GOP failure watch

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1670759

 

Yes, Keynes did want to stimulate demand...for total goods and services in the economy. The mechanism for doing so is to shift demand forward, with the expectation that the economic benefits of any particular stimulus program would reverberate through the economy. For example:

The Tennessee Valley Authority shifted demand forward for the construction of dams in the Tennessee Valley area in the 1930s. Horrifically, demand for building new dams petered out after all the rivers were dammed up. Dam construction in the area was relative scarce afterward. However, the TVA is listed as one of the most successful stimulus programs, because for that short amount of time it put people to work.

For somebody who wants me to read a great deal of things, perhaps you ought to read the full PDF version of this paper.

So the paper is written by two micro-economists; a full debate between micro and macro economists would take years. Suffice it to say that trickle-down, Keynesian, and Krugman-ian economists prefer macro, whereas people like Milton Friedman and Hayek tended to prefer micro-models because they thought sophisticated tweaks to an economy would incur vast changes.

But you cannot just read the abstract and assume that everything is perfect. The paper says there probably were economic effects to unemployment but that they just could not measure them, and most importantly, that there is a "popular form of fiscal stimulus" that "provid[es] monetary incentives to boost consumption in the short term."

Wow. Almost precisely what I had been saying. And I have two economists to back me up! WEIRD.

Oh and finally, the paper was published in September 2010, meaning it had to go through months of a rigorous editing and submission process, meaning its data couldn't have been more than the first six months after Cash for Clunkers started, meaning perhaps more economic benefits would have been seen in month seven in those measured fields, making their argument only good for the time period they did data. You can never be sure.

 

I do want to commend both of you on backing your shit up. Having done that, I was forced to debate you on your terms, and I cannot wholly destroy your arguments because there are other educated people with the same beliefs. Now we can debate things on the merits rather than having MS29 conversations.

 

We might as well have been digging Keynesian holes and filling them back up.

Again, you ignore the fact the program was too short making pulling demand forward meaningless. The only pertinent C4C demand stat is increased incremental sales, which were negligible and very, very, expensive. Furthermore, destroying a lot of perfectly good cars amounts to nothing more than putting the "Broken Window Parable" into practice.

 

I understand how the multiplier works, and you are still wrong. Keynes never wanted to shift demand forward...he wanted to stimulate demand. You don't stimulate demand by shifting it forward...they are mutually exclusive concepts. If you shift it forward, then you are reducing future demand, which is absolutely against the idea of stimulus.

The TVA (good for you for actually finding one of about four New Deal programs that were actually successful) was an infrastructure program. In other words, they were building things that 1) needed to be built anyway, and 2) was intended to provide benefits that would last hundreds of years (we still benefit from it).

A good parallel for today would be Los Angeles' 30/10 program. Not C4C. Cash for Clunkers was intended to increase demand for automobiles. It didn't do that.

1) The papers were written by two macroeconomists that intentionally used micro methods. This is not uncommon for analyses such as these, because macro methods are derived from micro methods. In fact, micro methods are necessary to use when analyzing industry specific programs, even if the end result is an analysis of macro-level effects.

2) There is no such thing as trickle-down economists, because they are called Supply-Side economists.

3) There is no such thing as Krugman-ian economists, because they are called New Keynesian economists. This is important because New Keynesians are the ones that pioneered the concept of using micro methods to analyze macro results, which I spoke of in point #1.

4) Milton Friedman and Hayek did not prefer micro-models because they were macroeconomists. Their entire lives were dedicated to analyzing the macroeconomy.

Really, you are just making shit up here, and I'm embarrassed for you.

The paper says that there is some evidence that there were some short term relative employment effects in high automotive industry cities, but it states that those effects are difficult to separate from the bailouts. Their caveat does not say that they couldn't measure effects on employment...only that they couldn't measure macro effects on employment. They most definitely could, and did, measure the effects on employment in high exposure cities, and found no increase in employment beyond a few months.

Really? You think you have two economists to back you up? Did you not read anything?

That, right there...the bolded part. Zero increase in demand for automobiles. Unmeasurable (ie. insignificant) increase in employment. Zero macroeconomic benefit beyond a few months of employment. That is the ********ing opposite of what you are saying.

Really, the only thing you have going for you is their admission that monetary incentives for consumption is a popular form of stimulus, which is A) Obvious to everybody, and B) not what you have been saying.

In case you didn't notice, their data goes to June 2010.

And the multiplier function is a logarithmic decay function. The strongest effects are felt the closest to the stimulus, and the long run effects grow weaker as time passes. In other words, if the benefits weren't felt even 3 months after the end of the program, there is zero chance that they would be felt 9 months later.

Of course any Old-Krugmanian economist would tell you as much. Excuse me...Keynesian.​

 

Actually, you still make debating things on their merits impossible, because you refuse to see the merits.

You just concluded that two economists agree with you, even though they completely disagree with you. That is called delusion.

I can debate things on merits all day long. When I have an intellectual opponent, I usually do so. When I don't have an intellectual opponent, I usually just make fun of him.

I actually wish everybody here was like you. It would make my job much easier, because then I would never have to resort to arguing on merits and I could just make fun of everybody. Unfortunately, I don't have that luxury. There are dozens of intelligent opponents on these forums, and I usually feel quite stupid around them. Just so you know, none of them are backing you up here.

 

You are talking past me as much as is humanly possible. To suggest that stimulating short-term demand (Cash for Clunkers) and stimulating demand (Keynesian economics) are mutually exclusive is ignorance, pure and simple. It is one thing to mislabel New Keynesians and Krugman disciples because he is their most public face, but it is another to completely fake understanding how stimulus is supposed to work. Coupled with the fact that you comment on the rarity of 'successful' New Deal programs shows you have an inherent bias against this type of economics. That bias won't be overcome.

Had I said that Cash for Clunkers' only goal was to stimulate long-term auto sales, you would be correct that I was wrong. Had you read anything I'd posted, perhaps you wouldn't have come to that conclusion. Actually, I take it back. You had to have read what I wrote, and then realized that I was talking about things you couldn't take on, and thus went back to the "C4C didn't stimulate auto sales" trope.

Let's take a look at this study and see if we can figure out whether or not their economic indicators would be a good way to look at the 'success' of C4C. Here is how the typical C4C program went:

1) VFish takes his clunker to the car salesman, uses the rebate and turns it in for his new Nissan.

2) The store owners restock their inventory with a new Nissan.

3) Nissan builds a new car at their plant.

4) Nissan's suppliers build new parts to re-stock their inventories.

Unless Nissan's plant and all of the supplier-chains were located in the same location as VFish, it's very unlikely that home sales and unemployment fluctuations will be recorded by the results of this study. These guys acknowledge that in their paper. They acknowledge the major flaws. I own a Honda. Honda cars are manufactured outside of Columbus limits in Marysville, Ohio. I purchases my car in another suburb outside of Columbus. My economic benefits wouldn't be registered in Marysville, and Honda's economic benefits wouldn't be measured in my home. The AUTHORS ACKNOWLEDGE THIS. They admit that they do not measure the wider economic impact.

What about this is so hard?

 

I know. You have done both. The mere fact that you think that economic benefits might be felt 9 months from C4C that weren't felt 3 months from C4C shows that your understanding of the stimulus isn't even at the level of an Econ 101 student.

You never said anything about the goal of C4C, other than the fact that it was intended as a Keynesian stimulus. A Keynesian stimulus has the sole goal of boosting aggregate demand. C4C did not boost aggregate demand, therefore, by your own standards, C4C was a Keynesian failure. This is not my failure, it is yours.

Did you watch this on an animated video on Youtube? Or was this something else you learned on Answers.com?

They did measure wider economic impact, because they were using it as a control. In other words, they were acknowledging that there never was going to be a wider economic impact. Unfortunately for you (who fails to understand how a micro analysis can help you form macro conclusions), this doesn't help your point at all, because their conclusion that it was not beneficial is still entirely valid in a macro context.

The multiplier is just as much a positive multiplier as it is a negative multiplier. That means when demand goes up, the benefits get aggregated throughout the economy...but it also means that when demand goes down, the costs get aggregated throughout the economy. When demand drops, inventories rise, and raw materials purchases drop, and the effect is the exact opposite but equal in magnitude. There is no such thing as a positive-but-not-negative multiplier. They don't exist. If there is a multiplier, it exists on the same scale in both directions.

So when demand rose, aggregate demand rose. When demand tanked, aggregate demand tanked. It is impossible for there to be wider economic benefits if the demand for automobiles did not change on net. At best, the program created a standing wave which brought strong economic benefits one month, only to reverse fortunes the next, but no effect in the aggregate. There can't be any amplification of aggregate demand if there is no amplification of microeconomic demand.

Your naive analysis is hinged upon the idea that a negative demand shock does not have a negative aggregate demand shock, which is not only impossible in theory, but has been proven impossible in practice as well. In fact, the very observable phenomenon of Keynesians AND New Keynesians strongly advocating against cutting spending in a recession shows that they understand this concept very well. They understand that by cutting spending, you are doing much more than just not getting the benefits of increased spending...you are getting the opposite. Go ask any professional Keynesian economist what happens when government cuts spending in a recession...they will tell you that it will plunge you deeper into the recession. This is because they understand that the multiplier exists at the same magnitude in both directions.

Arguing with delusional people has historically proven to be difficult.

 

That's fair: I never mentioned anything about other goals of Cash for Clunkers aside from Economic Keynesian ideas.

For once, we agree.

 

Jesus Christ, we are still having this tired argument? Cash 4 clunkers did exactly what it was supposed to do. As I have linked to in the past, car sales fell off a cliff at the end of 2008 and well into 2009. Most companies were down 35% in December 2008. That is unheard of.

I don't buy the argument that c4c only pulled forward sales. Assuming that there is some normal level of demand for cars based on the aging and replacement needs that are traditional, then what the hell happened to all those missing sales from December through June? Did they simply disappear? Hardly. And as AB notes, the future sales that WERE pulled forward were pulled forward from quite a distance which was important. Edmunds (which is an excellent site for car info) got it wrong in their predictions for November and December of 2009. Sales were actually a million units better than they forecast.

But the point is this. The auto industry had stopped. Inventory on the lots was not that bad but that was because the companies had stopped replacing inventory. Factories stopped. Orders to suppliers stopped. Cash for clunkers stimulated demand, moved existing inventory off the lots and spurred companies to start ordering parts and making cars again. I remember posting an article soon after c4c that Hyundai was hiring back about 4,500 workers at their American assembly plants because they needed to restock their dealerships.

It was never meant to create demand. Only to stimulate demand. And it did what it was supposed to do. If you look at the long term unit sales, they have recovered nicely. Car companies are doing just fine these days and cash 4 clunkers played a part in jump starting the industry. Classic stimulus and wildly effective.

 

What is "quite a distance"? One month? Two months? As the analysis I posted has demonstrated, ALL effects were gone by May 2010, and demand did not increase on net after taking into account the existing growth trends from before C4C.

But since there wasn't any deviation from the long term trend, those workers would have been hired back anyway at a later date. So the real question to ask is if C4C was more effective at sustaining those unemployed workers than unemployment insurance. Considering how much of that money went overseas, I think unemployment insurance would win that battle in a heartbeat.

This is the point you are missing. Demand recovered...but unless you can prove that they recovered because of C4C then you can't say that C4C did what it was supposed to do. Since sales recovered at the same rate that they were recovering at prior to C4C, your analysis better be rock solid, because the casual glance doesn't favor your point of view at all.

 

Let’s be honest, demand spiked during C4C, and then plunged below pre C4C levels in the months following, and finally returned to the normal projected rate. No sizable stimulus, simply an additional 125k cars sold and lots of broken windows. A classic boondoggle and wildly ineffective.

And I'll gladly put this topic to bed Chris, but your liberal pals keep bringing it up.

 

Klose 4 Klunkers:

[ame="http://www.youtube.com/watch?v=HvfNl-kkqYs&feature=player_detailpage"]YouTube - Miroslav Klose Unbelievable Miss Bundesliga 5/14/11[/ame]

Robbin provides the stimulus, but all for naught.

 

You need to look up the definition of 'stimulus' if you're going to say 'demand spiked during C4C.'

 

Source WSJ

Doesn't appear to be the case

 

I certainly would not define it as 2 month program that cannibalizes demand from the following two months. We could saved $3 billion by doing nothing.

Here's a suggestion for you, a much better example of an effective stimulus program is "Cash for Caulk". I took advantage of that one too. Not only did it actually stimulate demand, it was also much more cost effective and its' benefits longer reaching.

 

You clearly don't understand macroeconomics

 

It does to me.

 

http://en.wikipedia.org/wiki/Confirmation_bias

 

Lets see, we have a one time spike, followed by a collapse, followed by a return to what looks like a linear progression. Yes, that is confirmation. You can call it confirmation bias if you like.

Anyway, you should consider my advise on "Cash 4 Caulk". It is a much stronger arguement.

 

Having posted three times in the last hour, are you too busy to invest time into providing a comprehensive, source-backed argument for your assertions?

 

Yo Ray Charles, I was refering to the chart in front you so why would I need to provide a link? Do you type at a braille keyboard or do you dictate to Forrest Gump and let him type your thoughts in?

 

http://en.wikipedia.org/wiki/Idiot

 

Cash for Caulkers, moron. Can you back up your argument about Cash for Caulkers? I'm not saying it's wrong, I just would like to see you provide data.

 

1. I didn't make an argument for "Cash for Caulkers". I merely noted it would be a better success story for you than "Cash for Clunkers" which truly turned out to be a clunker. I'll leave to "Chris for Clunkers" to explain why.

2. I don’t do homework for lazy students unless they pay me.