More on the Stimulus

Here’s a heat map that shows state-by-state allocations for the portions of the Economic Recovery and Reinvestment Act for which we could establish where the money is going (numbers from the Center for American Progress).  The darker a state, the more money it receives.

The average state receives $1707 per person, and the $825 billion package is spread out fairly evenly over the country.  There are, however, two places that benefit particularly well from the bill:  Alaska fetches $2550 per person, more than three standard deviations above the mean, and DC gets $2821 a head, nearly 4.2 standard deviations above the mean.

With this bill, Alaska continues its tradition of reaping bounty from federal coffers.  The state received $506.34 per capita in earmarks last year, according to Taxpayers for Common Sense, the highest in the country.  Number two was Hawaii at $226.86, less than half of Alaska’s tally.

Complete stimulus figures state-by-state after the jump.

Inauguration Twitter Excitement

A fantastic visualization of the Twitter buzz surrounding Obama’s inauguration.  The number of tweets steadily increases starting Monday morning, and then Tuesday at noon, the map explodes with activity.

The CBO’s Perspective on the Stimulus

An excerpt from CBO Director Douglas Elmendorf’s testimony before Congress:

In the absence of any changes in fiscal policy…the shortfall in the nation’s output relative to its potential would be the largest—in terms of both length and depth—since the Depression of the 1930s.

And perhaps even more important, since economists from across the ideological spectrum already agree on the need for a stimulus, Elmendorf estimates the bill’s impact:

[O]utput would be between 1.3 percent and 3.6 percent higher at the end of this year, higher by a similar amount at the end of next year, and 0.5 percent to 1.4 percent higher at the end of 2011…[T]he number of jobs would be between 0.8 million and 2.1 million higher at the end of this year, 1.2 million to 3.6 million higher at the end of next year, and 0.7 million to 2.1 million higher at the end of 2011.

Essentially, Obama could accomplish his goal of saving/creating three to four million jobs through this package alone.

One more point:  Republicans have argued that the bill will not do enough to spark the economy, and as an alternative, they’re pushing billions more in tax cuts.  The CBO calculated the multiplier effect for a variety of policy options and found that direct purchases by the federal government are one-and-a-half to two times more effective than well-targeted tax cuts.  Well-targeted tax cuts are what the Obama administration originally included in the package – tax cuts targeting the lower socioeconomic brackets where no one can afford to save the money.  Less-well-targeted tax cuts are what the Republicans offer: see Mitch McConnell’s middle-class tax cut.

Aftermath of Financial Crises

In today’s Barrons, Alan Abelson summarizes a paper (.pdf) by Ken Rogoff and Carmen Reinhart:

They cite three defining elements of the aftermaths of severe financial crises. First, asset markets of just about every kind suffer a bruising and prolonged battering. On average, for instance, real housing prices plunge 35%, and the agony stretches out over six years, while equity prices lose a whopping 55% over roughly 3½ years.

Second, output and jobs take it on the chin: The unemployment rate shoots up (again, on average) 7 percentage points over four years. Meanwhile, gross domestic product suffers losses averaging more than 9%, but — scant consolation — it happens more quickly, typically in two years or so.

Third, the real value of government debt tends to explode, shooting up an average 86% in the major post-war slumps. Reinhart and Rogoff contend that the huge swelling of such debt owes not, as commonly believed, primarily to bank bailouts and handouts (see, the banks aren’t even very good at raiding the Treasury). What really kites government IOUs, they say, is the drastic shrinkage in tax revenues generated by faltering economies and the “often ambitious countercyclical fiscal policies aimed at mitigating the downturn.” (A timely, obvious example is that $825 billion stimulus package the new administration has its heart set on.)

As an example of the potential turmoil ahead, unemployment (currently teetering at a 16-year-high of 7.2%) seems destined to creep upward through this year and possibly the next, brushing up against 10% before petering out.

Meanwhile, Biden and Larry Summers echoed the same message on the Sunday talk shows, saying that there’s “no good news” on the economy and the problems “aren’t going to get solved that fast.”  This communications strategy, led by Obama’s efforts to gird Americans for a slow recovery, has filled the public with an extraordinary reservoir of patience.  According to the latest NYT/CBS News poll, two-thirds of the country think the recession will last two years or longer, yet there’s still widespread confidence that Obama can turn the economy around.  That base of support will be critical as the economy continues to struggle.

Message Mismatch

John Thain, recently ousted from his post at Bank of America, paid $1.2 million to refurbish his office suite last year — after his company’s huge losses were made public.  While redecorating, he was preaching the virtues of “cost control” to employees and advised them to cut back on entertainment and travel.

Here’s a list of Thain’s additions, which he personally approved:

Area Rug: $87,784
Mahogany Pedestal Table: $25,713
19th Century Credenza: $68,179
Pendant Light Furniture: $19,751
4 Pairs of Curtains: $28,091
Pair of Guest Chairs: $87,784
George IV Chair: $18,468
6 Wall Sconces: $2,741
Parchment Waste Can: $1,405
Roman Shade Fabric: $10,967
Roman Shades: $7,315
Coffee Table: $5,852
Commode on Legs: $35,115

Memo To Krugman

Paul Krugman, who has turned Obama into his weekly pinata, takes another whack today:

Thus, in his speech Mr. Obama attributed the economic crisis in part to “our collective failure to make hard choices and prepare the nation for a new age” — but I have no idea what he meant.

If someone makes $40,000 a year, he shouldn’t take a loan for an $800,000 house.  When the savings rate plunges to near zero and dips into the red temporarily, there is a collective failure.   Obama means, after an era of living beyond its means, the public must make the hard choice of sacrifice.

The government shied away from difficult decisions as well, repeatedly kicking the can down the road on Social Security, Medicare, pensions, etc.  Consequently, the budget spiraled deeper into deficit, hampering current options with which to confront the financial crisis.

Get-Out-The-Vote Research

A summary of recent experiments turns up this nugget:

The content of mobilization messages is not as important as the quality, timing and delivery of messages, which is not to say that message content does not matter at all.

Eyes on Obama

*1.8 million attended the inauguration at the National Mall.

*CNN provided 21.3 million video streams.

*According to Nielsen, 29.2% of households watched the ceremonies.

*A graph of Google’s search traffic on Tuesday:

Jobs Created

Obama plans to save or create three to four million jobs over the next two years.  The records of his predecessors:

Ranking the Predictions

Georgetown Professor David Walker ranks the different forecasting models: the Iowa Electronic Market came out on top with a 0.2% error, while the RealClearPolitics average (0.3% error) was a close second.

RCP’s success speaks to a larger point about predicting presidential elections: with the abundance of polls, a simple aggregate provides a fairly accurate result.  And, even without polling, plugging a series of macroeconomic variables into a model gets close to the final margin.