The Stimulus Seems to have failed

Piggy said:
As far as I can see, CfC simply allowed auto dealers to pick their own pockets, by merely moving buying decisions forward in time for people in the market for cars. Hence the drop-off after it ended.

The first-time home-buyer credit appears to have done the same thing.
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But that can be very useful. There's a reason that the future is discounted.

Take a look at my business: I run a small yoga studio in shanghai. Sometimes we offer discounts on yearly memberships. One of the things this will do is offer current members a chance to pay for a year about half of what they're currently paying by purchasing one month at a time.

So, if we disregard the new members that I'm also marketing to, how could it make sense for me to make this sort of offer? Because it puts money in my hands. Money that I can spend on developing my business in a way that can more than make up for the lost revenue during the course of the next year. I can put that money into renovations, advertising, events (like bringing in famous yoga teachers), etc. At the very least it means that I've got revenue this month that I wouldn't have had otherwise (6x what I would have had) which can keep me paying the rent right now. If business was bad enough that I couldn't pay the rent today, even if things were to get better a few months from now I'd be out of business before that turn around and wouldn't be able to take advantage of it.

My point being that business can make use of that money today in such a way that it turns into greater value by the time tomorrow comes around.

(Btw, bad management decisions where I work resulted in the same sort of cycle. A strategy seemed to have resulted, judging by short-term results, in a boost in revenue. And although some of us protested the decision, the strategy was then fully implemented. As it turned out, we merely moved our clients' decisions forward in time, and the boost was followed by a very nasty trough.)
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Certainly that won't always be a good decision, but when done knowingly and with a specific aim (to get through a rough period, to take advantage of a booming market and expand, etc.) it makes sense.
 
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Piggy said:
Although the stimulus seems to have succeeded -- together with other measures -- in preventing the economy from throwing a rod, but to have failed to measure up to what its most ardent cheerleaders said or implied it would do,
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Actually the people most in favor of Stimulus almost universally said it was to small and that a second round would likely be needed to get the economy going.

Piggy said:
While it provided a shot in the arm for auto dealers, at what cost?

As far as I can see, CfC simply allowed auto dealers to pick their own pockets, by merely moving buying decisions forward in time for people in the market for cars. Hence the drop-off after it ended.

The first-time home-buyer credit appears to have done the same thing.
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This is perfectly acceptable for fiscal stimulus. The point is to get money flowing immediately to prop up short term demand and stave off a deflationary spiral. The long term effects come from getting money moving again not from the direct effects of the stimulus, though if you can do both so much the better.
 
lomiller said:
Actually the people most in favor of Stimulus almost universally said it was to small
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Not to nitpick, but just for clarification, I was talking about those who were the most ardent cheerleaders for what was passed, which doesn't include those who thought it was either too small, or too big, or shouldn't be done at all.
 
lomiller said:
This is perfectly acceptable for fiscal stimulus. The point is to get money flowing immediately to prop up short term demand and stave off a deflationary spiral. The long term effects come from getting money moving again not from the direct effects of the stimulus, though if you can do both so much the better.
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As I said, I think the equation will turn out net-positive for the broader stimulus. Not so sure about CfC.
 
Roboramma said:
But that can be very useful. There's a reason that the future is discounted.

Take a look at my business: I run a small yoga studio in shanghai. Sometimes we offer discounts on yearly memberships. One of the things this will do is offer current members a chance to pay for a year about half of what they're currently paying by purchasing one month at a time.

So, if we disregard the new members that I'm also marketing to, how could it make sense for me to make this sort of offer? Because it puts money in my hands. Money that I can spend on developing my business in a way that can more than make up for the lost revenue during the course of the next year. I can put that money into renovations, advertising, events (like bringing in famous yoga teachers), etc. At the very least it means that I've got revenue this month that I wouldn't have had otherwise (6x what I would have had) which can keep me paying the rent right now. If business was bad enough that I couldn't pay the rent today, even if things were to get better a few months from now I'd be out of business before that turn around and wouldn't be able to take advantage of it.

My point being that business can make use of that money today in such a way that it turns into greater value by the time tomorrow comes around.

Certainly that won't always be a good decision, but when done knowingly and with a specific aim (to get through a rough period, to take advantage of a booming market and expand, etc.) it makes sense.
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The dynamics aren't necessarily identical across the board.

For example, discount/premium coupons. These are usually intended to get buyers to choose your business over others for goods or services they regularly buy, which is why restaurants use them so frequently. By increasing your market share, you make up for the hit in volume and, hopefully, increased future traffic if people like what you're offering more than what your competition is offering.

Introductory discounts, such as those often offered by newspapers and magazines, as well as banks and gyms, are generally intended to lure folks who are either not currently using the service at all and need a little push to get them in the market, or who are dissatisfied with their current provider and are looking to switch. The goal is to develop mid- to long-term relationships.

But with cars and houses, you're talking about buying decisions that people make infrequently, and which are not much swayed by incentives, as far as whether or not they'll make the decision at all. In that case, you're essentially just swaying the timing of the decision. (The crazy mortgages of the '00s, of course, were an exception, since these were designed to bring people into the market who otherwise would not be in the market, because of course they should not be in the market.)

Add to that, the offer was independent of merchant.

So in the case of CfC, I think we have to view that as simply borrowing against the future.

Whether it was wise to move those decisions forward, and suffer the subsequent drop, is up for debate. The dealerships may have done just as well, or better, to suck it up, downsize (even more than they did) and keep the income curve flatter over time.
 
A few interesting evaluations of the stimulus, from research done for independent analysis of political ads:

Did the Stimulus Create Jobs?
Yes, the stimulus legislation increased employment

Pants on Fire: The stimulus bill "didn’t create one new job."

Barely True: In the 100 days since its passage, the economic stimulus has "saved or created nearly 150,000 jobs." (May '09)

Half True: "We've created or saved up to 1.6 million jobs, according to the CBO -- the Congressional Budget Office -- through the Recovery Act." (December '09)

Pants on Fire: Says a "Pro-Stimulus economist admits it is not working … "

And there are a few pertinent points in this article:
FactChecking ‘The Pledge’

# It declares that “the only parts of the economy expanding are government and our national debt.” Not true. So far this year government employment has declined slightly, while private sector employment has increased by 763,000 jobs.

# It says that “jobless claims continue to soar,” when in fact they are down eight percent from their worst levels.

# It repeats a bogus assertion that the Internal Revenue Service may need to expand by 16,500 positions, an inflated estimate based on false assumptions and guesswork.

# It claims the stimulus bill is costing $1 trillion, considerably more than the $814 billion, 10-year price tag currently estimated by nonpartisan congressional budget experts.
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Hi Piggy, in my post I deliberately choose to only look at the benefits of "borrowing against the future", certainly my own business sees the other uses of offering discounts and promotions, etc. But the aspect that I focused on was the simple fact that getting the money upfront means I have that money to spend today. Aside from other benefits this one certainly exists.

And being able to spend that money today can help my business tomorrow. Do you agree with that?
 
Roboramma said:
Hi Piggy, in my post I deliberately choose to only look at the benefits of "borrowing against the future", certainly my own business sees the other uses of offering discounts and promotions, etc. But the aspect that I focused on was the simple fact that getting the money upfront means I have that money to spend today. Aside from other benefits this one certainly exists.

And being able to spend that money today can help my business tomorrow. Do you agree with that?
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Oh, sure. But of course there's a curve and a sweet spot.

Yeah, you need capital, but you also need cash-flow, so it's a matter of figuring what the calculus is, so to speak, and balancing that against your current and projected needs.

In some cases, it makes good sense. In other cases, not so much.

Sounds like it has worked for you.

In our case, we would have been better off not to have fronted those revenue decisions.

And given where we are now, I'm wondering if the dealers are wishing they hadn't either.

Would be interesting to hear their opinions on the matter.
 
http://www.investors.com/NewsAndAna...o-Act-Citing-Deflation-But-Data-Disagree.aspx

Fed Poised To Act, Citing Deflation, But Data Disagree

… snip …

The core consumer price index, which excludes food and energy, shows that inflation has fallen to a five-decade nadir of 0.9%, undercutting the low of 1.1% touched in 2003, when the Fed was similarly on guard against deflation.

But strip out rent costs, which account for 40% of the core CPI (including rent forgone by homeowners), and underlying inflation is 2% — near the upper part of its range since the late 1990s.
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Wow. Recovery summer really worked. What's next? The high inflation we saw during Carter years? Many do say Obama is the new Carter. :D
 
http://finance.yahoo.com/news/Econo...3.html?x=0&sec=topStories&pos=2&asset=&ccode=

A panel of economists on Tuesday predicted several more years of pain for the United States, agreeing unemployment will remain high far longer than 2014, when White House and congressional economists have predicted a jobs improvement.
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These liberal *genius* economists are all stuck on stupid and think more money should be wasted on stimulus, but at least they are putting the lie to all the relatively rosy predictions still coming from a deluded Whitehouse. Read that article. They talk about unemployment heading higher. Since long term unemployment above 10% is sometimes used to define a depression, when should we expect them to start calling this Obama's Depression? :D
 
BeAChooser said:
Many do say Obama is the new Carter.
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Actually, I think GW Bush was the new Carter.

Both were very religious, extremely idealistic, remained social outsiders in DC, and inept at military intervention.

But that's for another thread.
 
You didn't follow the formula. It's

1) Irrelevant link to nowhere
www.irrelevantlinktonowhere.com

2) Quote with bolded portion that makes no sense:
Democrats introduced a bill that calls for kicking puppies and kittens, while GOP members reveal themselves as angels.
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3) Stupid comment, then big grin smilie:

Obviously Dems are evil wicked stupid big stupid heads cause they're stupid. :D
 
Piggy said:
Both were very religious
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Not necessarily bad. And by the way, Obama is certainly busy putting on a show of being religious right now.

Piggy said:
extremely idealistic
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I think it makes more sense to view Bush as embracing pragmatism. Consider, for example, his policy of preemption in the WOT. Clinton was also in many ways a pragmatist, which might be why the Bushes and Clintons seem to get along so well together. And both tried to compromise with the other other party. Clinton signed welfare reform and Bush gave even more billions to public schools.

Piggy said:
remained social outsiders in DC
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LOL! You really think that?

Piggy said:
and inept at military intervention.
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His "ineptness" led to victory in Iraq when the Carter currently in the Whitehouse had declared defeat and was already waving the white flag of surrender.

But like you say, perhaps that's for another thread. :D
 
BeAChooser said:
His "ineptness" led to victory in Iraq
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Only if you change the goal from "Find and destroy WMD" to "Convert a secular suni state into a shia state more aligned with shia-dominated Iran to create a new power dynamic in the Middle East and allow the next administration to withdraw".

If that were the mission, it has indeed been accomplished.
 
BeAChooser said:
You really think that?
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Absolutely. Unlike Reagan, Bush Sr., Clinton, and the Obamas, but like the Carters, the Dubyas didn't much mingle socially and tended to stay insulated within their own inner circle.
 
Piggy said:
Unlike Reagan, Bush Sr., Clinton, and the Obamas, but like the Carters, the Dubyas didn't much mingle socially and tended to stay insulated within their own inner circle.
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It's true that Bush Jr didn't have many parties under the desk in the Oval Office, as one of his predecessors did. :D

And he certainly hasn't come close to being the party animal that Obama turned out to be during his inauguration. Or done as much bowing. :D

Nor did he have the "Hollywood" experience of Reagan as a guide. Bless Ronald Reagan for getting out of that crowd. ;)

But the fact is that during Bush's 8 years in office, they hosted more than 1,500 Official White House Social Events. Surely that's enough … more than 1 every 2 days? As for being insular, his party for Pope Benedict XVI gathered the largest crowd on record at the White House and all the social events honoring US service men will surely be remembered by many of the few who really matter. :D

Now, let's get back to Obama's failed Stimulus.
 
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