Brooks: The Causes of Obama Economic Failure

[Kathianne]

Germany followed the traditional US approach to recessions, while the US went all Euro:

http://www.nytimes.com/2010/08/27/opinion/27brooks.html?_r=1


August 26, 2010
The Parent Model
By DAVID BROOKS
During the first half of this year, German and American political leaders engaged in an epic debate. American leaders argued that the economic crisis was so bad, governments should borrow billions to stimulate growth. German leaders argued that a little short-term stimulus was sensible, but anything more was near-sighted. What was needed was not more debt, but measures to balance budgets and restore confidence.

The debate got pointed. American economists accused German policy makers of risking a long depression. The German finance minister, Wolfgang Schäuble, countered, “Governments should not become addicted to borrowing as a quick fix to stimulate demand.”

The two countries followed different policy paths. According to Gary Becker of the University of Chicago, the Americans borrowed an amount equal to 6 percent of G.D.P. in an attempt to stimulate growth. The Germans spent about 1.5 percent of G.D.P. on their stimulus.

This divergence created a natural experiment. Who was right?

The early returns suggest the Germans were. The American stimulus package was supposed to create a “summer of recovery,” according to Obama administration officials. Job growth was supposed to be surging at up to 500,000 a month. Instead, the U.S. economy is scuffling along.

The German economy, on the other hand, is growing at a sizzling (and obviously unsustainable) 9 percent annual rate. Unemployment in Germany has come down to pre-crisis levels...

[Modus Ponens]

Germany followed the traditional US approach to recessions, while the US went all Euro:

Brooks should know better than to put up this kind of facile analysis. The EU has for the last decade done better than the U.S. in productivity; this is at least in part because they have long had a higher unemployment rate, and more output per hour is being squeezed from workers. Germany, like the rest of Europe, also has (by U.S. standards) a very generous saftey net. SO: they don't have any labor slack to cut AND the unemployed are already being well taken-care of. Result: they didn't need a big stimulus (let alone the bailout packages), and could wait for the next turn of the economic cycle.

The U.S. economy has two big problems right now. First, demand is depressed because U.S. consumers, with the complicity of the U.S. financial system, lived beyond their means for most of the Aughts. Consumers are now digging out from under a mountain of debt. Until they get out, they won't do much consuming, which is key for the health of the economy.

Then to the supply side: the U.S. economy has failed to innovate in the last ten years. As we shed manufacturing jobs, innovation is crucial to the creation of new sectors of the economy. But it hasn't happened (the Bush tax cuts notwithstanding). All the innovation we've experienced has come from the export of white-collar work and, *ahem* innovations in finance.

Nowadays I am really beginning to see the Bush years as pivotal in the history of our Republic. There were decisions to be made at that time which were crucial for the long-term competitiveness and prosperity of the country; we failed to meet the challenges; and now we clearly on a declining path.

[Kathianne]

You have some links regarding US and 'most' Euro unemployment rates over the past decade?


Brooks should know better than to put up this kind of facile analysis. The EU has for the last decade done better than the U.S. in productivity; this is at least in part because they have long had a higher unemployment rate, and more output per hour is being squeezed from workers. ed. Never mind that last redundant point. Productivity we all understand as defined.Germany, like the rest of Europe, also has (by U.S. standards) a very generous saftey net. SO: they don't have any labor slack to cut AND the unemployed are already being well taken-care of. Result: they didn't need a big stimulus (let alone the bailout packages), and could wait for the next turn of the economic cycle.

The U.S. economy has two big problems right now. First, demand is depressed because U.S. consumers, with the complicity of the U.S. financial system, lived beyond their means for most of the Aughts. Consumers are now digging out from under a mountain of debt. Until they get out, they won't do much consuming, which is key for the health of the economy.Since 1950's when have Americans lived 'within their means'?

Then to the supply side: the U.S. economy has failed to innovate in the last ten years. As we shed manufacturing jobs, innovation is crucial to the creation of new sectors of the economy. But it hasn't happened (the Bush tax cuts notwithstanding). All the innovation we've experienced has come from the export of white-collar work and, *ahem* innovations in finance. Why do you think so many jobs have moved overseas? Why do you think companies have decided against innovations?

Nowadays I am really beginning to see the Bush years as pivotal in the history of our Republic. There were decisions to be made at that time which were crucial for the long-term competitiveness and prosperity of the country; we failed to meet the challenges; and now we clearly on a declining path.

The problems didn't originate with Bush, indeed he promised little change other than domestic expansion plans, in 2000. Obama now, he promised change, from a post-racial, post-partisan moderate viewpoint. Little of that observable in his 1.5+ years.

[Modus Ponens]

Why do you think so many jobs have moved overseas?

The shift of American jobs overseas has been going on probably since the 70's. There are various reasons for this. Cheaper labor costs, fewer or nonexistent environmental and safety regulations in foreign countries, as well as lower or nonexistent benefits for workers (like health benefits, pensions). Add in falling communication and transportation costs, and more generally the spur of increased international competition, and the benefits of outsourcing (and the punishments for failing to) become too strong for businesses to ignore. Oh, that and $$$$$... (of course)


Why do you think companies have decided against innovations?

Investment in innovation is risky. CEOs in recent times get rewarded for the latest quarterly stock performance; and in the last decade accounting trickery and new exotic financial instruments have led to the generation of huge sums in the U.S. service sector. If real R&D is hard, but cooking the books relatively easy, what do you think is likely to happen?


The problems didn't originate with Bush, indeed he promised little change other than domestic expansion plans, in 2000.

I didn't say that they did start with Bush. But he turned our disadvantageous financial position in 2000, to one that has now become insuperably difficult to overcome. Under Bush we doubled the national debt, and we didn't spend that money on any kind of investment goods. We gave ourselves a new entitlement, but did not raise taxes to pay for it. Hell, we fought not one, but two wars of imperial management, and didn't pay for those, either. I really don't have to get into this. History will record what a disaster his administration was for the country, how we were digging out from it for a generation.


Obama now, he promised change,

Most of his plans were swamped by the crisis. He has done what he could to repair our image abroad; he is in the process of closing down these two imperialist boondoggles in the Middle East. In the midst of a severe economic downturn, he did manage to pass a wide-ranging new heath care entitlment. I don't know about you, but all this is for sure change I can believe in. One thing he hasn't done yet is raise taxes on the rich. That's one promised change that's overdue.


from a post-racial, post-partisan moderate viewpoint. Little of that observable in his 1.5+ years.

We all know that it is Obama's enemies who are obsessed with race, not him. And the record shows that Obama made many good-faith efforts to partner with Republicans on major legislation. For his outstretched hand, he got nothing but a clenched fist. If you ask me, it's time for him to say to hell with bi-partisanship.

[Missileman]

Most of his plans were swamped by the crisis. He has done what he could to repair our image abroad; he is in the process of closing down these two imperialist boondoggles in the Middle East. In the midst of a severe economic downturn, he did manage to pass a wide-ranging new heath care entitlment. I don't know about you, but all this is for sure change I can believe in. One thing he hasn't done yet is raise taxes on the rich. That's one promised change that's overdue.

If fantasy were cash, you could buy a galaxy. Explain how imperialism involves making a place better than you found it and then getting the hell out. Healthcare reform is doing as much to kill our economy as Barney Frank's loaning strategies. It's a bullshit excuse to let DC get its hands on more money that they think they know how to spend better than those who earn it. As for taxing the rich...just how much of their money should be forfeit to the government in your opinion?




We all know that it is Obama's enemies who are obsessed with race, not him. And the record shows that Obama made many good-faith efforts to partner with Republicans on major legislation. For his outstretched hand, he got nothing but a clenched fist. If you ask me, it's time for him to say to hell with bi-partisanship.

Here ya go...C-L-U

Buy a vowel and get a clue! The only thing he's offered Republicans is an opportunity to sign on to his policies.

[Modus Ponens]

If fantasy were cash, you could buy a galaxy. Explain how imperialism involves making a place better than you found it and then getting the hell out.

Typical American arrogance. We perpetrate an illegal invasion (in Iraq), instigate near civil-war that leaves tens of thousands dead, and you think we've made the place better? You know, that's great you think that. Good thing for you, you don't live under a military occupation. If you did, you might look at the world differently.


Healthcare reform is doing as much to kill our economy as Barney Frank's loaning strategies. It's a bullshit excuse to let DC get its hands on more money that they think they know how to spend better than those who earn it.

Do you think in thirty years' time, historians are going to be blaming the whole crisis on Barney Frank? You have no solutions to offer, just sloganeering. Just like the lot of the Republicans. Looks like this fall the American people, like an abused wife, are going to go back to them one more time, hoping that maybe this time they'll get competent government instead of cynical rule.


As for taxing the rich...just how much of their money should be forfeit to the government in your opinion?

First of all, it's not "their" money. Taxes are the return that an individual pays on the investment that the surrounding society has made in them. NOBODY makes their money "all on their own." That's a myth. The more money one earns, the more one has benefited from life in the society, and the more they owe back to it for the support of the general welfare. Simple. As for the rate, I'd top the rate off at about 55%. If the rich want to squeal about it, they can always renounce their citizenship and leave. I'll sure as hell call their bluff on that.

[Missileman]

Typical American arrogance. We perpetrate an illegal invasion (in Iraq), instigate near civil-war that leaves tens of thousands dead, and you think we've made the place better? You know, that's great you think that. Good thing for you, you don't live under a military occupation. If you did, you might look at the world differently.

Even if your point were accurate, which it's not, it doesn't alter the fact that your accusation of "imperialism" is hyperbolic bullshit.

Just to be clear...you really believe that the Iraqi people were better off when Hussein was in charge?




Do you think in thirty years' time, historians are going to be blaming the whole crisis on Barney Frank?

I guess it will depend on who writes the history. I suppose you're of the opinion that the entire housing collapse, which was the catalyst for our current economic woes, was entirely the doing of GW.



You have no solutions to offer, just sloganeering.

Are you a psychic? Since the subject of solutions hasn't been brought up, how would you know whether I have solutions to offer or not?



First of all, it's not "their" money. Taxes are the return that an individual pays on the investment that the surrounding society has made in them. NOBODY makes their money "all on their own." That's a myth. The more money one earns, the more one has benefited from life in the society, and the more they owe back to it for the support of the general welfare. Simple. As for the rate, I'd top the rate off at about 55%. If the rich want to squeal about it, they can always renounce their citizenship and leave. I'll sure as hell call their bluff on that.

Well hey comrade...if your too fuckin lazy or stupid to accumulate your own money, why don't YOU renounce YOUR citizenship and move to Cuba, where YOU can benefit equally with the rest of the peons.