Over five years, my research shows an extra $600 billion of public spending at the cost of $900 billion in private expenditure. That's a bad deal. Christina Romer, the chair of President Obama's Council of Economic Advisers, and her husband, David, have been major contributors to research on tax multipliers. Their results, which rely on the history of U.S. tax legislation since 1945, show tax multipliers of larger magnitude than the one I found. (So my conclusions here—based on the coming increases in taxes—would be strengthened if I switched to their estimates.) By contrast, I have not seen serious scientific research by Ms. Romer on spending multipliers, so I cannot understand her rationale for assuming values well above one, as she has apparently done when evaluating the fiscal stimulus plan. If the spending multiplier were really larger than one, it would mean that GDP would rise by even more than the rise in government spending.
Certainly everyone can agree that the stimulus bill was messy and inefficient. With extra time and deliberation a more effective stimulus plan surely could have been devised! Everyone can also agree that it was not a silver bullet; after all, the unemployment rate breached 10%. Yet our feeling remains that the stimulus is having a measurable and sizable, if temporary, impact on economic growth and employment, and that by reducing slack in the labor market, it provided insurance against the risk of deflation that was palpable when the legislated was enacted. Indeed, part of the stimulus’ value was its signal that the federal government did not intend to let economy slide over a precipice into another Great Depression, something that seemed quite possible at the time. For those who argue that we couldn’t afford ARRA, we offer these counterpoints: (a) our analysis showed that the legislation “dynamically” paid for more than a third of itself by restoring the economy to full employment sooner; (b) because it is temporary, ARRA has essentially no lasting impact on the unsustainable nature of the country’s current fiscal stance; (c) our calculations suggested that the benefit (e.g., the present discounted value of temporarily higher GDP) exceeded the budgetary cost of the legislation.
Treasury Secretary Timothy F. Geithner, after helping to steer the United States through its worst economic crisis in decades, is seeing his role in Washington clipped because of popular upset at the financial bailout, The Wall Street Journal reports. The troubles that Mr. Geithner has had pushing his agenda for a financial overhaul through Congress have led many to regard him differently, the newspaper says, and lawmakers have shied away from him as he drew criticism for his relationship with Wall Street. But who knows — maybe a spread in Vogue can fix that.
President Obama celebrated the first anniversary of the economic-stimulus law on Wednesday, arguing the $862 billion package is slowly helping to right the economy even as he pushes for additional spending for job creation.
The Obama administration is marking the one-year anniversary of economic stimulus legislation with efforts to show the measure sparked economic growth and curbed rising unemployment. In the first annual report on the legislation, Vice President Joe Biden wrote that the government spending “halted an economic freefall.” Administration officials are fanning out across the nation this week to more than 35 cities to tout the measure’s success.
Democrats, stung by criticism of their $787 billion economic-stimulus plan, are targeting Republicans who have attacked the program and then lobbied to get money for their districts. More than a dozen Republican lawmakers supported stimulus-funding requests submitted to the Department of Labor, the Environmental Protection Agency and the Forest Service, in letters obtained by The Wall Street Journal through the Freedom of Information Act.
Fannie Mae and Freddie Mac are going to have to quickly start issuing a lot more short-term debt to finance their purchase of nearly $200 billion in delinquent loans held in pools of mortgage-backed securities they guarantee. While Freddie's funding needs are expected to be modest—in the range of $10 billion to $20 billion, according to Barclays Capital—Fannie would need to raise about $60 billion.
Just how much additional growth does a stimulus package buy you? (1.65 x stimulus) - 2.1, apparently, where stimulus is a percentage of GDP. (Example - a stimulus measuring 3 per cent of GDP should produce growth that is 2.85 per cent above expectations.) Policymakers would hope that spending relatively more stimulus would bear some fruit. And so it appears from the Economic Report of the President.
Investing is a lot like surfing. You’ve got to paddle out, find your wave, adjust to it, and ride it in. The big wave that we've been riding since the March lows ended on January 14th when Intel reported an 875 percent increase in net income but somehow the stock managed to sell off. At that moment the propulsion of water underneath our surfboards turned into the friction of sand. At EconomicTiming.com, I called Q1 2010 a time when investors would be transitioning from stage one of the stock market recovery to stage two and that is exactly what has happened. Right now, investors are paddling out on our boards trying to get in position for the next wave. It’s not an easy process. You can get knocked off your board. You can have false starts.
The plot thickens again for the American International Group bailout. The rescued insurer is in discussions to sell its American Life Insurance, or Alico, unit to MetLife. But A.I.G. might get MetLife stock as part of the potential $15 billion deal. As a result, the government could end up owning stock in yet another company, bringing further delay and uncertainty to the bailout repayment effort, Breakingviews says.
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Stimulus