Archives for: June 2012, 08
I was in the passing lane of the expressway. I actually felt the rumbling before I heard it. I had a flat at 60 miles per. And I had to find my way across three lanes to the shoulder.
After I got the old Chevy Tracker towed to a nearby shop, the counter guy went out with me to see what was needed. We both stood looking at the shredded mess of what used to be a tire. It was all long strips of rubber.
After a sad couple of seconds, I spoke up. "So, what do you think? Can you patch it?"
Guy didn't miss a beat. Says he,"It might need more than one patch."
Some car repairs are obvious. Flat tire. Busted hose. Not always.
When auto parts were a major expense, consumers of my day wanted to be sure a part needed replacing before discarding it. Need a new battery? Test the old one to be sure the problem isn't the starter. Or bench test the starter.
The term "bench test" today is often used in computer work. When my loved one assembles a computer, she will often stop to bench test what she has done before proceeding to the next step.
When John Maynard Keynes consolidated a lot of existing theories into Keynesian Economics three generations ago, he focused on money supply. There were a lot of moving parts that he tracked in his predictive models. Interest rates, bond returns, capacity, employment, and on and on. What later became "Supply Side Economics" was a one of those parts. Under some conditions, Supply Side could work. In other times, don't count on it. Generally, though, he was an advocate of increasing money supply during recessions or depressions. Low interest rates would do. Deficit spending was even better.
That was during bad economic times.
During roaringly terrific economic times, payback was in order. Surpluses would pay for the deficits. Interest rates would go up. That would not only pay down the public debt that had been increased by deficits, it would keep inflation from gobbling up the value of currency.
That was during really good times.
The Great Depression, the Hoover depression, that deep, deep Republican dive to the bottom of the pit, was a bit of a testing ground. Herbert Hoover and his deputies preached the intuitive Gospel. Government should tighten it's belt during hard times. Since families had to cut back, why should government be exempt?
The resulting upheaval brought in the patrician from New York. Roosevelt had campaigned for a balanced budget, but he soon went for the Keynesian cure, cautiously running deficits. Sure enough, the economy began to recover. Unemployment went from catastrophic to merely horrible.
In 1936, Republicans began getting political traction with alarms about continuing deficits. The American people didn't buy it, but Roosevelt himself did. At least he did a little bit. He began to cut back on spending. The budget wasn't balanced. Not even close. But the deficit went down.
And so did the economy. In 1937, unemployment went up for the first time since Roosevelt had feared only fear itself. In 1938, with the return of larger deficits, the economy returned to a long trudge upward.
Roosevelt's deficits impressed most folks, including Roosevelt, with their unprecedented size. In retrospect, they weren't as large as they could have been.
On December 7, 1941, the Empire of Japan bombed the US fleet at Pearl Harbor, killing a lot of service personnel. The war made it impossible to avoid amazing deficits. By 1945 the war was ended, and so was the Great Depression.
That was one heck of a bench test.
In 2009, the Obama administration inherited a shrinking economy. It was shrinking at the rate of over 3%. So they put together a jobs program, and ineptly called it a stimulus. It stopped a slide into oblivion that scared the pants off almost everyone. The jobs program was a pretty big, and everyone thought it would bounce the economy back up fairly quickly. So they were cautious about spending the stimulus-should-have-been-called-a-jobs-program too quickly. Best go slow and make sure growth lasted.
It took more than a year before we got the final retrospective measurements. It turned out the rate the economy had been diving back when Obama took office was not 3%. It was 9%. Got that?
Not three percent.
Not not not 3.
That was some incredible shrinking economy he inherited.
The stimulus-why-didn't-they-call-it-a-jobs-program was way smaller than it should have been after all. Still, you can see what happened. The number of jobs dropped, then dropped, then dropped. Then the stimulus-what-the-hell-were-they-thinking-about-calling-it-that began to pump money back into the economy. Then the whole thing turned around. In a few months the number of jobs rose, then dropped, then rose, then rose, then dropped, then rose and rose and rose and rose.
Just not very fast. Except when compared with what happened before that.
But. . .
It did pass the bench test.