The American Rescue Plan – GDP Impact Assessed

Goldman Sachs (Phillips/Briggs/Mericle, 3/13) document some aspects of the American Rescue Plan, signed into law by President Biden.

Source: Goldman Sachs (Phillips/Briggs/Mericle, 3/13).

Goldman Sachs outlines their estimates of the fiscal impulse resulting from the ARP.

Source: Goldman Sachs (Phillips/Briggs/Mericle, 3/13).

Peak impact is estimated for 2021Q2, at a 7 percentage point higher level of GDP. This estimate is predicated upon multipliers of a certain size (note interestingly there is little debate over the idea of positive “multipliers”).

CBO has made adjustments for social distancing in its previous projections of the CARES act; estimates of fiscal impact on GDP have to be conditioned on expectations regarding the extent of pandemic. GS is somewhat above the WSJ mean forecast, suggesting expectations of a higher package size and/or larger multipliers.

Figure 3: GDP actual (bold black), WSJ March survey mean (blue), Christopher Thornberg/UC Riverside Business School (red), Alfred Romero/NC A&T State University (green), Jan Hatzius/Goldman Sachs (orange), CBO estimate of potential GDP (gray), all in billions Ch.2012$, on log scale. Forecasted levels calculated by cumulating growth rates to latest GDP level reported. Source: BEA (2020Q4 2nd release), WSJ surveys (various), CBO (February 2021), and author’s calculations.

Interestingly, GS does not foresee a lot of overheating since their estimate of slack is greater than that implied by CBO’s estimate of potential.

Source: Struyven, Hatzius, and Bhushan, “There Is More Slack Than They Think?” Goldman Sachs, February 16, 2021.

93 thoughts on “The American Rescue Plan – GDP Impact Assessed

  1. pgl

    “GS does not foresee a lot of overheating since their estimate of slack is greater than that implied by CBO’s estimate of potential.”

    Goldman Sachs is also forecasting the largest fiscal impact early on and then tapering. Which is exactly what one would want from fiscal policy.

    1. JohnH

      More good news! “ Democrats, Pushing Stimulus, Admit to Regrets on Obama’s 2009 Response”

      Of course, the impact of Obama’s mediocre response and subsequent, self-defeating austerity has been obvious for a decade. What added to the tragedy was Democrats’ insistence on blaming it all on Republicans, viciously attacking anyone who dared suggest that Obama and Pelosi had a big role to play in the poor economy of the 2010s.

      1. Barkley Rosser


        We get it that you want to show that Trump was no worse than Obama or Hillary and Bush not worse than Clinton so you can justify your third party affiliation. But do you really want to claim that Republican opposition played no role in the initial too-small size of the Obama 2009 stimulus? I realize you avoid that issue by focusing on the Obama admin followup to passing the stim, not enough marketing apparently.

        Oh, and indeed Obama could have pushed more stim in 2011, but by then GOP had control of the House and was spouting on about impending hyperinflation and fiscal austerity. They played no role and it was all Obama’s fault? Really?

        This sort of thing does yet again make me embarrassed to have you as a fellow alumnus of UW, even though a certain party here thinks you provide all these deep insights.

        1. JohnH


          Democrats remind me of the joke about the man who was walking an unruly donkey. He came upon a sign that said, “Donkeys trained. No Beating.” He asked the trainer: “Is it really true that you can train donkeys without beating them?” The trainer assured him that it was so. The man left his donkey with him. Soon he heard a “thwack, thwack, thwack.” He turned around to see the trainer hitting the donkey over the head with a thick board. He rushed back and screamed: “I thought you said you didn’t beat donkeys in order to train them.” The trainer replied, “I don’t. I was only getting his attention.”

          It’s sad that it took someone as awful as Trump to beat Democrats over the head and remind them to act like Democrats again.

          And it truly embarrasses me that a UW graduate could constantly try to make excuses for a lame bunch of politicians that only now, a decade later, are beginning to acknowledge the error of their ways.

          Elephants are famous for their long memories. Donkeys aren’t. How long will it be before Democrats forget the lessons on the last decade?

          1. pgl

            “And yet, Biden did more for the economy with 50 votes in the Senate than Obama did with 60.”

            Gee – I thought your style was to bitch about what was not done. OK this was a good spending bill but since you refuse to attack Biden for not delivering (yet), permit me to list out things on at least my agenda:

            The minimum wage alas is still only $7.25 an hour
            Infrastructure investment has not been passed
            The Green New Deal has not been passed
            The Trump tax cuts for the rich are still in effect
            HR1 and HR4 need to be passed (voter rights)
            The George Floyd police reform bill not been passed in the Senate

            Of course the last items on this list are very important to our fellow black citizens including the Obamas. Maybe that is why you have not commented on them.

          2. Barkley Rosser


            Regarding the 2009 fiscal matter, maybe the Dems could have pushed through something larger, although they did not have the example of a too-small 09 stim to motivate them while many in both parties were worrying about it being too bad.

            The key player was Obama’s top econ adviser, Larry Summers, arguably a voice of Wall Street. I have long had a problem with the guy and have even argued him to a draw face to face, something few people do. As it is, let us be thankful he is not in the current admin as he has come out against this particular stim.

            Oh, and does this mean that you actually think Biden is better than Trump? I thought you thought they were about the same, both corporate tools thus justifying your third party stance.

          3. JohnH

            Barkley, So far I’m very pleasantly surprised with Biden. He’s even taken his message on the road to build support, something Obama barely did. Part of Obama’s problem was that there was little pressure from the left to do more, so it was easy to move right.

            Instead of pressure from the left there were plenty of partisan hacks ready to blame Republicans for everything, when in fact the Democratic leadership was rife with deficit hawks ready to embrace Paul Ryan’s fiscal conservatism. The party leadership seems to have learned, while some of the partisan hacks are still in denial that Democrats were ever behind austerity.

        2. pgl

          I’m rather amused that he is not attacking Biden (yet) for not getting something 10 times larger than the recent legislation. Likely the most progressive legislation in generations but it is never enough for this troll who just keeps repeating the same old song over and over for years and years.

          I’m glad you are brining this troll back to reality because I’ve gone very bored with his incessant whining.

        3. pgl

          I just put a link under the CPI post to McConnell’s scorched earth Senate speech. Of course McConnell has been running a scorched earth Senate since 2009. But this is AOK to people like JohnH as of course Obama has to be blamed for everything.

          1. JohnH

            And yet, Biden did more for the economy with 50 votes in the Senate than Obama did with 60.

            pgl the partisan hack just has to blame Republicans…even when Democrats had the votes to deliver.

        4. pgl

          “pgl the partisan hack”

          This troll always does this whenever one questions him. I take it as a badge of honor given the incessant stupidity he writes.

          1. pgl

            How did I miss this from JohnH?

            “when in fact the Democratic leadership was rife with deficit hawks ready to embrace Paul Ryan’s fiscal conservatism.”

            My comments at Angrybear and Econbrowser on how I utterly loathed the intellectual garbage spewed by Paul Ryan are likely still there. But JohnH routinely claims that I’m a partisan hack who endorsed this deficit hawkery. You see – JohnH is either incapable of reading the English language or he is a pointless liar.

      2. pgl

        You know if you had an ounce of courage you might decide to join the rest of us shooting down the right wing intellectual garbage from the likes of Bruce Hall and Manfred. But you don’t have an ounce of courage so pardon me for interrupting your steady steam of bitching.

        1. JohnH

          The best way to combat Republicans is to make sure Democrats serve the people, instead of just pandering to their corporate patrons.

          1. pgl

            And the way you do that is to attack anyone who might question a damn thing you write? You are not only an idiot but also a boring broken record.

  2. Moses Herzog

    To me, the relative amateur (although in actuality I see myself as above “joe six-pack” on most of these things, albeit a low bar), possibly the most surprising thing about this post is GS saying we have a larger slack than CBO is saying. I’m curious, does anyone other than our resident blowhard, i.e. anyone actually knowledgable, know how often in say the last 10–15 years that GS has gauged a GDP “slack” percentage/number larger than CBO has??

    1. pgl

      The crew at GS has been saying CBO’s estimates of potential output are on the low side. So has people like Brad DeLong. It would be nice if people started paying attention to what economists have been saying as opposed to setting up the usual BS straw men to attack.

  3. 2slugbaits

    The table at the top puts the lie to the GOP’s absurd claim that less than 10% of the ARP goes towards COVID relief. Of course, the claim itself is irrelevant because it’s not called the “COVID Relief Plan”; it’s called the “American Rescue Plan.” The Fox Noise talkingheads arrived at that 10% figure by adding the Public Health component ($125B) and the FEMA component ($50B), or ($125B + $50B) / $1844B = 9.5%. But that’s a pretty cramped definition of COVID relief. Anyone with half a brain would recognize that fiscal support due backstopping idled high contact service sector employees due to government public health regulations should be included in any sensible definition of COVID relief. Even CoRev should be able to figure that one out. Same with health insurance subsidies. Same with rental & homeowner assistance.

      1. pgl

        Republican tax cuts for the rich – no problem if it adds to debt (notice how he ducked that). OK we needed stimulus last year but we did not need it to be run with the Jared Kushner for the well connected. But McConnell is pretending we have a booming economy for all even without this new fiscal stimulus. Of course this is utter nonsense but Senator Turtle will go back into his shell when real economists point out the real world.

  4. Moses Herzog

    I guess I think/live inside my own head too much, but here is another one that got me:
    “(note interestingly there is little debate over the idea of positive “multipliers”)”

    Was this an inside joke Menzie was making to his students, or is this a reference to something a politician said?? I remember saying in other threads that I wasn’t sure if using the terminology “negative multiplier” was a good way to express that idea (you know, like how do you multiply something that “isn’t there”??) but I have actually seen IMF papers and a few others mention this even though it’s kind of NOT…… the word is escaping me right now…. not “self-evident”?? Not something that our minds would come to naturally….. oh that’s going to bug me until I can think of that word.

    1. Moses Herzog

      When I say “mention this” in an IMF paper, I mean, use that same expression “negative multiplier”. I thought of the word that was driving me crazy. Counterintuitive . It’s kind of counterintuitive to “multiply out” (how many iterations??~~as it assumably gets smaller and smaller) spending that “isn’t there”. Of course you can, because you’re “assuming” the money “would have” been there but wasn’t because “buhduh buhduh buhduh…..”

  5. Bruce Hall

    It would be interesting to add the proposed infrastructure and climate change plans (combined about $4 trillion) on top of this to see the impact. Also to see if it changes the estimate of inflation.
    Perhaps there is some overlap. It’s not clear to me if these are different names for the same plan or two parts to a larger plan. Perhaps (I hope) the former.

    I seem to recall a $0.75 trillion for child care/elder care and another $0.75 for higher education over the next decade (not including the cost of forgiving student loans) plus a couple of trillion for health care, housing, and something called “Buy American”. Shouldn’t these be added to the chart, too?

    These ought to give us about a huge bump in GDP, eh?

    Now, I believe there is another side of the coin (not talking about inflation).

    1. pgl

      “It would be interesting to add the proposed infrastructure and climate change plans (combined about $4 trillion) on top of this to see the impact.”

      Except that will not be enacted until 2022 and it will come with taxes to pay for this. But do please do continue to misrepresent things you do not understand.

      1. Bruce Hall

        Except that [infrastructure spending] will not be enacted until 2022 and it will come with taxes to pay for this. But do please do continue to misrepresent things you do not understand.

        Oooo, I must have misread the GS graph. I thought it went out to 2024.

        And raising taxes should really stimulate business and hiring.
        • Raising the corporate tax rate to 28% from 21%
        • Paring back tax preferences for so-called pass-through businesses, such as limited-liability companies or partnerships
        • Raising the income tax rate on individuals earning more than $400,000
        • Expanding the estate tax’s reach
        • A higher capital-gains tax rate for individuals earning at least $1 million annually. (Biden on the campaign trail proposed applying income-tax rates, which would be higher)

        Seems as if the government simply wants to be the middleman with a slight fee for transferring funds between accounts.

        I’m sure the $60 billion (paltry) tax increase in the “stimulus” bill isn’t included in the taxes planned for the infrastructure bill (or the climate bill?).

        As the saying goes: if a small tax is good, a huge tax is better.

        1. pgl

          Remind me again – when did Art Laffer get the Nobel Prize in economics. More like your favorite topic …. basket weaving.

        2. 2slugbaits

          Bruce Hall pgl said this: will not be enacted until 2022

          You said this: I thought it went out to 2024

          pgl was saying when the infrastructure spending would begin. You were saying when it would end. So no, you didn’t misread the GS graph; you misunderstood the English language.

          As to your bullet points, you might want to rethink things. Why do you believe raising the top marginal rate on very high income earners would hurt employment? And why would expanding the estate tax hurt employment? Both the empirical and theoretical evidence on the estate tax are unambiguous. Expanding the estate tax has a positive effect on the labor supply. The income effect always dominates the substitution effect because the substitution effect is zero when it comes to choosing whether or not you die. DUH! And why would raising the corporate tax rate hurt employment? Wouldn’t that make it more likely that companies would substitute labor for capital? Trump’s cut in the corporate tax rate certainly did not increase fixed investment in equipment. And how does a higher capital gains tax reduce employment?

          I love it when Trump supporters try to do economics. Bless their little hearts they try so hard. Kind of brings a smile and a tear to my eye.

          1. pgl

            Forgive poor Bruce as I doubt he has ever watched any infrastructure project. I moved to the very east end of Manhattan’s Upper East Side in late 2007 only to watch the 2nd St. subway project begin. What a mess for the residents. I moved to Brooklyn in 2013 and they still had not opened it up.

            Of course Bruce’s attention span is 6 minutes top. Anything that takes more than 6 years is way over his head.

          2. pgl

            “And why would expanding the estate tax hurt employment?”

            It would actually increase the employment of sleazy tax lawyers and their slime ball valuation ‘experts’ Hey Princeton Steve’s incompetence at finance would make him the perfect gift and estates valuation expert!

    2. pgl

      “During the campaign, Biden pitched a $2 trillion plan that aims to achieve carbon-free power generation by 2035 and creates “millions” of union jobs.”

      The 2nd damn sentence. Damn it you cannot read even two sentences. BTW in case you do not get what is meant by 2035, the story noted Yellen’s remarks about tax increases. Lord your inability to read your own links is really embarrassing. I guess you do not realize your last link is your landlord demanding overdue rent. Good luck posting from some street corner when you become homeless.

      1. Bruce Hall

        “…and creates “millions” of union jobs.” Uh-huh. Sure. Kind of like the Oakland Bay bridge made in China?

        Or maybe the solar panels made in China? Or the computer chips made in Asia? Or the steel for the construction?

        Perhaps you are referring to the new migrant workers unions for picking fruit. I’m sure the fruit will be non-GMO and organically grown to save the climate.

        1. pgl

          First you criticize Buy American and now you criticize using anything Chinese? A wee bit inconsistent. But I’m sure Stephen Miller would applaud the hatred for anything Chinese!

        2. pgl

          I get that you are too lazy and stupid to actually read your own links so let me help:

          “He says American steel fabricators don’t have the capacity for a job like the Bay Bridge. ”

          Now you did write “Or the computer chips made in Asia?”

          Wasn’t there some troll named Bruce Hall who whined about a global shortage of semiconductors. I guess you would wait on this project until this capacity to make these inputs were available in the US which of course would mean jobs not filled now.

          You worked for Ford back in the day? I guess your management incompetence is why Ford almost went bankrupt!

        3. pgl

          Your little story made a false or very outdated claim. Chinese manufacturing wages may have been $12 a day 20 years ago (that’s $1.50 an hour if we are talking an 8 hour day just in case your preK teacher has not taught you simple arithmetic yet) but check this out as it points out wages in China have grown considerably over time. Of course everyone knows that – everyone except Bruce “no relationship to Robert” Hall!

    3. pgl

      Dean Baker needs to stop laughing at you and start educating your stupid little brain with his wisdom:

      “I seem to recall a $0.75 trillion for child care/elder care and another $0.75 for higher education over the next decade”.

      Over the next decade is not spending during 2021. Since you flunked preK arithmetic, $750 billion over a decade is only $75 billion per year. Of course you provided no link here so we will chalk this up as another Alternative Fact emailed to you be Kelly Anne Conway. Who BTW has joined Dean Baker for laughing at you. Over a decade – hello?!

    4. baffling

      “Now, I believe there is another side of the coin (not talking about inflation).”
      now if a country had to follow the same rules as a business, you may be correct. but a nation does NOT have to follow the same rules as a business. in fact, it should not follow the same rules as a business. that is how we got the great depression. if you do not understand this fundamental fact, you should not even be posting here bruce.

    5. 2slugbaits

      Bruce Hall Regarding the infrastructure bill it’s all but certain to be paid for with some combination of tax hikes and user fees. Do you object? If so, then I suggest you don’t drive and don’t use your local sewer & water utilities and don’t order anything that requires transportation. If you aren’t willing to pay for it, then you shouldn’t reap any of the benefits. Remember the story of the Little Red Hen?

      The Green New Deal isn’t an optional luxury or “nice to have” thing. Someone and some generation is going to pay the cost one way or another. And the longer we wait to invest in the GND, the greater the cost. As a geezer it’s understandable why you don’t want to pay for something for which you will get almost no benefit. But on the other hand you can probably understand why a much younger generation might be upset about having to pay for your refusal to pay for enjoying the benefits of a carbon economy without having to pay for those benefits.

      As to forgiving student loans, Biden has made it pretty clear that he does not support total forgiveness. He’s thinking in terms of $10K, which would primarily benefit lower income people who attend community colleges and public universities. That’s not unreasonable. We fund K thru 12, so why not K-14? Don’t forget, many of today’s high earning taxpayers got their college degrees back in the day when the government heavily subsidized the cost of going to college. And then as those high income earners became Republican voters governments started cutting back on higher education. It’s called pulling up the ladder behind you. So a little payback is probably in order.

      1. Bruce Hall

        The Green New Deal isn’t an optional luxury or “nice to have” thing.

        Really. Not optional? Wow! Amazing. I think there are millions of people who would disagree with that concept.

        1. 2slugbaits

          Bruce Hall There probably are millions of people who would disagree, just as there are millions of people who aren’t terribly bright. Climate change is real and one way or another we’re going to have to implement something like a GND.

        2. pgl

          The same millions who think Trump won in 2020. It is the same morons who would rather drink bleach that take the vaccine. I hope Amazon is still delivering your bleach each week.

        3. Baffling

          You may think dealing with climate change is optional, bruce, because you are old and will be dead before payment is due. But some of us will be around for a while and will have to pay that bill when due. Why are you sticking us with the bill bruce? Are you a cheapskate or something?

          1. pgl

            “Are you a cheapskate or something?”

            He makes his own mom to pay for his take out meals that he has been eating in her basement for the past year.

  6. pgl

    Warren Buffett’s Stock Options and Common Sense was published on April 9, 2002 but its opening is even more interesting in light of 1/6/2021:

    In 1994 seven slim accounting experts, all intelligent and experienced, unanimously decided that stock options granted to a company’s employees were a corporate expense. Six fat CPAs, with similar credentials, unanimously declared these grants were no such thing.
    Can it really be that girth, rather than intellect, determines one’s accounting principles? Yes indeed, in this case. Obesity — of a monetary sort — almost certainly explained the split vote.
    The seven proponents of expense recognition were the members of the Financial Accounting Standards Board, who earned $313,000 annually. Their six adversaries were the managing partners of the (then) Big Six accounting firms, who were raking in multiples of the pay received by their public-interest brethren.
    In this duel the Big Six were prodded by corporate CEOs, who fought ferociously to bury the huge and growing cost of options, in order to keep their reported earnings artificially high. And in the pre-Enron world of client-influenced accounting, their auditors were only too happy to lend their support.
    The members of Congress decided to adjudicate the fight — who, after all, could be better equipped to evaluate accounting standards? — and then watched as corporate CEOs and their auditors stormed the Capitol. These forces simply blew away the opposition. By an 88-9 vote, U.S. senators made a number of their largest campaign contributors ecstatic by declaring option grants to be expense-free. Darwin could have foreseen this result: It was survival of the fattest.

  7. pgl

    I offer up this brief but informative discussion of the global semiconductor sector as something that Bruce Hall might actually read beyond the damn headline. Bruce the other day gave us a scatter shot of a bunch of articles he clearly did not understand as he drew two really stupid lessons – (1) the pandemic is causing a semiconductor shortage (none of these articles said that); and (2) companies need to vertically integrate (a concept he clearly does not get).

    This well informed discussion notes that the two major players are Samsung (Korea) and Taiwan Semiconductor Manufacturing. Korea and Taiwan invested heavily in this sector for decades eclipsing the dominance of the US.

    The policy implications are that countries like China and the US should develop their own productive capacities. China already is. But I guess Bruce Hall got confused as his boy Trump never grasped this issue. Biden has and we are now starting to re-invest in the sector we invented generations ago. But of course someone who gets all his information from his MAGA hat will never grasp this either.

    1. Bruce Hall


      I think you misread my comment. I did not say the pandemic caused the chip shortage, that’s what the contention of someone else’s comment prior to mine that linked to the ABF substrate plant fire shortage (did you read that part?). So please don’t write words on my keyboard.

      I also pointed out that vertical integration as envisioned by Henry Ford was something that Musk appeared to be pursuing, not that he had achieve it. I think I do know what vertical integration means having worked at Ford for 30 years and seeing what the move to supplier sourcing, especially single sourcing, meant both good and bad. Production stoppage due to a single-sourced component shortage happened more often than the proponents of that strategy wished to concede.

      As to policy implications, it is helpful to have multiple sources of strategic supplies if you can produce them yourself. We saw that at the beginning of the COVID epidemic when we couldn’t obtain critical PPE or medicines from China. I’d say the same thing about critical technological components and raw materials. Egg in one basket and so on.

      In a perfect world we don’t have concerns about these issues. We hardly live in a perfect world.

      1. pgl

        So you are basically saying that you are not responsible for any of the sentences your write. Got it. Of course I have always noted you are Kelly Anne’s Steno Sue.

          1. pgl

            I read it – your usual stupid garbage. Now you should start reading your own links before embarrassing your poor mom.

  8. pgl

    Douglas Irwin wrote this paper on trade policy in the semiconductor sector relating it to a dispute between the US and Japan during the Reagan days:

    How times have changed. I just checked the financials for the Taiwanese giant TSMC and 2020 were an incredible year for them with surging sales, rising profit margins, and a doubling of their equity value to $560 billion. Chips are big business.

      1. pgl

        A credible article from your finally but did you actually read it. Can I make this easy for you?

        ‘The U.S. share of global semiconductor fabrication is only 12%, down from 37% in 1990, according to the Semiconductor Industry Association.’

        That is true as I have been noting. But do you know what the Semiconductor Industry Association is all about? First of all it was set up to lobby the Reagan Administration to protect US manufacturing. Of course trade protection did not work out that well. Now this association has been of late lobbying against attempt by Trump and others to restrict trade. So I guess this is why Kelly Anne did not let you know who they were.

        ‘It might not seem important that 88% of the semiconductor chips used by U.S. industries, including the automotive and defense industries, are fabricated outside the U.S. However, three issues make where they are made critical to the U.S. as the global leader in electronics: lower capability, high global demand and limited investment.’

        Global demand is up which is driving the shortage – not that stupid pandemic crap you echoed. And the profits of semiconductor manufacturers like Micron are up which will encourage investment. Oh wait – you have no idea where Micron’s headquarters even are. Once you figure that out – please educate us where their production facilities are. Snicker!

  9. Manfred

    All of this is fine and dandy. The federal governments spends gazillions of money – money it does not have – and of course Goldman Sachs is thrilled, as usual.
    What nobody seems to address or ask is: why exactly was this “American Rescue Plan” necessary? For what exact purpose? The economy was well on its way to grow without it anyway. So why exactly were these 1.9 Trillion needed? To pay off Democratic friends? To pay off Democratic states?
    Nobody seems to address the fact that two of the most well known macroeconomists, Lawrence Summers and Oliver Blanchard, came out against this package.
    Why were they against it? What did they see that Goldman Sachs and the brainy commenters in this blog did not?

    Here is an example in today’s Baton Rouge newspaper:
    “Public schools are in line to get a staggering $2.6 billion from the federal stimulus bill that won final congressional approval last week, more than double the amount that schools landed in December.
    The announcement has set off a new wave of questions on how the aid will be used, especially since public school leaders are still grappling with how to spend the $1.2 billion approved less than three months ago and even some of the $287 million authorized in March 2020.”

    So public schools did not spend all the money allocated to them in previous money blowouts, but for some reason it was necessary to spend even more, in the 1.9 Trillion package. Is this what is taught in a “public policy school” – just spend other people’s and future generations’ money like a drunken sailor?

    Again – why exactly was this package of 1.9 Trillion needed? And by the way – the Biden Administration is now talkiing of a “major tax hike”. Really? So they spend 1.9 Trillion in a blowout package, and then they realize they have to increase taxes – do a “major tax hike”? Is this stuff taught at “public policy schools”?

    1. pgl

      Lawrence Summers and Oliver Blanchard, came out against this package.

      Manfred resorts to lying again. Come on Manfred – please mansplain for us what they actually wrote. Oh wait – you clearly do not understand what they wrote. Never mind.

    2. pgl

      “So public schools did not spend all the money allocated to them in previous money blowouts, but for some reason it was necessary to spend even more, in the 1.9 Trillion package.”

      They may have spent less because they had to close because of the pandemic. I guess Manfred sort of missed the point about the dangers of getting infected with this virus.

      Look I get that this arrogant little troll is actually really a dumbass but could he have made it more obvious???

    3. 2slugbaits

      Manfred Look at the G-S graph…the second one in Menzie’s post. Notice that spending does not occur in one lump sum and then it’s done. Spending is always spread out over several years and decays exponentially. One of the big mistakes that Obama made was that the ARRA phased-out too quickly before the economy was able to stand on its own two feet. Biden learned from the way McConnell undercut Obama. That big lesson was that you only get one bite at the apple, so make it count. One of the reasons that the economy appears likely to rebound later this year is because businesses, consumers and local governments feel confident that the federal government will be there to backstop them if there’s a downturn. A lot of people burned through their wealth during the pandemic even though the personal savings rate was very high. Those who are deeply in debt and behind in their rent will act as a drag on the economy unless the government extends a lifeline. Take away the promise of a government backstop and the economy’s future prospects would not look nearly so bright.

      Is the $1.9T fiscal package too large? It might be, but the consequences of it being too small are a lot worse than if it’s too big. If it’s too big and we get inflation the Fed can always increase interest rates. Basically we have two policy tools to correct for too much stimulus, but only one policy tool to correct for an underpowered stimulus. That’s an important asymmetry.

      then they realize they have to increase taxes – do a “major tax hike”?

      Ever hear of something called a balanced budget multiplier?

      just spend other people’s and future generations’ money

      Well, when the problem is weak aggregate demand the problem is that other people are not spending their money. Instead, those “other people” are asking the government to spend it for them. Why else do you think Treasury rates are so low? The financial markets are begging the government to issue more debt. As to “future generation’s money”, there’ s no such thing as a Fiscal Ghost of Future Christmas pulling future spending into the present. Future generations pay interest to themselves. And if the interest rates are less than the growth rate created by that borrowing, then future generations are better off.

      Just where did you learn macroeconomics? Sounds like you’re a disciple of Angela Merkel’s famed “Swabian housewife.”

      1. pgl

        “Just where did you learn macroeconomics?”

        Manfred got a Ph.D. from the University of Wikipedia!

      2. Manfred

        oh slugs…
        you ask: Just where did you learn macroeconomics?

        Same question to you, slugs, same question to you.

        Of all the follies you mention, let me point out one: ” Instead, those “other people” are asking the government to spend it for them.” Really? Who? What “other people”? Enlightened Democrats who think they can spend money better than Joe Blow on the street? So a bunch of bureaucrats in Washington DC sitting in offices are better at spending money than millions of people? Why not set up a Politbureau then, that assigns spending of all the money people have?
        You see slugs, here is the philosophical difference – you put your faith in a bunch of bureaucrats, probably educated in “schools of public policy”, who think they are better resource allocators. I don’t.

        The economy was recovering well before the package was approved. The whole package was unnecessary. Just a huge blowout of money to pay off political friends.

          1. pgl

            Please do not bother Manfred with actual data. It will only get him angry and we will have to endure more of his nonsense.

        1. 2slugbaits

          Manfred When “other people” choose to save income rather than spend it, they are asking others to spend it for them. That’s what it means to buy a government bond. You’re telling the government that you’d rather the government spend the money and deliver an interest payment rather than spend it yourself. You seem to be the one who doesn’t understand the difference between household economics and macroeconomics; hence the “Swabian housewife” reference.

          BTW, I learned my economics at what is generally considered the freshest of freshwater econ departments. Fortunately I was smart enough to unlearn a lot of freshwater macro.

          1. pgl

            Freshwater programs usually include the University of Chicago, Carnegie Mellon University, Cornell University, Northwestern University, the University of Minnesota, and the University of Rochester but I would also include two University of California schools – Santa Barbera and Riverside. All very good schools.

            I once co-taught a graduate seminar in macro with a bright person from UCSB. We did not agree on much but I’m sure he too would tell someone like Manfred to find another line of study.

          2. pgl

            Anyone who would write this BS is beyond idiotic?

            “Enlightened Democrats who think they can spend money better than Joe Blow on the street? So a bunch of bureaucrats in Washington DC sitting in offices are better at spending money than millions of people? Why not set up a Politbureau then, that assigns spending of all the money people have?”

            The kind of transfer payments in this bill are checks deposited in people’s bank accounts to spend as they choose. No one is telling them what groceries to buy and what clothes to purchase for their kids. No Manfred once again proves his is nothing but a troll and one that is not exactly the sharpest pencil in the box.

        2. pgl

          “Same question to you, slugs, same question to you.”

          Seriously dude – you can’t even mention your school? Why not? Oh yea – the chair of the economics department was Dr. Seuss. Good to know you never attended a real economics class in your life!

        3. pgl

          “The economy was recovering well before the package was approved. The whole package was unnecessary.”

          Gee Senator Turtle (aka McConnell) said the same thing in the floor of the Senate. Of course most people watching his charade fell off their chairs laughing.

          BTW the economy was recovering in 1936 too and then boom your kind of fiscal austerity occurred leading to the 1937 recession. But we get it – your knowledge of economic history is even weaker than your grasp of macroeconomics.

    4. Moses Herzog

      Manfred, have you ever had to lower yourself, by working a job in state government?? Getting your living salary/daily bread from state government I mean?? I mean, according to Republicans isn’t that where all the lazy useless people go to get a paycheck??~~to work in the state government?? You would never stoop yourself that low, would you Manfred??

      Here’s some interesting numbers for you Manfred:

      Did you go to public school as a child Manfred?? Gee, I hope not, it might make me wonder about you. What about your children, did they go to public school?? If they went to public school in Louisiana (perennially ranked in the bottom 5 states in the nation in public education, and surprise surprise via their dollars spent on public education BOTTOM 5 IN EVERY CATEGORY UNDER THE SUN) your children are probably ready to work at McDonald’s right about now, if they can make change without the help of a machine or scanning someone’s credit card.

      Here’s some other interesting numbers for you Manfred:

      There was a spending freeze on Louisiana public education after the 2008 financial derivatives and swaps crisis, yes Manfred?? That was brought on by, correct me if I’m wrong, your TBTF banker and insurance friends who work in the “very efficient” private market economy. Or did Jamie Dimon and Henry Paulson (“W” Bush’s Treasury Secretary at the time when the swaps and derivatives crisis hit) give you another fantasyland excuse?? Were you on this blog or anywhere online bitching about tax dollars being “redistributed” to the large banks?? Or was your keyboard and your mouth mysteriously silent on that topic, when the TBTF banks and insolvent insurance companies were robbing the public education coffers???

      I guess our great “Economics technocrat” Manfred believes the way to “Make America Great Again” is by starving public education of resources and attracting low quality teaching with low salaries so that all of America’s young people can grow up to be a mass of village idiots?? A shamefully dumb electorate is certainly working out well for Republicans at the ballot box.

      1. pgl

        Manfred was kept out of public schools getting his “education” from mommy – Ayn Rand. Home schooling creates some warped minds.

    1. Manfred

      I thought the new guidelines imposed by the owners of this blog established that commenters had to restrict their comments on the blog entry itself.
      But apparently, not.

      1. Menzie Chinn Post author

        Manfred: Re-read the policy. Racist/misogynistic comments will constitute cause for deletion and banning. We asked for people to keep their comments topical, but heck, I’m not going to go over every comment to see how close they hew to topic. Otherwise, I’d delete this comment of yours.

        1. Manfred

          Oh yes Menzie, by all means, let us re-read the policy: it very clearly states – I quote:

          Comments should be directed to the topic of the original post, and commenters should restrict themselves to civil discussion of the substance of comments. In addition, racist, misogynistic comments and use of profanity will not be permitted.

          Effective immediately, failure to adhere to this policy will constitute cause for editorial action.

          Per James Hamilton and Menzie Chinn

          I repeat: Comments should be directed to the topic of the original post.

          Tell Menzie, how am I misreading it?

          1. Menzie Chinn Post author

            Manfred: First sentence is admonition. Second sentence (“In addition”) justifies deletion/banning since they are “not permitted”.

            So, forgive me if I don’t understand your confusion and/or inability to comprehend.

          2. noneconomist

            I, for one, can’t wait to read “Manfred Speaks”, a scintillating new econ blog featuring Manfred, whose latest posts have consisted of whining about the injustices he’s suffered on Econbrowser.

          3. pgl

            March 16, 2021 at 10:17 pm
            I, for one, can’t wait to read “Manfred Speaks”

            Remember Max Speaks, You Listen? Great blog. Now what we will see with your suggestion:

            Manfred Speaks, NO ONE listens!

  10. pgl

    An interesting discussion on the semiconductor shortage from the Harvard Business Review:4

    Geopolitical factors also played a role, specifically when the Trump administration began tightly regulating sales of semiconductors to Huawei Technologies, ZTE, and other Chinese firms. Those companies began stockpiling chips essential to 5G smartphones and other products. At the same time, American firms were cut off from chips made by China’s Semiconductor Manufacturing International Corporation after the federal government blacklisted the firm.

    So Trump’s stupid trade war with China is a cause of this shortage. Excuse me but this was never mentioned by Bruce Hall in his earlier absurd rant. Why not Bruce? Where you afraid that if you did – Kelly Anne Conway would take your MAGA hat away?

    1. Manfred

      I thought that the owners of this blog had established a new policy, that commenters had to restrict comments to the specific blog entry in question.
      But apparently, not.

      1. Menzie Chinn Post author

        Manfred: Re-read the policy. Racist/misogynistic comments will constitute cause for deletion and banning. We asked for people to keep their comments topical, but heck, I’m not going to go over every comment to see how close they hew to topic. Otherwise, I’d delete this comment of yours.

      2. pgl

        Like your dishonest little attack on the intelligence of anyone but your rightwing garbage is the only acceptable comments here. Gee Manfred – I did not attack your race, your religion, or your sexual preferences so I did not banned simply because I attacked your integrity.

  11. baffling

    the state fiscal aid is the game changer between the biden recovery efforts and the obama recovery efforts. we had some uneducated who complained about the slow recovery during the obama era, but would always ignore the HUGE impact the state and local governments had on unemployment. this has at least be addressed during the biden efforts. i doubt we will get the same slow recovery this time around. this really was a key win for biden.

    1. pgl

      “we had some uneducated who complained”

      Speaking of uneducated trolls who complain, read the latest BS from Manfred.

  12. pgl

    Can we remind people like Bruce “no relationship to Robert” Hall that expenditure switching is not the same thing as expenditure adjusting. Yes his utter confusion over the fiscal stimulus debate included “Buy American” which is Biden’s form of what Bruce’s hero called MAGA. I guess Bruce thinks Trump’s trade protection increased our net exports which means he utterly does not understand a damn thing Menzie has so patiently noted for the last several years.

    But yea we need to produce more semiconductors locally as opposed to in Asia. Not for Bruce Hall’s RonJon level of stupidity (as if it was the pandemic that led to the shortage of semiconductors which in truth came from an increase in demand). So Micron produces more semiconductors and Samsung ends up selling their product to other nations. A win, win but for some reason Bruce Hall thinks this will drive up US inflation. Yes – Bruce is that DAMN stupid.

  13. pgl

    Biden is putting Gene Sperling in charge of making sure the funds from the act will be allocated efficiently and properly. This is a far cry from how Trump got rid of the people who were supposed to administer the CARES Act, which essentially became the Jared Kushner slush fund.

    Of course Kelly Anne Conway is composing an email of Alternative Facts which will be sent to his little toady Bruce Hall to become another one of their patented comments here.

  14. Dr. Dysmalist

    Yes, I’m old enough to remember that, during the not-so-Great Recovery, Indiana’s GOP state and federal legislators and state office holders seemed to alternate on a daily basis between complaining that the recovery act and resulting deficits were too large, and lobbying the feds to pay states more for unemployment insurance. No cognitive dissonance was ever detectable. Such is life with the GOP, especially now that it’s the GQP.

    BTW, I agree that it seems as if Old (emphasis on old) Uncle Joe learned a few useful things (GASP!) from his experiences during the Obama Administration. He’s been a pleasant surprise. So far, he’s done very little, if anything, for objective people to complain about. Gee, it’s almost like politics, and especially governing, are professional skills rather than part-time hobbies.

    1. pgl

      “Indiana’s GOP state and federal legislators and state office holders seemed to alternate on a daily basis between complaining that the recovery act and resulting deficits were too large, and lobbying the feds to pay states more for unemployment insurance. No cognitive dissonance was ever detectable. Such is life with the GOP”

      So true. Please remind JohnH that there has always been this problem with the GOP. He for some dumb reason thinks Republicans like McConnell are better than Democrats like Obama.

      1. JohnH

        Pgl is probably a big fan of the Detroit Tigers because “they’re not as bad as” the Pittsburgh Pirates. And he was probably a big fan of Calvin Coolidge because “he wasn’t as bad as” Warren Harding.

        When “not as bad as” is your standard, it’s a race to the bottom. And the last 50 years of presidential politics shows it…which is why I have voted third party for the last quarter century.

    2. Barkley Rosser


      I think Biden is doing very well on domestic policy, but I confess I am becoming increasingly concerned about foreign policy. In particular it is increasingly looking like he has let neocon hawks hiijack the effort to get the JCPOA back and going with Iran. This should have been an easy slam dunk, just do it. But his lead people have made all sorts of demands, including the face one about “Iran must move first” with reports of no talks going on, although maybe some are secretly. I sure as heck hope so. Otherwise, this may just end up in a place that pleases only Netanyahu and MbS, ugh.

      There are some other areas of foreign policy I am concerned about, but that is the current biggie. Heck, Biden has all this foreign policy experience and a dovish past, but rather than having people like Kerry (who is off chasing climate stuff) and Wendy Sherman in charge, he has the likes of the awful Victoria Nuland apparently driving policy.

  15. Moses Herzog

    Probably Iranian military (and/or proxies’) ballistic missile strikes on or near U.S. Mid-East bases might have something to do with Biden being slow to play nice with Iran.

    Don’t know if our geriatric crew here are keeping up on that. U.S. Presidents tend to be strange that way when U.S. soldiers lives are seriously injured, lost, or threatened. Who knew??

    1. Barkley Rosser

      And Biden hit pro-Iranian militias in Syria who supposedly attacked US forces in Iraq. I have no problem with that, and I and others thought that and the Iranian moves were all pre-diplomatic noise and puffing. But both sides seem to have gotten themselves stuck in a “You go first” mode, with the Iranians supposedly rejecting an EU initiative recently to get talks going, although they may be happening secretly, perhaps in the usual suspect, Oman, whose Muslims are Idabite and thus neither Sunni nor Shia. But then Iran has suggested a low key initial move US could make, letting South Korea loosen up funds owned by the Iranians, but apparently the US has nor moved on this.

      No, Moses, sorry, this goes beyond missile strikes. Neocon hawks in the admin, with both eh NSA Sullivan and the SecState Blinken, seem to have gotten on board with this “Iran must move first and they must be willing to negotiate on items like missiles not in the original JCPOA,” the latter a demand coming out of Netanyahu, with this latter bs coming out of them prior to any Iran missile strikes. This is not going well, and I am getting a bad feeling about it, as an old Middle East hand.

    2. joseph

      The old circular argument “We can’t withdraw our troops because they keep attacking our troops because we don’t withdraw our troops.”

      The U.S. has no particular reason to fight wars in the Middle East. The Middle East simply does not matter to the U.S. The U.S. should not be taking sides for Israel or the Saudis against Iran. Just leave them alone. That’s their region to manage, not the U.S.

      The U.S. does have an interest in reducing nuclear proliferation, but that is more a diplomatic issue than a military one. The presence of U.S. troops in the region just makes that diplomacy more difficult.

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