http://www.nytimes.com/2010/02/04/opinion/04collins.html?emc=eta1
What would I do without people like Gail Collins at the New York Times (article attached) to explain how our government is putting together the new budget for the coming year(s). I read earlier this week that the new budget is $3.8 Trillion and I was pleased to see that $100 Billion was installed for "jobs" because, as Warren Buffet, Paul Krugman and others have said, the original stimulus program was not enough ("we" just don't use the word "stimulus" for the new jobs program).
Collins lets us know that we should be fascinated when the White House announces it wants to cancel plans to put an American on the moon by 2020! Actually, this is a good thing because, as Collins reminds us, we did that in 1969. Many of us were around then and we remember that. Perhaps this was the new "discount" space program where we revisit old victories - like the Civil War battlefields where people "re-enact" today what went on.
Collins distinctly remembers George Bush promising to get us to "Mars" by 2020. Well, it turns out that NASA was a little off on that estimate - it would have been more like 2030. The 2020 date, it turns out, was a "moon visitation" which is the first step on the trip to Mars. Please correct me if I'm wrong, but 40 years later we had a "goal" to be able to get to the moon in 10 years so that we can go to Mars. What takes 10 years? Did somebody misplace the technology from 1969?
Perhaps all those shuttle flights which were very expensive and tragic were wasted. We have no interest here in finding out if one can grow tomatoes in the stratosphere while flying around the earth when people are starving and jobless. But, for some reason, we did that and, 40 years later, we have to wait 10 years to go to the moon on our way to Mars? Incidentally, Mars why?
So, the White House wants to save $3.4 billion a year with a "game-changing/paradigm-shifting space program that does not require any moon landings. The new goal is a little hazy. But it involves ... going farther, faster to interesting destinations as we learn things." So, the new cheaper program will be "... bold in a less expensive way."
Collins makes an excellent point that a federal program is next to impossible to cut because there is usually somebody who cares much more about keeping it than the White House does about making it go away.
Overall, we're hopeful that the $100 Billion for jobs is spent rapidly and effectively because we don't want it to go away.
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I know you and I have had multiple discussions on this topic, but it has to make me wonder how effective "stimulus" actually is - I know you tend to side with Krugman, but these are the exact investments that a government "stimulates" but aren't realistically viable in a normal economy.
ReplyDeleteI know they may help get us out of a recession faster, but then you end up with programs like the "Christopher Columbus Fellowship Foundation" which as the article says "gives out prizes to people who, um, discover things and runs a contest for middle school students who have ideas about community improvement. The winners go to Disney World and then to the Christopher Columbus Academy, which also happens to be in Disney World."
The issue isn't the boom that comes from the stimulus, it's the bust that comes when unsustainable investments continue. I always like to think in my sheltered little world that the government would know when to take their foot off the accelerator, but the key point that the article makes is that "Cutting a federal program is next to impossible because there’s usually somebody who cares much more about keeping it than the White House does about making it go away."
So how do we take the foot off the accelerator when it's necessary if there are so many people willing to fight for unnecessary government programs?
Marcelo - Brilliant comment. I expect nothing less from you! Actually, the stimulus wasn't enough but it did make a difference. If you go back to the NY Times 11/21/09, "A New Consensus...", you'll be able to see a graphic attachment where IHS Global Insight, Macroeconomic Advisers and Moody's Economy.com (that's Zandi) show the economy with and without stimulus and there was/is a difference. Far more jobs are being saved than created, but those jobs are teachers, police officers, etc. Plus, the money is getting doled out over 2 years. So, it's not cutting off abruptly. In addition, there is now another $100 Billion, as I mentioned in my post, to "supplement" the original effort to stimulate job growth. As Zandi points out, without the stimulus, the GDP would still be negative and unemployment would be firmly over 11%.
ReplyDeleteI am also in agreement with Zandi that every dollar of additional infrastructure spending means $1.57 in economic activity.
As Krugman points out in today's Times, "The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs."
We didn't do enough during the Great Depression which is why it lasted as long as it did. And, we're not out of the woods yet!
This is true, but I never argue that the stimulus won't help RIGHT NOW. The issue is what happens a few years down the road when we have printed a ton of money and we have all this excess liquidity. The government has clearly shown in the past that they never like to be the party poopers who stop the boom that will inevitably come at some point.
ReplyDeleteWhat ends up happening is that inflation runs rampant and we get this goverment-induced economic "boom" which looks great, just like it did in the 70s, and just like it did in the early 2000s, but then everything goes out of hand and we end up with unsustainable investments. Things like people who can't afford the homes they're buying because of the excess money in the system.
So I am in agreement with you that that the government shouldn't just sit around and not do anything, but I still question their ability to know when to pull out and let free markets operate. Politicians love to take credit for the boom that will inevitably come at some point, so they'll keep doing what got us there.
I should also point out an article that our old friend Peter Lewin wrote last year. I'm well aware of his biases, but you know I like to challenge both sides :)
ReplyDeletehttp://www.thefreemanonline.org/featured/recycling-discredited-ideas/
Marcelo - Again, great stuff from you! The government-induced boom that you referred to most probably would be responded to rapidly by the Fed raising interest rates. The would be the problem the Fed had in the early/mid 2000s when the Fed kept rates artificially low and pronounced the markets as "self-policing". In addition, we have Paul Volker who is still with us and part of the Obama Administration - Volker is the Fed Chairman who fixed the problem in the early 80s by raising interest rates faster than inflation until it stopped (I oversimplify but you get my gist). Volker is also defining for Congress what is needed for "regulatory oversight". My only problem is that Congress is taking too long and the "agencies" are busy fighting each other for "turf". I'm shocked, shocked!
ReplyDeleteMars and the moon are pointless.
ReplyDeleteThe revised NASA budget still looks like BS. A past teacher of mine worked at NASA and noted a number of pointless experiments, understating a culture out of touch with reality analogous to the Ford gas cap issue.
Hurray Marcelo. Zandi is dandy. Krugman is agreeable, duh. Yet... life is not fair.
Regulation will happen soon enough to minimize effects of the next domestically driven recession. However, the global economy will increasingly influence the U.S. economy whether we like it or not. The force of BRIC mismanagement could lead to recessionary consequences outside the periphery of the nearest regulator or bureaucrat.
Why can't NASA evolve into a venture capital farm of some sort? It is in a way, but not nearly as much as it could be. Something like the Kurzweilian vision. We can boldy go where no man has gone before right here on Earth.
Great Comments All - I must admit to paying no attention to NASA announcements, so I only saw today (on CNN) that NASA is "delaying" a shuttle take off. When I looked closely, it turns out that the shuttle was/is scheduled to add a "room" to the "International Space Station": some sort of "observation deck". Seriously!
ReplyDeleteIf I might supplement the comment above, I have subsequently found out that the "observation deck" cost $400 million. Seriously!
ReplyDelete