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home : opinions : columns September 30, 2014

12/27/2011 9:58:00 PM
Column: Do what's proven to work with economy
The CBO report linked here says between 1.6 and 4.6 million jobs were created by the stimulus.

The articles linked here and here and here list many economists favoring stimulus first, including those from JPMorgan Chase and Goldman Sachs, and Martin Feldstein. Bill Gross, a prominent Republican and founder of the world's largest bond fund says we need "to create a demand for labor. The private sector is not going to do it." "Putting a shovel in the hands of somebody can be productive." "An anti-Keynesian, budget-balancing immediacy imparts a constrictive noose around whatever demand remains alive and kicking." "Washington hassles over debt ceilings instead of job creation in the mistaken belief that a balanced budget will produce a balanced economy. It will not."

The Wall Street Journal survey is covered here.

The IMF report is covered here and here and here.

Coverage of Ben Bernanke's progressively more direct statements is here.

(A collection of the best of my columns from 2001 to 2006 is available. Search Amazon for my name.)

Tom Cantlon
Courier Columnist

Steer into the slide. When driving on a patch of ice and the road curves right but your car wants to slide left, you steer gently left. The gut instinct of anyone who didn't grow up with this is to turn harder right because that's where you want to go. Successful winter drivers, though, understand you have to do something counter-intuitive first. You have to steer what seems like the wrong direction. Not permanently, just long enough to regain control.

Economically we need to do something counter-intuitive. Stimulus. Especially direct stimulus, for instance creating jobs for people by doing infrastructure work, which is needed anyway. The Congressional Budget Office says so in its report showing that the previous stimulus, while hardly enough to reverse the recession, did a lot to soften it. About 3 million jobs. Those are real people who have jobs, who keep their homes, who buy things that keep your family in their jobs. The congressional leaders who claim it didn't work should go door-to-door to each of those homes and try to explain how the stimulus actually failed them. They would gain a different perspective before long.

Many economists say we need stimulus; quite a few Republican economists are on the list and many major bank and investment firm managers. In a survey of economists by the Wall Street Journal, a large majority chose lack of demand over any other reason for a lack of hiring. The International Monetary Fund says stimulus is needed. The IMF for Pete's sake. The IMF is the ultimate promoter of austerity. For decades it has been primarily known for loaning money to countries in trouble only on condition that they first pass extreme austerity measures. That same IMF says austerity, here or in Europe, will only make things worse. That both will be better able to catch up on debt later if they stimulate and grow a stronger economy first. They specifically point to the administration's proposed jobs plan as the kind of thing that's needed. Finally Ben Bernanke has been doing all the indirect stimulating through the Federal Reserve he can, and has been relentlessly prodding Washington to match that with direct stimulation.

It is by no means a permanent solution. First, we stimulate, then we can get the deficit down to a manageable level as we did during Clinton's time, and get our debt down to a manageable ratio as we could have during much of Bush's time. But then there is much else to do to refocus what our economy produces so most of our people can thrive in a changed world.

Do we want our kids to have our debt, or our continued high unemployment? No. That is why we need to get control of the economy, grow out of our problems, and set them on a path to still better growth. They are the working people of the very near future. We need to give them an economy that's working. If you're in debt and slipping more, you can try to cut back, but if you just don't have the income you're only slowing the inevitable. The better option is to go get a different job, which might take spending on education or on moving. A job that can handle the debt. Then you can have a realistic plan that actually deals with it. That's what we need to do as a nation.

My condolences to the purists who would like to have a small set of answers that give perfect results in all circumstances. It would be nice if things worked so cleanly but someone forgot to inform reality. We are stuck with having to deal with a more complicated world.

To steer the car, turn the wheel in the direction you want to go. Yes. Almost always. If you want to drive your car that way the next time you're sliding, that's your business. But this is the big bus that we are all on. These are real people who need to survive the recession, and who want a shot at jobs in an economy that works. How to steer when you're in a slide is not a mystery or something new. It's well known by most of the expert drivers on the bus and they're shouting it from their seats, from both the right and left sides of the aisle. When the big bus is in a slide, gut instincts be darned. Do what is known to work. Steer into the slide.

Tom Cantlon is a longtime local resident, business owner and writer. Contact him at TomCantlon@TomCantlon.com.

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Reader Comments

Posted: Friday, January 06, 2012
Article comment by: Hokas Pokas

@ @ Hokas:

Yes, blame Bush. Great.

You nailed the issue here when you state: "Now, if the issue is a finite supply of resources and competition, driving prices, . . ."

Today, we have government imposed artificial restraints placed on resources and competition. This is not limited to the U.S. government either. That is the problem.

Posted: Sunday, January 01, 2012
Article comment by: Perspective !

The World Economy is fixable by: Loan Forgiveness by IMF, individual and cooperative ownership of farms, public ownership of natural resource.

Posted: Sunday, January 01, 2012
Article comment by: Attentive Listener

Jasmine, if you have a credible source, provide it. Otherwise, you are asking us to believe something just because it is written down.

Posted: Friday, December 30, 2011
Article comment by: Jasmine Tea

Just because some information comes from something other than your favorite source does not mean it is not true.This is not the only place I have heard this news.

Maybe you should watch something other than the mainstream media that is trying to protect the current regime.

Posted: Friday, December 30, 2011
Article comment by: Kathy Svendsen

Jasmine, Americans for Prosperity (AFP), the website you took your information from, "is a Washington, D.C.–based political advocacy group. According to their literature, they promote economic policy that supports business, and restrains regulation by government. AFP was a major supporter of Republican candidates in the 2010 election cycle and is heavily involved in political activities aimed at reducing regulation of the oil and gas industry."

That is a direct quote and supports my premise that Republicans have only 2 agendas: deregulation and tax breaks for the wealthy

Posted: Friday, December 30, 2011
Article comment by: Jasmine Tea

Solyndra was not a " fluke".The latest is Bleacon for $43 million
Ngp for $79 million
Finlands (Fisker) $529 million
Ener 1 $55 million
Severstal $730 million

All of these have failed, failing and or under investigation... You can probably find that a good percentage of those taxpayer dollars went to Obama, Unions, DNC, George Soros or some other Democrat supporter.

This and the Global Warming Scam are just another fear based political scheme to seperate the taxpayer from their money to propogate the liberal agenda.


Posted: Friday, December 30, 2011
Article comment by: @ You Can't Make This Stuff Up

I'll ignore the idiot jab...

My position is:
a) very few economists, let alone our leaders, understand modern monetary systems. It's not a matter of intelligence. I think it's a matter of questioning ingrained flawed economic theory. The gold standard ended in 1971. We have to stop thinking like we are still on it.
b) money doesn't grow on trees, it is created out of 1s and 0s in computers. We and just a few other countries in the world control our own currency and the relative value floats on the world fx markets. We also have the enviable position of issuing the world's reserve currency. Extra benefits, extra responsibility. Huge problems come from countries' spending money they don't have if they do not control their own currency... this is precisely the problem with Greece, et al and the Euro. I'll bet you're smart enough to understand this if you do a little research - pragcap.com -

Posted: Friday, December 30, 2011
Article comment by: Reality always trumps ideology

Kathy: I worked in the solar industry for many years and consider myself a strong supporter. However, the idea wind and solar will eventually meet all the country's energy needs is not realistic. I'm sure you mean well, I would suggest enough research to really understand the challenge. The hard core environmentalist's position that we should not pursue coal, gas, oil, hydro-electric or nuclear all for various reasons I won't repeat here, is simply foolish. They should be ignored as crackpots, because that's what they are.

Posted: Friday, December 30, 2011
Article comment by: Kathy Svendsen

Jasmine, solar and wind power are being promoted, even in Yavapai County, and will one day make energy clean and inexpensive, if we're smart. Oil wells dry up every day, and when they all become inefficient, the results will be catastrophic for those who didn't see it coming. Coal has claimed many lives to disease and accidents. No one is advocating abandoning oil and coal until something else is in place. After all, practically all our engines are designed to accept only those products. Solyndra was a fluke which many of you are riding like a bronco to discourage investments in green energy.

Posted: Friday, December 30, 2011
Article comment by: You can't make this stuff up

MMT Mentor: So your postioin is
a.) only you and Tom have the real inetelligence to understand all this financial stuff, and,
b.) there is never a problem with a country spending money it does not have because, hey, we can just print more. For you, money does, in fact, grow on trees.

Yeah, you're really smart. I don't agree with Tom but I will say this, he doesn't come off as an idiot.

Posted: Friday, December 30, 2011
Article comment by: Pragma Tist

Solution for the near and long term:
Legalize marijuana. Regulate and tax the hell out of it.
The wealthy and the poor would stay the way they are (respectively).
All of the unemployed who want a job would get one.
The national debt would be eliminated in less than five years.
The number of people using marijuana recreationally would not change. The government would simply be cashing in on an industry that has existed for decades.
"If ya can't beat 'em, join 'em." (If you want to live)

Posted: Friday, December 30, 2011
Article comment by: @ MMT or Inflation

You're right. Simple money printing will not create jobs or get the economy moving. And if the massive liqudity already out there is not pulled back quickly after things get going, inflation becomes a big risk. The solution lies in fiscal and tax policy. We need long-term rational reform there. MMT recognizes these things. However, stimulus in the form of infrastructure projects does make sense in the current situation. Others also argue the government just needs to "get out of the way" so job creators can bring the economy back. Well, demand is the key and that takes jobs. Wouldn't it make sense to spend money on roads, highways, bridges and tunnels and put people to work? The private sector will not build these projects unless there is a profit motive. So what kind of country do you envision? I am not a fan of concessioned toll roads, bridges, etc.

Posted: Friday, December 30, 2011
Article comment by: Jasmine Tea

The facts are that government has done more to harm the overall economy than private industry. This began with the creation of the Federal Reserve, and was furthered by the elimination of the Gold Standard.

Moving on to the nineties it was the Clinton administration who started the ball rolling downhill with the Fair Housing scheme. While I do not agree with a lot of what GW Bush did… he tried three times to get Congress to reign in Fannie & Freddie only to have YOUR GOVERNMENT REGULATOR “ Barney Frank “adamantly stated “that there was no need for concern, Fannie & Freddie were doing just fine.

The politicians knew all of this was coming, however they chose to conceal it in order to protect themselves and then throw gasoline on the ensuing fire that erupted to further their political agenda and enrich themselves i.e. Rahm Emmanuel: “Never let a good crisis go to waste”

Did you ever notice how many career politicians go to Washington on a $ 175,000.00 per year salary and retire as millionaires? So, if you still believe that government regulation / crony capitalism/ artificial economic stimulus is the answer … I believe you choose also to cling to a failed ideology.

As regards my suggestions on helping the economy If people like you who blind your eyes to the example of ”Green Energy” stimulus fraud of SOLYNDRA yet cling to the backwards ideology of getting rid of the use of Fossil Fuels, especially before we have in place a viable alternative in place.

Try this experiment go and have your electricity disconnected, sell your car(s) and start down the road of not having any convenience associated with Fossil Fuels or Nuclear energy. I bet you could not make two days before you realized the folly of your ideology that left unchecked … would have us all riding horses, bicycles and sitting around a campfire for light and warmth.

Posted: Friday, December 30, 2011
Article comment by: MMT Or Inflation

Soooo MMT,

The government prints money and everything will be okay. If the private sector does not trust the governments policies, then all the money printed in the world will not create lasting jobs and real productivity. If the government increases the supply of money not backed by productivity (defined as the production of goods and services), then inflation will ensue. Inflation takes money out of the private sector, just as taxes and government regulation, reducing productivity.

When government spends money, THEY define who wins and who loses. Recently the choices made have failed miserably.

Inflation may well be the end game to bring our debt in line with productivity. The wealthy will be okay as they will be positioned in commodities that weather inflation. The poor will still be poor and dependent on the government, as it spreads printed money around. The middle class will descend to a lower class and the elderly who put money away for retirement will find their savings worthless for buying everyday goods.

The common folk may not understand the nuances of different economic theories, but they do know you can not create wealth or productivity without real work and sweat. I for one think the private sector can bring us out of our present situation, but only if the government gets out of the way.

Obama needs increased economic activity to happen now, but for that to happen, other than another stimulus package, he will have to abandon the ideology of his base. His only chance at re-election is to continue on his present course, which means our economy will be flat though 2012, as the Republican house will not endorse crony capitalism spending bills, for Obama’s special interests.

Posted: Thursday, December 29, 2011
Article comment by: MMT mentor

Good discussion here Tom, but since the majority of those who disagree with you are arguing from a point of view that fails to understand how the monetary system really works we're not likely to get very far with them.

Jasmine says a fifth grader could figure out the "lunacy" of trying a spending program. Could her same fifth grader tell her where money comes from... how it's created... how we can never really run out if we print it ourselves.

The other Toms argue about the government "taking any money it spends" out of the private sector. Where does the private sector get the money from? And then the argument that we're this close to being Greece? Go ask the same fifth grader if that makes any sense. The key is understanding the difference between being a currency issuer and a currency user. What matters, as commented below, is productivity and capacity. We are far below our limits there. Check out MMT - it'll do you good.

Posted: Thursday, December 29, 2011
Article comment by: Kathy Svendsen

Jasmine, we tried deregulation under GWBush and where did it get us? The worst recession in history. The industries that were given free reign ended up begging for government help. Many jobs had already been lost before the crisis, and many more once it began. Have you forgotten about that?

Taxing coal out of business isn't a bad idea if it leads to the development of alternative forms of clean, renewable energy. Something has to be let go of, like the horse when the combustion engine was invented. If the coal industry pollutes the atmosphere, then it is only fair that they pay partially for the damages.

If it were just the current president who is scaring the hell out of everyone, how do you account for the fact the collapse began in the last days of the Bush administration? I wondered, wrongly, it seems, if the crisis that brought representatives back to Congress wasn't a staged event to grab what was left of the spoils. The reason nothing can be accomplished in Congress is because of the "just say no" tactics of the Republicans and their wayward tea party accomplices.

Posted: Thursday, December 29, 2011
Article comment by: Jasmine Tea

Mr, Cantlon
Your analogy about the car is better stated as: “you cannot steer the car to any good effect once it has been driven into the ditch” . I will not go into who was to blame… it happened.
A fifth grade math student can figure out the lunacy of trying to spend our way out of this mess.
Just for the sake of argument though... If the stimulus was an honest effort to jump start the economy, instead of rewarding political cronies and protecting a bloated government workforce.
We might have seen some private business’s jump in to take up any momentum created…however the private businesses are not so stupid as to put money out for something that there is currently no demand for … and they are not going to throw money into something that is going to be overregulated out of existence by the current regime…i.e.: Obama’s promise to tax the coal industry out of existence.
This POTUS scares the hell out of most business people… they cannot make any plans for their industry.
I give you the example of the recent 2 month extension of the payroll tax, that it took them 2 months to agree upon. These businesses’s need to be able to have a good forecast before they invest in a new venture.

The CBO is only as good as the information it has been given… jus like a computer. The example of Obamacare being under 1 trillion and deficit neutral was quickly proven to be a manipulation of the CBO by the Whitehouse… every week we hear about a story about how it will negatively affect the country.

The stimulus cost of at least 250k for a job saved or created is too much for the country to bear, we currently need to come up with 16 trillion to just get to a “baseline” broke.

This country has a powerful economy that can effectively get going without “transferring water from one end of the pool to the other”. How about eliminating capital gains tax for one year, lower the federal gas tax, put a leash on the EPA.
These are the things that have been proven to work and best of all… they are not counterintuitive to the majority of America, especially the shakers and movers of industry.

You seem intelligent from what I have read… so I must assume that you” choose” to cling to the failed ideology/ business model of socialism Marxism that has FAILED everywhere it has been implemented.

Liberals/progressives might get slightly more respect if they truly lived they way they preach for rest of us to live. Donate 90% of your income to all of the things you trump green energy, stimulus projects,
Government healthcare, isn’t that your goal? Take 90% from the wealth creators to fund your failed ideologies?

Posted: Thursday, December 29, 2011
Article comment by: The blunt truth

If Mr. Cantlon got exactly what he is asking for, and after it predictably failed AGAIN, we would get a long letter from him on why it is all Bush's fault. Spin all you want to, Tom, Obama said give me my stimulus and unemployment will be under 8% in 6 months. He failed. That's just a fact. Mostly the stimulus was an excuse to funnel money directly or indirectly to Democrat party loyalists (Finanical Services Industry, UAW, Green Energy firms that took the money and promply went out of business and so on).

Posted: Thursday, December 29, 2011
Article comment by: Kathy Svendsen

Tom G, it isn't the transporting of the Keystone oil that most scientists object to, but the fact it is so dirty and will be very expensive to process enough so it can be used. It is predicted that with the extra costs involved, all gas prices will shoot up. Not to mention that scientists warn the increased pollution could very well be the tipping point of an already endangered planet. We may all one day wish we had heeded the warnings of those scientists.

I'm with you on the use of corn as fuel. Insane

Posted: Thursday, December 29, 2011
Article comment by: Independent Spirit

@ Kathy Svendsen
Here is an idea. Downsize the Federal Government. Stop spending so much money on b.s. programs. The Federal Government should stay out of the home building business.......sell off HUD, Freddy, and Fanny. thats just a quick start to balancing our budget.

We dont need more tax money from Americans rich or poor. We simply need to spend less.

Posted: Thursday, December 29, 2011
Article comment by: Tom G

Kathy Svendsen, as and thinking human knows, the 2.3 million miles of existing US pipelines are many times safer than takers truck, railroad tankers and supertanker ships.

It's all about this insane, manufactured hatred of all things oil and oil is natures own ORGANIC fuel that we're are attempting to supidly replace with a large portion of our food chain, CORN.

Gasoline was $1.83 when Obama took the oath of office and the economy WILL NOT noticable improve until FUEL is reasonably priced again for economic health and growth.

Posted: Wednesday, December 28, 2011
Article comment by: @ Hokas

"We don't have any money, and, in fact, the entire world is running short."

Why would the world run short on money? Like there is some finite supply of money. Now, if the issue is a finite supply of resources and competition, driving prices, then at some point there can never be enough money for scarcity. Isn't the real issue the distribution of goods, services and energy, and the good life for Americans? And, a liberal democracy and market economy the best means for the greatest number?

When the economy collapsed, did any physical object or resource change? All the tooling, equipment, transportation, housing, public infrastructure supply chains, agriculture, and the tax code, regulatory systems and all did not suddenly disappear, only the money jobs and equity values did. The problem was financial system failure, a failure of capital availability, and the credit bubble burst, and tax policy was neither the cause of the crash or a solution to stimulus. However, failure of the regulatory system was causal in the crash.

The current debt increase has a primary causes that are outside of the Presidents control. The was the vector effect, with the continued spending path from the previous president like the wars, the decrease in revenues from the previous administration tax cuts and loss of tax revenues from the recession, the social cost of the recession putting more people on the dole, and the bail-out signed by Bush. I realize that in political season, all blame falls upon the President. Like blaming the janitor for the spill he is cleaning up.

I rather have someone trying to fix the problem and have debatable results, than someone who has defined the problem in a way that the proscribed solutions are the same causes of the problem, in the first instance.

Posted: Wednesday, December 28, 2011
Article comment by: Let's be honest

Mr. Cantlon: Every liberal Democrat says the same thing, "yes the debt is a huge problem".
Then they absolutely refuse to do anything about it today (might be unpopular you know), or even to commit to doing anything about it at any specific time in the future. It's just remains something liberals are going to address "some day" (trust me baby, check's in the mail) . It's $15T now, almost $5T more than it was just 3 years ago. When will you liberals agree to actually do something, when it is $20T, $30T, $50T? Here's my guess, you will start clamoring something must be done immediately the second a Republican is in the White House.

Posted: Wednesday, December 28, 2011
Article comment by: Andy Anderson

Soooo glad to see so many intelligent people realize that you cannot spend your way out of debt. Dumbest idea I ever heard of. People do NOT want shovel ready jobs that pay $7 an hour, they would rather collect unemployment. Go to work, you lazy people, I am tired of supporting you.

Posted: Wednesday, December 28, 2011
Article comment by: justa thought

under "normal" circumstances every dollar used to create jobs in the public sector is a dollar that the private sector doesn't have to create jobs, however right now are NOT "normal" circumstances.

right now the financial and corporate sectors are awash in cash and yet they are not investing in new facilities, new equipment or new staff (the so called "job creators" are not creating jobs) therefore: if the public sector creates a job, even an inefficient job, it's still a net job that adds to the economy

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