An email from Macroeconomic Advisors:
Q4-2008 Past-Quarter GDP Tracking -5.5 percent: Both exports and imports were weaker than BEA's assumptions in the fourth quarter, but exports much more so. This suggests much lower net exports in the fourth quarter. Therefore, we lowered our tracking estimate of fourth-quarter GDP growth by seven-tenths to a 5.5% rate of decline...
The implications for those counseling inaction right now--those who think (a) we don't need a fiscal boost, and (b) the fiscal boost should be postponed until Cass Sunstein and Jeff Liebman can do their cost-benefit analyses and then convince the members of congress to listen to them--are left as an exercise for the reader.
It is a bit of depressing news, but then I was already expecting that the next revision of GDP might show it a little lower. So I can't say that I'm incredibly surprised. And remember, I'm not saying that a fiscal boost would be a net negative. Whatever the present plan does to shore up GDP will be appreciated.
But I'm still a skeptic. And Brad himself said that's ok a few days ago!
Arnold Kling feels lonely and unloved:
I'm feeling somewhat lonely these days. My understanding of macroeconomics is closer to that of Paul Krugman, Mark Thoma, and Brad DeLong than it is to that of Robert Barro, John Cochrane, or Eugene Fama. And yet I am a stimulus skeptic...
It's fine to be a stimulus skeptic! But stimulus skeptics need to be stimulus skeptics for reasons that are (a) theoretically coherent and (b) empirically relevant. To be a stimulus skeptic because you fear that the bill that emerges from congress will have a very low bang-for-buck, or fear that the long-run drag from amortizing the extra debt will cost us more than we gain from the short-run fiscal boost.
I'm a little from column A and a little from column B. Mostly I question the bang-for-the-buck, as I explain at length in the previous post.
I'm just trying to puzzle out in my head how the present stimulus package will materially affect the trajectory of this chart. And I'm just not seeing it.
On your unemployment chart which is 1957 and which is 1990?
They are both purple!
The deep one is 1957. Blame Excel. I think they are slightly different shades, but I should have differentiated them more. The chart comes from this post http://www.williampolley.com/blog/archives/2009/02/employment-loss.html where there were actually two charts. The first had so many series that it ended up using similar colors. For the second, I simply deleted some of them for clarity, ending up with two series with similar colors. My apologies.
The portions of the stimulus which prevent state governments (legally required to balance their budgets) from making massive, damaging cutbacks -- those will be very obviously and bluntly effective. They would quite directly have prevented job losses.
Unfortunately, those portions were shredded by three Senate Republicans.