Charts of the Day: Employment

posted at 8:30 am on July 10, 2010 by Ed Morrissey

Barack Obama likes to tell people that we should thank him for his interventionist economic policies, and that without them, unemployment would be much worse in the US than it is now.  For instance, he told Racine that without his economic stimulus, we’d be at 12, 13, even 15% — even though Racine itself is at 14.2% unemployment.  D’oh! Otherwise, this looks like a classic Churchill conundrum.  Had the UK elected Winston Churchill as Prime Minister in 1936 and he fought Hitler early, forcing him from power, would Churchill have gotten credit for saving Western civilization?  Or would he have been seen as a war monger, without the context of tens of millions of dead people in World War II?

Actually, we can test the hypothesis in this case, at least to some extent.  The financial collapse also battered our northern neighbor, Canada, although not quite to the same extent it did us.  (Canada has more conservative banking and lending policies, which shielded them from the worst of the problems.)  Instead of using a blizzard of government spending to correct a downturn in unemployment, Canada tightened its belt and rode it out.

So how do the two compare?  First, let’s look at the US levels of civilian employment since January 2007, eleven months before the recession started, to see how we’re doing:

As before, the red star denotes the passage of Porkulus.  Since that point in time, employment sharply declined for most of the year, plateaued, and then rose a bit before falling off — but the rise was minimal.

How did Canada do without massive government stimulus spending?  Well …

Employment rose by 93,000 in June, pushing the unemployment rate down 0.2 percentage points to 7.9%. This is the first time the rate has been below the 8% mark since January 2009.

Employment has been on an upward trend since July 2009, increasing by 403,000 (+2.4%). These gains offset nearly all the employment losses observed during the labour market downturn which began in the fall of 2008. The June unemployment rate, however, remained well above the October 2008 rate of 6.2%, due to a large increase in the number of people in the labour force over this period.

For those who have trouble recognizing it, that’s what a recovery looks like.  Canada’s job creation really has gone in the right direction, not simply plateaued at the nadir of the curve.  Maybe Canada’s private sector has been hiring because it doesn’t have to worry about the price signals of the massive government interventions created by the Obama administration that the US private sector has to deal with.  (via King Banaian)

Update: Just to restate: the charts show the actual number of civilians employed, not percentages of the population. I understand the confusion; the first chart looks very similar to one I produced earlier this week looking at the percentage of civilian population participating in the workforce, whose similarity comes from obvious reasons, but is based on different data from the BLS.


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Dems say they’re going to run this fall based on the economy. Unbelievable.

petefrt on July 10, 2010 at 8:41 AM

Hmmmm. Might this have something to do with Canada being led by a Conservative and the USA by a Marxist America hater?

I report – you decide.

honsy on July 10, 2010 at 8:41 AM

O Canada!

cmsinaz on July 10, 2010 at 8:42 AM

The dems are going to run on rose colored glasses
and pipe dreams.

thgrant on July 10, 2010 at 8:43 AM

In America, we know that the business climate won’t improve until January of 2013, if then, so what’s the point? We’re just hunkering down for a long Winter of tax hikes until then.

RBMN on July 10, 2010 at 8:44 AM

where is dear leader’s economic team aye?

cmsinaz on July 10, 2010 at 8:45 AM

Dems say they’re going to run this fall based on the economy. Unbelievable.

petefrt on July 10, 2010 at 8:41 AM

then the gop should show both of these charts in ads against them… fiorina are you listening?

cmsinaz on July 10, 2010 at 8:46 AM

Employment rose by 93,000 in June

And since our population is 10% of the United States, that would be the equivalent of about 930,000 jobs being added. Non census jobs too….

Canadian Infidel on July 10, 2010 at 8:48 AM

Dems say they’re going to run this fall based on the economy. Unbelievable.

petefrt on July 10, 2010 at 8:41 AM

Maybe they meant they are running for their political lives in the opposite direction, and as far away from Obama, Reid, and Pelosi as is humanly possible.

pilamaye on July 10, 2010 at 8:50 AM

Maybe Canada has a conservative as its head of state.

Kafir on July 10, 2010 at 8:51 AM

I was lucky enough to land a good job in this mess (but then my major is one of the few still in demand in spite of all the Obamanomics going on) But if things really spiral out of control here, I’m going to Canada, garbage socialized medicine and all.

DangerHighVoltage on July 10, 2010 at 8:53 AM

Canadian Infidel on July 10, 2010 at 8:48 AM

WoW! I didn’t realize Canada only had around 30 million people. To be honest I googled it because I thought you were exaggerating. 33,311,400 according to world bank I guess.

Mord on July 10, 2010 at 8:54 AM

Maybe Canada has a conservative as its head of state.

Kafir on July 10, 2010 at 8:51 AM

Canadian conservatives are like european conservatives.

Which is to say, they aren’t.

A big contributor to Canada’s success in preventing massive catastrophe is the fact that their banking laws are surprisingly sane.

DangerHighVoltage on July 10, 2010 at 8:55 AM

(Canada has more conservative banking and lending policies, which shielded them from the worst of the problems.)

They don’t have Barney Frank & his pals forcing their banks to lend to unworthy borrowers.

itsnotaboutme on July 10, 2010 at 8:58 AM

Hey, this isn’t working. Let’s do it some more.

Mojave Mark on July 10, 2010 at 9:04 AM

it is, of course, RAAAAACIST! to even notice this…you will all have to undergo re-education to wipe these charts from your minds.

Justrand on July 10, 2010 at 9:04 AM

I cannot prove that the situation would not be worse if Obama were to not do something stupid.

percysunshine on July 10, 2010 at 9:04 AM

It appears that Canadas’s success is/was largely due to that fact that it’s pols did not pressure the banks to abandon all common sense in the name of ephemeral premises of ‘equality’. Ours have no such brain and still do not. These Dems cannot seem to get their heads around the idea of fiscal restraint. Been at the trough too long and cannot change direction. Reason number one why they have to go.

jeanie on July 10, 2010 at 9:05 AM

Whatever MSM can do to try to spin the “recovery” theme between now and the November election, it will.

bw222 on July 10, 2010 at 9:06 AM

A big contributor to Canada’s success in preventing massive catastrophe is the fact that their banking laws are surprisingly sane.

DangerHighVoltage on July 10, 2010 at 8:55 AM

They don’t have Barney Frank & his pals forcing their banks to lend to unworthy borrowers.

itsnotaboutme on July 10, 2010 at 8:58 AM

While we are being led by the insane.

Dasher on July 10, 2010 at 9:06 AM

They don’t have Barney Frank & his pals forcing their banks to lend to unworthy borrowers.

itsnotaboutme on July 10, 2010 at 8:58 AM

And that’s where this all started…When the Bush administration wanted more oversight into lending practices, Frank’s immortal words still echo down the spine…that “Fannie and Freddie are sound”.

It was all downhill from there.

JetBoy on July 10, 2010 at 9:10 AM

Maybe Canada has a conservative as its head of state.

Kafir on July 10, 2010 at 8:51 AM

Yes, we do ! A fiscal conservative !! A nice change after 12 years of Liberal Piggy careless spending!

Thank you Mr. Harper!! :)

cableguy615 on July 10, 2010 at 9:11 AM

The preceeding charts were brought to you by Double-Dip Dempression – it melts your wallet, not the press.

steveegg on July 10, 2010 at 9:15 AM

Whatever MSM can do to try to spin the “recovery” theme between now and the November election, it will.

bw222 on July 10, 2010 at 9:06 AM

Isn’t it telling that they have so much regard for the intelligence of the American electorate. The only smart and thinking people here must be them and our truly brilliant Legislative branch and WH…doncha know!

jeanie on July 10, 2010 at 9:16 AM

jeanie on July 10, 2010 at 9:16 AM

Yes, but does a nut in an asylum think the others are insane?

OldEnglish on July 10, 2010 at 9:23 AM

good post.

HellCat on July 10, 2010 at 9:25 AM

Not spending money you do not have is racist!

jukin on July 10, 2010 at 9:33 AM

All you need do is drive by your local mall …

tarpon on July 10, 2010 at 9:38 AM

Freddie and Fanny have only one problem, a problem that no public figure or other responsible party dare mention: The mark-to-market (MTM), i.e value, of residential mortgage-backed-securities is approximately ZERO. And these MBSs are 95%+ of Freddie and Fannie’s portfolio.

Some day, a decade or two out, they will be able to calculate the value of the active mortgages that remain, but not today. And not tomorrow. Not anytime soon.

So today, FNMA and FHLMC are worthless, zero value, they have no marketable, saleable assets. No “responsible party” or “public figure” can admit these facts, lest the riots and general public panic begins !

Who is John Galt on July 10, 2010 at 9:40 AM

I used to live in a subdivision that had a railroad line across the main entry/exit roadway. In the 2001 recession, I saw recovery in more frequently being stopped by a freight train.

Alas, that was before they closed the GM plant in NE Atlanta. But the more freight I saw on that rail line, the more economic activity was happening.

I never got mad waiting for a freight train. I even smiled, sometimes.

Who is John Galt on July 10, 2010 at 9:45 AM

Dems say they’re going to run this fall based on the economy. Unbelievable.

petefrt on July 10, 2010 at 8:41 AM

Good.

We need to do the same. We’ll come out on top

blatantblue on July 10, 2010 at 9:47 AM

Can anyone name a single Obama measure that was crafted to deal directly with the employment deficit and has shown a verifiable, tangible improvement?

BKeyser on July 10, 2010 at 10:02 AM

But but but…it’d work, I’m sure it would, if only those rascally republicans would stop sabotaging the president’s efforts. Don’t blame Obama, boys and girls, blame Congressional republicans. And governors, and red state legislatures, and…all you guys who don’t belong to the SEIU and stuff. Yeah. Not the fault of the brilliant plan, no.

/

Bob's Kid on July 10, 2010 at 10:03 AM

The first graph is invalid due to the use of fraudulent government stats. Redraw it with accurate values reflecting all the people who fell off the roles or who aren’t counted for other reasons.

The graph will look quite different. Also, drop out all the fake census workers.

No one is hiring. Companies are still laying off and are scared stiff of the coming tax increases.

dogsoldier on July 10, 2010 at 10:07 AM

Can anyone name a single Obama measure that was crafted to deal directly with the employment deficit and has shown a verifiable, tangible improvement?

BKeyser on July 10, 2010 at 10:02 AM

Replies now pouring in:

Basil Fawlty on July 10, 2010 at 10:17 AM

Can anyone name a single Obama measure that was crafted to deal directly with the employment deficit and has shown a verifiable, tangible improvement?

BKeyser on July 10, 2010 at 10:02 AM

The kool-aid crowd would reply with a link to the propaganda recovery site, which is as we all know complete horse crap.

Lawnmower anyone?

dogsoldier on July 10, 2010 at 10:23 AM

Calling it unemployment is obviously racist. Just like when you teaklanners called Obama a socialist. The correct turn to use now is funemployment! Get with it wingnuts!

Caper29 on July 10, 2010 at 10:30 AM

Dems say they’re going to run this fall based on the economy. Unbelievable.

petefrt on July 10, 2010 at 8:41 AM


Presenting The Wall Of Worry: The 50 Ugliest Facts About The US eCONomy

Rae on July 10, 2010 at 10:31 AM

Where’s canopfor???

mobydutch on July 10, 2010 at 10:31 AM

Does Krugman ever look at charts like these?

scalleywag on July 10, 2010 at 10:38 AM

Maybe Barry should push for mandatory marijuana use by every voter just before the November elections.

GarandFan on July 10, 2010 at 10:39 AM

The first graph is invalid due to the use of fraudulent government stats. Redraw it with accurate values reflecting all the people who fell off the roles or who aren’t counted for other reasons.

The graph will look quite different. Also, drop out all the fake census workers.

No one is hiring. Companies are still laying off and are scared stiff of the coming tax increases.

dogsoldier on July 10, 2010 at 10:07 AM

Point of order – the graph measures the absolute number of people working. Whether one who is not employed has tried to look for work in the previous 4 weeks or hasn’t tried to look for work in the previous 4 weeks (which gums up the unemployment rate) is immaterial to that graph.

steveegg on July 10, 2010 at 10:40 AM

Does Krugman ever look at charts like these?

scalleywag on July 10, 2010 at 10:38 AM

I suspect the Krugman-in-Wonderland group would answer no.

Basil Fawlty on July 10, 2010 at 10:49 AM

In all fairness though, you’re comparing something that is 1/10th the scope.

ButterflyDragon on July 10, 2010 at 10:57 AM

Alas, a lib can actually claim that the first graph (with the star) provides support for Obama’s claims – at the star, the downward slope does, it seem, hit an inflection point and actually begins to change direction. Compared to the Canada chart it’s not a positive thing, of course, but of itself one could say “look, at the star it begins to improve.”

While true, that’s not the entire story, of course.

Midas on July 10, 2010 at 11:01 AM

Well I’m no economic expert but Mr. President’s plan is not working. We screamed about it not working when they were developing the plan, but no one cared. Virginia has gotten stimulus money and what happened here at the university where I work? Hiring freezes, furlough days,no raises, a rise in health insurance deductibles and premiums, a cut in our retirement contributions, and budget slashes. I know of no one who has gotten a job through stimulus funds. Our hiring freeze is over, but not one job is listed as “part of the recovery act.” I’m happy to still be employed but who knows for how long.

scalleywag on July 10, 2010 at 11:02 AM

You’re absolutely right! Had Churchill taken down Hitler early, without 6 million murdered Jews to bolster his case, he would have been branded an “international interloper” and “adventurer”. Hitler would have been described as an “eccentric but harmless avuncular figure”.

The same is true if some alert agent had nabbed the 9-11 hijackers on 9-10. Not only would the agent not have received any credit for saving 3000 lives and both World trade Center towers, but would have been sued for millions of dollars by the likes of John Edwards for “racial and ethnic discrimination and profiling” and the likes of Ted Kennedy and John Kerry would be issuing public apologies to the “Muslim community”.

I guess the only lesson learned here is, unfortunately, the disaster must occur first. People CANNOT learn from the past.In the nuclear age this is a fatal philisophy.

MaiDee on July 10, 2010 at 11:11 AM

steveegg on July 10, 2010 at 10:40 AM

You are correct sir! My apologies, Ed and all. I should have read more carefully before I mouthed off.

Having said that, I’d humbly like to ask for an accurate graph of the actually unemployed.

A hard count of that number will probably be a serious shock.

dogsoldier on July 10, 2010 at 11:14 AM

Sorry I forgot to mention that I sent Ed a link to an article wherein its reported that in his Nevada speech yesterday Bozo claimed he beat the recession.

I kid you not.

The dems are seriously going to try the “BIG LIE” tactic.

dogsoldier on July 10, 2010 at 11:20 AM

Instead of using a blizzard of government spending to correct a downturn in unemployment, Canada tightened its belt and rode it out.

That’s exactly the policy pursued in every major economy that fell into the Great Depression and other massive recessions over history.
Why don’t you look at Japan’s very similar ‘balance sheet’ recession of the past decade- marked by the collapse of a major bubble and plummeting asset prices. When government spending was cut to bring about ‘fiscal restraint’, the economy declined further and the deficit increased. Barron’s has made this case repeatedly while pointing out the importance of public spending in the current US scenario.

These charts are meaningful to people who don’t understand the nature of the country’s near financial collapse, which emanated from US financial institutions. It doesn’t take a rocket scientist to realize that a relatively trivial $200 bil in failed subprime loans didn’t bring our economic system to the brink. Rather it was financial weapons of mass destruction- such as credit default swaps- that infected the financial system with a cancer that required massive intervention under Bush. Even Alan Greenspan now admits that his failure to regulate derivatives and brake the growth of the housing bubble led to our economic calamity. Or read Too Big To Fail for a more complete picture of what happened.

And yes, policies such as extended unemployment benefits have been utilized in almost every other severe US recession in the past, enacted during both Democratic and Republican administrations. And almost every respected mainstream economist, including Nouriel Roubini who predicted most of what unfolded over the past 4 years, supports the current levels of government spending to prevent even deeper economic failure. Yes, things could have been far, far worse. Although I have been totally dismayed by the massive deficit spending that’s occurred over the past decade, now is not the time to tighten our belts. In a severe recession, less government spending can actually lead to higher deficits, as unintuitive as that may sound. Attempts to cut spending will merely lead to a deeper and more protracted recession, higher unemployment, and no end in sight to massive deficits that will only turn around with a major economic rebound.

bayam on July 10, 2010 at 12:00 PM

Well I’m no economic expert but Mr. President’s plan is not working. We screamed about it not working when they were developing the plan, but no one cared. Virginia has gotten stimulus money and what happened here at the university where I work?

The stimulus package may have been done the wrong way, but that doesn’t mean that stimulus was the wrong policy. If public spending doesn’t fill the void at a time when both businesses and individuals refuse to spend while repairing their balance sheets, consumer demand will fall in a destructive cycle that breeds further unemployment and more economic misery.

bayam on July 10, 2010 at 12:06 PM

We have conservative banking laws. Period. Thank heavens for small mercies. The US used its banking laws for social engineering. And you guys have not learned your lesson, yet. Those banking laws have not been changed.

Of course, all these charts are pointless considering that the other shoe hasn’t dropped yet.

keep the change on July 10, 2010 at 12:07 PM

For sure the housing market was a big bubble. Canadian housing is very pricey, but they did not crash like we did, so Fannie and Freddie did play a role.

We also have way more illegals sucking the system than Canada. Canada is an oil seller, and is running like Australia as a commodity supplier to Asia. That brings money in. They have a smaller population to service, but a huge bunch of trees and oil. We had the WTC blown up and Canada did not. That hurt us big time. We have the hurricanes and Canada much less less. Katrina cost a bunch. We had a huge war on two fronts and Canada particpated at a much smaller level, because, after all, they did not lose a WTC

However, the WTC and Katrina, and the part of the war run under Bush were factored into our debt before Obama took office.

It is the trillions of borrowed money Obama flushed down the drain which separates us from Canada

Obama’s debt creation dwarfs Bush’s

Obama funded for a while the payrolls of many states for jobs which should have been eliminated. The states are still broke, and the jobs are still unsustainable. Money lost forever, but to be paid on until the end of time.

Why are we in trouble? Document where the trillion went, and how much went for anything but a holding pattern. Obama ‘saved’ the banks and created a new home owner tax credit so banks could sell the houses out from under the folk who paid on them for years, effectively subsidizing the foreclosures – with a downpayment from the gov to the banks

Canada was lucky, They loved Obama, but did not elect him

entagor on July 10, 2010 at 12:16 PM

I am a Canadian and a supporter of Conservative PM Harper.

Reading this makes me want to gloat, to boast about my country…

But the story isn’t that we are doing so well, it’s that my American friends are suffering. And that doesn’t make me happy at all.

I pray that America is strong enough to survive Obama/Pelosi/Reid because I want to see both countries prosper.

Johnny 100 Pesos on July 10, 2010 at 12:16 PM

We have conservative banking laws. Period. Thank heavens for small mercies. The US used its banking laws for social engineering

Not even the captain of deregulation, Alan Greenspan, would agree with you. It’s amazing how many people don’t understand how Wall Street greed was completely responsible for the collapse. Blaming the government is the result of ignorance fed by extremists who have little understanding of how the highest levels of the US financial system, starting with the quants behind securitized loans and other derivities, operated over the past decade.

bayam on July 10, 2010 at 12:17 PM

Wow that was a excellent analysis Ed!! Thanks!

JeffVader on July 10, 2010 at 12:19 PM

bayam on July 10, 2010 at 12:00 PM

You are a Keynesian who believes the state can plan an economy. That is a lot of rubbish.

Government spending destroys private capital and savings, which is the source of demand for labor. Canada simply has not engaged in the destructive policies of Obama and Congress.

AshleyTKing on July 10, 2010 at 12:22 PM

Government spending destroys private capital and savings, which is the source of demand for labor.

Are you saying that Barron’s and Dow Jones are liberal? In the aftermath of a major asset bubble collapse, when neither businesses or individuals are willing to spend, only public spending can keep unemployment from spiraling out of control. This isn’t an armchair theory- it’s been demonstrated time and again in economic crises around the world over the last five decades. Your ‘principles’ are the ones held dear by the Hoover administration and other governments in history that presided over economic collapse. You have no precedent on your side.

bayam on July 10, 2010 at 12:27 PM

The US ‘securitized’ its home mortgage system under the behest of the Dept. of Labor in 1970, via Ginnie Mae, which would spell the end of traditional, conservative local bank lending and the rise of national and international banking going through a process of getting government ‘securitized’ loan packages via Fannie and Freddie. The local players, unable to compete with this new government structure then were forced into risky lending vehicles, leading to the collapse of the S&Ls and many Thrifts. Before that period of time most mortgages were held in local portfolios, run by local managers who kept track of local markets and changes in them.

This would create many interesting artifacts like an increasing rate of home appreciation and a higher foreclosure rate… starting in the late 1970′s. These two are not sustainable together as they are contra-indicators to a healthy home lending system. Yet the money poured into the ‘securitized’ system continued, along with government programs like the CRA which would push lenders to take more risk via regulation, not via good sense.

That is social engineering at the National level.

It doesn’t work.

And we will pay very, very dearly for it, now and for years onwards until we stop trying to socially engineer via Congressional and bureaucratic fiat.

ajacksonian on July 10, 2010 at 12:27 PM

Maybe Canada’s private sector has been hiring because it doesn’t have to worry about the price signals of the massive government interventions created by the Obama administration that the US private sector has to deal with.

…and what do we get from the “Hope and Change” democrats who helped engineer this economic catastrophe with their corrupt sub-prime schemes through Fannie/Freddie and have exasperated it with there failed policies over the last two years……

…………plans to push their economically destructive policies like “card check” and “cap and trade” during the lame duck session.

…..with democrats, it’s always ideology before country.

…….

Baxter Greene on July 10, 2010 at 12:32 PM

and what do we get from the “Hope and Change” democrats who helped engineer this economic catastrophe with their corrupt sub-prime schemes through Fannie/Freddie

You could try reading a book such as Too Big Too Fail, or a dozen other books, that explain how and why our form of capitalism nearly came to an end in 2008. Not even those on Wall Street responsible for the massive banking failures blame anyone in government, beyond a lack of government regulation. It’s easy to devise political theories that oversimplify rather than understand complex economic systems, but it’s worth the effort.

bayam on July 10, 2010 at 12:39 PM

bayam on July 10, 2010 at 12:17 PM

sorry, but your argument has no facts and it is just filled with the same leftist nonsense that has since been discredited. In Canada our banking laws don’t allow for the nonsense that happened in the States. Period. If you want a liar loan, you need 35% down in cash. That prevents the banks from losing their shirts if the market falls.

From The American by Mark J Perry

Here are some stats. In the 1930s, when 9,000 U.S. banks failed during the Great Depression, not a single bank in Canada failed. When almost 3,000 American banks failed during the Savings and Loan (S&L) Crisis, only two small Canadian banks failed in 1985, and those were the first bank failures in Canada since 1923. And while almost 200 U.S. banks have failed since the start of the global recession in early 2008, Canada remains the only industrialized country in the world that has survived the last two years of financial and economic stress without a single bank failure.

Here are the fundamental differences:

1. Full Recourse Mortgages in Canada. Almost all Canadian mortgages are “full recourse” loans, meaning that the borrower remains fully responsible for the mortgage even in the case of foreclosure. If a bank in Canada forecloses on a home with negative equity, it can file a deficiency judgment against the borrower, which allows it to attach the borrower’s other assets and even take legal action to garnish the borrower’s future wages. In the United States, we have a mix of recourse and non-recourse laws that vary by state, but even in recourse states, the use of deficiency judgments to attach assets and garnish wages is infrequent. The full recourse feature of Canadian mortgages results in more responsible borrowing, fewer delinquencies, and significantly fewer foreclosures than in the United States.

The full recourse feature of Canadian mortgages results in more responsible borrowing, fewer delinquencies, and significantly fewer foreclosures than in the United States.

2. Shorter-Term Fixed Rates in Canada. Canadian mortgages carry a fixed interest rate for a maximum of five years, and rates are then re-negotiated for the next five years, similar to a five-year adjustable rate. This practice allows banks to achieve a better maturity match between their assets (mortgages and loans) and interest income, and their liabilities (deposits) and interest expense, which protects them from the kind of maturity mismatch and interest rate risk that resulted in our S&L crisis and almost 3,000 bank failures in the 1980s and 1990s.

3. Mortgage Insurance Is More Common in Canada than in the United States. About half of Canadian mortgages carry mortgage insurance (compared to 30 percent in the U.S. currently and only 15 percent before the crisis), primarily for those mortgages financing the purchase of a home with less than a 20 percent down payment, and the borrower is required to pay the full mortgage insurance premium upfront. Another difference from the U.S. is that when private insurance companies in Canada insure mortgages, they have the authority to approve or reject the property appraisal, and they have strong financial incentives to only approve realistic property appraisals. Mortgage insurance in Canada covers the full loan amount for the full life of the mortgage, and cannot be eliminated like in the United States when the property value exceeds the mortgage balance. The traditionally much higher frequency of mortgage insurance in Canada compared to the United States helps to stabilize Canada’s mortgage and housing markets, and is one of the many features that contribute to its ranking as the safest banking system in the world.

Compared to the United States, the Canadian banking system is much more concentrated, with the five largest Canadian banks (out of only 82 in the entire country, compared to more than 8,000 banks in the U.S.) holding more than 80 percent of total bank assets.

4. No Tax Deductibility of Mortgage Interest in Canada. Home mortgage interest has never been tax-deductible in Canada, so there is no tax advantage to home ownership in Canada over renting. (Addendum: Except that any capital gains from the sale of a principal residence in Canada are not taxed). There is also no tax benefit to converting home equity into household debt in Canada, which has resulted in a much greater equity accumulation in Canada (70 percent of total real estate value) than in the United States (currently only about 45 percent). Also, paying down your mortgage in Canada is a tax-free investment and further encourages greater equity accumulation than in the United States. Interestingly, even without any tax advantage for home ownership, the Canadian homeownership rate (69 percent) is actually higher than in the United States (67.2 percent).

5. Higher Prepayment Penalties in Canada. Prepaying mortgages in Canada is allowed, but there are much stiffer prepayment penalties (three months of mortgage interest) than in the United States, which discourages the kind of refinancing that frequently took place in the United States leading up to the housing meltdown, and often involved pulling home equity out in the refinancing process (encouraged by the tax deductibility of mortgage interest).

Home mortgage interest has never been tax-deductible in Canada.

6. Public Policy Differences for Low-Income Housing. To promote affordable housing for low-income households, the Canadian government has not used public policies like the Community Reinvestment Act in the United States, which encouraged homeownership for lower-income and less creditworthy borrowers, financed frequently with subprime mortgages. Instead, the Canadian government provides public funding for low-income rental housing, rather than encouraging homeownership for low-income households, and Canada has thus avoided the American mistake of using misguided policies to turn good, low-income renters into bad homeowners.

7. Differences in Canada’s Bank Concentration
and Greater Diversification. Compared to the United States, the Canadian banking system is much more concentrated, with the five largest Canadian banks (out of only 82 in the entire country, compared to more than 8,000 banks in the United States) holding more than 80 percent of total bank assets. This concentration became an advantage during the recent financial crisis because it facilitated critical discussions among the five large banks and the single federal regulator (the Office of the Superintendent of Financial Institutions). Also, Canada has never had branching restrictions like the U.S. laws that prevented interstate banking up until 1994, and this has historically allowed Canadian banks to achieve geographical diversification for their deposits and loans portfolios. It was largely this difference in geographical diversification that help explains why the United States had 9,000 bank failures during the Great Depression (each operating within only one of the 48 states, due to the prohibition on interstate branching) and not a single Canadian bank (all with branches nationwide) failed in the 1930s.

Interestingly, even without any tax advantage for home ownership, the Canadian homeownership rate (69 percent) is actually higher than in the U.S. (67.2 percent).

8. A Few Other Differences
that Contribute to Bank Safety in Canada. There is a much lower rate of loan originations by mortgage brokers in Canada (only 35 percent) than in the U.S. (70 percent), far less mortgage securitization in Canada than here, and a much smaller subprime mortgage market. Banks in Canada keep and service 68 percent of the mortgages on their own balance sheets that they originate and underwrite, which encourages prudent lending since banks are putting much of their own capital at risk. Finally, almost all mortgage payments in Canada are made electronically by an automatic payment arrangement, which minimizes late payments.

Bottom Line: Taken together, the features and regulations of banks in Canada outlined above create a healthy and sound “pro-lender” environment absent of political motivations for outcomes like greater homeownership, compared to the often politically motivated “pro-borrower” and “pro-homeowner” policies of the United States. While Canada’s banking system has promoted responsible borrowing and prudent lending and underwriting practices with little politically motivated interference, the U.S. banking system seems to have encouraged excessive lending to risky borrowers because of the political obsession with homeownership.

Canada’s banks are generally ranked as the safest and soundest in the world, and their non-politicized banking system could provide a model for banking reform in the United States. Moving towards the Canadian banking system could go a long way towards stabilizing our mortgage, credit, and housing markets and make us less vulnerable to financial shocks in the future.

keep the change on July 10, 2010 at 12:44 PM

Just remember this, Canada has about the population of Tokyo and the land & natural resources of Russia.

It is near perfect in it’s ratio of population to raw material output.

If it had a conservative government in would rule the world, eh?

TheSitRep on July 10, 2010 at 12:49 PM

….and while democrats brag about the “financial reform bill”,
….they leave Fannie/Freddie free to soak up billions of tax dollars with their uncapped gift from Obama.

Now the democrats have furthered their corrupt policies:

http://hotair.com/archives/2010/07/08/is-reid-campaign-hiding-its-activities-to-evade-campaign-finance-laws/

Say what? Well, the fact that the federal government has shifted its social engineering to FHA after all but destroying Freddie and Fannie should come as no surprise. Nor should it come as a surprise that they’re using the same mortgage-backed securities mechanism that created the global financial collapse to shed the cost of guaranteeing those loans. But one might have thought that the collapse of the housing bubble from overspeculation and irrational supply of credit would have taught Washington a lesson about interfering with the lending markets.

….more corrupt failure that all the regulations in the world can’t stop because the people in charge of the regulating are part of the problem.

…..which is why the corrupt Tim Geithner was put in charge by the Obama administration, he was a main player.

…The corruption combined with the destructive spend and tax policies of democrats guarantees major unemployment, and a stagnate economy headed for collapse.

Baxter Greene on July 10, 2010 at 12:49 PM

Not even those on Wall Street responsible for the massive banking failures blame anyone in government, beyond a lack of government regulation.

bayam on July 10, 2010 at 12:39 PM

…you could try a little common sense and see that government, especially the democrats that protected the corrupt policies that fed Fannie/Freddie, allowed them to
carry out their destructive policies.

…as we are seeing right now, the government has significant control over the banking industry.

…and government players used their power to keep the corruption flowing.

Fan and Fred: Frauds by Design?
Posted By Tom Blumer On January 8, 2010 @ 12:00 am In . Positioning, Money, Politics, US News

http://pajamasmedia.com/blog/fan-and-fred-frauds-by-design/?print=1

In September 2008 [1] (“Think Enron Was Bad? ‘Fredron’ and ‘Fanron’ May Be Worse”), reacting to the implosions at Fannie Mae and Freddie Mac, the two “government-sponsored enterprises” that had just become “government-controlled enterprises,” I quoted a Wall Street Journal editorial telling readers that “taxpayers are now on the hook for as much as $200 billion.”

Enron’s perpetrators were aggressively prosecuted and shamed, while Fannie Mae’s and Freddie Mac’s executives, officers, and directors made and kept millions in undeserved salaries and bonuses, even during years-long periods when their books were unauditable. Up to and including Rahm Emanuel, President Obama’s chief of staff, many if not most of them are still influential and respected players within the government and the Democratic Party.

…you can spin all you want…but government officials provided the means and cover for these institutions to conduct their corrupt policies that now have us in this hole.

Baxter Greene on July 10, 2010 at 1:03 PM

As a former Calgarian (GO STAMPS!), this sort of this fills my heart with pride.

Now if only Canada would grant the basic human right of self-defence to its subjects citizens and build up its armed forces, I’d move back. Because of the unrest south of the border, my wife wants to move from Arizona to Canada. I don’t, because at least I can defend my family here. I’d be disarmed the minute I crossed the border into Canada, and I can’t accept that.

ExUrbanKevin on July 10, 2010 at 1:24 PM

….There is more than enough evidence that democrats used their positions of power to push destructive policies:


Blame Fannie Mae and Congress For the Credit Mess

http://online.wsj.com/article/SB122212948811465427.html?mod=googlenews_wsj#printMode
By CHARLES W. CALOMIRIS and PETER J. WALLISON

Many monumental errors and misjudgments contributed to the acute financial turmoil in which we now find ourselves. Nevertheless, the vast accumulation of toxic mortgage debt that poisoned the global financial system was driven by the aggressive buying of subprime and Alt-A mortgages, and mortgage-backed securities, by Fannie Mae and Freddie Mac. The poor choices of these two government-sponsored enterprises (GSEs) — and their sponsors in Washington — are largely to blame for our current mess.

Here are democrats in their own words pushing these “free money” schemes and instituting class warfare.

Democrats “Bank affirmative action”

http://www.youtube.com/watch?v=ivmL-lXNy64

……here is a good example of how close this relationship was/is:


Fannie Mae CEO calling Obama and the Dems the “Family” and “Conscience” of Fannie Mae

http://www.youtube.com/watch?v=usvG-s_Ssb0

….These are clear examples of government having “everything” to do with the collapse of our economy.

Baxter Greene on July 10, 2010 at 1:31 PM

….There is more than enough evidence that democrats used their positions of power to push destructive policies:


Blame Fannie Mae and Congress For the Credit Mess

http://online.wsj.com/article/SB122212948811465427.html?mod=googlenews_wsj#printMode
By CHARLES W. CALOMIRIS and PETER J. WALLISON

Many monumental errors and misjudgments contributed to the acute financial turmoil in which we now find ourselves. Nevertheless, the vast accumulation of toxic mortgage debt that poisoned the global financial system was driven by the aggressive buying of subprime and Alt-A mortgages, and mortgage-backed securities, by Fannie Mae and Freddie Mac. The poor choices of these two government-sponsored enterprises (GSEs) — and their sponsors in Washington — are largely to blame for our current mess.

…Democrats were the prime leaders in pushing these corrupt schemes into our financial system.

Baxter Greene on July 10, 2010 at 1:35 PM

Top marginal tax rate in Canada is 29%.

In the US it’s 35% about to be 39.6% on Jan 1.

Any other questions as to why Canada is in recovery and we’re in a depression?

angryed on July 10, 2010 at 1:36 PM

These charts are meaningful to people who don’t understand the nature of the country’s near financial collapse, which emanated from Democrats forcing lending institutions to give mortgages to people who couldn’t pay them back US financial institutions.

And almost every respected mainstream economist, including Keynesian and former Clinton Administration “economist” Nouriel Roubini who predicted most of what unfolded over the past 4 years, supports the current levels of government spending to prevent even deeper economic failure.

bayam on July 10, 2010 at 12:00 PM

Fixed.

BTW you forgot to mention that the economist you cite is joined at the naval with Geithner, and before that, with Robert Reichhhhhhhhh.

Del Dolemonte on July 10, 2010 at 1:37 PM

…you can spin all you want…but government officials provided the means and cover for these institutions to conduct their corrupt policies that now have us in this hole.

Baxter Greene on July 10, 2010 at 1:03 PM

With bayrum, what you say will simply go in one ear, and out the other. Based on long experience going back to Captain’s Quarters.

Del Dolemonte on July 10, 2010 at 1:40 PM

Dwight Eisenhower once said ” A country that values it’s privaledges above it’s principals soon has neither”

Canadians like the minority of Americans – want to be productive members of society

The US hand out mentality, encouraged and combined with Obama’s trillion dollar slush fund and all out coming tax increases will cripple us to oblivion

audiotom on July 10, 2010 at 1:43 PM

Democratic spend and tax economic policies have only made the situation worse.

Even other countries are seeing this.Obama’s policies got nowhere at the G20 and other countries have caught on to this failure:

Spending our way to prosperity is going out of style.
http://online.wsj.com/article/SB10001424052748703615104575328981319857618.html?mod=rss_opinion_main

For going on three years, the developed world’s economic policy has been dominated by the revival of the old idea that vast amounts of public spending could prevent deflation, cure a recession, and ignite a new era of government-led prosperity. It hasn’t turned out that way.

The difference this time is that the Keynesian political consensus is cracking up. In Europe, the bond vigilantes have pulled the credit cards of Greece, Portugal and Spain, with Britain and Italy in their sights. Policy makers are now making a 180-degree turn from their own stimulus blowouts to cut spending and raise taxes. The austerity budget offered this month by the new British government is typical of Europe’s new consensus.

….These policies have destroyed growth,caused massive unemployment, and have set back countries for decades.

Baxter Greene on July 10, 2010 at 1:44 PM

Del Dolemonte on July 10, 2010 at 1:40 PM

…True….

…I remember him there.

Obama has no better friend.

Baxter Greene on July 10, 2010 at 1:45 PM

BTW you forgot to mention that the economist you cite is joined at the naval with Geithner, and before that, with Robert Reichhhhhhhhh.

Del Dolemonte on July 10, 2010 at 1:37 PM

..Hey

How is Mr. “Deficits are beneficial” Orszag doing these days.

Baxter Greene on July 10, 2010 at 1:48 PM

Baxter Greene on July 10, 2010 at 1:48 PM

..oops

..days?

Baxter Greene on July 10, 2010 at 1:49 PM

Again $200 bil in failed subprime loans by 2008 didn’t bring the US financial system to its knees. Yes, those loans should never have been allowed. But that dollar amount is fairly insignificant given the size of the US economy. No one running Wall Street banks or broker dealers seriously blames government for causing the crisis.

Spending our way to prosperity is going out of style

Barrons and most other financial experts disagree. You can try and label most economists as ‘Keynsian’ but that doesn’t invalidate all the knowledge that economists have gained over the years from watching how economies respond to government spending or the lack thereof. Calling for a repeat of Japan’s 10 year balance sheet recession isn’t very smart. If you study the recessions that have occurred around the globe over the last 20 years, you realize that governments that fail to spend in response end up in serious turmoil.

Keep in mind the main reason why deficit spending is so painful now is because Bush departed from mainstream economic policies by introducing massive deficits when the economy was booming. Paul O’Neil, his Treasury Secretary at the time, tried to oppose tax cuts that economists warned would lead to today’s deficits. It’s amazing that anyone is dim enough to criticize Clinton’s economic team, which took a huge deficit and turned it into a substantial budget surplus. If we had stayed on that path, no one would be concerned about the size of the national debt today.

bayam on July 10, 2010 at 4:21 PM

Might have something to do with the fact that Harper’s an economist.

atadOFF on July 10, 2010 at 5:34 PM

It’s amazing that anyone is dim enough to criticize Clinton’s economic team, which took a huge deficit and turned it into a substantial budget surplus. If we had stayed on that path, no one would be concerned about the size of the national debt today.

bayam on July 10, 2010 at 4:21 PM

LOL, so when are you and AnninCA getting married? She hearts Clinton almost as much as you do.

Of course, you forget to mention many Inconvenient Truths about the “Clinton Economy”. Or as I call them, Myths.

1. The economic recovery Clinton falsely claimed “credit” for in reality began 18 months before the media got him elected in 1992. This fact cannot be argued, as Fed stats prove it to be true. The Clinton Kneepads at the NY Times finally admitted that the recovery began in March of 1991, but it took them until 1999 to do so.

2. Clinton never generated a surplus. He only lied about doing so. The claim is generally made that Clinton had a surplus of $69 billion in FY1998, $123 billion in FY1999 and $230 billion in FY2000 . Clinton claimed that the national debt had been reduced by $360 billion in the last three years, presumably FY1998, FY1999, and FY2000–though, interestingly, $360 billion is not the sum of the alleged surpluses of the three years in question ($69B + $123B + $230B = $422B, not $360B).

There was never a surplus and the facts support that position. In fact, far from a $360 billion reduction in the national debt in FY1998-FY2000, there was an increase of $281 billion.

Verifying this is as simple as accessing the U.S. Treasury website where the national debt is updated daily and a history of the debt since January 1993 can be obtained. Considering the government’s fiscal year ends on the last day of September each year, and considering Clinton’s budget proposal in 1993 took effect in October 1993 and concluded September 1994 (FY1994), here’s the national debt at the end of each year of Clinton Budgets:

FY 1994: $281.26 billion
FY 1995: $281.23 billion
FY 1996: $250.83 billion
FY 1997: $188.34 billion
FY 1998: $113.05 billion
FY 1999: $130.08 billion
FY 2000: $17.91 billion
FY 2001: $133.29 billion

As can clearly be seen, in no year did the national debt go down, nor did Clinton leave President Bush with a surplus that Bush subsequently turned into a deficit. Yes, the deficit was almost eliminated in FY2000 (ending in September 2000 with a deficit of “only” $17.9 billion), but it never reached zero–let alone a positive surplus number.

3. So why do Clinton kneepads like yourself say he had a surplus? It has to do with Democrat doublespeak and political smoke and mirrors.

Understanding what happened requires understanding two concepts of what makes up the national debt. The national debt is made up of public debt and intragovernmental holdings. The public debt is debt held by the public, normally including things such as treasury bills, savings bonds, and other instruments the public can purchase from the government. Intragovernmental holdings, on the other hand, is when the government borrows money from itself–mostly borrowing money from social security.

While the public debt went down in each of the final four years of the Clinton Regime, the intragovernmental holdings went up each year by a far greater amount–and, in turn, the total national debt (which is public debt + intragovernmental holdings) went up. Therein lies the discrepancy.

When it is claimed that Clinton paid down the national debt, that is patently false-the national debt went up every single year. What Clinton did do was pay down the public debt-notice that the claimed surplus is relatively close to the decrease in the public debt for those years. But he paid down the public debt by borrowing far more money in the form of intragovernmental holdings (mostly Social Security).

In other words, Clinton was borrowing money to make it look like he was generating a surplus.

4. Clinton left his successor the worst attacks on America in the country’s history, which temporarily wrecked the economy and ended up getting us involved in 2 very expensive wars. bin Laden himself said that the attacks were supposed to happen on Clinton’s watch, and his 1996 Fatwa against the US specifically mentioned Clinton by name.

BTW, it was Clinton himself (his Justice Department) who first claimed al Qaeda was in cahoots with Iraq, so let’s not go there. It should also be noted that most prominent Democrats in 1998 also said Iraq was a sponsor of State terrorism and that Saddam Hussein should be removed from office, by force if necessary.

As for the subprime loans, they did bring the system to its knees. I work in the mortgage industry and have been dealing with Fannie and Freddie for decades, so I know what I am talking about. Bush (and McCain for that matter) tried to warn Congress about these loans, but were laughed at by Democrats Chris Dodd and Barney Frank.

So, got any more lies about Clinton to amuse us with? This is fun.

Del Dolemonte on July 10, 2010 at 5:46 PM

Verifying this is as simple as accessing the U.S. Treasury website where the national debt is updated daily and a history of the debt since January 1993 can be obtained.

So, got any more lies about Clinton to amuse us with? This is fun.

You don’t seem to understand the difference between the national deficit and national debt. Until you comprehend that difference, you will remain confused about what occurred under Clinton vs. Bush. You also fail to look at debt as a percentage of GDP which is the most valid measurement.

bayam on July 10, 2010 at 7:45 PM

The dems are going to run on rose colored glasses
and pipe dreams.

thgrant on July 10, 2010 at 8:43 AM

Why not…it worked last time.

Asher on July 10, 2010 at 7:46 PM

It appears that Canadas’s success is/was largely due to that fact that it’s pols did not pressure the banks to abandon all common sense in the name of ephemeral premises of ‘equality’.
jeanie on July 10, 2010 at 9:05 AM

spot on with your comment. Funnily enough most of Canada’s policies (including the (in)famous multicultural ones) are actually predicated on the ‘ephemeral premises of equality’ that you mentioned there, only they did it differently there and they didn’t inolve their private sector and and banking system in this whole ‘equality’ experiment thing (or better term still, social engineering) . As you probaby know, their taxes there are way higher than in the US, well, I live in California and comparably I can say they are not so much higher in Canada than they are in Cali, but definitely they are higher there than in most of the US states. The Canadians redistribute a lot of the taxpayers money and sink them into this whole social programs, equality mumbo jumbo policies but they do/did it so of their own volition, as a social contract between them and their govt, whatever you call it, and so without involving their banking system the way idiots like Barney Frank and his ilk did it here. So yeah, they build projects or they have Council Housing programs (as they are called in the UK) or social housing projects – whatever their name – for their poorer or ‘underprivileged’ population (yeah, in Europe most of them look like ghettos if you ask me, especially in France/Paris, maybe less so in th UK), but they did not force their private sector, their financial or mortgage institutions to lend to insolvable people to sort out the housing problem in these countries. It might sound strange,but both the Europeans and the Canadians had more common sense than idiots like Barney Frank in dealing with this issue. The Dems’ excuse was that well, ya know, the subprime lending seemed to be the perfect subsitute for the kind of generous and grand social programs or schemes that the US didn’t have in place like the UK and Canada fors instance. In other words it was ok with them to mess up the entire banking system for the fulfillment of their utopian social equality dreams. The sad part is that imbeciles like Frank are totally unapologetic to this day for driving the whole US economy into the ground through a series of direct and indirect blows that were the result of the subprime lending disaster. To my mind, people like Frank are criminals/felons and should share a prison cell with Bernie Madoff. but not in Oabmaland obviously…

jimver on July 10, 2010 at 8:01 PM

Spending our way to prosperity is going out of style.
http://online.wsj.com/article/SB10001424052748703615104575328981319857618.html?mod=rss_opinion_main

Baxter Greene on July 10, 2010 at 1:31 PM

Megan McArdle of Atlantic Monthly makes a similar point in his article ‘Is Keynes Still Right?’ Her conclusion: ‘I don’t know that Keynes was ever right that government spending could jolt a country out of a liquidity trap. But even if he was, that doesn’t mean that he’d still be right–the political economy might have changed too much for his prescriptions to work.’

http://www.theatlantic.com/business/archive/2010/07/is-keynes-still-right/59291/

jimver on July 10, 2010 at 8:37 PM

oups, sorry, ‘her article’, not ‘his article’ :-)me typing is a guaranteed ‘adventure’ :-)

jimver on July 10, 2010 at 8:38 PM

All you need do is drive by your local mall …

tarpon on July 10, 2010 at 9:38 AM

+1000. A massive mall that’s been around longer than I’ve been alive is facing bankruptcy. Oddly enough, the individual businesses inside were all keeping their heads above water, but the people/company owning the mall itself just couldn’t hack it in the Obamacession.

Thing is, I don’t really know that many of the stores will be able to find replacement venues. So we’re probably saying goodbye to 2-3 dozen businesses of all stripes.

Dark-Star on July 10, 2010 at 9:00 PM

Megan McArdle of Atlantic Monthly makes a similar point in his article ‘Is Keynes Still Right?’ Her conclusion: ‘I don’t know that Keynes was ever right that government spending could jolt a country out of a liquidity trap.

http://www.theatlantic.com/business/archive/2010/07/is-keynes-still-right/59291/

jimver on July 10, 2010 at 8:37 PM

Unfortunately, as long as there have been recessions around the globe, the only proven remedy has been deficit spending. Austerity measures not only fail to reduce the deficit, they have consistently led to even longer, more protracted recessions marked by slow job growth. The only way to fix the deficit is to create jobs and stimulate the economy.

We do know that in past recessions similar to what’s now occurring in the US- near zero interest rates in the wake of an asset bubble- cutting government spending has consistently failed to deliver any kind of positive outcome. So before anyone gets too caught up in armchair academic discussions, it’s helpful to look at how past recessions have played out under different levels of public spending.

bayam on July 10, 2010 at 9:09 PM

bayam on July 10, 2010 at 9:09 PM

The ultimate questions for government or consumers are these: what exactly is your money being spent on, who do they directly benefit, and what material goods do they create?

Look at the first Depression. After a decade of “alphabet soup” programs that did very little to turn things around, along comes World War 2. Will you look at that, suddenly factories are going 24/7 and unemployment dropping like a stone. The difference? What all the money was being spent on – the production of useful physical goods.

It’s the same thing today. Expecting to recover by blindly funding reproduction, pork projects, and semi-useless ‘green jobs’ is hopeless.

Dark-Star on July 10, 2010 at 9:20 PM

Unfortunately, as long as there have been recessions around the globe, the only proven remedy has been deficit spending.

Governments always try to spend their way out of recession to keep themselves in power. That is proof of nothing other than the axiom of feeding the crocodile so that he eats them last. And as long as governments can continue to borrow money hand over fist, they will continue to fee the crocodile. But now they can’t. The bond markets have finally said enough is enough. No more borrowing from tomorrow to artificially prop up today. And finally the voters themselves, at least in America, are saying no as well. What worked in the past did not work, it only delayed the inevitable.

keep the change on July 10, 2010 at 9:21 PM

Governments always try to spend their way out of recession to keep themselves in power. That is proof of nothing other than the axiom of feeding the crocodile so that he eats them last.

That’s not quite true- in many recessions governments have reduced spending as a response, hoping that austerity was a solution. I’m just saying that it’s pointless to hold an abstract discussion when there’s abundant empirical evidence on the impact of government spending on the economy during a recession.
So if you’d point out a past scenario when austerity measures effectively reduced the length or severity of a recession- or resulted in lower deficits- your argument would be more credible.

bayam on July 10, 2010 at 9:40 PM

Look at the first Depression. After a decade of “alphabet soup” programs that did very little to turn things around, along comes World War 2. Will you look at that, suddenly factories are going 24/7 and unemployment dropping like a stone. The difference? What all the money was being spent on – the production of useful physical goods.

It’s the same thing today. Expecting to recover by blindly funding reproduction, pork projects, and semi-useless ‘green jobs’ is hopeless.

Dark-Star on July 10, 2010 at 9:20 PM

You make a great point and I respect your opinion. I’d only disagree on trying to place value on the type of jobs created. Jobs that involve building business software or clean energy are just as valuable as jobs for manufacturing trucks. The value of good is in the eye of the beholder (or consumer). The important thing is that people have incomes that can be spent to stimulate demand and job growth.

bayam on July 10, 2010 at 10:01 PM

bayam on July 10, 2010 at 10:01 PM

Agreed. The thing is, right now we’re trying to run an economy that is heavily out of balance on service jobs…that’s why I’m so heavy on the ‘make-stuff’ jobs.

(also, the products made have to be useful. Otherwise we’ll just recreate the ‘Soviet Steel’ debacle!”)

Dark-Star on July 10, 2010 at 10:17 PM

Jobs that involve building business software or clean energy are just as valuable as jobs for manufacturing trucks. The value of good is in the eye of the beholder (or consumer). The important thing is that people have incomes that can be spent to stimulate demand and job growth.

bayam on July 10, 2010 at 10:01 PM

No they aren’t. This “green energy” thing in particular is classic pie in the sky. The “value of the good” is what people want to pay for something that they want.

Keep in mind the main reason why deficit spending is so painful now is because Bush departed from mainstream economic policies by introducing massive deficits when the economy was booming. Paul O’Neil, his Treasury Secretary at the time, tried to oppose tax cuts that economists warned would lead to today’s deficits. It’s amazing that anyone is dim enough to criticize Clinton’s economic team, which took a huge deficit and turned it into a substantial budget surplus. If we had stayed on that path, no one would be concerned about the size of the national debt today.

bayam on July 10, 2010 at 4:21 PM

Good Lord, a Krugmanite. Tax cuts (and removing the sword of Damocles hanging over the heads of employers) are the solution. Employment is still sluggish after a trillion dollars pissed away in so-called “stimulus”. You’ve already lost the argument.

ddrintn on July 11, 2010 at 12:27 AM

Unfortunately, as long as there have been recessions around the globe, the only proven remedy has been deficit spending…So before anyone gets too caught up in armchair academic discussions, it’s helpful to look at how past recessions have played out under different levels of public spending.

bayam on July 10, 2010 at 9:09 PM

Not entirely true…Had the feds kept spending at 1944 levels through 1954, the US economy would be where it is now. Keynes called for spending only when needed. It’s the change in spending that acts as a stimulus, but only if that change finds its way to the people. FDR had the advantage of starting with a very low debt, thus allowing him to borrow massively without having to deal with a lot of existing debt service. Keynes always said that governments should go back to saving whenever they can.
We should remember that in his days, low government spending was the norm. This is likely the seed of his theories, in fact. He never imagined the corruption that now bleeds off fiscal spending long before it gets to the populace. Given the existing debt load and the current level of corruption that makes money evaporate long before it gets to where it needs to be, there is no way to increase our borrowing in a Keynsian manner.

Much of the New Deal and other Liberal spending of the 30s-60s was actually decent, since it created capital assets. Bridges, dams, electrification. Consider: we just spent over half a trillion dollars in stimulus… where are the new highways? Where are the repaired bridges? Where is the new Air Traffic Control system? The party is over. There are simply no “degrees of freedom” to allow Keynsian policies to do anything but bankrupt the US economy. Yeah, monetarism might work, there is so much cash out there that the economy could roar back – but problem is nobody really predicted a business buzzkill as bad as Barack Obama.

jimver on July 11, 2010 at 1:12 AM

I’m an American but I found out a little about Stephen Harper (emphasis mine)

Now in his fourth year as Prime Minister, Mr. Harper and his Government are working hard to ensure Canada’s economic recovery is strong and sustainable. Keeping taxes low, reducing deficits and laying the foundations for long-term prosperity top the Government’s agenda. Mr. Harper is also continuing to advance Canadians’ interests and values on the international stage in a year when Canada is hosting the 2010 Olympic and Paralympic Winter Games, the G8 and G20 summits, and a Royal Tour by Her Majesty Elizabeth II, Queen of Canada.

Stephen Harper was born on April 30, 1959, in Toronto, Ontario. He moved to Alberta in 1978 to work in the petroleum industry and went on to obtain both a bachelor’s and a master’s degree in economics from the University of Calgary. Mr. Harper and his wife Laureen have two children, Benjamin and Rachel, and maintain a permanent home in Calgary.

SgtSVJones on July 11, 2010 at 2:19 AM

Stephen Harper was born on April 30, 1959, in Toronto, Ontario. He moved to Alberta in 1978

SgtSVJones on July 11, 2010 at 2:19 AM

I am not surprised at all. I studied in Toronto for 3 years and lived in Nova Scotia for 1 year and travelled all over Canada. People in Alberta are a v. conservative brand, v. business-oriented and successfull people, with solid work ethics…then of course there’s the oil industry there that’s flourishing and turned Calgary and the whole province into the most prosperous region of Canada. The Albertans are the exact opposites of the loon liberals that populate British Columbia (especially the Vancouverites) and who are birds of a feather with our beloved san franciscans and in general our californian la-la landers :-) so basically if you chose to live in Canada it is advisable to opt for the sanity of Calgary (it comes at a price though, it’s friggin’ cold there :-), Nova Scotia is not too bad either, a good mix of conservative and liberal politics…Toronto’s pretty liberal, but more like the US East Coast type og liberalism, and not the deranged West Coast version…

jimver on July 11, 2010 at 3:16 AM

So before anyone gets too caught up in armchair academic discussions, it’s helpful to look at how past recessions have played out under different levels of public spending.

bayam on July 10, 2010 at 9:09 PM

It’s aslo helpful maybe to look at what IMF has to say about the IS growth outlook and its deficit… am pretty sure they cannot be ‘accused’ of being ‘caught up in armchair academic discussions’…
‘The International Monetary Fund gave Social Security — the so-called “third rail of American politics” — a bold kick Thursday in a report that urged the Obama administration to focus more on closing the deficit. The report also said that economic growth would occur at a slower rate than the White House is predicting and that the nation will fall deeper in debt than anticipated.’

Read more: http://dailycaller.com/2010/07/10/imf-says-u-s-wrong-on-growth-outlook-deficits/#ixzz0tMESvyGc

jimver on July 11, 2010 at 3:45 AM

Unfortunately, as long as there have been recessions around the globe, the only proven remedy has been deficit spending

bayam on July 10, 2010 at 9:09
PM

not so fast, you might want to read “New Keynesian Versus Old Keynesian Government Spending Multipliers,” by a team at Stanford (NBER Working Paper No. 14782) and at the data analyzed by Harvard’s Edward L. Glaeser.

http://economix.blogs.nytimes.com/2010/06/01/what-we-dont-know-and-perhaps-cant/

his conclusion (backed by data) speaks volumes:

‘The fundamental problem with acquiring certainty about Keynesian intervention is that anti-recessionary spending is just not very amenable to clean, compelling empirical evaluation. Recessions aren’t that common, and there are too many moving parts. Times change, so it isn’t obvious that the lessons of the 1930s – not that we can agree on those, either – are applicable today.’

jimver on July 11, 2010 at 4:34 AM

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