Tag Archives: Stimulus

News

Japan in recession after following Paul Krugman’s Keynesnian advice

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Here’s the news story as reported by CBC:

Japan’s economy unexpectedly slipped back into recession as housing and business investment dropped following a sales tax hike, hobbling its ability to help drive the global recovery.

The world’s third-largest economy contracted at a 1.6 per cent annual pace in the July-September quarter, the government said Monday, confounding expectations that it would rebound after a big drop the quarter before.

The news cast a pall over financial markets: Japan’s share benchmark fell 3 per cent, and many others in Asia also declined. Shares were lower in early trading in Europe and Dow Jones and S&P futures were off 0.5 per cent, suggesting a dismal start for the week on Wall Street.

This Daily Signal article by respected economist Stephen Moore explains what led to this mess:

The tenets of Lord Keynes and his modern disciples have been put on trial in Japan, and the verdict is not a happy one. The rest of the world, not least of all the U.S., ignores these lessons at its own peril.

The engine of growth that created the Land of the Rising Sun economic miracle in the post-World War II era first began to falter in the early 1990s in large part because of a centrally planned industrial policy model.

The panicked response to the downturn was to flood the economy with a continuing series of Keynesian monetary and spending stimulus injections.

None of it has worked.

The collapse of Japan’s stock market tells the whole story. In December 1989, the Nikkei 225 index stood at a lofty 38,900. Today, almost a quarter-century later, the index stands at just under 16,000.

In 25 years Japan has experienced a nearly 3/5 liquidation of its financial wealth.

Japan has directed tens of billions of dollars into public works projects — “investments,” as President Obama calls them. This was paid for with debt. In the last two decades, Japan’s debt burden catapulted from 19% of GDP, among the lowest in the industrialized world, to over 142%, among the highest.

The government spending coincided with a monetary policy almost unprecedented in its looseness. From the late 1980s through 2000, the central bank’s balance sheet more than doubled — a precursor to the “quantitative easing” carried out by the U.S. Federal Reserve. And since 2000, the balance sheet has doubled once again.

Inflation rates in Japan are bearing down on 4% — a near-high among major competitors.

The result? The expected Keynesian “multiplier effect” from spending and a flood of yen into the market never arrived.

Housing starts in Japan are still lower than the level nearly 25 years ago. Unemployment, still low by international standards, is nearly twice the level of 1990, and wages have been flat.

Labor force participation continues to trend downward as well — falling by around 4 percentage points over the last two decades.

Yet, liberal economists have urged Japan to keep the stimulus coming. Last winter, the New York Times’ Paul Krugman exulted in Prime Minister Shinzo Abe’s expansionary fiscal and monetary policies.

“So, how is Abenomics working?” he wrote. “The overall verdict on Japan’s effort to turn its economy around is so far, so good. If Abenomics works, it will serve a dual purpose — giving Japan itself a much-needed boost and the rest of us an even more-needed antidote to policy lethargy.”

Japan, Krugman predicted, “may also end up showing the rest of us the way out” of stagnation.

Forbes magazine confirms leftist “economist” Paul Krugman’s detailed advice to Japan:

In the 1990s it was Krugman who most loudly championed Japan’s innumerable and reckless “stimulus” schemes, together with dozens of rounds of “quantitative easing” (fiat money printing). Japan followed his advice and ever since then has suffered a secular stagnation. Since 1990 Japan’s public debt has ballooned from 68% to 233% of GDP; its money supply is up 286%, while its industrial output is lower by 3.4% and its equity index is down by 73%. This is what Keynesians “stimulus” has done for Japan – and Krugman wants the same for the U.S.

Mr. Krugman repeatedly invokes the magic multiplier, the bogus claim that when we spend our own dollar we boost GDP by a dollar, but when the government takes it and spends it, GDP is boosted by $1.40. Wow. Fabulous. Government spending not only “pays for itself,” but more than pays for itself. On this view, were government to take everything we earned and spend it, the economy might well expand to the moon. Is it magic – or voodoo?

I notice that leftists at the BBC are calling the failure a “surprise“.

Where did Abenomics go wrong?

In the spring of 2013, Prime Minister Shinzo Abe launched an ambitious growth strategy that rapidly became known as Abenomics.

Its aim was to drag Japan’s economy out of 20 years of deflation and put it back on the road to growth. Billions of dollars were pumped into the economy through stimulus spending. The Bank of Japan went on an even bigger spree, printing hundreds of billions of dollars of new money and using it to buy government bonds.

And the leftist New York Times is calling it “unexpected“:

The surprise recession underscores the difficulties faced by Mr. Abe, who won power two years ago on a pledge to reinvigorate the economy and end his country’s long streak of wage and consumer-price declines. His agenda, dubbed Abenomics, has focused largely on stimulus measures, in particular an expanded program of asset purchases by the central bank. Yet its impact, economists say, has been dulled by the tax increase, which was approved under a previous government.

[…]Then, in early 2014, Mr Abe’s government took a calculated gamble. With the economy growing he could risk putting up taxes for the first time in nearly 20 years. Consumption (purchase) tax would rise from 5 to 8%. The tax rise was urgently needed to plug the giant hole in Japan’s public finances.

Why does anyone take economic advice from people on the left like Paul Krugman? Raising taxes, increasing debt and more government spending never helps the economy grow. Certainly not at the rate that pro-growth policies do.

We need to cut our corporate tax, which is the highest in the world. We need to cut spending and cut government duplication and waste. We need to privatize inefficient government programs. We need to reward work instead of dependency. We need to stop borrowing money and raising our national debt. We need to stop printing money, aka – quantitative easing. We need to raise interest rates and encourage saving instead of spending.

News

Nancy Pelosi’s brother-in-law gets $737M of taxpayers’ money to build solar plant

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From the UK Daily Mail.

Excerpt:

Nancy Pelosi is facing accusations of cronyism after a solar energy project, which her brother-in-law has a stake in, landed a $737 million loan guarantee from the Department of Energy, despite the growing Solyndra scandal.

The massive loan agreement is raising new concerns about the use of taxpayers’ money as vast sums are invested in technology similar to that of the doomed energy project.

The investment has intensified the debate over the effectiveness of solar energy as a major power source.

The SolarReserve project is backed by an energy investment fund where the Minority Leader’s brother-in-law Ronald Pelosi is second in command.

PCG Clean Energy & Technology Fund (East) LLC is listed as one of the investors in the project that has been given the staggering loan, which even dwarfs that given to failed company Solyndra.

Other investors include one of the major investors in Solyndra, which is run by one of the directors of Solyndra.

Steve Mitchell, who served on the board of directors at the bankrupt energy company, is also managing director of Argonaut Private Equity, which has invested in the latest project.

Since Solyndra has filed for bankruptcy has been asked to testify about the goings on at the firm by two members of the House and ‘asked to provide documents to Congress’.

[…]The project approval came as part of $1 billion in new loans to green energy companies yesterday.

Did they learn anything from Solyndra? No:

‘The administration’s flagship project Solyndra is bankrupt and being investigated by the FBI, the promised jobs never materialised, and now the Department of Energy is preparing to rush out nearly $5 billion in loans in the final 48 hours before stimulus funds expire — that’s nearly $105 million every hour that must be finalised until the deadline,’ said Florida representative Cliff Stearns, who is chairman of the investigations subcommittee of the House Committee on Energy and Commerce.

Since Nancy Pelosi took over federal spending in January 2007, the national debt has increased from $8.5 trillion to about $17.5 trillion. That’s NINE TRILLION dollars in new spending. And much of it just handed off to the people and groups who got the Democrats elected 2008 and 2012.

News

New study: the effects of declining marriage rates and lower salaries for men

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First, let’s remember that Obama’s massive trillion dollar stimulus program was designed to help women, not men, even though men had a higher unemployment rate than women when it was enacted.

Christina Hoff Sommers explained it in the Weekly Standard.

Excerpt:

A “man-cession.” That’s what some economists are starting to call it. Of the 5.7 million jobs Americans lost between December 2007 and May 2009, nearly 80 percent had been held by men. Mark Perry, an economist at the University of Michigan, characterizes the recession as a “downturn” for women but a “catastrophe” for men.

Men are bearing the brunt of the current economic crisis because they predominate in manufacturing and construction, the hardest-hit sectors, which have lost more than 3 million jobs since December 2007. Women, by contrast, are a majority in recession-resistant fields such as education and health care, which gained 588,000 jobs during the same period. Rescuing hundreds of thousands of unemployed crane operators, welders, production line managers, and machine setters was never going to be easy. But the concerted opposition of several powerful women’s groups has made it all but impossible. Consider what just happened with the $787 billion American Recovery and Reinvestment Act of 2009.

[…]The National Organization for Women (NOW), the Feminist Majority, the Institute for Women’s Policy Research, and the National Women’s Law Center soon joined the battle against the supposedly sexist bailout of men’s jobs. At the suggestion of a staffer to Speaker of the House Nancy Pelosi, NOW president Kim Gandy canvassed for a female equivalent of the “testosterone-laden ‘shovel-ready’ ” terminology. (“Apron-ready” was broached but rejected.) Christina Romer, the highly regarded economist President Obama chose to chair his Council of Economic Advisers, would later say of her entrance on the political stage, “The very first email I got . . . was from a women’s group saying ‘We don’t want this stimulus package to just create jobs for burly men.’ ”

[…]Our incoming president did what many sensible men do when confronted by a chorus of female complaint: He changed his plan. He added health, education, and other human infrastructure components to the proposal. And he tasked Christina Romer and Jared Bernstein, Joseph Biden’s chief economist, with preparing an extraordinary report that calculated not only the number of jobs the plan would likely create, but the gender composition of the various employment sectors and the division of largess between women and men.

Romer and Bernstein delivered “The Job Impact of the American Recovery and Reinvestment Plan” on January 10. They estimated that “the total number of created jobs likely to go to women is roughly 42 percent.” Lest anyone miss the point, they added that since women had held only 20 percent of the jobs lost in the recession, the stimulus package now “skews job creation somewhat towards women.”

But in the lower quintiles, women can do a lot better for themselves and their children by getting married before having children. The second income makes a big difference. But what if men’s incomes go down, and their unemployment rate goes up?

The left-leaning Atlantic explains how it works.

Excerpt:

The good news, trumpeted in Women’s Work,the latest report from the Pew Economic Mobility Project, is that dramatic increases in women’s labor-force participation have boosted the “financial security and mobility” of millions of families across America since 1970. The bad news is that growing economic opportunities for women have not translated into more family income for poor and working-class families at the lower end of the income ladder.

[…]What accounts for the paradox that women’s income is rising across the board yet family income is falling for the bottom 40 percent of families? Mainly, to paraphrase [feminist] Hanna Rosin, the end of marriage and men in working-class and poor communities across the nation, coupled with the fact that maternal labor-force participation has plateaued since the 1990s. That is, a dramatic retreat from marriage, declines in men’s employment and income, and a leveling off of maternal labor-force participation have all combined to limit the income available to lower-income families, and to offset the increases in women’s income documented in this new report.

[…]One reason that lower-income families are losing economic ground is that gains in women’s income have been offset by declines in marriage among the poor and working class. As the figure below indicates, more than half of these families are headed by just one parent—typically a single mother. Lacking the income of two parents, or the income of a father, these single-parent families are much less likely to reap the benefits of increases in income that have accrued to today’s working women.

[…]Another major factor holding back families financially in the bottom 40 percent are declines in men’s income. Consistent with Rosin’s thesis, which argues that many men in the United States are seeing their economic fortunes erode, the graph below indicates that men’s personal income has fallen across most groups, but particularly among working-class and poor men. So, one more reason that family income has declined for poor and working-class families is that husbands and boyfriends have less dough to put on the table than they once did. This is particularly important because, even today, as the Pew report notes, men’s wage rates in couple-headed families are almost “twice as important as those of their female partners for boosting family income.”

So if you want to help poor women, here are two things that you should do. First, you should help men get better educations so they can get good-paying jobs, even at the low end of the job market. Second, we should be encouraging women to marry in order to get that second income (or only income, if it’s high enough) in order to help make ends meet. Unfortunately, the Democrats are opposed to both.