Saturday, September 11, 2010

Faux Facts

The political right in the US likes to hold up Germany as the country which has done the right thing in this recession/depression. They admire it for its austerity as opposed to Obama's "socialism" and his "mad spending".

Well... the facts care to differ. Here's a graph from a blog post by Paul Krugman on his NY Times site:


What the graph shows is that:
  • Germany is spending more government money to counter the recession than the US.

  • The Obama "stimulus" is lost in the enforced austerity at the state and local level in the US. Government spending is flat! There is no stimulus!

  • The claims of German "austerity" are a lie. The German government may be talking a brave game of austerity, but the social programs in Germany automatically kick in during a downturn and force governments at all levels to spend more to support unemployed people. The US has very few social programs to support the unemployed, so you can get the flat graph above.
Here's Krugman's assessment:
It’s worth noting that just to keep up with the trend in potential GDP, US government purchases would have to have risen about 6 percent over the period shown. As far as actual government spending on goods and services goes, as opposed to aid to individuals, we’ve had no stimulus at all — basically because of cutbacks at the state and local level.

But hey, stimulus has failed.
So Krugman says it is even worse than how I presented it in the bulleted list above. I was assuming that government "consumption" included all expenditures, but if you read Krugman carefully, the above graphs don't include unemployment payments. That means the surge in spending in Germany isn't from social programs kicking in. It is coming for real programs purchasing real goods & services. So much for government "austerity" in Germany!

5 comments:

thomas said...

The right wingers, as usual, are pushing their point of view and "religious dogma" at the expense of the facts. People here tend to swallow these lies because they think that if they give their money to the rich and make the poor suffer that somehow magically things will improve. And, the pundits on Fox continue to lie about how cutting taxes leads to economic growth every time it has been tried without fail.

I was at a job site recently that was funded by stimulus money. The city official on the job that showed me the locates for utilities and talked about traffic control for our part of the utility work complained that it required Davis Bacon pay because of the funding.. That is the first and only job that I know of that was funded by stimulus funds. I don't get a sense of a lot of stimulus going on anywhere. Putting people to work on improving our infrastructure or just cleaning up parks and roads would put money directly into the economy. Or, even just relieving people of overpriced debt on their homes would free up consumers to spend more on home maintenance or upgrades or simply funding Christmas this year.. Obama needs to learn what moves the economy and stop catering to the rich bankers etc.

RYviewpoint said...

Thomas: Sadly Bush had a chance to put a real stimulus in place, but he never did. His first two economic "stimulus" packages were tax cuts (mostly for the rich). When this current economic catastrophe was on the horizon, Bush went for his $152B 2008 stimulus package, but it included no infrastructure spending. The argument was that "it takes too long for infrastructure projects to get going" to make them effective. Just think if a really big chunk of that $152B had been for infrastructure!

There is a crying need for infrastructure spending in the US. The recent San Bruno pipeline explosion is one example. The I-35 bridge that collapsed in 2007 in Minneapolis is another example. There are many more.

Sadly, even the 2009 Obama stimulus bill has only $105B out of its total of $787B. To get some perspective, compare that $105B to the $288B in "tax cuts". Nutty. Tax cuts are a poor way to put people to work (except for the bottom 50% of the population who essentially spend all they earn, tax cuts for them get spent!).

I think Obama "knows" what gets the economy to grow. But he isn't willing to fight hard for that. Instead, he wants to "find compromises" or to engage in political dealing with the Republicans. Also, he let himself be convinced by his "political experts" that the downturn wasn't as bad as his economists were telling him and that, anyway, a serious attempt to fill the hole with real stimulus wasn't "politically possible". I fault Obama for not going to bat for the beleaguered American worker. (That Wall Street bankers were some of his biggest financial doners probably has something to do with him being willing to work harder to save the banks than the unemployed or those about to lose their homes.)

thomas said...

RY;

Just from my experience; a lot of infrastructure has been built with cheap labor and cheap materials provided by the lowest bidder, so the big wheels can get their hands on more profit. And, a lot of our systems, like pipelines, are simply aging and need maintenance or replacement. Gas pipelines are supposed to be leak surveyed every year and some depending on population around them need it more often plus there should be corrosion monitoring. Many pipeline companies have started contracting these things out, so there is less liability on the company or at least they have someone to blame. I have not remembered to look into the incident that you mentioned, and I really wanted to check that out and see what their initial statements were. Probably a bad weld or a bare spot corroded and time and stress or sometimes a seam opens in the pipe due to stress due to a bad installation.

The bottom line is that many people would benefit from direct government hiring in some sort of jobs program and they could be used to do all sorts of things and get paid for it a the same time. The country would benefit although some would complain; they would be happier by now (if it had started in 2009) seeing a healthier economy. That "if" didn't happen and probably will not happen in the future seeing that we will have even more opposition in congress, if elections go like the prophets say they will. In that case things will have to get worse before they can be acted upon.

thomas said...

I just got to read your link in your comment about the San Bruno explosion.. I was visiting with a retired welder who worked for PG&E for several years in California. He told me of a pipeline that they were removing from the ground for recycling or salvage. He said that they would pull out large runs of the pipeline and simply drop it and the welds would break apart so the pipe was sticks that were easily handled. He said the reason it broke so easy was that the welders had only surface welded the pipe with an Oxy-acetylene torch which was all they had to use in the early days.

In my welding tests; a weld of this type (torch) has to have full penetration and a good cap. I can't imagine sleeping at night with welds that would break apart simply by dropping the pipe.. I worry enough as it is about whether I am welding things together properly without this kind of work in my history. I have to prepare for yet more welding tests this coming week..

RYviewpoint said...

Thomas: It's good to hear that you take your work seriously. I wish everybody did. It is easy to get mad at management and "get back at them" by doing sloppy work or sabotaging the process. But in reality this rarely hurt the company or management. It is the users of the service or product who get hurt. Innocent bystanders.

The place where I worked management would tell the engineers that we were "gold plating" our designs and the systems we built. From my perspective it was simply taking their job seriously and enjoying the feel of work well done.

I can understand management wanting to "cut corners" in the hope of speeding up the work and making a bigger profit, but system failures are hard to identify. You are far better off to build in a safety factor for every known failure mode to ensure a sound system.

I remember reading somewhere how Henry Ford in the 1920s had his engineers study how his cars break down. It wasn't to figure out hot to strengthen parts. He wanted to know the weakest component and then lower the quality on everything else so that no part had a longer life expectancy than the weakest part. Bizarre.

My crazy viewpoint is that building quality in is far cheaper than trying to fix faults after the fact. One reason why Japan's production scared the US in the 1980s was that they had taken on the quality control ideas of Juran and Deming. Only in the late 1980s did quality engineering come back to America and only in the 1990s in a big way. The US automobile industry nearly died because it decided to rely on "sizzle" (advertising) and not "steak" (quality engineered cars).

One problem that the US and Canada have is that they have no career path for blue collar workers. In German they have an excellent apprentice program that is fully integrated with their high schools. When I taught high school I tried to get the principal interested, but he wasn't interested because it wasn't school board policy and it would just be "extra work" for him. That was tragic because I taught in the interior of BC where less than 20% of the kids went on to college.

One think I liked about the Toyota quality system (which obviously has failed in this decade because they now build cars with serious problems) was that they empowered the employees to stop the production line if they saw a problem. This is expensive, but they realized that only on the shop floor could you understand what was causing a problem and get at the root to fixing it. Asking engineers in another building to "fix" a problem when they weren't even acquainted with the shop floor was a big waste of time.

Anyway... it is good to hear that you take your job seriously. I wish more people did. It would be a better world.