In the Wall Street Journal this morning in mid-September 2009, John Taylor, a noted economist from Stanford has determined, in his wisdom, or that of Rupert Murdoch, or his lieutenants, or Roger Ailes or Sean Hannity or Ann Coulter…take your pick when you are dealing with Neocon propaganda…has said that the stimulus did not work. I don’t recall Taylor predicting the demise of the economy when it nearly demised. He is not noteworthy for sounding the alarm and offering a substantial solution to the roughly 3 million foreclosures before they foreclosed, nor does he offer one for the 3 million that are scheduled to foreclose this year. It is not that Dr. Taylor lack credibility. It is merely that his judgment is suspect. Economics is not an exact science. It may not be a science at all. It may turn out to be alchemy wedded to horse parlor betting.
For example, this economist, this “scientist” of the many factors involving the economy, says that government intervention in the financial collapse made it worse. He has commented that the visit of the Treasury Secretary and the Federal Reserve Chairman to Congress last fall to plead for financial assistance simply made things worse. Those who are not economic “scientists” might say that, Treasury Secretary Hank Paulson, who does in fact sometimes give the impression of an over-age frat boy, and Fed Chairman Bernanke, a person of a somewhat more subdued nature, were simply engaged in a prank. But they would have had little reason to show up and embarrass themselves before Congress. Especially Paulson’s going down on one knee, like Al Jolson singing “Swannee River,” to beg for the money. Remember that Republicans were not at all interested in bailing out the economy. Almost none of the Republican members of the House of Representatives voted for the government to help out Wall Street. So what was the evidence that things were failing? Was Taylor right in saying they should not have bailed out the banks?
Well, let’s see. There was a certain feeling among the roughly 500,000 people who were being laid off…each month…that the economy just wasn’t right. Not only that, the employees at the roughly 30 banks a month that were failing and the former employees of Lehman Brothers, a company that did fail…a company worth about $50 billion dollars..that’s billions, with a B…these employees were inclined to think that something less than satisfactory might be stirring in the economy. While Dr. Taylor mused, then wondered, then prepared to pontificate. While he was preparing his pontification, Congress… under Nancy Pelosi, evaluated the facts and decided that they would pony up half of the $700 billion Paulson said was needed. The other half would come after Congress evaluated the results of what could be done with the first half. And that’s how it went. No statistical models. Just action. It wasn’t pleasant. It was a bitter pill. Especially for Democrats. But it worked.
Now…Taylor…who just happens to have a book to promote on this subject, says that he has he revised his previous estimate. It just happens to take the same line as the Wall Street Journal…namely that anything that a Democratic Congress or President can or would do is suspect and probably corrupt, foolish, socialist and dumb He now accepts the fact that 3.5 million–or more–people thrown out of work in a 9 month period last year may be a problem, if not for the economy then certainly for the economies of those people. But now, he says, the government is interfering again, in apparent violation of his ideology, this fellow at the HOOVER Institute at Stanford. Bad government! Bad, bad government! Do not get involved in trying to put people back to work. Otherwise they will never exert their own energy to go out and get a minimum wage job and use it to create a large corporation and move all those jobs to China. Which Taylor and the Wall Street Journal think is just fine, thank you very much.
Taylor says that we tried a stimulus package last year and it didn’t work. That was when George W. Bush gave a tax rebate of something like $600 to everyone. That is a conservative approach, by the way. How many times have you heard the Neocons say that if we just give people back their own money instead of giving it to the government, they would be much better off? (It should be pointed out that these days they want to give Chinese money back to Americans. Because it is Chinese money we have used to pay for the tax cuts for the rich, since we were already in debt by $11 trillion dollars.)
So what did Republicans do about the stimulus? They simply pouted and stamped their feet (Exaggeration, you say? Have you seen the tea party people?) until they got tax cuts as part of the plan. So everyone got the $250 that they demanded. If John Taylor is dismayed at how the stimulus has worked thus far, then he is upset at his own Party’s version of a stimulus. If it didn’t work under Bush, as Taylor says, then why did they demand it again this year, as a condition of even participating in government? And why did Taylor, having agreed it did not work last time not insist that it not be a part of the Obama stimulus? Could he be partisan? Nah!
Any one who has not seen more workers out on the roads, with the self-promoting signs telling you that this particular job is part of the stimulus, must be staying in a lot. All the local communities and the interstates are barely passable for all the construction. So those people are working. And they are buying things, granted, that they are…because of free traders like Dr. Taylor…things probably made in China. But at least buying things and paying taxes.
When you have a negative growth rate of 9%, and then you have a serious upturn but it is still less than zero, it shows that, while there is improvement, the problem could be, yes, with the impact of the stimulus. But it could also be the result of the loss of 200,000 jobs still bleeding the economy each month. It may be that Dr. Bernanke, who is an expert on the Great Depression has a better idea of how long things will take. The Republican economists have a great record in taking us into Recessions. First Reagan, then the first Bush, then the second Bush. It should be noted that Dr. Cogan and Dr. Taylor were associated with those “trickle not-quite-down” theories that led us to $11 trillion in debt.
Dr. Taylor takes his statistical models and applies the current numbers. That is good if your model is correct. If, on the other hand, your model says two plus two is five, then no matter how many times you enter two, the model will always come out wrong. The fact is that “Cash for Clunkers” sold 500,000 cars when nothing was working. The Treasury has already earned billions on loans to financial institutions. Goldman, Sachs has recovered to the point that its bonuses to executives are so high that they are the subject of government investigation. The government’s 34% stake in CitiBank has skyrocketed as CitiBank has done well and the stock soared. State governments are gradually stabilizing and the school year got off to a good start everywhere despite the deep recession. All these things happened because the people in charge of the economic programs in this country are the best minds that could be found to work on these kinds of problems.
The part that Dr. Taylor clearly acknowledges did not work for certain was the Republican portion…the tax cuts. Taylor continues to maintain that the stimulus did very little and private investment made the recovery. Therefore, we should drop the stimulus as it is doing no good. Government is not working. Well, the fact is that there was no private investment until the government got involved. There has been very little of that stimulus spent or loaned out to business because most banks and non-bank investment groups have been holding on to their money and making recurring, safe investments to improve their own financial situations.
Furthermore, while the Republican portion of the bill, according to Dr. Taylor’s own analysis…i.e., the tax cuts…showed no visible effects, we do know that the job-creating portion of the stimulus is under way with over $91 billion in contracts let and most of those in the process of starting or having already started. The education segment was begun early because of the school year deadline and it is working. One executive in the education field has said some of the initiatives are the most imaginative and interesting he has ever seen. The idea of the stimulus is, as is said in virtually every speech, press announcement and on every comment on each of the related government web sites that this will show its effectiveness in 2010, not as early as mid-2009. We experienced the kind of job loss that hits a country hard. No matter how hard Dr. Taylor pushes his models, only humans will make things better.
The humans who call themselves Republicans got us into this mess. Perhaps Dr. Taylor should turn off his models and let them cool down while the humans who call themselves Democrats get to work on returning the economy to normal.