More Lame Conservative Logic

Adam:

We don't need a stimulus package yet. The situation's not nearly dire enough.

Because you don't really need to start bailing until the water level reaches your mouth.

Comments

[fermat]

But giving us money and telling us to spend it won't help either. Money needs to be earned before it's spent, otherwise we will keep this cycle up. It's not that we don't think there is a problem, it's that we don't think that this is the way to deal with it.

[Lee]

Actually, the Congressional Budget Office just came out with a report that says that if absolutley nothing is done.

Repeat, absolutely no stimulus, that the recession will end in the second half of 2009.

That's right, later this same damn year.

"CBO anticipates that the current recession, which started in December 2007, will last until the second half of 2009, making it the longest recession since World War II.

This recession, however, may not result in the highest unemployment rate. That rate, in CBO’s forecast, rises to 9.2 percent
by early 2010 (up from a low of 4.4 percent at the end of 2006) but is still below the 10.8 percent rate seen near the end of the 1981–1982 recession.

In preparing its economic forecast, CBO assumes that current laws and policies governing federal spending and taxes do not change. This forecast, therefore, does not include the effects of a possible fiscal stimulus package.

On that basis, CBO anticipates that real GDP will drop by 2.2 percent in calendar year 2009, a steep decline.CBO expects the economy to begin a slow recovery in the
second half of 2009 and to grow by a modest 1.5 percent in 2010."

Nearly a trillion (!) dollars to spend on a recession that will fix itself (with no debt) in less than 12 months anyway?

That's a sledgehammer on a furniture tack.

Adam is right, and has the Congressional Budget Office on his side.

[Wally]

Jeez, Adam & I were having polite discourse.

[Tom]

"Just came out with" is not exactly an accurate description of the report's timeliness, since it was released on January 8 and is based on Data from September. Since then, the economic situation has deteriorated markedly.

The CBO's unemployment estimate for calendar 2009, just to pick a number, is 8.3%. The current unemployment rate is 7.6%, which means that if the CBO estimate is going to pan out, the unemployment rate will rise only about 0.1% a month for the rest of the year. In January, the unemployment rate went up by 0.4%, so the kind of slowing it would take to hold the 8.3% average seems unlikely. For that reason, it's reasonable to conclude that the CBO estimate of an unemployment high of 9.2% in 2010 is likely low by a meaningful amount.

The report -- even without discouraging 4th quarter data -- also predict an exceptionally slow recovery. Even using the CBO's relatively rosy scenario -- hey, it's not their fault; they were using old data -- unemployment isn't expected to drop back to 6% until sometime in 2013. That, too, is likely to be an underestimate, since nothing has happened in the months between September's data and now that indicates the recession is going to be either shallower or shorter. In fact, all the pressure has been toward deeper and longer.

I agree that the scale of the stimulus package is daunting. Let's be honst: it's terrifying. I'm a deficit hawk, myself, and think that the next big political battle is going to be over getting the government out of all the businesses it's currently getting itself entangled in. (And out of some other, long-standing businesses it should never have been in, too.) I also think that there are lots of things happening right now that are healthy, even if hard. (For example, I'm not that big a fan of easy credit, so some of the decrease in consumer credit use, while damaging to retailers today, good in the long term.) So I'm not one of those people who thinks it's the government's job to attack all discomfort.

That said, we're in an accelerating downward spiral that has precedents and theory taking us into territory that is scary. Were it up to conservatives, we would not have taken steps to stabilize the banking system, and would not even be talking about stimulus. I'm unimpressed by the conservative arguments being made, since they seem more attached to ideology than reality. And I'm pretty sure I'm not willing to gamble the next 10 years on this particular "just released" report.

[Lee]

"And I'm pretty sure I'm not willing to gamble the next 10 years on this particular "just released" report."

Tom, do you really need to delve into "The Politics of Fear?"

[Wally]

Tom,
These guys are scoring, here. They have made (some) valid points and you have responded with snark. C'mon, you're the intellectual heavyweight. I work at a grocery store, I can't be expected to defend our position.

[Tom]

Even giving an allowance for a certain baseline level of snark endemic to my particular personality disorder, I'm not seeing a lot of snark here, Wally. Lee made a point that the CBO had "just released" a report, which I think overstates the report's timeliness and, thus, significance. I took the time to actually read the report. In my response, I pointed out how the situation has changed and what I believe to be the effect on Lee's larger point, that no stimulus is necessary.

And then in explaining my opposite conclusion, I concede some of the concerns of critics of the plan I'm in favor of. I explain why I come down on the other side of the issue despite those conservative reservations, and acknowledge a very conservative point: that economies benefit from both good and bad times.

I've done this consistently, by the way, recently criticizing Democrats for trying to sneak controversial spending into the stimulus to avoid having to take controversial stands.

So I'm not really seeing the snark. Perhaps if you pointed it out more clearly, it would pierce my apparently impenetrable brain.

[Wally]

"More Lame Conservative Logic" seems snarky to me, but hey, it's your blog.

[Tom]

I'm going with Times vs. Sullivan, which established that truth is defense against accusations of libel.

But OK, you're right.

[Adam]

It was worth it just to get my first mention in a FUNCTIONAL AMBIVALENT post.