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Old 11-03-2010, 04:25 PM   #41
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Heck, it's only 50 billion that's not a lot of money to the Administration..........
The one responsible for TARP?
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Old 11-03-2010, 07:17 PM   #42
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I wonder how much tax revenue would have been lost (and how much more Fannie's and Freddy's pre-existing guarantees would have cost ) if TARP hadn't passed. As it is, tax revenues are down $400B as a result of the recession. It's hard to argue (although I'm sure some will) that Government revenues would have been higher, or the GSE's guarantee costs lower, if TARP never existed.
That's just the beginning. Who knows how bad things would have gotten? Polar caps melting, tectonic plate slippage, a reversion to the gold standard . . . the sky is the limit. When we hear folks wax eloquent about how dark things would have been but for TARP and when the dread-inducing music begins in the background, all right thinking people are overwhelmed with gratitude for our wise and benevolent leaders.
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Old 11-03-2010, 07:38 PM   #43
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That's just the beginning. Who knows how bad things would have gotten? Polar caps melting, tectonic plate slippage, a reversion to the gold standard . . . the sky is the limit. When we hear folks wax eloquent about how dark things would have been but for are because of TARP and when the dread-inducing music begins in the background, all right thinking people are overwhelmed with gratitude for our wise and benevolent leaders.
Since no one really knows what would have happened, this statement is just as true...
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Old 11-03-2010, 08:36 PM   #44
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That's just the beginning. Who knows how bad things would have gotten? Polar caps melting, tectonic plate slippage, a reversion to the gold standard . . . the sky is the limit.
It certainly helps explain why the Saints won the Super Bowl...
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Old 11-03-2010, 08:44 PM   #45
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That's just the beginning. Who knows how bad things would have gotten? Polar caps melting, tectonic plate slippage, a reversion to the gold standard . . . the sky is the limit. When we hear folks wax eloquent about how dark things would have been but for TARP and when the dread-inducing music begins in the background, all right thinking people are overwhelmed with gratitude for our wise and benevolent leaders.
Naturally no one knows the full extent of what would have happened, but that is a thin reed to hide behind. We can certainly evaluate the reasonableness of hypothetical scenarios. On the one hand, a reasonable case can be made for widespread bank failures, higher unemployment, and lower government revenues absent TARP. Can a similarly reasonable case be made for lower unemployment and higher government revenues absent TARP?
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Old 11-03-2010, 09:15 PM   #46
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Naturally no one knows the full extent of what would have happened, but that is a thin reed to hide behind. We can certainly evaluate the likelihood of alternate scenarios. On the one hand, a reasonable case can be made for widespread bank failures, higher unemployment, and lower government revenues absent TARP. Can a similarly reasonable case be made for lower unemployment and higher government revenues absent TARP?
This is the metric? By this standard we could have "success" by confiscating $1 trillion in private property and using it to pay 20 million people to dig and fill ditches and make them pay taxes. And then simply burn other scores of billion$. Sure, we'd establish a terrible precedent of government intrusion (like TARP), we'd make people wonder if the rule of law applies at all times in the US (another casualty of TARP), but we'd have higher employment and higher govt revenues.

Do we want our new gold standard to be "the ends justify the means"?

Especially when the "ends" aren't so good, unless we awfulize about what might have been?
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Old 11-04-2010, 06:55 AM   #47
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This is the metric? By this standard we could have "success" by confiscating $1 trillion in private property and using it to pay 20 million people to dig and fill ditches and make them pay taxes.
Are you talking about the Stimulus billl? I'm under the impression that 40% of this $1T was for tax cuts (not spending). Surely this portion isn't a confiscation of private property.
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Old 11-04-2010, 07:36 AM   #48
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This is the metric?
So without being able to offer up a reasonable alternative scenario you basically agree, then, that government revenue would be lower and unemployment higher had TARP not been implemented. And considering that TARPs new projected cost of $50B is just 2% of Federal Revenue, it wouldn't take a big swing in either number to conclude that TARP more than paid for itself.

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Especially when the "ends" aren't so good, unless we awfulize about what might have been?
As to how bad things might have been, we know for a fact that we were losing 779,000 jobs per month at the bottom of the recession (that is more than 6% of the workforce on an annualized basis). We know for a fact that those job losses peaked three months after TARP. I don't see how we could pretend that the unprecedented monetary and fiscal intervention applied to arrest that decline didn't really help (just a coincidence?) and that a simple continuation of the trend we were on is an "awfulization" of the "do nothing" alternative instead of the reasonable base case scenario that it is. And if there is a thoughtful argument to be made that allowing the companies at the core of our financial system to fail wouldn't have accelerated that trend to the downside, I'd like to hear it.
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Old 11-04-2010, 10:16 AM   #49
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As to how bad things might have been, we know for a fact that we were losing 779,000 jobs per month at the bottom of the recession (that is more than 6% of the workforce on an annualized basis). We know for a fact that those job losses peaked three months after TARP. I don't see how we could pretend that the unprecedented monetary and fiscal intervention applied to arrest that decline didn't really help (just a coincidence?) and that a simple continuation of the trend we were on is an "awfulization" of the "do nothing" alternative instead of the reasonable base case scenario that it is.
You could make a similar argument that it was the Reagan tax cuts that pulled us out of recession, but it would (a) be oversimplistic to primarily attribute the recovery to that single event and (b) it would be confusing correlation with causation.

Just a coincidence?
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Old 11-04-2010, 10:22 AM   #50
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So without being able to offer up a reasonable alternative scenario you basically agree, then, that government revenue would be lower and unemployment higher had TARP not been implemented. And considering that TARPs new projected cost of $50B is just 2% of Federal Revenue, it wouldn't take a big swing in either number to conclude that TARP more than paid for itself.
TARP was agreed upon by both parties, and its water over the bridge. In the end, it was a necessary evil. However, when folks like GM tout they "paid back every dollar" and in reality they just used a non-TARP govt loan to pay off a TARP loan, it makes them look stupid, and causes the taxpayer to wonder which idiot is in charge...........

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And if there is a thoughtful argument to be made that allowing the companies at the core of our financial system to fail wouldn't have accelerated that trend to the downside, I'd like to hear it.
I'll give you TARP as "ok", if you grant me the "Stimulus Plan" was sheer lunacy...........
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Old 11-04-2010, 10:53 AM   #51
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Arguments about the appropriate level of government spending aside, I don't see how keeping taxes lower than what will cover spending is not just another form of "stimulus"...

If there's no final demand, it's all just whizzing in the wind. Fortunately, the economy does appear to be gradually improving. Deleveraging is going to be a long, slow slog, but we might just make it.

No particular love for unions, or automakers, but why shouldn't they get a share of the pie Wall Street got?
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Old 11-04-2010, 11:03 AM   #52
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One of the things that IMO some confuse is that we might think that TARP worked, but it was a bad idea...


I don't think that the gvmt should force solvent companies to take forced investments in them by the gvmt with a required return to the gvmt...

I don't think that the gvmt should have taken over AIG, CITI, GM or Chrysler... maybe they should have helped them through bankruptcy or being wound down.... but direct ownerhship Reminds me of Venezuela

The gvmt did close down a number of firms.... or forced them to be sold etc... is that the way we want gvmt to work?


Finally... the total cost to the gvmt of this recession will be a lot more than we think... and I do not think that we have stopped paying yet...
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Old 11-04-2010, 11:25 AM   #53
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You could make a similar argument that it was the Reagan tax cuts that pulled us out of recession, but it would (a) be oversimplistic to primarily attribute the recovery to that single event and (b) it would be confusing correlation with causation.

Just a coincidence?
Not a coincidence at all.

What I find fascinating about most people's understanding of macro economics is that they have, for partisan political some reason, decided to only look at the Supply Curve or the Demand Curve of the economy. They ignore the big picture where equilibrium is formed at the point those two curves cross and that disequilibrium can be caused by either side.

So if you have a situation where supply constraints impede economic growth, the proper course of action is to remove those constraints. Evidence of a Supply constrained slump is elevated inflation in the face of high unemployment. That sounds a lot like the late 1970’s. And indeed, an oil embargo, high taxes and high regulation constrained supply. In that environment loose money only served to accelerate inflation. Given that backdrop, the proper policy response was to break the oil embargo, cut taxes, remove regulatory barriers to economic growth, and tighten monetary policy.

Fast forward to today, and the economic difficulties look nothing like those of the late 70’s. Instead of a supply constrained economy, our economy suffers from excess supply and inadequate demand. The big picture symptoms of a demand constrained economy are high unemployment and falling inflation, which is what we have today.

It’s telling that nearly all of the economists and pundits who predicted run away inflation because of monetary easing also suggest that reduced taxes and regulation are the keys to recovery. They’ve fundamentally misdiagnosed the problem because they only see the world through the supply side of the equation. They still think it's 1979. So they're stunned as inflation continues to fall in the face of unprecedented monetary expansion and contort themselves in various directions to explain it when the answer is simple. Aggregate demand collapsed. Period. Full stop.



The proper policy response in the face of inadequate demand is loose monetary policy, and yes, direct government spending. Building, or encouraging, more supply in an oversupplied market is counterproductive. Deregulation, marginal tax cuts, tight money ect. etc. do nothing to address the problem of inadequate demand, and in the case of tight money, actually make it much worse. Why are these things even being suggested in some quarters?

This isn’t rocket science and it doesn’t have to be partisan. It’s possible for Reagan’s policies to be correct for the problems he faced, but entirely inappropriate to those of today. It’s O.K. to recognize that. It happens to be the actual world we live in. But some people have drawn the wrong conclusions from Reagan's success. Some have gone so far as to adopt a world view that government action is everywhere and always evil, and therefore have come out against it, even in cases where it is necessary and beneficial. They seem especially hostile to those cases where it has been wildly successful, like TARP.
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Old 11-04-2010, 12:21 PM   #54
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Entertaining, as always.

I'll just note that there is a huge gap between the opinions of political spin control specialists, political economists, and what they've convinced the public to believe, and what mathematical economists have concluded regarding the recent economic fluctuations, particularly now that more complete data on the 2007-2009 period is available.

There's a certain perverse amusement in seeing a triumph of ideology over empirical data. Alas, no amount of typing will convince most folks to change their mind.
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Old 11-04-2010, 12:30 PM   #55
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and what mathematical economists have concluded regarding the recent economic fluctuations, particularly now that more complete data on the 2007-2009 period is available.
do tell!!
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Old 11-04-2010, 01:46 PM   #56
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For anyone actually interested in digging through the econometric models and data, I suggest:

Data summaries and linkfests:
St. Louis Fed: Tracking the Global Economy
UCB Libraries | GovPubs | Stimulus

Dr. Ray Fair (Yale Dept. of Economics) has both a good model, and good survey articles on forecasting and targeting effects:
Recent Research

Dr. Fair's analysis of the 2008-2009 recession (a work in progress; this is the March 2009 version):
http://fairmodel.econ.yale.edu/rayfair/pdf/2009A.PDF

Hs past work seems to have produced reasonable results. [1] From a study of the previous recession and recovery:
http://cowles.econ.yale.edu/P/cd/d14b/d1497.pdf
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Section 5 consists of a number of counterfactual experiments using the MC model. The first three experiments provide estimates of the effects of the expansionary fiscal and monetary policies in the post boom period. The estimates are briefly as follows. Had there been no tax cuts, employment would have been 2.2 percent lower by 2004:3 than it actually was; had there been no large increases in federal purchases of goods, employment would have been 1.2 percent lower; and had there been no fall in short-term interest rates, employment would have been 2.5 percent lower. These effects are roughly additive in the model (fourth experiment), and the combined estimate is that employment would have been 5.6 percent lower in 2004:3 than it actually was.
Concluding with:
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Treasury found that, without enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001, the Job Creation and Worker Assistance Act of 2002, and the Jobs and Growth Tax Relief Reconciliation Act of 2003: (1) by the second quarter of 2003, the economy would have created as many as 1.5 million fewer jobs and GDP would have been as much as 2 percent lower, and (2) by the end of 2004, the economy would have created as many as 3 million fewer jobs and real GDP would be as much as 3.5 to 4.0 percent lower.
There are a number of other good articles coming out over the next several months, which should become freely available from researchers websites following publication.

1. Reasonable does not imply politically acceptable, but merely indicates that the results from the model for variation of a parameter correlate well with prior similar fluctuations seen in the actual economy.
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Old 11-04-2010, 01:52 PM   #57
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Gone4Good....

A good analysis... and I do not disagree with what you said about the difference back then and today... and in truth I do not disagree that it is the demand that is the problem today...

But (isn't there always a but )... it is difficult to encourage demand if so many people are not buying (now, I disagree that people are not buying, just not like before) if they feel that there is a possibility of lost income.... and them feeling 'poorer' due to the value of their house dropping...

The other point is maybe the new level of demand is 'correct' for right now... and trying to move it is a fools game...

My last comment (and remember, I do agree with most of what you say) is that the politicians want to have their cake and eat it.... remember that in good times they are supposed to run a surplus to pay down the debt they accumulated on their last spending spree... we have not done that at all.. probably will not anytime soon... at some point in time in the future, when the economy is humming along... the debt will start to become a burden and we will have to do some negative things in order to bring it under control.... I would rather not do some of the things right now that might not have much impact on the demand curve and live with a slower economy than have to pay a lot now and in the future...

Just in case someone wants to point out that maybe I have not felt the downturn... I lost my job, but found another at a lower salary... my sister and her husband both lost their job... I had another BIL get his hours reduced... so again, it affects my family... but I would rather the country be on sound footing in the future than what can my family or I get from the gvmt now...
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Old 11-04-2010, 02:07 PM   #58
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The other point is maybe the new level of demand is 'correct' for right now... and trying to move it is a fools game...

My last comment (and remember, I do agree with most of what you say) is that the politicians want to have their cake and eat it.... remember that in good times they are supposed to run a surplus to pay down the debt they accumulated on their last spending spree... we have not done that at all.. probably will not anytime soon... at some point in time in the future, when the economy is humming along... the debt will start to become a burden and we will have to do some negative things in order to bring it under control....
So true..
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Old 11-04-2010, 03:45 PM   #59
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-clipped to save bandwidth-.....This isn’t rocket science and it doesn’t have to be partisan. It’s possible for Reagan’s policies to be correct for the problems he faced, but entirely inappropriate to those of today. It’s O.K. to recognize that. It happens to be the actual world we live in. But some people have drawn the wrong conclusions from Reagan's success. Some have gone so far as to adopt a world view that government action is everywhere and always evil, and therefore have come out against it, even in cases where it is necessary and beneficial. They seem especially hostile to those cases where it has been wildly successful, like TARP.
Just chiming in here to say that these are my views as well 100% to the T.

I don't consider myself to be that smart and I'm certainly not a learned man in macro-economics but what you posted seems like common sense. I often wonder why more people aren't saying this?
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Old 11-04-2010, 04:16 PM   #60
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The other point is maybe the new level of demand is 'correct' for right now... and trying to move it is a fools game...
For me to believe this, I'd have to believe that the demand of 14.8MM unemployed people isn't constrained by their unemployment.

And with respect to politicians (and the electorate) having their cake and eating it too, I completely agree. We shouldn't have squandered the nations balance sheet with guns and butter programs during the good times. But we did and that limits our ability to deal with the current economic situation.

Edit to Add: With respect to our fiscal constraints, there is a reasonable way through but it requires adult leadership. Regardless of today's large deficits (inflated by reduced tax revenue and higher 'safety-net' spending) our real structural budget problems are entirely about future entitlement growth, Social Security, Medicare and Medicaid. It's certainly possible to tackle the entitlement problem today (reduced future benefit promises and higher future taxes) in a way that solidifies confidence in our fiscal health, without negatively impacting today's economy. That would free up some capacity to deal with the current slump.

Don't hold your breath.
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