The Real Economy of the Middle Class

[themagneticfields]

Let's have that first point once again:
1 Forecasts of the unemployment rate without the recovery plan vary substantially. Some private forecasters anticipate
unemployment rates as high as 11% in the absence of action.

One more time, for the economic literacy-impaired:
1 Forecasts of the unemployment rate without the recovery plan vary substantially. Some private forecasters anticipate
unemployment rates as high as 11% in the absence of action.

Three times is the charm:
1 Forecasts of the unemployment rate without the recovery plan vary substantially. Some private forecasters anticipate
unemployment rates as high as 11% in the absence of action.

This note doesn't address uncertainty about the projection for unemployment with the recovery plan, just without the recovery plan. Note 2 seems to address uncertainty about the estimates on the whole: These estimates, like the aggregate ones, are subject to substantial margins of error.

 

[redgreen5]

Umm...do you not know that expanding VA hospital wings would fall under civil engineering projects?

1. Only the construction part of it. Acquiring new doctors, nurses, lab techs, etc. and then x-ray machines, CAT scan machines, laboratories, beds, etc. is an equipment purchase.  The phrase "expanding a VA hospital wing" is a bit more comprehensive than your own little worldview seems to realize.

2. Moreover, I'm talking about addressing people's perceptions of government inactivity here.  When people talk - and pundits write - about "shovel ready" projects, they're typically thinking big projects involving transportation.

3. You skipped my other example.  I don't blame you.

With $131 billion allocated for construction-related spending in the stimulus package, all 50 states are receiving significant funds for everything from highways to energy projects to environmental cleanups to making government buildings more energy efficient. - McGraw Hill

You are confusing "stimulus" with our original topic which was, "what counts as shovel ready".  Your citation is about 'stimulus'. See that word in red? 
Which confirms what I said:  nowhere in the stimulus spending bill was it restricted to only construction.

And, in case you are wondering,

I was not. I was aware of the distribution of funds before I ever engaged this discussion.

the biggest categories spending wise were tax cuts, health care initiatives, education spending, individual assistance (i.e. "welfare"), and infrastructure spending. Which of those are purely "stimulus", hmm?

1. Again: you are confusing "stimulus" with our original topic which was, "what counts as shovel ready".

2. Which ones are stimulus? All of them. Here are the facts:

1. the American economy derives 70% of its growth from consumer spending - the reason this is important is because it gives guidance as to how to stimulate a sluggish economy.  In other words, a 5% improvement in the 70% growth area will result in a larger overall improvement in the economy, than a 5% growth in the 30% area will.  That's just natural; 5% of a big pie is more than 5% of a small pie.
http://useconomy.about.com/od/grossdomesticproduct/f/GDP_Components.htm

2. unemployed individuals pretty much life hand-to-mouth - people on unemployment are, by definition, making less on unemployment than they were on their jobs.  This holds true even for minimum wage jobs.  So with less money coming in, the unemployment benefits will be spent on vital essentials. This means that unemployment benefits go directly into the local economy, for things like rent, groceries, gas, clothing, etc. as opposed to being stashed in savings accounts or invested in foreign stocks and bonds;

3. money from unemployment benefits is a significant boost to local economies - whether you're talking about city, county, state, etc.  This is a phenomenon known as the multiplier effect; for every $1 injected into the local economy, what is the net result experienced across the total economy?  In other words, the amount of extra groceries that the local grocery store buys, the additional stock clerks it has to hire to handle the customers, the additional inventory ordered by the drugstore, the additional expansion in retail space rented out to make enough room for a local clothing store, etc. 

4. of all the items considered for stimulus, increased aid to the unemployed has the highest payoff - you can look on this as a kind of metric of ROI (return on investment), except in this case we're measuring the return on tax dollars invested, with the goal of stimulating the economy out of a recession. Figures from the CBO show the results ranging from a low of 0.70 per $1.00 spent, to a high of $1.90 per dollar spent.  http://www.cbo.gov/publication/41813  There is variation on the actual amount, because it depends on the geographic location, the items involved, etc.  Mark Zandi, of Moody's Economy.com, in Congressional testimony indicated that the ROI for unemployment benefits was $1.64 in return for every $1 invested. He further estimated that the only item with a higher return on investment was an expansion of food stamp programs, with an ROI of $1.73.

5. the idea that unemployment benefits discourage job-seeking in a depressed economy can be easily disproven - during the current recession, there were 15 million jobs lost.  At the peak, there were 1.5 million jobs going unfilled (i.e., want ads for positions that weren't being filled).  If we had a magic wand and could match up job hunters to these positions instantly, guess what?  We'd have zero open jobs left, but we'd still have 13.5 million people looking for work (15 million workers - 1.5 million jobs = 13.5 million workers left).  Of course it doesn't work that way.  A job opening may not be in the same location as the unemployed person to fill it; a radiation technician in Atlanta, GA can't always just pull up stakes and move to the job opening in Detroit.  This is referred to as economic friction.

 

[redgreen5]

And since civil engineering isn't the only sector covered by "shovel ready"......

The facts are not your friends in this case.

Yes, I'm afraid they are.
http://www.propublica.org/special/the-stimulus-plan-a-detailed-list-of-spending

Too bad you aren't familiar with construction projects, particularly government-driven ones. Your errors would be obvious to you.

Fortunately, the projects discussed don't all fall inside the "construction" category.

Again...9 in 10 dentists prefer Crest toothpaste.

Again, a non-answer does not refute me, nor does it rebut my statement that someone with better credentials than you *disagrees* with you.

Nice try.  But don't try to quibble about "promise".  You are trying to make it sound as if someone had issued a point-blank statement that something would not happen. The actual record of events shows something far different.

No...what the ones pushing for the spending did use the projection for was a selling point for the stimulus...over and over and over again.

Really? How wonderful. Then you should have no problem finding five such examples of an administration official stating that unemployment wouldn't go over 8% if the stimulus gets approved.
Let me know when you have your example citations ready.  Make sure you have not just the citation, but also the linkback to the original statement.  Stick around; I'll have questions.

Unlike you, I've actually read what Rohmer and Bernstein wrote.

Ad hom. And wrong...keep playing.

Not ad hom; just a fact.  You haven't read it. I have. Case closed.

The TIME news reporter got it wrong.  TIME may not be very biased....

LOL!

Feel free to present evidence of bias. But don't expect me to take your uninformed viewpoint as anything worth noting.

You know what would happen if my estimates were off by nearly 100%? I'd probably be fired or declared incompetent at my job.

LOL apples and oranges. 

1. The estimates were not "off by 100%";

2. The estimates were hampered by not knowing the full extent of the economic downturn - as I told you before, Q1 2009 economic available at the time - your job also cannot provide accurate estimates, if the requirements of the project haven't fully been calcuated due to lack of information;

3. Your job is considerably easier than measuring the entire national economy of the United States - your job does not have as many moving parts, independent actors, and complex relationships as the national labor economy - which stands to reason, since your job is one tiny *part* of the overall national economy, therefore it cannot be equally as complex;

4. The full stimulus, as envisioned in the proposal, was not enacted; in fact, 1/3 of the spending was cancelled, and another chunk of it was redirected to different purposes than originally planned.  What would happen to your projections on one of your projects, if 1/3 of the budget was eliminated and another chunk re-purposed to some other goal?

Your entire attempt to draw a comparison between your job and this situation was utterly absurd from the get-go.  It relies on a simplistic and naive attempt to draw parallels between vastly different jobs and task types. You might fool *yourself* with such tactics, but they won't work on anyone who understands the macroeconomic material and the timeline of events, like myself.

1 Forecasts of the unemployment rate without the recovery plan vary substantially. Some private forecasters anticipate unemployment rates as high as 11% in the absence of action.

See that word there? That word is "some". It's meaningless. For all we know, "some" is two.

Nonsense.
You're just unhappy that I have pointed out your ignorance of the ample disclaimers, and now you're trying to downplay those disclaimers for political purposes. I should have realized you'd eventually get around to doing that.

Really...try to follow along...you said partisan wrangling was part of why the guys missed the 8% mark so badly.

Yes I did. That does not imply that such partisan wrangling could be forecasted.  Nobody knows what deals will be struck in Congress, or at the local/state level.  What's more, the forecast was made even before legislation was put before Congress. 
http://seattletimes.nwsource.com/html/politics/2017906970_apuspresidentialcampaignfactcheck.html

ROMNEY: "The administration pledged that their stimulus would keep the unemployment rate below 8 percent. It has been above 8 percent every month since."

THE FACTS: Obama never said that he would hold unemployment below 8 percent if Congress adopted his stimulus package. The 8 percent figure cited by Romney, and many other Republicans, comes from a transition staff-written projection written by economists Christina Romer and Jared Bernstein that was issued weeks before Obama was sworn in and long before there even was a stimulus plan before Congress.

Romer, who went on to head Obama's White House Office of Economic Advisers, said after she left the White House in 2010 that the projection was so far off because she - like nearly every other economic forecaster - had failed to anticipate how deep the recession was and the extent to which conditions would continue to worsen. Their report was never an official Obama administration assessment or projection.

That stimulus plan, with a price tag of $787 billion at the time, wound up costing $825 billon. The nonpartisan Congressional Budget Office has said that the stimulus increased the number of people employed by 1.4 million to 3.3 million and cut the unemployment rate between 0.7 and 1.8 percentage points. Economists continue to debate whether the stimulus lived up to its promise or was worth the cost, but few seriously argue that it failed to create jobs and many believe it helped to end the recession.

Apparently you don't have the first clue what you're talking about.

It doesn't take a fortune teller to know that partisan wrangling will occur and a lot of it at that.

Yes, I'm afraid it does.  The trick is quantifying the amount of wrangling, and translating that into estimates that impact the passage of legislation, and how quickly it gets implemented at the local and state level.

Of course, if you feel otherwise, then present your calculations for how you account for partisan wrangling in civil engineering construction projects. 
Make sure the equation addresses both degree and scope such wrangling, at state and local level.
Stick around for questions; I'll have quite a few.

My rebuttal demonstrated that your claim of fallaciousness was wrong.  Furthermore, you seem to confuse what the role of an economic prediction is, and the basis upon which such predictions are made.

I'm sorry....I was just replying to your points regarding why they were wrong.

No you aren't.

All economic projections - whether for private companies in their 10-K statements or quarterly messages to investors, or for countries, issuing economic forecasts - they all come with caveats and provisos.  Is this really news to you?  Do you require some examples?

These advisors carefully bounded their projections with detailed caveats.  It isn't their fault - or the President's fault - if certain people find it convenient to ignore those caveats for their political purposes and gains.

How often do you see non-governmental economic projections that are off by 100%? (And I'm not talking about some high-risk "get rich quick" projection.)

1. Off by 100? See above rebuttal.

2. You're the one with the claim that this is unusual. Feel free to provide a list of non-governmental economic projections, of equal magnitude and equal levels of information, and show the distribution of the magnitude of their errors.

Here's one more item for you:  the fact that Rohmer/Bernstein were up front about all this - and the fact that they admitted their estimate was off, due to lacking Q4 data -- well, that puts them light years ahead of the Bush adminstration, which routinely tinkered with the economic data. Moreover, when the economic data was embarrassing, the Bushies simply refused to release it.

Ahh....it's Bush's fault. 

That just tells me you are a partisan hack, but I can't really express shock there.

I was not blaming Bush for anything. I was comparing how two different administrations handled the public disclosure of potentially embarrassing bad news about the unemployment situation during their administrations.  In the case of Bush, they refused to release the data. In the case of Obama, they released it.

The fact that you tried to twist my comment into "it's all Bush's fault" tells me that you've run out of arguments and are now just firing blanks, and hoping nobody notices.

Good luck with that. :

 

[qwerty]

The only shovel ready job during the Obama administration was the burial of Michael Jackson.

 

[redgreen5]

blah blah blah

Interesting chart.  The GOP-controlled Congress and Bush administration wrecked the economy, and exited quickly out of town, leaving the economic mess for the adults to clean up.

Classic GOP trick.

 

[qwerty]

blah blah blah

Interesting chart.  The GOP-controlled Congress and Bush administration wrecked the economy, and exited quickly out of town, leaving the economic mess for the adults to clean up.

Classic GOP trick.

When is Mr. Hope and Change planning to start cleaning up?  Skyrocketing debt, unemployment, gas prices.... the guy is a fraud, phony, professional politician that has never worked an honest day in his life......I can now see how you can relate to him.

 

[redgreen5]

[quote author=qwerty]

When is Mr. Hope and Change planning to start cleaning up? [/quote]

Last I checked, unemployment was down, stock market was back up, producer price index back up, exports up,
Banks had their best year ever last year, etc.

Maybe you need to actually read some news after 2009.  Let me know if you need some help sounding out the big words.

 

[qwerty]

Last I checked, unemployment was down

Lets first just look at the hard number: When Obama was inaugurated, the unemployment rate was 7.8 percent, it is currently at 8.2..... 8.2 is a bigger number than 7.8.

Now lets look at the real number.  When Obama was inaugurated, participation in the labor force was 65.7%, it is currently 63.3%, a decline of 2.4%, the last time it was this low was when Carter was president (Don't Figure)...that being said, if you take into consideration the jobs that Obama has killed, and use them in the unemployment statistics (using the same workforce when Bush was President), the real unemployment rate is now over 11%. The only reason the numbers are coming down is because of the steep decline in the American workforce (congratulations Obama).  So the liberal plan to destroy American Jobs to drop the unemployment rate is working.

Last I checked, stock market was back up

Up as when the Dow was 14,164 at the high point during the Bush years?  Up as when the lowest was 7,286 during the Bush years?  Up as when the highest under Obama was 13,252? Up as when the lowest was 6,547 under Obama?

Last I checked, an increase of producer price index back up,

Way back up to 1.9 from the high of 9.9 under the Bush years?

Last I checked, exports up

YEAH! We rank at 190 and the trade deficit has widened to $51.8 billion as we shovel money to foreign countries... The world owns over three trillion dollars more than we own of them.

Last I checked, banks had their best year ever last year

Yes, they are doing so well that three Chinese government banks will be coming to America.

You also forgot one big improvement that Obama does not tout, the growth of the National Debt to 15.6 trillion from 10.6; an increase greater than the 8 years of Bush.  If (dear Lord, I hope not) Obama is elected for another 4 years, using his own budgets, it will top $20 trillion, an increase of 87%.

Last I checked.......

You may want to check again....

 

[JrChurch]

I have little patience with blind loyalty to one's party.  When the party is wrong, it hurts the country. 

When Republican-controlled (elected in 2002) Congress continued running deficits for four fiscal years (2004-2007) and they failed to balance the budget, I was deeply concerned about their lack of restraint in spending.  I understood that our country was dealt a catastrophic blow in 2001 and our president's chief concern was the safety of our people, but the elected officials failed to reduce expenditures to pay for the security measures we needed.  Fiscal conservatives were disgruntled with the behavior of their officials and withheld support. 

Democrats won back the majority in both the House and Senate in the 2006 election, and in the three following  fiscal years  (2008, 2009, 2010), they have run record deficits of  $458.6 billion, $1.41 trillion and $1.3 trillion.  According to the CBO, "The deficits of $1.4 trillion in 2009 and $1.3 trillion in 2010 are, when measured as a share of gross domestic product (GDP), the largest since 1945