Obama's Recession Fix Fits Economists' Models

[dtotire]

Obama's Recession Fix Fits Economists' Models


By Jane Bryant Quinn
Sunday, February 1, 2009;

Page F01
In the fight over the stimulus plan, Republicans are demanding more tax cuts as the best way of lifting the economy fast. "We can't borrow and spend our way to prosperity," said House Minority Leader John A. Boehner (R-Ohio).

Well, maybe we can -- or at least begin. In a crisis, government spending has to be the first responder, with tax cuts coming up behind.
Allen Sinai, chief global economist and president of Decision Economics, a New York-based research and forecasting firm, recently ran various types of government actions through his respected macroeconomic model of the United States. He discovered some surprising things.
First, even a very large stimulus doesn't help the economy a lot. The negative forces are too strong -- centered on the credit collapse and the collapse in consumer spending. Government will lean against this stunning downturn but can't make up for the massive loss of private demand.

Furthermore, the larger the budget deficit, from tax cuts and spending, the bigger the bounce in expected future inflation and long-term interest rates. That will take the edge off future growth.

Sinai forecasts a stimulus-based gain in gross domestic product of perhaps 2 percentage points in the first year and 1 point in the following year compared with where we'd be otherwise. A turn could come as early as summer. Without a significant stimulus, he'd expect the recession to last into March 2010.


more:
http://www.washingtonpost.com/wp-dyn/content/article/2009/01/31/AR2009013100132.html?hpid=topnews

[BlooInBloo]

1. It's always a hoot to hear them act concerned about borrowing and spending.

[Deja Q]

2. Did Boner bote for the spending that President G W BUSH *signed*?

Couldn't he see all this the first time around?

[Still Sensible]

3. Boehner with his head up his ass as usual

"We can't borrow and spend our way to prosperity," said House Minority Leader John A. Boehner (R-Ohio).

Excuse me? Under the leadership of the GOP we have been funding two wars by borrowing (from China) and spending millions of dollars a day, billions of dollars a month! All this while your side has passed multiple tax cuts that mostly benefited Wall Street, Big Business tycoons and the rich. Give me a fucking break.

Your 15 minutes are up butt boy. Get out of the way or you'll get hit by the runaway recovery freight train.

[corruptmewithpower]

4. This gigantic stimulus experiment looks like 535 witches standing around a cauldron,

tossing in every weed and crawly thing they can find and expecting us all to thank them for serving us such delicious stew. Instead of wasting many billions of dollars on trying to fix an economy they don't understand, why not just give money to the poor. That won't cost much, and It's not so extraordinarily risky.