Dear Dean Baker,

Well Done!!

What do these reports have in common? They provide powerful evidence that the federal government is not doing enough to help the "real" economy. As Sam Gompers famously responded when asked what workers wanted--"More!"—our nation's state and local governments, households, workers, and poor need more help, now. We have tried the Reagan/Paulson/Rubin/Geithner "trickle down" approach of targeting relief to Wall Street, but the only thing trickling down is misery. The only way to stop the downward spiral is to substitute trickle-up policy—and even if nothing trickles-up, at least we will have helped those most in need.

I have already outlined a comprehensive recovery package so will here simply summarize four policies that would bring immediate relief.

Read more here:
http://neweconomicperspectives.blogspot.com/2009/07/carnage-continues-time-to-ramp-up.html

As you said "It is tragic that tens of millions of people around the world are sitting unemployed because of such poor thinking by those in positions of responsibility."

We need jobs to reduce poverty: Last week Pavlina Tcherneva provided an excellent argument for direct job creation by the federal government. We have already lost 6 million jobs, and Tcherneva notes that unemployed plus discouraged workers total about twice that number. However, a plausible case can be made that we are short more than 20 million jobs.

Read more here:
http://neweconomicperspectives.blogspot.com/2009/07/bring-stubborn-unemployment-numbers.html

I don't know Dean. This might mean diverting some of the trillions going to Goldman Sachs.

A month ago the inflation and deficit hawks used their loudspeakers in MSM to create drive the long-term bond up to near 4%, still near the historic low. Since that time as deflation slowly places its death grip on the economy that rate has fallen back to 3.4 %, 60 basis points. If there was a capital shortage, the bond price would have gone in the other direction.

Dean,

Great post.

Great post, and very good comments by Economist and Rickster. ECONOMIST, thanks for the links!

Dear EconDumbo,

I am glad you enjoyed!!

We just updated the blog:

http://www.neweconomicperspectives.blogspot.com/

If only the private sector did their fair share and if finance would stop draining people with 20 to 30 percent interesrt rates on credit cards along with a timid effort to reduce forclosures. The private sector needs to investy in the U.S. if it wants a country down the road.

As you said "It is tragic that tens of millions of people around the world are sitting unemployed because of such poor thinking by those in positions of responsibility." I think there is necessary to improve employment policy.Enterprise should try to provide more employment opportunities,especially to the graduates. This will allow more people to inspire confidence and morale. It is so important.

Craig: AGREED! Goldman Sachs could fall under Trust Busting Act should they ever be prosecuted, doubtful. Printing more dollars IS the answer to recapitalize the government. Dollar shortage among the general population IS the problem.

the public took on an unsustainable debt load that led to a crisis so let's just do the same for the government!

woohoo!

high inflation and a currency crisis will solve our problems.

paper money is our savior!

>: IF our currency were backed by GOLD or silver then I would heartly agree, BUT its not.

Dean,

Your number of housing wealth NOT consistent w/ Business Week's James Cooper Business Outlook section (6/29).

Of course, he could be wrong.

He said since 2007, wealth looses for consumers totaled $13.9 trillion. And only $3.9 of that comes from lost housing wealth.

Which is right? $8 trillion?

Thanks.

Post Political reporters routinely quip that when they were hired, they were told there would be no math. What a shame for David Ignatius and the rest that reporting on the Social security and other economic news requires a basic understanding of arithmetic.

There very well may be a demand shortfall but this post does nothing to demonstrate it.

This post assumes that the only tool the government is using to manage aggregate demand is fiscal policy.

In fact, as has been the case with every recession since WWII, monetary policy is the primary tool used to manage aggregate demand. Fiscal policy is being used to at the margins.

Dr. Baker may believe that we are in a liquidity trap or that monetary policy is not making a difference for other reasons.

However, to write a post on the government's efforts to increase demand and not even mention monetary policy is exactly the sort of simplistic analysis he constantly attacks others for doing.

dk,

the federal funds rate is zero, that should be pretty good prima facie evidence of a liquidity trip.

Must be missing something here. Let's say we accept the math and throw down 1.3T in stimulus. But recoveries almost always take years, so that begs the question -- what about next year? Do we just going to keep pumping out stimulus money until the economy hits the level it was at?

And what was it about that level of activity that made it "more correct" than any other? Everyone agrees that it was an unsustainable bubble, so if we get back there won't we just be in another bubble?

How about if we immediately directed all remaining TARP money into the hands of consumers, and another $1 trillion from the Fed into the hands of consumers?

Capital would start crawling out of the woodwork to create products for that new consumption power, and would start re-hiring the millions of workers needed to produce the goods to fill the new-found consumer demand.

Economic Populist Forum

the public took on an unsustainable debt load that led to a crisis so let's just do the same for the government!

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