Comments for David Brooks Is Being Ignorant on the Economy Again at http://www.cepr.net , comment 1 to 12 out of 12 comments http://www.cepr.net Sat, 25 May 2013 09:52:29 +0100 FeedCreator 1.7.3 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11376 How many jobs have economists created ? Henry Nothhaft has an interesting opinion piece in the Wall Street Journal (not that anyone here reads that BAD paper) weekend edition on this topic - JOBS - (it should have been titled "Why big business likes big government")- I would link to it but what is the point, no one will agree with him (he knows how to create jobs - he has done it before)and my post will get negative ratings..... - Jethro Tue, 06 Sep 2011 16:14:12 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11372 Dean Baker’s argument is stronger the he realises, and the reason is that the entire interest rate argument is IRRELEVANT. As Keynes and Milton Friedman, amongst others, pointed out, a monetarily sovereign country does not, repeat not need to borrow in order to fund stimulus: it can simply print money. So if the current rate of interest was 10%, that would be irrelevant. Government can simply print and spend (and/or reduce taxes). And for the benefit of the economic illiterates who think that printing money automatically leads to excess inflation, the latter outcome only materialises if the AMOUNT printed is significantly more than is needed to raise demand and effect a recovery (i.e. solve the problem). As David Hume pointed out in his essay “On Money” two hundred years ago, money supply increases only have an effect ONLY TO THE EXTENT THAT THEY ARE SPENT and raise demand. It’s a pity the human race has learned so little about economics in the last two centuries. I could take a leaf out of izzatzo and end with some phrase like “stupid Republicans” or “stupid conservatives”. But I don’t want to sink to izzatzo’s level – well not on Dean Baker’s site anyway. - Ralph Musgrave Tue, 06 Sep 2011 10:04:42 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11366 I should say that current interest rate should not be a critical factor in deciding whether or not the government spends money. If economic resources are not being used and the private sector is failing to spend, then the government should spend. For government spending, interest rates are something which affects the long-term expense, and over the long term rates tend to even out. Also overall growth rate is more important. In general economists are excessively concerned with interest rates. They are not nearly as important in actual economic decisions (outside of finance industries) as economists think they are. - skeptonomist Tue, 06 Sep 2011 06:03:46 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11365 At the end of WWII, the CPI was 18. Today it is 226 which means that more than 90% of the value of that record debt has been wiped out by inflation. http://research.stlouisfed.org/fred2/data/CPIAUCNS.txt We are now paying less than 2% interest to finance the remaining value of that debt. So, was fighting and winning WWII worth the enormous debt that was incurred, or should our grandparents have been more concerned about the [i]terrible debt burden[/i] we have to face today? I'm sure izzatzo would disagree, but personally, I am glad they embraced the debt. - Paul Tue, 06 Sep 2011 05:48:20 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11364 In 2001, Grover Norquist called a national sales-tax holiday “exactly the kind of immediate stimulus our shell-shocked economy needs now.” Norquist went on to quote George W. Bush’s chief economist, Glenn Hubbard, saying we needed stimulus “sooner rather than later.” Sen. Olympia Snowe (R-Maine) introduced a bill to that effect. Around the same time, Rep. Paul Ryan (R-Wis.) held a hearing in which he invited Kevin Hassett, a conservative economist based at the American Enterprise Institute, to make the case for a fiscal stimulus. “The economists who studied this were quite surprised to find that fiscal policy in recessions was reasonably effective,” Hassett testified. “It is just that folks tried a first punch that was too light and that generally we didn’t get big measures until well into the recession.” Ryan was delighted by his answer. “That is precisely my point,” he replied. “That is why I like my porridge hot. I think we ought to have this income tax cut fast, deeper, retroactive to January 1st, to make sure we get a good punch into the economy, juice the economy to make sure that we can avoid a hard landing.” - EMichael Tue, 06 Sep 2011 05:47:31 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11363 " The money may appear "free" now, but that debt will not be repaid and most of it will be turned over at future interest rates." Yep, and 2021(fill in the year)dollars will be the same as 2011 dollars.......or not. - EMichael Tue, 06 Sep 2011 05:34:46 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11362 Personally, I think the road to serfdom is paved with unemployment mixed with low and stagnating wages. Stupid RWDWs - EMichael Tue, 06 Sep 2011 05:06:52 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11361 It has become very fashionable to talk about "free money", but this is very misleading. Izzatso actually makes a good point here. The money may appear "free" now, but that debt will not be repaid and most of it will be turned over at future interest rates. Calculating the cost of government borrowing at current interest rates is bad economics - better to take some kind of long-term average. Not that Brooks is really arguing this - his column is just silly carping about spending money, and he gives no alternatives. - skeptonomist Tue, 06 Sep 2011 05:05:39 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11360 [quote]However, we expect to be back at full employment at some point in the future. At that point, we will value efficiency.[/quote] When the discount rate is zero the value of future and present goods are the same, therefore producing and consuming more goods now is claimed to cost nothing in the future. Not producing and consuming more goods now is presented as a waste of unused available resources. Living in the short run like this is deadly, which is the message from Brooks. When money is available at essentially a zero real interest rate, the government can borrow the principal now and pay back the the same amount later at effectively a negative opportunity cost when more growth is created through spending. This is the road to serfdom. In the short run we're all dead. We must prepare for the long run or there won't be any short runs. The zero discount rate touted by Baker is a socialist illusion designed to pull the uninformed into a Forbidity Trap that doesn't value efficiency. Be worried. If you don't feel crowded out you're likely sliding into the Forbidity Trap and should find some trade-offs somewhere - anywhere, like for the sound of one hand clapping add another hand to crowd out the first hand and so forth. Stupid liberals. - izzatzo Tue, 06 Sep 2011 04:38:17 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11359 What is the value of the work done besides the jobs created? A very conservative nephew of mine was complaining about an ARRA funded highway improvement in his home city. He also used the "it costs $250K for each job created" thing. Ten minutes later he was talking about how his commute time had been reduced by 30 minutes a day due to the highway improvement. He failed to notice any connection. - EMichael Tue, 06 Sep 2011 04:05:54 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11358 Really? How does that work? Do the Chinese, Japanese and Europeans simply agree that the U.S. needs more jobs and economic growth so therefore they will sacrifice their jobs and economic growth for us? I have never seen that happen before and since it is completely contrary to Keynes, I have some doubts. "But if nations can learn to provide themselves with full employment [b]by their domestic policy[/b] (and, we must add, if they can also attain equilibrium in the trend of their population), there need be no important economic forces calculated to set the interest of one country against that of its neighbours. There would still be room for the international division of labour and for international lending in appropriate conditions. But there would no longer be a pressing motive why one country need force its wares on another or repulse the offerings of its neighbour, not because this was necessary to enable it to pay for what it wished to purchase, but [b]with the express object of upsetting the equilibrium of payments so as to develop a balance of trade in its own favour. International trade would cease to be what it is, namely, a desperate expedient to maintain employment at home by forcing sales on foreign markets and restricting purchases, which, if successful, will merely shift the problem of unemployment to the neighbour which is worsted in the struggle[/b], but a willing and unimpeded exchange of goods and services in conditions of mutual advantage." The General Theory of Employment, Interest and Money, p.382. - Paul Tue, 06 Sep 2011 03:59:03 +0100 http://www.cepr.net/index.php/blogs/beat-the-press/david-brooks-is-being-ignorant-on-the-economy-again#comment-11355 > Money that is spent inefficiently, but puts people to work, is better than just leaving workers idle. While I do think we should be spending money to put people back to work, it would be useful to hear some sort of upper limit on just how much a job is worth to the economy given the present conditions. Is $200,000/job reasonable? It sounds high although perhaps it pays for itself over the next decade. Obviously at some point it must become too much, but how to determine that? I understand that this will depend on a host of factors, including what sort of value the job creates towards future growth, above and beyond circulating money in the economy. - Chris Tue, 06 Sep 2011 01:22:20 +0100