Calculated Risk:
Capacity utilization for total industry moved up 0.2 percentage point to 72.7 percent, a rate 7.9 percentage points below its average from 1972 to 2009.
Well, that's only 89.9% of the '72-'09 norm, then--or about 10% off.
Better, but sick.
Sounds like an excellent time to choke off funds to state governments, balance the federal budget and leave the private sector to fend for itself. Afterall, we have to worry about Moody's bond rating and that massive 3.73% interest rate on short-term treasuries.
ReplyDeleteThat outta get things moving.
A goodly chunk of this activity is still inventory replenishment.
ReplyDeleteGov't spending didn't help before and more gov't spending my great-grandkids money won't change that for the better.
Yes, a good chunk of that is an inventory bounce. Right on. No one disagrees. Now who do you think is going to maintain GDP growth once inventories are rebuilt in the next 6-12 months? The answer is no one if the deficit hawks get there way.
ReplyDelete"Gov't spending didn't help before...."
That's fundamentally wrong. Actually, there isn't any honest economist and/or politician that believes that statement to be the least bit true. There is a big difference between believing that government spending is crowding out private investment at present and believing that government spending is ineffective in boosting aggregate demand. The former is incorrect, the latter is nonsense spewed only for political purposes and based on no real economic data whatsoever.
If you're worried about your great grandkids, you should favor some form of health care and social security reform to bend the cost curve of both. Oh, that and short term government spending to boost aggregate demand while interest rates are low and as we remain in a liquidity trap.
I certainly am in favor of some health care and social security reform to bend the cost curve down. The bill being bastardized and rammed through the Congress is a FAIL of epic proportions on that front.
ReplyDeleteBut do tell, how was it exactly that increasing the welfare state again and giving money to the states to temporarily fill budget holes helped private industry? Oh yeah, it didn't. We filled a few pot holes - whoop-de-doo. And don't drag out the tired "but we saved police, fire and teachers". Yep, and you also saved all the inefficient paper pushers and bureaucrats. All that have to be funded by private sector jobs that have been becoming endangered species.
You wanted to do targeted job creation, how about opening up those lands again that were closed off by Salazar for oil and gas exploration and production. I mean, who needs those jobs or the inexpensive energy. Or how about instead of a loan guarantee for 1 stupid nuke plant (of a design that isn't approved yet and won't be for years btw) they actually funded the actual building of a couple of nuke plants? Even put in a "buy American" wherever possible (some components can't be made in the US at the moment because we have been killing off the industry). That would have that vaunted multiplier effect of creating lots of jobs for a long time. In fact, opening up those lands and funding 10 nuke plants would have cost less than $100B and would have created more jobs than the stupid Porkulus bill could ever dream of.
The only durable goods that the government buys are for the military. And you want to cut that budget I'm sure.
"The only durable goods that the government buys are for the military."
ReplyDeleteI'll just leave that one alone and let you ponder that thought for a little while longer.
"But do tell, how was it exactly that increasing the welfare state again and giving money to the states to temporarily fill budget holes helped private industry?"
The answer should be easy to figure out. But it's not because you aren't really thinking about it. Who do you think is the primary beneficiary of wages earned by a government worker that would otherwise be unemployed? That money doesn't disappear into thin air. Who do you think the government contracts to design, build, etc. ARRA projects? I do believe that these designers/contractors are paid and pay out the same green-colored money you have in your wallet.
Lastly, given the list of projects that you state, I can assume that you are in favor of another multi-billion dollar stimulus program targeting energy independence? So that must mean that you, in fact, agree with the effectiveness of government stimulus (larger stimulus actually considering that the ARRA spent less than $100 billion on infrastructure and you would spend at least that on nuclear energy development alone), but are just disappointed with the direction, speed and size of funds distributed?
If that's true. Hey! We agree. Welcome to the light.
P.S. you lost me on the nuke plant commentary rant though. So you don't like the fact that the Feds. provided a loan guarantee for 1 nuke plant but, instead, you want the Feds. to directly and spontaneously build dozens of multi-billion dollar nuke plants? So you don't like big gummint but it's cool if Uncle Sam builds, publically owns and operates a few dozen new nuke plants?
Yes - I believe that some government spending can be beneficial in times of recession as a stimulus. But it needs to be on "stuff" not paper-pushers. At least with "stuff" you have something tangible - a prize - at the end of the rainbow that employed people to make it. ie - infrastructure, which as you state was not so stimulated. Its not just the cost, but the opportunity cost.
ReplyDeleteHence my vehement disagreement with the Porkulus bill. Which looked more like welfare-state lefty wish-list that the Dems had been stuffing in a drawer for 30 years just waiting for this moment. The problem with keeping the paper pushers working, was that it was at the expense of private sector workers. See, if we were going to lose a few million jobs, it should have been the paper-pushers. By filling all the state budget gaps and boosting HHS, DoEd, State Dept, Interior, etc. budgets, it only accomplished making the permanent size of the government bigger and more expensive to continue to support.
The nuclear "rant" was just an example of that. How many jobs did the loan guarantee create? Zero. How many jobs would direct funding of a plant create? 3000-5000 construction jobs, a few thousand more jobs with the mini-city that supports those jobs (ie - waitresses, etc) and supply chain boost. The "prize" at the end? A creator of cheap, CO2-free (if you care about that) energy with another few hundred permanent jobs to keep it running.
So yeah, I'd have put $100B into real, base-load energy (on long-term loans to private utilities, not have Uncle Sam own/operate them), about the same amount into fixing all the bridges that need it, and told the States to tighten their belts for the rest of it.
A lot less money, a lot more jobs.
Would sure beat filling those potholes, huh?
You misinterpret the current situation in terms of state and local government expenditures. The data does not support your conclusion that Uncle Sam is handing out jobs to state employee "pencil pushers" all over the country. To the contrary, most states are in the process of slashing expenditures due to lack of tax revenues and federal support. Naturally, this offsets stimulative measures taken by the Federal government which is why we should be pumping money into state budgets on a temporary basis instead of promoting Hoover-style budget cuts into the teeth of a major recession:
ReplyDeletehttp://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=ASLEXPND&s[1][transformation]=ch1
Secondly, I think don't think you understand the composition of ARRA. Of the mere $108 billion spent in ARRA by Q3 of 2009, about half of that number went towards sunsetting unemployment & Medicare payments directly related to the fallout from the financial crisis. Not necessarily welfare....unemployment extensions for folks who can't find work for an extended period. The other half went primarily towards direct spending on things such as infrastructure:
http://www.cbo.gov/ftpdocs/107xx/doc10708/11-9-09MBR.pdf
In other words, we haven't spent enough on the latter but the former is a necessary evil considering the scope of this recession. Yet the ARRA still managed to add approx. 2.5% of GDP growth in Q3 and Q4 of 2009. Imagine what would happen if we actually spent money on, well, stimulating the economy.