My liberal readers will already agree with what I’m about to quote, and my conservative readers will immediately dismiss it because the link goes to nytimes.com, so I don’t know why I bother — but for what it’s worth:
Just look at the outside evaluations of the stimulus. Perhaps the best-known economic research firms are IHS Global Insight, Macroeconomic Advisers and Moody’s Economy.com. They all estimate that the [stimulus] bill has added 1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs. The Congressional Budget Office, an independent agency, considers these estimates to be conservative.
Yet I’m guessing you don’t think of the stimulus bill as a big success. You’ve read columns (by me, for example) complaining that it should have spent money more quickly. Or you’ve heard about the phantom ZIP code scandal: the fact that a government Web site mistakenly reported money being spent in nonexistent ZIP codes.
And many of the criticisms are valid. The program has had its flaws. But the attention they have received is wildly disproportionate to their importance. …
The reasons for the stimulus’s middling popularity aren’t a mystery. The unemployment rate remains near 10 percent, and many families are struggling. Saying that things could have been even worse doesn’t exactly inspire. Liberals don’t like the stimulus because they wish it were bigger. Republicans don’t like it because it’s a Democratic program. The Obama administration hurt the bill’s popularity by making too rosy an economic forecast upon taking office. … Even if the conventional wisdom is understandable, however, it has consequences. …
Of course, no one can be certain about what would have happened in an alternate universe without a $787 billion stimulus. But there are two main reasons to think the hard-core skeptics are misguided — above and beyond those complicated, independent economic analyses. The first is the basic narrative that the data offer. … The second argument in the bill’s favor is the history of financial crises
Read the whole thing, which has a lot more detail on those “two main reasons.” I await serious rebuttals, based on actual data and well-sourced information and respected expert opinion, not mere assertion and empty argumentation and ideological claptrap.
Meanwhile, with respect to the point I boldfaced above (“saying that things could have been even worse doesn’t exactly inspire”), I would just add the following, quoting from my own Facebook commentary. I was actually talking about the bailouts, but it applies to the stimulus debate as well:
[N]ow everyone hates [the stimulus], just like everyone hates every other preventative effort that has visible costs and invisible benefits (think “botched” hurricane evacuations for storms that don’t ultimately hit). Again I say, Lord, let us not be blinded by our human inability to process counterfactuals, Amen.
First, I could simply use the line of reasoning you’ve used against the stimulus skeptics (myself in particular) in the past: maybe it didn’t, there’s no way to know. Certainly, if the unprovable nature of economics can be used against those who doubt the stimulus, the same can be used against those who promote the stimulus.
Next, I will say that Economy.com is a great website with lots of information, but it is hardly a some uber-respected forcasting and analysis firm. National Review, using simple math, pointed out that their head economist vastly overestimated the multiplier effect of the deficit spending, unless you really believe that sans stimulus, GDP would be down 20%+. So holding Moody’s in general out as one of the most respected forecasters, is a little disengenuous. In fact, I’m not sure if anybody believes much of anything that Moody’s says nowadays, given their track record on so many other things. Economy.com is great for data for doing your own analysis, not for the supposed brains of the people running it.
IHS is well respected for its industry analysis and data, but again, I am unaware of them being some economic forecasting powerhouse. Investors and businesses don’t tend to wait on edge for the latest pronouncement from IHS before making trades and business decisions. I’d say that they economics analysis is less widely followed than their industry analysis. Their market share studies and industry market projections are quoted all the time, but their economics forecasts are not.
I am not aware of Macroeconomic Advisers and cannot comment on their repuation.
It sounds to me like the author picked a bunch of pro-stimulus economic analysts and held them out to be the go-to guys in economic analysis.
Let me attack on particular line of support proffered by the article.
“Then there is corporate spending. It surged in the final months of last year. Mark Zandi of Economy.com (who has advised the McCain campaign and Congressional Democrats) says that the Dec. 31 expiration of a tax credit for corporate investment, which was part of the stimulus, is a big reason. ”
I analyze corporations accross a variety of industries for a living. I disagree with that comment. There are three reasons why corporate spending has improved in the latter half of the year.
1) Inventory restocking. Up and down the supply chain firms have cut back on inventories which are at historical lows and now need to be replenished.
2) Recovery of the financial markets. In late 2008, early 2009, everybody was in “cash preservation mode”. Cheap ST debt (commercial paper) was unavailable, and everybody, even fairly healthy companies, were afraid that if they had to refinance debt, it would be done at astronomical rates (if you could even get refinancing). By Q3 the debt markets had improved and thanks to near 0 ST rates, refinancing even for lousy corporations is fairly cheap. Hence corporations can now take longer term views of spending.
3) Psychological recovery from the early 2009 “the world is ending” mindset. In late 2008, early 2009, people were wondering whether or not we would enter another depression. Hence, they cut back on spending more than they really needed to. In early 2009 nobody thought their job was safe, and no firm thought their sales were safe. When the entire financial system didn’t blow up and people survived the various rounds of layoffs, people began to losen up a bit. You might say that the stimulus caused this psychological improvement, but I would question that logic. Who said to themselves after the stimulus passed “gee, I can now spend now because everything will be o.k.”? Virtually no one I would argue. Certainly few public corporations said in their reports that due to the stimulus, they now have better confidence in the future. Instead, they saw that rather than worse case scenario 50% sales declines, sales declined by “only” 25%. They saw that their bankers were returning their calls again. They saw that if they needed to raise money, the could so so at reasonable (if not historically cheap rates). In other words, based on my observation and analysis of corporate reports (and common sense), when data and experience showed that the world was not ending, companies loosened up the purse strings and began spending again. TARP and the fed actions were clearly helpful (if not absolutely necessary) in this regard. The stimulus was a non-issue.
I have yet to come accross a company that said that they accelerated capex purchases in Q3 or Q4 to take advantage of the expiring stimulus credits. Perhaps that played a minor factor, but the bulk of the activity was based on the above 3 factors. Furthermore, accelerated pruchases in advance of an expiring government benefit aren’t really worth that much anyways. If a purchase is driven by a subsidy expiration, all you’re doing is taking 2010 economic activity and putting it into 2009. That’s hardly great policy.
Mark Zandi may be very smart (although given that he works for Moody’s, I would hardly state that as a given) but I think his economic models don’t actually capture how real people make decisions, nor do they factor in how people actually did make their decisions.
Kyle, thanks for the detailed response. You definitely answered my call for a substantive conservative rebuttal!
With regard to your first point — “I could simply use the line of reasoning you’ve used against the stimulus skeptics (myself in particular) in the past: maybe it didn’t, there’s no way to know” — I would take issue with this, in the following sense. When I’ve used that line of reasoning, it’s been in response to people simply mocking the “created or saved” concept as being obviously untrue, without having any data to back up its supposed untruth. And my response was, look, you don’t know, I don’t know, so why are you going around mocking this with the certainty of someone who knows it’s false, when in reality you are just assuming that? At least, that was my intent. By contrast, here, I am actually presenting data (or at least an article that cites respected experts’ reports that are based, presumably, on data) that purport to show that we can indeed, if not know, at least make a reasonable educated guess. It isn’t really valid to respond to that by saying “BUT WE DON’T KNOW!!!” Whereas I think, in context, that response was reasonable in the instances where I’ve used it.
With respect to the allegation that the author “picked a bunch of pro-stimulus economic analysts and held them out to be the go-to guys in economic analysis,” that may be true, but if so, presumably the Wall Street Journal or somebody must have their own bevy of respectable anti-stimulus economic analysts they can cite, right? So where’s the beef? Not that you, personally, are required to know this 🙂 but surely someone must. FWIW, the WSJ article referenced in this NYT article doesn’t do that. It looks at certain raw numbers — which one might argue are cherry-picked, as you say about the NYT’s chosen economic reports — and draws conclusions from them, but it doesn’t cite or reference any comprehensive analyses by respected nonpartisan experts or think-tanks or whatever that support its conclusion. But that article was written in September of last year, so maybe such reports didn’t exist yet, and maybe they do now. Dunno.
As for the rest of your analysis, I’m not knowledgeable enough to really assess it one way or the other. Some of your points do make instinctive sense, though the various asserted causes of economic recovery — stimulus-related and non-stimulus-related — are by no means mutually exclusive; for instance, there’s no question increased confidence causes recovery, and that recovery in turn increases confidence, and so on and so forth. But that begs the question, which is whether the stimulus had a salutary effect on that virtuous cycle, and if so, how much of an effect? I don’t know, but it appears to me (unless and until I see evidence to the contrary) that the consensus among nonpartisan experts is: yes, it had an effect, and a reasonably important one.
P.S. Re: my previous argumentation about “created or saved” being unprovable, another point I think I made, or intended to make, is as follows, in response to the argument that it’s ridiculous for Obama to be using an apparently unverifiable and newly-created-for-this-purpose metric: okay, but what metric is he supposed to use? Provable or not, the number of jobs “saved” (as opposed to “created”) is extremely important, particularly in an environment when making things less-bad (as opposed to actually better) is probably the best you can hope for in the short term — in other words, an environment where, at best, the stimulus is going to (at least initially) “save” a lot more jobs than it will actually “create.” Obama didn’t create that dilemma (he “inherited” it! let me be clear! heh), and IMHO it’s not really fair to fault him for using an unverifiable metric to sell his program unless there’s some better metric out there that will more accurately reflect what’s going on. Jobs “created” alone is not that metric, at least not in the economic conditions of a year ago.
First of all, Kyle, your post was awesome, you should definitely jump in here more often. Very well done. You did a very nice job pillorying the corporate aspect of the link argument, the only slightly different point I would have made is that corporations, relieved last year that the world is not ending (i.e. only down 25%), plus facing a lower base and with banks willing to lend again, will by their very instinct begin to invest more. The stimulus is probably irrelevant to that process.
I’d rather focus on the jobs assertion. The article cites that the $787 Billion stimulus created ~2 million jobs, and then took an easy potshot at Scott Brown in pointing out that jobs saved was surely greater than 0. That Brown comment is quite the straw man in this debate.
Sake of argument, suppose the government simply wished to create “jobs”, not have them be worth a damn, let’s say that they were jobs like what those English peasants were doing pounding the ground when King Arthur first encountered them in Monty Python’s Holy Grail. Worthless jobs. Suppose further the government wanted those jobs to pay around the national median, which I think is something like $40 K/year full-time. Of course, we will have to pay our peat-patters bennies too, so all-in this will cost us $60 K/job.
How many such jobs could we buy for $787 Billion? The answer of course is more than 13 million. Obama’s stimulus “got” us maybe 2 million, so the rest of the money went to…something else. Wait, you say, the stimulus is focused on other investments in the future, not just buying jobs, and that may be true, but methinks that the 2 million jobs created or saved certainly takes credit for any job the stimulus touched at all, such that 2 million may not be that much.
In fact, the most dangerous piece of propaganda in the attached piece is openly taking credit for saving state or municipal jobs that were threatened by shrinking tax bases. Think about that for a second. Your state is losing its tax base through poor demographic factors, mismanagement, or some other reason, such that you will be forced to lay off a whole bunch of workers and cut services, when suddenly in comes Obama as the White Knight (Black Knight?) with his stimulus to save the day, allowing you to make your budget.
Did Obama solve your demographic problem? No. Did he clean up your mismanagement? No. A whole bunch of those 2 million jobs, perhaps even most of them, represent little more than kicking the can of local problems down the road. I don’t know about you, but if we are going to have to face these disasters anyway, I’d rather take the pain today than tomorrow if it means saving $787 B.
At the end of the day, there’s something fundamentally duplicitous talking about “jobs saved” in the context of a “stimulus bill”. From a terminology standpoint, “jobs saved” can be thought of as the economic equivalent of a Band-Aid. A pretty expensive Band-Aid, when by all appearances, the patient will start bleeding again when its removed next year.
One could almost characterize the stimulus largely as follows:
“There’s something fundamentally wrong with the economy such that many individuals are unemployed, consequently not able to provide the tax dollars to support many traditional local and state government services.
In order to ‘fix’ the economy, Obama borrowed a bunch of money to temporarily continue providing those services”.
I’m sure the above doesn’t fully characterize the stimulus, but to the extent that there’s a kernel of truth there….the description above is a conservative’s worst nightmare. We may be living it, I’m afraid.
Well, there’s “data” and then there’s data. You seem to be placing a lot of emphasis on the fact that these economists pull out a specific number. But this “data” is really no more than an opinion. It’s not like tring to measure unemployment or inflation, where you are trying to estimate an actual existing thing. This two million jobs saved or created isn’t really data or an estimate; it’s a SWAG. You can’t really judge how good the estimates are without having at least an idea of how they were arrived at. For example, some econometric models simply assume that Keynesian government spending always creates economic activity. For example, they take whatever is spent on the stimulus, apply a multiplier to this, and assume that but for the stimulus, GDP would be that much lower. Unemployment sans the stimulus then follows from this. For example, if you assume a 1.5x multiplier, and we spend $100B on stimulus, then you assume that whatever GDP is, $150B of that is due to the stimulus. You then figure out what unemployment would be if GDP was $150B lower, and bam, you have your jobs created or saved. Such a model would be a perfectly legitimate way of forecasting, if you believe the multiplier you apply is sound. But of course, your ultimate result of jobs “saved or created” doesn’t really prove anything. The result begs the initial question of whether economic growth is boosted by government deficit spending. Thus these economists’ estimates of two million are no more valid than me saying, the multiplier is 0, therefore no jobs were created or saved. If they have real data measurements (such as a survey asking people how much higher their payrolls are because of the stimulus), that would at least have some meat on it.
Brendan – “Republicans don’t like it because it’s a Democratic program.” …
How about Sensible folk don’t like it because way too much of the so-called Stimulus spending doesn’t stimulate; it sporadically defibrillates a patient who doesn’t have arrhythmia; it feeds an early diabetic glazed donuts; it gives crack cocaine equivalent to users rather than trying to wean them off their drug; and, for all the science on which it was based, just how well did the scientific model used by those who tout the stimulus match the result of the experiment ?
Apart from that, “Great job, Brownie !”, right ? OK – “Great job, Obambi !” (the nickname has to be sorta cute, doesn’t it ?) …
Bottom line –
Did significant amounts of the Stimulus go to increasing domestic energy production to lessen dependence upon foreign energy sources ? No …
Did significant amounts of the Stimulus go to fixing/enhancing essential infrastructure to keep production going ? Nope …
Did significant amounts of the Stimulus go to encouraging increased production of marketable goods, to increase/preserve tax revenues without having to increase tax rates ? No sirree ! Not on the current Administrations watch !
OK – how about –
Did significant amounts of the Stimulus go to increasing/preserving private sector jobs (which actually produce marketable goods) ? Not that *I* can find …
As far as I can tell (and Kyle, if he cares to, can correct my impression/interpretation), the current Obama/Pelosi/Reid response to the economic downturn (that started during the Bush II second term, after Congress went from GOP control to Dem control) might as well have been the Hoover response to the Market Crash of 1929 – and *that* turned a Market Crash into the Great Depression … I wish it were different, but I’m not seeing it yet …
So – the assertion that “Republicans don’t like it because it’s a Democratic program. “ doesn’t fly – Hoover’s response was a Republican response, and, as far as I know, with the benefits of hindsight, Republicans don’t like Hoover’s Republican program any more than they like Obama/Reid/Pelosi’s Democratic version of Hoover’s Republican program …
It is projection to give the reason for the dislike as being a party label reason … the current Administration’s response would suck just as much if Dubya and a GOP Congress had failed to learn from history and were doing it …
(I know it’s a mean question, but I’m going to ask it anyway …
Kyle – am I right in believing that 9/11 could have caused a significant recession, if it had been handled badly ?)
Kyle, excellent addition to the conversation. I certainly would be considered a conservative in my comment’s to Brendan’s blog. Although, I must say, I favored some stimulus action by the government in early 2009, as well as some bailout in the fall of 2008. I do think the government played a critical role in pulling the US back from the brink of a much tougher recession or even depression.
The assertion that the stimulus has created jobs is flawed. The stimulus has created funding by which capitalist minded individuals are utilizing the funds to create jobs. My concern isn’t whether we should defend the stimulus or attack it, there will be plenty of academic study in the future that will analyze this with the perspective of hindsight. The bigger concern I have is that according to http://www.recovery.org, we have begun 55,261 projects valued at $171.36 Billion. By most accounts I have heard or read, only about 1/3 of the $787 has been injected into the economy. Is it conceivable that the remaining $530 Billion yet to be spent should be pulled back? When are we as a nation going to take our medicine and demand a government that spends less than it takes in? This current round of deficit spending is adding to an already alarming $12+ trillion in national debt.
If we want our children and grand children to have the same type of opportunities many of us have been afforded, should we start to be better stewards of the funds? We are a nation of “fix it now” mentalities, the reality is there will be serious hardships to try and get the US back to even, and I say we need to start now. The US is back from the brink, and 10% unemployment is bad, but why spend more borrowed dollars to try and repair an economy now that will be hurt later because of the borrowing. When demand starts to grow again, we are headed for some serious inflation.
In my opinion we need leadership right now that will stand up and say “Yes it is going to be tough, but the government can’t solve all the nations economic woes. In the interest of our future, it is time to reconsider the ARRA spending and pull back on some of those funds.” Of course money is power in Washington DC so there ZERO chance of a politician actually doing that. The GOP had their chance in the first decade and they botched it, so now we will weather the Dems philosophies.
My understanding is we’ve only spent 1/3 of the stimulus, but for 2 million jobs, that still amounts to $130k per job. The theory behind stimulus is that it’s supposed to be a multiplier: you spend X to get 1.5X, and regenerate the underlying private economy to eventually replace X. Clearly that has not happened in a measurable, provable way.
Then you have to consider, if the point of the stimulus was as an emergency to keep the economy from rolling off the precipice into total collapse, and if we’ve only spent 1/3 and we’re no longer on the verge of total collapse, why are we still spending the other 2/3? The effect we intended the stimulus for has already occurred! Those appropriations should be canceled in order to reduce the deficit.
In addition, as others above has pointed out, much of these jobs “saved” were government jobs. This is not true economic stimulus. If I can steal some financial reasoning from the book Rich Dad, Poor Dad, private economy jobs are “Assets” because they generate tax income for the government to spend. Government jobs are a form of government spending and are thus “Liabilities”. Stimulus money should be applied to generate re-growth in Assets, not expand Liabilities. Each dollar spent on a Liability is a dollar taken from an growth-generating Asset; this dollar spent on Liabilities either comes from the Assets as a direct, one-for-one takeaway, or as a borrowed dollar that must be taken from future Assets-generated income.
Put it another way: Suppose you have $500k in stocks that generates $50k in income (dividends and capital appreciation), which you live off of and spend 100%. Now suppose the market collapses, companies cut back dividends, and your stock values fall to $400k producing only $20k a year in income. How do you cope? Let’s say you rush out and take a temporary job making $50k a year. You’re now temporarily bringing in $70k a year. What is the best course of action? (Assume no inflation or taxes)
A) Spend the $70k a year and keep working until the market rebounds, and cut back on working until your passive income reaches $50k.
B) Spend the $50k a year as before, and reinvest the $20k into your stocks until your stock values and dividend payments have sufficiently rebounded such that you can stop work.
Obviously option B will mean you resume retirement much faster. In this analogy, you are the government, your time out of retirement back at work is like borrowing money, and the additional $20k you have coming to you as income is your increase in temporary, borrowed income, which can be spent either on either the stocks (private economy, generates the recurring income you need to survive) or on upping your lifestyle (government sector jobs). Just like choosing option B, if the stimulus money was focused solely on creating private sector jobs, the economy and the tax base would have rebounded quicker and we would have spent far less. If you choose option A, not only does it take much longer for your stocks to rebound (since you’re not reinvesting in them, you’re just waiting for the capital appreciation to rebound and the dividends to come back), you’re also accustoming yourself to a more extravagant lifestyle and you’ll find it difficult to eventually wean yourself back to living off of $50k a year.
Obama and the Democrats chose option B — they borrowed a bunch of money, and spent most of it on things that significantly expand the size of government, and will be incredibly difficult to wean off of once the economy rebounds (which will take far longer).
I should add to my first paragraph above that, if the goal is to spend X to generate 1.5X in economic growth, and if the total cost of each job “saved” is $130k, I think it’s pretty easy to surmise that we’re actually spending X to get .25X. That’s an incredibly poor ROI.
Nice to see you jumping in, Andrew. I completely agree that the “multiplier” from stimulus is what matters, much more so than jobs. If jobs were all that mattered, we can always just hire these people.
Here’s one simple way to think of it: 50+ years ago, when Eisenhower built the interstate highway system, he spent money building the roads (and hired a bunch of people to do so), and then as a result interstate commerce was vastly more efficient, making logistics and transportation easier for consumers and businesses, thus leading to vast amounts of new wealth.
The created wealth obviously didn’t come from hiring the workers to lay the road – the workers are a cost; the benefit is the improved logistics. If you were a financial guy analyzing the interstate system, you might build a model which showed the material, labor and administrative costs of building the interstate highway, and your model would also incorporate all the additional wealth from improved transport. You might also build in the costs of future maintenance and repair, though in fairness those costs would be too far down the road for Eisenhower’s administration to care that much.
When Obama comes along 50 years later and says he’s going to borrow a bunch of money to invest in the maintenance of Eisenhower’s highways, that’s certainly nice, but you can think of Obama’s spending as a later input into Eisenhower’s model. The marginal benefit of the interstate system occured more than 50 years ago. The maintenance and repair doesn’t necessarily add any new benefit; Obama is just cleaning up after Eisenhower.
That may be important, but its not stimulative.
Alasdair, @#7: (I know it’s a mean question, but I’m going to ask it anyway …
Kyle – am I right in believing that 9/11 could have caused a significant recession, if it had been handled badly ?)
I’m not Kyle, but I can jump in here with my semi-literate knowledge.
Post-9/11, then-Fed chair Alan Greenspan moved to cut interest rates to stave off the potential economic calamity that fear and panic might have brought. The rate had already been going down from 6% at the start of 2001, but on September 17, the Fed cut 50 basis points to 3%. Then 50 more on October 2 and again on November 6. On December 11, they eased up a bit, only lowering 25 basis points. Interest rates had never been below 3% in the entire decade of the ’90s, but at the end of 2001 they were at 1.75% and wouldn’t get back over 3% until mid-2005.
Consequence: borrowing money became super-cheap. Consequence: people took out loans they couldn’t afford when the rates rose again — especially on real estate, a bubble that had been inflating for years (and one that the federal government — both parties — approved of, and where predatory or otherwise overzealous lenders were socking borrowers with jacked-up increases in adjustable-rate mortgages). Consequence: we got overextended and the whole thing collapsed. Basically, this IS the 9/11 recession we never had, at least according to the CNBC documentary House Of Cards.
Should that be true, then the implication is clear: acting to “stave off” economic calamity is a fallacy, because sooner or later, the economy and everyone in it will have to take its medicine. So what good is it if the stimulus “created or saved” two million jobs if it only postpones Judgment Day? And that’s assuming a) it did such a thing and b) it didn’t accelerate the day of reckoning by adding yet another load of debt to the camel’s back.
Mike – I’m frowning, because the collapse/overextension was a paper one until whichever memo it was got leaked (by Schumer, if I recall correctly), combined with companies being required to change their accounting practices to show current market value of assets rather than acquisition value of assets … (very fuzzy jargon use, I freely confess – I’m a mainframe computer geek, Jim, not a Doctor of Economics!) …
As long as the interest rates stayed low, which they did, and have con tinued to do, *that* problem was a potential future problem, not a current one …
Going by your comment above, then, once the panic point/crisis point had passed, perhaps we should have eased the interest rates back up again – probably a valid point …
This leaves, however, my question – to which your answer seems to be “Yes, 9/11 could have caused a significant recession, but didn’t because it wasn’t handled badly from the perspective of containing and dealing with the panic.” …
Is that a fair summary, Mike ?
And whichever way you answer that last question, you have actually made my point very nicely …
IF the Stimulus had worked, we would still have a problem with which we would need to deal, while having time within which to deal with it …
Given that the Stimulus hasn’t worked (unemployment WAAAY above 8%), it is multiply (meaning in multiple ways) ludicrous and even irresponsible to put forth a proposal for High Speed Rail to/from Tampa (?) as being a worthy project to enhance the infrastructure in pursuit of a recovery …
(grin) Even if the train is Silver, economiocally, it sure ain’t any sorta Silver Bullet …
I’m pretty sure you mean “mark to market.” While that’s taken some of the blame, the truth is a bomb this big has many different fuses. For example, I once heard it posited that the immigration crackdown in 2006 was a factor: many of the areas where the housing market fell hard — Las Vegas, Florida, the Inland Empire — were also places where illegal immigrants lived, having bought houses thanks to affordable mortgages and lax “ninja” loan requirements. When they bailed after immigration became a hot-button political issue, the theory goes, they caused a lot of abandoned homes, thus glutting the market and depressing prices.
I don’t know. It seems plausible. But like I said, there’s 100 different triggers for this; it was a systemic risk that was allowed to fester for years. Which sorta renders the need to pin this on any one pet cause (e.g. Carter and the CRA, or Joe Biden using the word “deregulation” ten times in about three minutes during the 2008 VP debate).
Ahhh dammit, misclicked before I finished. Anyway, it renders the need to pin it on any one cause as the obvious machinations of an intractable partisan.
Mike – yup, I had forgotten that exact phrase … for AIG, “mark to market” meant that a division of AIG that was less than 4% of AIG assets effectively brought down the entire AIG, since that division could not get liquidity as required by governmental regulation after “mark to market” became standard …
And, indeed, overall, there was no single cause, as you say … one can, however, pin down a number of specifics without which the crash itself need not have happened at the time that it did …
Me, I blame Lord North for what happenen way back then, much more than George III or George W … still, they all played their part, did they not ? (grin)