Economic panic over, 95% of stimulus money unspent--support for spending eroding?

[samclem]

According to this article at the Rasmussen web site, many people believe the stimulus money should not be spent.

Forty-five percent (45%) of Americans say the rest of the new government spending authorized in the $787-billion economic stimulus plan should now be canceled. A new Rasmussen Reports national telephone survey found that just 36% disagree and 20% are not sure.


According to news reports, only $36 billion of the stimulus plan had been spent as of late May.


Just 20% of adults say the tax cuts included in the stimulus plan should be canceled while 55% disagree. The stimulus plan includes $288 billion in tax cuts.


While there is a wide partisan gap on the question of stimulus spending, there is little partisan disagreement on maintaining the tax cuts.

The article is very "thin"--for example, what does "spent" mean? Obligated? Actually paid to parties outside the government?

While the economy is still in a rough patch and things are not rosy, I think it's fair to say that the fear and panic that was so common in early 2009 is much less common now. If the administration and legislators want to get this money spent on their favorite projects, they'd better do it quickly before the public changes their mind about the whole scale of this thing.

 

[ERD50]

Be interesting to see a breakdown of responses based on the amount of Federal taxes the person pays.

Maybe the ~50% that pay no to little Fed taxes would be all for "spending" the money, while those that pay more might feel we should keep the deficit from growing?

The full article is worth a read, it's short and to the point. It looks like the people don't have much faith in this bill, and like it less the more they see of it:

Only 31% of U.S. voters believe the economic stimulus package has helped the economy. That's down from 38% when it first passed in February.

...

However, only 31% of Americans believe the new government spending in the stimulus package creates new jobs. Forty-eight percent (48%) say the stimulus spending does not create jobs, and 21% are not sure.

Are the people waking up? Some Euro leaders have also been saying that govt spending is not a solution.

I sure don't want to be paying down that debt in my retirement, if the results are so questionable, and I don't want to pass it on to future generations.

-ERD50

 

[alvarezg]

There isn't much empirical evidence on what is the right way to deal with a recession/depression. Leading up to the Great Depression, Hoover did not spend; thought the market would heal itself. It doesn't seem to have worked. Roosevelt spent money by the barrelfull and maybe got some improvement, but not much. Then came WWII and spending by the boatload. That seems to have fixed the economy.

 

[youbet]

There isn't much empirical evidence on what is the right way to deal with a recession/depression. Leading up to the Great Depression, Hoover did not spend; thought the market would heal itself. It doesn't seem to have worked. Roosevelt spent money by the barrelfull and maybe got some improvement, but not much. Then came WWII and spending by the boatload. That seems to have fixed the economy.

Was it the "spending" that did it or the fact that everyone went to work. Folks accepted menial jobs instead of collecting the public dole, lived frugally without waste and generally were just darn productive. People produced things instead of waiting for govt paper manipulations of "money" to take care of them........

I think we need "producing" more than we need "spending."

 

[Abreutime]

There isn't much empirical evidence on what is the right way to deal with a recession/depression. Leading up to the Great Depression, Hoover did not spend; thought the market would heal itself. It doesn't seem to have worked. Roosevelt spent money by the barrelfull and maybe got some improvement, but not much. Then came WWII and spending by the boatload. That seems to have fixed the economy.

This is a common misconception. Check out the wiki for background, or look through the office of budget and management figures for more detailed figures. Hoover raised spending from $3.1B to $4.7B, and started a lot of the projects (public works like the Hoover Dam) that became lynchpins of FDR's New Deal. In fact, FDR's 1932 presidential campaign criticized Hoover for his deficit spending, and pledged to balance the budget if elected. These political pressures helped push Congress to pass large tax increases.

I agree with your general point, that macroecnomic policy-making is far from an exact science. Check out this article in Reason magazine.

 

[ziggy29]

Depends. I think once a lot of people feel like the economy may be bottoming, those who still have their jobs (and feel increasingly secure about keeping them) may want the spending cut out.

 

[Gone4Good]

Roosevelt spent money by the barrelfull and maybe got some improvement, but not much.

Actually the economy grew quite sharply from ~1933 to 1937. GDP growth was 10.8%, 8.9%, 13.0%, and 5.1% in 1934, '35, '36, and '37 respectively. Unemployment was cut in half during that time period and actually fell below the level we have today.

Many think that attempts to balance the federal budget in 1937 choked off the recovery and caused the "second depression within the depression".

I never quite follow the logic of those who argue that government spending didn't help end the depression, but unquestioningly accept the fact that massive government spending to fight WWII did.

Some (like Krugman) are cautioning against making the same mistake today by withdrawing stimulus too quickly. After all, we're still losing 300,000 jobs per month. It's not like we've even hit bottom yet.

 

[Gone4Good]

I think we need "producing" more than we need "spending."

But don't you need someone to buy what you produce?

 

[Independent]

It seems to me that recessions are all about confidence. Some people don't spend because they are afraid of losing their jobs. Business revenues fall because some people aren't spending. Businesses fire some people because revenue is down. More people don't spend because they are afraid of losing their jobs....

If people believe that the stimulus is going to "jump-start" the economy, they loosen up, start spending, and the economy recovers. Taken to the extreme, you don't have to spend the stimulus money, you just have to convince people that you are going to spend it.

In the real world, you can't pull off that big of a confidence game, so you really need to spend some money to convince people that times will get better.

 

[ziggy29]

I never quite follow the logic of those who argue that government spending didn't help end the depression, but unquestioningly accept the fact that massive government spending to fight WWII did.

WW2 by itself may have only been a temporary "stimulus" except for its aftermath. The aftermath of WW2 resulted in a sudden and huge increase in demand for U.S. goods that lasted into the 1970s. I suspect the fact that the war destroyed so much industry and infrastructure in Europe and elsewhere -- and required U.S. industry to rebuild it -- had the biggest role in more or less ending the Great Depression once and for all.

The problem is that after the 1970s, we kept borrowing to pretend the boom was still on until we couldn't sustain it any more; i.e. today.

 

[Independent]

WW2 by itself may have only been a temporary "stimulus" except for its aftermath. The aftermath of WW2 resulted in a sudden and huge increase in demand for U.S. goods that lasted into the 1970s. I suspect the fact that the war destroyed so much industry and infrastructure in Europe and elsewhere -- and required U.S. industry to rebuild it -- had the biggest role in more or less ending the Great Depression once and for all.

The problem is that after the 1970s, we kept borrowing to pretend the boom was still on until we couldn't sustain it any more; i.e. today.

I looked at the FRED data, dividing "balance on current accounts" by GDP. I think this gives net exports as a percent of GDP. Their data starts in 1947, when net exports were about 4% of GDP. From 1948 thru 1970, the average was 1.6%. When I think about depression level unemployment I think in terms of 10% and greater. The export numbers seem far too small to have carried the economy.