Transcript Kurth - bYTEBoss

The Economy
By Jeffrey Kurth
Selection 1 - Article
Averting the Worst
By PAUL KRUGMAN
Published: August 9, 2009
New York Times
http://www.nytimes.com/2009/08/10/opinion/10krugman.html?adxnnl=1&adxnnlx=1260738036AYyTxAoNZrit8qt8QS2eKw
Averting the Worst
By PAUL KRUGMAN
Published: August 9, 2009
So it seems that we aren’t going to have a second Great Depression after all. What saved us? The
answer, basically, is Big Government.
Just to be clear: the economic situation remains terrible, indeed worse than almost anyone thought
possible not long ago. The nation has lost 6.7 million jobs since the recession began. Once you
take into account the need to find employment for a growing working-age population, we’re
probably around nine million jobs short of where we should be.
And the job market still hasn’t turned around — that slight dip in the measured unemployment
rate last month was probably a statistical fluke. We haven’t yet reached the point at which things
are actually improving; for now, all we have to celebrate are indications that things are getting
worse more slowly.
For all that, however, the latest flurry of economic reports suggests that the economy has backed
up several paces from the edge of the abyss.
A few months ago the possibility of falling into the abyss seemed all too real. The financial panic
of late 2008 was as severe, in some ways, as the banking panic of the early 1930s, and for a while
key economic indicators — world trade, world industrial production, even stock prices — were
falling as fast as or faster than they did in 1929-30.
But in the 1930s the trend lines just kept heading down. This time, the plunge appears to be
ending after just one terrible year.
So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in
the very different role played by government.
Probably the most important aspect of the government’s role in this crisis isn’t what it has done,
but what it hasn’t done: unlike the private sector, the federal government hasn’t slashed spending
as its income has fallen. (State and local governments are a different story.) Tax receipts are way
down, but Social Security checks are still going out; Medicare is still covering hospital bills;
federal employees, from judges to park rangers to soldiers, are still being paid.
All of this has helped support the economy in its time of need, in a way that didn’t happen back in
1930, when federal spending was a much smaller percentage of G.D.P. And yes, this means that
budget deficits — which are a bad thing in normal times — are actually a good thing right now.
In addition to having this “automatic” stabilizing effect, the government has stepped in to rescue
the financial sector. You can argue (and I would) that the bailouts of financial firms could and
should have been handled better, that taxpayers have paid too much and received too little. Yet
it’s possible to be dissatisfied, even angry, about the way the financial bailouts have worked while
acknowledging that without these bailouts things would have been much worse.
The point is that this time, unlike in the 1930s, the government didn’t take a hands-off attitude
while much of the banking system collapsed. And that’s another reason we’re not living through
Great Depression II.
Last and probably least, but by no means trivial, have been the deliberate efforts of the
government to pump up the economy. From the beginning, I argued that the American Recovery
and Reinvestment Act, a k a the Obama stimulus plan, was too small. Nonetheless, reasonable
estimates suggest that around a million more Americans are working now than would have been
employed without that plan — a number that will grow over time — and that the stimulus has
played a significant role in pulling the economy out of its free fall.
All in all, then, the government has played a crucial stabilizing role in this economic crisis.
Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the
solution.
And aren’t you glad that right now the government is being run by people who don’t hate
government?
We don’t know what the economic policies of a McCain-Palin administration would have been.
We do know, however, what Republicans in opposition have been saying — and it boils down to
demanding that the government stop standing in the way of a possible depression.
I’m not just talking about opposition to the stimulus. Leading Republicans want to do away with
automatic stabilizers, too. Back in March, John Boehner, the House minority leader, declared that
since families were suffering, "it’s time for government to tighten their belts and show the
American people that we ‘get’ it." Fortunately, his advice was ignored.
I’m still very worried about the economy. There’s still, I fear, a substantial chance that
unemployment will remain high for a very long time. But we appear to have averted the worst:
utter catastrophe no longer seems likely.
And Big Government, run by people who understand its virtues, is the reason why.
Selection 1 - Article - Analysis
Paul Krugman, a recipient of the Nobel Peace Prize in Economics, is a professor of Economics
and International Affairs at Princeton University and former Labor Secretary during the Clinton
administration. He has a wealth of experience within the realm of economics, as well as the day
to-day functions of government. Because of this, I consider him to be a figure of authority.
While writing this article, Paul Krugman was generally positive, writing in a manner that’s eager,
fervent, passionate, and zealous. For those of us that are familiar with economics, it’s apparent by
reading this article that he’s a follower of a belief in economics that’s associated with John
Maynard Keynes. In short, these economists advocate a greater role of the government to
stimulate aggregate demand when all other avenues, such as consumers, both in America and
around the world, as well as the private-sector, are unwilling, or unable to, during recessionary
cycles. Knowing this, there is a clear bias within his writing.
The purpose of the article is to explain the reason as to why we have averting the worst, as the title
states, which is clearly defined as a Great Depression II. According to Paul Krugman, the reason
why we are on a path towards recovery, and not dealing with another depression is because of Big
Government. The claim is presented by means of claim of value, since it has to do with his
opinions and ideas about what’s right and wrong.
In order to prove his point, Paul Krugman uses a variety of information to support his claim, and
incorporates a refutation in the process. This includes, facts and statistics, examples and
illustration from his observation, good reasons, historical analysis, and analogies. Throughout
most of the article, he makes reference to how we have experienced the worst economic
slowdown since the Great Depression, while listing the number of jobs that we have lost, causes
of the problem, and what we have done to rectify the situation.
In a sense, the entire article is a refutation of the belief that “Government is not the solution;
government is the problem,” as quoted by President Ronald Reagan. Because of the role that the
government played, according to Paul Krugman, we’re in a much better place today than many
economists predicted just one year ago. As he said at the very end of the article, “And Big
Government, run by people who understand its virtues, is the reason why.”
Because of his word choice, I believe that he’s appealing to fear, while also ridiculing the
opposition, in order to prove his point. While he does say that we have averted the worst, he does
explain how he’s still worried about the state of our economy, with high unemployment looming
over our horizon. As he mentions President Ronald Reagan, along with the ideology and beliefs
associated with him, there is a clear sense of ridiculing being touched upon. At one point, he
targets the President directly, while saying that he is wrong, and goes on to say that sometimes the
private-sector is the problem; and the government is the solution.
Selection 2 - Testimony
The Recovery Act and
Economic Growth
Testimony before the Joint
Economic Committee of the
U.S. Congress
Mark Zandi, Chief Economist
at Moody’s Economy.com
http://www.economy.com/mar
k-zandi/documents/JECFiscal-Stimulus-102909.pdf
Because of the length of this testimony, I decided not to
factor it into this presentation, and instead just provide
the link in case you would like to look into it.
Selection 2 - Testimony - Analysis
Mark Zandi is Chief Economist and co-founder of Moody's Economy.com, where he directs the
company's research and consulting activities, and a former advisor to the McCain for President
campaign. Moody's Economy.com, a division of Moody's Analytics, provides economic research
and consulting services to businesses, governments and other institutions. Taking that into
consideration, I believe that, like Paul Krugman, Mark Zandi is a figure of authority.
Throughout his entire testimony to Congress, Mark Zandi was consistently neutral in his tone,
providing his insight on the American Recovery and Reinvestment Act of 2009 and the overall
state of our economy in an informative, instructive, and unbiased manner. His claim is that the
Great Recession, as he and many others call it, has come to an end, mainly because of the effort of
the Federal Reserve and fiscal policymakers in Washington, D.C. Specifically, I believe that his
claim is one of value, since he’s lending his opinions during the testimony. Aside from his central
claim, he does offer some suggestions on what policymakers should do to continue our economy
on a positive footing, which would be a claim of policy.
One thing is for sure, he provided a sufficient amount of supporting evidence during his
testimony. On numerous counts, he invoked facts and statistics, examples and illustration from his
observation, good reason, historical analysis, and testimony from experts in the field. All of which
was very organized and persuasive.
During the testimony, Mark Zandi did provide a refutation to critics, and potential critics, of his
argument, that the American Recovery and Reinvestment Act of 2009 hasn’t helped our economy,
and that it’s failing to create jobs. He does this in an unbiased manner, explaining in practically
each section the history of the problem and what the piece of legislation has done to help turn
things around. With this said, he doesn’t disagree with every criticism, and admits where the
effort has fallen short.
Considering that this is a testimony, and Mark Zandi is an expert in the field, I believe that this is
an appeal of authority. Whether he meant for this to be portrayed as such or not, his claim is being
rested on the fact that he’s providing the testimonial. Knowing this, there are probably a lot of
people out there that would agree with the claim because of who’s behind it. Politicians could also
use this to their benefit, as long as he’s talking about what they’re in support of.
Selection 3 - Graphic Material
Estimated Macroeconomic Impact of the American
Recovery and Reinvestment Act in the Third Quarter of
Calendar Year 2009
Congressional Budget Office
The Atlantic
http://business.theatlantic.com/2009/12/cbo_stimulus_is_
working_almost_exactly_as_expected.php
Selection 3 - Graphic Materials Analysis
On Monday, November 30, 2009, The Congressional Budget Office, a nonpartisan entity that
analyses legislation for Congress, came out with a report having to do with the impact on
employment of the American Recovery and Reinvestment Act of 2009. In addition to other
information, as shown on the two graphic images, the report found that the piece of legislation is
responsible for the creation of between 600,000 and 1,600,000 additional jobs. This is right in the
range of the numbers brought forwards by the Obama administration.
The title of the image, as well as the source and a note, is clearly shown, and the trend is apparent.
Comparing the estimate from March to November, the impact the legislation is positive, whether
it’s on GDP (Gross Domestic Product, otherwise known as the total economic output of America),
unemployment, or employment. The purpose of the image is to show how the CBO achieves the
numbers in their report, by the use of a macroeconomic model.
To the average person reading a newspaper or watching the news, a direct number of 640,000 jobs
created by the legislation may seem far away from the goal of 3,600,000. But when taking into
account the multipliers within the graphic material, it makes more sense. Each economic proposal
within the piece of legislation has a multiplier, or the impact each has on the economy after it has
had a chance to flow through and serve its purpose. As an example, look at the some of the tax
cuts incorporated in the legislation, costing 168,000,000,000. Now, if you factor in the multiplier,
1.7, the final impact it has on the economy, with respect to a dollar amount, is 285,600,000,000.
From what I can tell, the formation shown in the graphic image is complete, and it does support
the text of the report written by the CBO. All of the necessary information is presented, including
a high and low estimates of dollar amounts, multipliers, GDP, employment, and unemployment.
The information is very recent, ranging from the implementation of the legislation, February, up
until November of this year.
Selection 4 - Political Cartoon
Selection 4 - Political Cartoon Analysis
The subject of this cartoon is the U.S. economy, and it compares the stimulus package and our
economy to the situation surrounding the Titanic. In the cartoon, the U.S. economy is the Titanic,
and the stimulus package is the iceberg. Apparently, the author of the cartoon believes, and
claims, that the stimulus package, also known as the American Recovery and Reinvestment Act of
2009, won’t work as intended and that it’s something that will being down our economy. Because
an opinion is stated through the cartoon, this claim is one of value. In addition, since the artist is
trying to convince the audience to accept his/her point of view, the author’s purpose is persuasion.