Words v. Action

Can We afford the Stimulus in the first place? Menzie Chinn makes a number of important observations in his Post. One should keep certain real facts in mind when considering the information. The first rise of Debt/GDP occurred in WWII, when there were Price controls, artificial limitations on Civilian Products production, high Taxes to suppress Inflation, and a huge Increase in the Export Market because of the destruction of foreign economies. Now, We have no Price controls, unlimited access to Civilian Products due to elimination of Tariffs, extremely low Taxes because of previous Stimulus attempts, and a shrinking Export market as the rest of the World conserves on its financial reserves. Menzie Chinn truthfully asserts that the differences are partly offset by the Debt/GDP rising in other Countries, so that the value of the U.S. Dollar maintains some Constancy in relationship to other Currencies. This offset, though, must be seen as limited, as foreign Debt is of lower magnitude, and attempting much less Stimulus effort. Menzie Chinn only marginally refers to the relative ineffectual activity of previous Stimulus, which incited the increase in Debt/GDP without significant increases in Production above the normal predictable levels of a economic Boom; there being still significant debate on whether there was any real impact on Productive performance–the idea being that the increases in GDP would have occurred anyway without the Housing Crisis.

The DOL reports that Unemployment Claims rose to a Record 5.56 million active Claims. The first thing which must be said is that this is one hell of a large unemployed force, as it can be proven actual Unemployment may be 3 Times as large due to the strained Rules of the DOL on discouraged Workers. The second thing which must be stated is that percentage-wise, it is not that high an Unemployment rate; We have a huge Labor force seeking Employment, and One in which it is hard to find profitable employment for them. The Unemployment must be considered Natural under the Recessionary conditions, and any Stimulus to increase Employment must be seen as Stress on an economy seeking to reform for Boom conditions. This is a basic Statement that adverse Conditions must sometimes be accepted for eventual overall performance; I know how that Statement makes me Popular; it is still a fact.

I tend to agree with Tyler Cowen, who is still awaiting the truly bad News. It is like the economic argument which goes "If all the marginal factors remain Constant. . ." We live in a real World where marginal factors float on an Ocean of Current, and Static would destroy the entire model. The economy will not improve without real favorable conditions coming to the fore, which We have yet to see. The Statement that ‘Things have not gotten Worse’ is only the Statement that ‘We are degrading at a vastly decreased rate’. We need more of an impetus to gain Us a glowing economy once again. lgl