September 27, 2011
David Brooks is really upset, we may have a lost decade because he is sitting there being right, standing in the middle, and the two extremes who control public debate won’t agree with him. How do we know Brooks is right? Well, he is in the middle between the two extremes he just told you about, how could he not be right?
How do we know that the liberals/progressives are wrong? Brooks tells us:
“Many Democrats are predisposed to want more government spending. So they pick up on the one current they think can be cured with more government spending: low consumer demand. Increase government spending and that will pump up consumer spending.
When President Obama’s stimulus package produced insufficient results, they didn’t concede that maybe there are other factors at play, which mitigated the effects. They just called for more government spending. To a man in love with his hammer, every problem requires a nail.”
Yeah, don’t we just hate these Democrats? They are in love with their hammer (government spending) and therefore make everything look like a nail.
Suppose Brooks ever took 10 minutes to read the Obama administration’s projections for the stimulus. (It’s on the web and can be downloaded for free, so a NYT columnist should have access to it.) The first item in the summary of Romer-Bernstein report would tell Brooks that:
“A package in the range that the President-Elect has discussed would create between 3-4 million jobs by the end of 2010.”
Let look at that one again:
“A package in the range that the President-Elect has discussed would create between 3-4 million jobs by the end of 2010.”
Okay, 3-4 million jobs from a “package in the range that the President-Elect has discussed.”
How many jobs did the economy need? By April of 2009, when the first stimulus payments were going out the door, the economy had already lost more than 6.5 million jobs. If we add in normal job growth that we would have seen in a healthy economy, we were already down by more than 8.0 million jobs.
And the economy was still losing jobs at the rate of more than 400,000 jobs a month. By July, we down by almost 10 million jobs from what would have been expected if the economy had sustained a normal pace of job growth from the start of the recession. This is what Brooks would know if ever bothered to look at the numbers.
Now let’s look at that quote one more time:
“A package in the range that the President-Elect has discussed would create between 3-4 million jobs by the end of 2010.”
President Obama proposed a stimulus package of about $800 billion. He got a package of around $700 billion. (We have to pull out $80 billion for the Alternative Minimum Tax fix. No one, I mean no one, thinks that this fix, which is done every year, had anything to do with stimulus.)
Furthermore, the package was more heavily tilted toward tax cuts than the package that President Obama proposed. Tax cuts have less impact per dollar than spending. David Brooks could find this fact in the Romer-Bernstein paper as well. The appendix tells us that a tax cut equal to 1 percent of GDP will eventually increase GDP by 0.99 percent. By contrast, government spending equal to 1 percent of GDP will increase GDP by 1.57 percent of GDP.
If President Obama got a package that was smaller than what he requested and more tilted towards tax cuts than what he expected, then the impact on growth and jobs would be less than what he expected. He expected that the package he rquested would create 3-4 million jobs, the package he got would be expected to create something less than 3-4 million jobs. And, we know that the economy needed somewhere in the neighborhood of 10 million jobs.
So how is anything about stimulus disproved because a stimulus that could have been expected to create maybe 3 million jobs was not adequate in a downturn where we needed 10 million jobs? There are no tricks here, this is all arithmetic and it is all right there in black and white.
But, Brooks does not want to be bothered by arithmetic. He wants his readers to support his plans for tax reform, for cutting Social Security and Medicare. In other words he wants his readers’ support for doing all the the things that David Brooks always wanted to do, but he now says that we absolutely have to do because of an economic crisis caused by the incompetence of the people who always wanted to do these things.
And the people who insist on sticking to arithmetic — who point out now and said at the time that the stimulus was not large enough — well to a man in love with his hammer, every problem requires a nail. If arithmetic is nails, Brooks has no hammer.
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