing the debt from $16 trillion to say $4 trillion, improve the economy? The only thing government could do at that point was to provide stimulus to get the economy going again, and it worked. Austerity measures are great but must come when the economy is booming. You guys have it backwards and it is the reason why austerity measures are proving detrimental in various European economies. Hell even Republicans are now admitted that the impending sequester would be detrimental to our economy, pushing us back into recession. Well, HELLO? What the hell do you think the sequester is if not drastic cuts in government spending?

So, if you understand the "costs" so well, then please tell me how spending $530 billion on stimulus projects, is somehow a bad idea. Remember the other $250 billion came in the form of tax cuts, which is always considered a good thing in Republican circles. Right?

[_cinepro]

Again, are you going to bring up the costs and provide a cost-benefit analysis or not? If you're unable to explain what the costs were and compare them to the benefits, then how can you claim it is a question worthy of debate? I mean seriously. Make an argument already. What do you think the costs actually were?

If you don't think the guy who started a thread titled "The Stimulus Worked" is the one who should do the cost-benefit analysis, then more power to you. I'm just pointing out that you've only made half an argument (which everyone else seems to have noticed as well), but I'm not sure why you feel it's our job to do your homework for you.

As I said at first, if you're right and the stimulus "worked" to a degree that is greater than the cost, then great! But I won't be uncorking the Martinelli's until both sides of the argument are made.

[_EAllusion]

It is stubbornly ignorant or dishonest to intentionally ignore where we are now (because of the stimulus) with where we would have been without the stimulus (depression). Once you do that honestly, the benefits far outweigh the costs....

I just caught a snippet of conversation I didn't see. So, to be clear, Kevin obviously argued that the stimulus prevented a economic depression. I interpreted this as more likely conflating the stimulus with TARP, but said, "It simply does not follow from the fact that the stimulus lowered unemployment that the stimulus's negative effects were worth that benefit. It also does not follow from the fact that the stimulus elevated GDP growth and lowered unemployment that the alternative was an economic depression," as my first line response. And Gad, I split those into two distinct assertions by using the word "also."

Regarding whether Kevin has consistently attempted to argue that economists have a consensus view that the stimulus was a good thing /worth it / etc. by pointing to wide agreement among economists that it lowered unemployment / increased GDP, he has repeatedly. One does not follow the other. That requires a cost/benefit analysis.