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Can A President Really Stimulate/Jump Start The Economy

  1. GA Anderson profile image85
    GA Andersonposted 18 months ago

    A recent read posed an interesting thought - A president really can't stimulate or jump start an economy with realistic policy changes.

    This story, explaining the problem with the electorate thinking that the president has this power, comes from Prof. Russel Roberts.

    Here is his brief analogy:
    "Imagine coming across a young boy who is standing at the edge of the shallow end of a swimming pool. He holds a bucket in his hands and he looks crestfallen. What's wrong, you ask. Well, he explains, I'm doing a science experiment and it's not working. What's wrong? For the last hour I've been emptying water into this pool with this bucket. But the water level hasn't changed a bit. The pool hasn't gotten any deeper. It's a big pool, you explain. A few bucketfuls of water aren't going to have much of a visible effect. The boy redoubles and retriples his efforts. A week goes by. You come back to the pool and he looks no happier than he did before. What's wrong now, you ask. I've been doing the same thing eight hours a day for a week and I still don't see any change. Is there a leak in the pool, you wonder. No, he says, no leak. I checked that out.

    The boy shrugs his shoulders and gets back to work. You watch as the boy goes to the deep end of the pool, scoops up a bucket of water, walks the length of the pool and empties it into the shallow end. "


    For the complete explanation: Source link:Presidential Economics: What Leaders Can and Cannot Do about the State of the Economy

    Hmm.. any believers out there?

    GA

    1. wilderness profile image95
      wildernessposted 18 months ago in reply to this

      But if we borrow a trillion or two from China and pour it into the pool?

      1. GA Anderson profile image85
        GA Andersonposted 18 months ago in reply to this

        The good professor might have had something like that in mind too. This blurb was part of the follow-up after the swimming pool story;
        "...But if it rained each night of the boy's efforts, he might actually come to believe that moving water from the deep end to the shallow end actually leads to making the water deeper. ..."

        GA

        1. wilderness profile image95
          wildernessposted 18 months ago in reply to this

          Well put!  It does seem that that's what we're doing.

    2. Credence2 profile image85
      Credence2posted 18 months ago in reply to this

      I like this, " a president can no more stimulate the economy in the short term than a child get grow an extra foot overnight.'

      I guess 2004 seems a long time ago, but the principles in your question are unchanged.

      So, I say no
      I don't think that any single man is that formidable.

      1. GA Anderson profile image85
        GA Andersonposted 18 months ago in reply to this

        In the boundaries of reasonable and realistic actions, I agree with the Professor. The realities of a market economy validate, (for me), his contention.

        But, while I am still pondering this thought,  I am surprised he did not discuss the possibilities that in a fiat currency economy with a Federal Reserve system such as ours, a president in concord with the Fed may very well be able to create a short term artificial stimulation.

        The thought that comes to mind is the 2008 bailout. I am considering that if instead of having to use a capital injection to save a blow-up of the financial markets, that same amount was put to use in adding to the economy, (jobs, programs, etc.), instead of filling holes to save it, then it seems that a president could create a short term stimulus.

        I am still working on that thought because I think the professor is talking about the ability to create a real stimulus, not an artificial one, such as I just described.

        Anyway, I think the professor is right, and I don't have to stretch my imagination to guess the meaning of your 2004 reference. (yep, I know it was in the article - *grin)

        GA

    3. Quilligrapher profile image91
      Quilligrapherposted 18 months ago in reply to this

      Good Evening, GA. Can I play witcha?

      With all due respect to Prof. Roberts and his academic credentials, his article is an expression of opinion that lacks substantial empirical evidence. This is not to be construed to mean that I think he is wrong or that I know better, but, rather, that he is a member of a class of economists recognized for their conservative perspectives. Economics is not an exact science and all economists rarely agree on the same topic.

      Divisions among economists and the recognition of ideological bent (or bias) are explained by Roger Gordon and Gordon B. Dahl, two economists who have explored Views among Economists: Professional Consensus or Point-Counterpoint? in the American Economic Review. They answer an important question in this paper.

      “To what degree do economists disagree about key economic questions?...An alternative perception, reflecting the traditional fresh-water/salt-water divide in macroeconomics, is that economists coalesce into different camps, to a degree reflecting a liberal/conservative divide, with one group focusing on evidence that government intervention is almost always too costly ex-post to be justified and another that market failures are all too frequent and can be alleviated by well-designed policy interventions. Compounding this divide is differences in the degree of importance given to distributional versus efficiency implications of alternative policies.”

      Adding to the reality that opposing camps exist, Gordon and Dahl illustrate how academic association has become a marker of perspective.

      “These camps have traditionally been associated with particular universities, with Chicago, Rochester, UCLA, and Stanford arguably reflecting the conservative camp, and MIT, Harvard, and Berkeley reflecting the more liberal camp.” {1}

      I added a bold font to emphasize Stanford because Professor Roberts is a research fellow at the Hoover Institution at Stanford University.  Therefore, no one should be surprised by his assertion that government intervention is almost always too costly in the end to be justified. Had he been invited to serve on the faculty of, say, Berkeley then you would expect him to have a more liberal viewpoint.

      Furthermore, his swimming pool analogy is cute but it does not begin to represent the complexities, forces, or the mechanisms that impact a national or a global economy. It is an oversimplified model that can only satisfy minds looking for an over simplified explanation. I fail to see any realistic aspect of the economy as it exists in the real world.

      So, Gus, I do not buy Prof. Roberts angle mostly because he offers no substance to support it. His views need to be considered along with the many broad consensus studies among economists that indicated the 2009 and the TARP stimuli endeavors helped the country avoid a much more severe depression.{2}

      Thanks for the use of the hall. See ya around.
      http://s2.hubimg.com/u/6919429.jpg
      {1} http://econweb.ucsd.edu/~gdahl/papers/v … omists.pdf
      {2} http://www.nytimes.com/2014/07/30/upsho … onomy.html

      1. GA Anderson profile image85
        GA Andersonposted 18 months ago in reply to this

        You present valid points Quil, and even falling as far below the bar of being an economics novice as I do, I was aware of the varying camps of economists, and the stark contradictions between their views.

        The professor's explanation was presented as an economics primer, admittedly, (by me), biased by his perspective. I am not sure that a more involved explanation of his view might not find as much subjective supporting evidence as opposing views would present for theirs. (can there be truly "empirical" evidence on economic theory? I don't know - yet)

        But, understanding your point about the complexities involved, the pool analogy, with the perspective of "deep end" and "shallow end,"  and all the gradients in-between might still be representative of those complexities.

        I also like its representation of the economy as an intermingled whole rather than separate connected segments. Perhaps that just means I am inclined to a conservative view of economics.

        My reference to the 2008/2009 bailout/stimulus efforts were not a criticism, but merely a reference to the size of government intervention that might be needed to stimulate the economy in the short term.

        Another analogy the professor used was to say that taking money from your left pocket, (money already in the economy), and transferring it to your right pocket, (transferring a piece of the economy's value from one place to another), does not mean you have more money, (increasing the value of the economy). That makes sense to me, with the caveat I mentioned to Credence2 about a fiat currency and an independent Federal Reserve.

        I am still thinking about this view of economics, and in some thoughts concerning my tentative agreement with the Professor - I am wondering if I might be a victim of my own semantics.

        ps. I did not take away a an impression that his position was that government actions would be too expensive, but that within reasonable and realistic limitations on those efforts - they would not achieve the often proclaimed results.

        My concern about being in a semantics loop comes from my current thoughts that  a president, (governmental action), may have the ability to take actions that might help "grease the skids" for an economic recovery. Hmm... is that just another way of saying stimulate?


        GA

        1. Quilligrapher profile image91
          Quilligrapherposted 18 months ago in reply to this

          I understand your points.
          http://s2.hubimg.com/u/6919429.jpg

    4. rhamson profile image77
      rhamsonposted 18 months ago in reply to this

      I think history shows us the reality of what Reagan did though the story is different from both camps. Many credit him as the comeback President in recent times. He cut taxes for the rich from 70% to 28% and corporate taxes from 48% to 34% . He also double the defense spending. In the process he doubled the nations debt and the deficit soared. [1] This was primarily as he cut taxes he did not reduce spending. The government grew and as he introduced legislation to tighten import duties and tax loopholes to make up for the differences it did little.

      So did he jumpstart the economy/ Yes. And he enslaved us for years of low wages and the wealthy increasing their income immeasurably.







      [1] http://www.businessinsider.com/corporat … erm-2012-7

      1. wilderness profile image95
        wildernessposted 18 months ago in reply to this

        "And he enslaved us for years of low wages and the wealthy increasing their income immeasurably."

        It sounds as if you're saying that the solution to some people becoming wealthy, earning more than the average, is simply to take it away from them.  Is that right?

        1. rhamson profile image77
          rhamsonposted 18 months ago in reply to this

          I think the tax reductions were not a take away. they were a give away as it had nothing to do with the economy coming back. I'm not saying take it away, but give it back. Eisenhower had the same if not worse tax policies and yet the economy flourished up until the mid seventies. Reagan came in and slashed what had worked in the past and doubled the debt while rewarding the rich. Guess who paid the difference with eleven tax increases? The now dwindling middle class.

          1. wilderness profile image95
            wildernessposted 18 months ago in reply to this

            If those reductions were a "give away" who was the recipient if not the owners of the cash?  You can't "give" something to someone if they already own it - the closest thing to that you can do is not take it in the first place.

            1. rhamson profile image77
              rhamsonposted 18 months ago in reply to this

              You are supposing that all the money was theirs to keep in your scenario. No taxes would benefit who? How would the country run otherwise? Since the Eisenhower Administration the tax code has been reduced by 54% in some estimations and that won't affect the country how? Yes it is giving back the money owed in taxes to benefit the Corporations and wealthy. Am I to understand that a corporation or CEO does not benefit from buying influence to assure a lower tax bill? Is it to be understood that everyone including those at the top should pay the same especially when the taxable income from these corporate giants hide in international shadow corporations? The top is as crooked as it gets so that their bottom line can increase for those who live here. Because the corporations have the means to buy influence and game the tax code the taxes should go back to what they were before the tax scams they are practicing now.

              1. wilderness profile image95
                wildernessposted 18 months ago in reply to this

                My problem with this scenario is that it pre-supposes that "the people" have an innate right to a large percentage (90%, for instance) of specific citizens (but not all), and that therefore if they forego taking it, it becomes a "gift" to the rich when they can keep what they have earned and own.

                It is a convenient way of looking at legal theft, an easy way to pass by the ethics of demanding that a few pay most of the costs for what the rest want, but that's about it.

                1. rhamson profile image77
                  rhamsonposted 18 months ago in reply to this

                  It is funny how deniability is convenient for you to make your argument. While one buys the advantage you place the other in equal consideration. Your argument hinges on equality which is a ruse you seem to ignore. That is why I contend higher taxes for the Corporation's is getting back what they have taken underhandedly.

 
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