Under democracy one party always devotes its chief energies to trying to prove that the other party is unfit to rule - and both commonly succeed, and are right.
~H.L. Mencken, 1956
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Leader of the House Nancy Pelosi had the following graph released (click on image for FULL SIZE)
Pelosi was previously widely ridiculed for publicly stating that
"every month that we do not have an economic recovery package 500 million Americans lose their jobs."
Time magazines' Fielding Cage took a further look at Department of Labor and Statistics data and released this graph
William Polley extends the data range to include all 11 recessions since 1948
Economists Woodward and Hall adjust the data to reflect the differing sizes of the workforce resulting with this graphic
George Reisman cautions against government involvment in business
Once government money enters the picture, the firms are effectively nationalized, even though the outward guise and appearance of private ownership may remain. This is because their operations are no longer based on profit-and-loss considerations but on satisfying the government and whatever sectors of public opinion are loud enough at the moment to influence the government’s decisions.
Arnold Kling writes that Government mismanagement could create a collapse
The present scenario analysis highlights two black swans. The first one is Depression Averted, under which a stimulus keeps the economy from falling in a downward spiral of layoffs and shutdowns. The other black swan is Catastrophic Collapse, in which a loss of confidence by investors in U.S. government debt leads to a total collapse in the U.S. financial system, with economic activity contracting by 90 percent or more.
The case for or against a fiscal stimulus comes down to the relative importance of these two black swans. A stimulus is worthwhile if the probability of Depression Averted is very high compared to the probability of Catastrophic Collapse. Although neither scenario is likely, I believe that Catastrophic Collapse represents the greater risk.
Greg Mankiw notes that a more mature Keynes was both sceptical of public works projects and in favour of cuts to payroll tax;
Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organisation (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle.”
Keynes, Collected Writings, vol. 27, p.122 )
I am converted to your proposal…for varying rates of contributions in good and bad times.
Keynes, Collected Writings, vol. 27, p. 208.
…[Y]ou are able to show fluctuations in income of an order of magnitude which is significant in the context… So far as employees are concerned, reductions in contributions are more likely to lead to increased expenditure as compared with saving than a reduction in income tax would, and are free from the objection to a reduction in income tax that the wealthier classes would benefit disproportionately. At the same time, the reduction to employers, operating as a mitigation of the costs of production, will come in particularly helpfully in bad times.
Keynes, Collected Writings, vol. 27, p. 218.
Mankiw is regarded by some as a Keynesian style economist, here is his plan for stimulus (as opposed to spending)
I would institute an immediate and permanent reduction in the payroll tax, financed by a gradual, permanent, and substantial increase in the gasoline tax. I would make the two tax changes equal in present value, so while the package results in a short-run budget deficit, there is no long-term budget impact. Call it the create-jobs, save-the-environment, reduce-traffic-congestion, budget-neutral tax shift.
Tax cuts to private industry are like the plague to a socialist leaning Government, Pelosi is of the view that the state can create jobs and a sustained job creation program will fix the economy
"Immediate job creation and then continuing job creation" were the twin goals of the separate stimulus legislationPelosi's opinions are largely without substance and often in error and if acted on will most likely fail.
