"...aggressive government action prevented a nightmare."

[babylonsister]

Posted with permission. Ezra Klein's piece cited again, so here's the link...
http://www.washingtonpost.com/business/financial-crisis-and-stimulus-could-this-time-be-different/2011/10/04/gIQALuwdVL_story.html
Financial crisis and stimulus: Could this time be different?

http://www.washingtonmonthly.com/political-animal/2011_10/when_the_economy_stood_at_the032711.php

When the economy stood at the precipice

By Steve Benen


One of the more unsatisfying political fights in America is over whether the 2009 stimulus “worked.” The debate itself is mind-numbing, in large part because there’s no way to win when the truth — it could have been worse — is something no one wants to hear.

Was the effort successful? In so far as it prevented a calamity, of course it was — the stimulus took an economy that was shrinking and made it grow; it took an economy that was hemorrhaging jobs and created conditions in which it created jobs. There are millions of Americans working today who’d be unemployed were it not for the Recovery Act.

And yet, it was terribly unsuccessful insofar as the economy still stinks and the jobs crisis hasn’t gone away.

With this in mind, Ezra Klein had a really terrific piece of work over the weekend, going into detail on the nature of the recession, how and why administration officials made the decisions they did, and just how impossibly difficult the circumstances were (and are).

It’s tough to excerpt from a 6,600-word feature piece — I do hope folks will set aside some time to simply read it — but let’s take note of some of the highlights. Ezra notes the seemingly-insurmountable hurdles facing the Obama administration before the president was even sworn into office, including the fact that they were relying on information that turned out to be wrong — they were told the U.S. economy was shrinking quickly, when it fact, the contraction was already at catastrophic levels.

The Bureau of Economic Analysis, the agency charged with measuring the size and growth of the U.S. economy, initially projected that the economy shrank at an annual rate of 3.8 percent in the last quarter of 2008. Months later, the bureau almost doubled that estimate, saying the number was 6.2 percent. Then it was revised to 6.3 percent. But it wasn’t until this year that the actual number was revealed: 8.9 percent. That makes it one of the worst quarters in American history. Bernstein and Romer knew in 2008 that the economy had sustained a tough blow; t hey didn’t know that it had been run over by a truck.

This contributed to an inadequate response, compounded by political circumstances that prevented a more ambitious stimulus and a second bite at the apple, which some in the administration falsely assumed would be a possibility.

Ezra also explains related developments that interfered with the recovery — the European debt crisis and oil market swings are described as “aftershocks” — including the limited options in dealing with the housing crisis, massive public-sector layoffs that acted as a counter-stimulus, and the very nature of a recession caused by a financial crisis, which is altogether different from a cyclical crisis in duration and severity.

In the bigger picture, though, after reading Ezra’s piece, I’m left with two related thoughts. The first is Republican critics of the administration’s efforts have been so wrong, they deserve to be laughed out of the room — any room. Every GOP instinct since the start of the recession in 2007 has been entirely backwards, and the fact that they’re strutting around in 2011, as if the high unemployment rate somehow lends credence to their twisted economic worldview, borders on criminal. If Republicans weren’t permanently discredited by the crash itself, their hilariously wrong responses to the downturn should remove any doubt about their intellectual bankruptcy and ruined credibility.

Second, as bad as things are right now, I’m reminded how much better off the nation is thanks to the unappreciated efforts. One of the more important and accurate economic analyses — the Rogoff/Reinhart research that Ezra highlights — projected that unemployment in 2011 would reach between 11% and 12%. That didn’t happen, not because Rogoff and Reinhart were wrong, but because of the efforts Democrats took.

Faced with impossible circumstances, a broken political system, and a fickle and impatient public, the Obama administration managed to prevent an extraordinary crisis. It wasn’t enough to create a robust recovery, and the American public is largely convinced the efforts were a horrible failure, but for those who care about the details, aggressive government action prevented a nightmare.

[Tarheel_Dem]

1. Thanks for posting this. I just read in another thread that the stimulus was a FAIL!

Right here on DU.

[babylonsister]

2. Maybe you need to post Steve's link. I'm all about edumicatin'

people. :D

[Tarheel_Dem]

8. Will do. Love me some edumication.

:rofl:

[RaleighNCDUer]

10. The stimulus WAS a fail, in that it was entirely inadequate and relied

much too heavily on tax cuts.

And there were plenty of people back then saying things were worse than they looked - and they were ignored.

Yes, it did prevent catastrophe, but the disaster continues.

The stimulus, as it was, was the MINIMUM necessary - it was giving aspirin to someone with a 104 temp. It was a good start, it was NOT then end game they claimed it was.

[Tarheel_Dem]

12. Thanks for the unsolicited GOP talking points.

:hi:

[Inuca]

14. I disagree with the post you are replying to, but

in fairness, these are NOT republican talking points.

[RaleighNCDUer]

16. Bullshit. What I said was a reason to double down on it, not to go to

austerity measures.

But thanks for playing.

[Tarheel_Dem]

18. Thanks Again.

:hi:



:rofl:

[DCBob]

26. You do recall that the agreement had to be taylored to get few R Sens to vote for cloture..

but even so it did work in that it stopped the worse case scenario.

[Cool Logic]

3. Obama's Stimulus Plan: Failing by Its Own Measure

When something does not achieve its stated objectives, what do you call it?

http://www.time.com/time/business/article/0,8599,1910208,00.html

[uponit7771]

6. Article date - ****Tuesday, July 14, 2009****, any economist worth a damn knows the stimulas worked

[Cool Logic]

13. Except for White House economists Jared Bernstein and Christina Romer.

[karynnj]

15. This is obviously a projection where the last data available was

somewhere in the last quarter of 2008. It was already far worse when Obama took office. That just emphasizes what Klein is saying - look how fast things were actually getting worse. It also explains why plans made in the 4th quarter of 2008 were not as big as they should have been - everyone knew the economy was going over the cliff and that there were increasing numbers of layoffs, but the final number was worse than people expected.

[RaleighNCDUer]

19. Nevermind that at that time Krugman was saying it needed to be

twice as big, with as few tax cuts as possible - no more than 10% tax cuts.

Not everybody accepted the government's numbers as gospel.

[karynnj]

21. True - and many Democratic senators agreed with Krugman - and argued that

but the reality was that only what could get 60 votes in the Senate could pass. That means we had to keep all the Democrats on board and pick up 2 Republicans at that point. (If we lost a Democrat - as we lost Feingold on the budget, we needed 3 Republicans.)

That first budget and the stimulus passed by the skin of their teeth.

Do you honestly think that Obama and Biden would not have preferred going bigger?

It was not just a problem with the government numbers, it was getting the biggest stimulus with the smallest part tax cuts through the Senate. You might fault Reid for not having tried to reset the rules to make filibusters less difficult by lowering the 60 votes.

[DCBob]

29. Yes, many forget there was a tremendous battle just to break the filibuster.

Its easy to say lots of things (eg Krugman) but not so easy to get them into law.

[leveymg]

4. Closer to the bottom of the food pyramid, we knew the contraction was catastrophic. But, somehow,

only the bigger players in the upper strata ever gets measured -- the huge banks and corporations that get all the bailouts -- making BIS forecasts far too rosy to be reliable benchmarks for employment policy.

Obama and his advisors need to get out of the bubble, if they really want to understand just how bad things really are for the majority of Americans.

[uponit7771]

7. Yeap, congress has NOTHING to do with wear we're at....come on people, the Obama bashnig is old and

...worn out and overtly obvious at this point.

Even conservatives have stopped blaming Obama for what Wall Street did

[leveymg]

20. I'm blaming Obama and his top econ. advisors for drastically underestimating the crisis

and for deficient solutions, not for creating it, in largest part.

Their ideology and models are merely deficient and unrealistic, not evil. Blame goes mostly to the banksters and the previous Administration and Congress for creating these conditions.

[DCBob]

28. and yet the Republicans wanted to do nothing and just let nature take its course.

Imagine how that would have worked out.

[Safetykitten]

5. Utter and complete garbage.

[babylonsister]

11. Aww, is this a disappointment to you? I think I'll

lean towards Benen and Klein; you, not so much. But that's quite an argument you have there.

[DCBob]

27. utter and complete mindless post.

[woo me with science]

30. +10000

This kind of crap is just laughable. We are living a fucking nightmare, and they are poised to slash the safety nets in order to make permanent those lovely tax cuts for billionaires.

Sheesh.

[uponit7771]

9. Went from 700k jobs LOSS to 90k jobs GAIN = success. Even if we're not beating churn the bleeding...

...was stopped by the stimulus.

[mikekohr]

24. And How Has President Obama Been Doing Backfilling The Black Hole Bush Left Him?

20 straight monthes of private sector job growth as of 11/4/2011

[ProSense]

17. Also, keep this in mind:

Despite 14 Straight Months Of Public Job Loss, Republicans Continue To Block Obama’s Jobs Plan


Republican Governors have done everything possible to impede the recovery.

[Bodhi BloodWave]

22. But don't you see, that they are doing it still is Obama's fault

he should obviously have gotten some federal agents to 'vanish' them and placed some liberal governors there in their place :)

[SupaDopeFlyGuy]

23. I dont understand...

I would like to see a presidential candidate take a stance away from the political template that requires certain things be said to certain demographics in a certain way at a certain time add political contributions and PRESTO, you have a president.

I would love to see a candidate actually say what’s real and mean what he says and than actually DO IT, tell all the special interest groups and party contribution sponsors to kick rocks and put the country first, but before THAT can even begin to happen...the people at large have to be ready for the required change and regain the sense of national pride and trust in our leaders competency and ethics...

Everybody likes to attack and point fingers and blame someone else for the issues facing the world, but if we as American citizens simply rant to one another and not in the necessary platforms and outlets, like the voting booth, the town hall meetings, etc. than nothing will change no matter how much we whine an complain.

I always like to hear the response from people when asked: What would you do? How would YOU solve the many supposed unsolvable and key issues currently facing the nation whether immediate like Iranian nuclear ambition response or further down the road for gen x’ers like social security and health coverage?

Young people have every reason to be skeptical toward social security when we are watching our parents and grandparents struggle with donut holes and cut backs. How are we as future recipients of a social security safety net to rely on in our golden years, when we don’t even have it for recipients today?? What happened to the money our parents and grand parents contributed for themselves? What is going to happen to the money I have contributed thus far towards my social security?

Very simply, no matter what the problem is, 99.99 % is money. With that, comes transparency, accountability and oversight. Period.

The corruption, mis-management and blatant greed that has contributed to the current state of the world has to end. Any other answer is a smoke screen. Any solution will be slight of hand.

If we all focus our attention on social security and national security, other key areas will begin to erode and ultimately become the future catastrophes imposed against the same people the presidential nominees are claiming to be thinking about...the future generations.

The change has to be accountability. Accountability with government funds. Accountability with who is attempting to defy the world with nuclear ambition. Accountability across the board, but if we start with accountability on government spending and allocation of all government funds, the problems will inevitably resolve themselves, slowly…and over time, from the top down. Sure, lots of people wont live quite as comfortably as they currently do and yes, MANY high level people will put every ounce of power they have to resist the curtain being pulled up, but it genuinely HAS to happen before we end up in the history book next to the roman empire.

With our attention taken of the plethora of economic and financially motivated issues, we can shift our focus onto the more human nature oriented issues with a greater clarity and determination as a single country and not a bi-partisan conglomerate of corruption, hypocrisy, hot air and broken promises.

[DCBob]

25. This is so true but so so hard to explain.

Im afraid the ignorant masses will never get it.