"FESTER", good one! Great article, but what about Flemming v. Nestor?

Are the Republicans really concerned about the economy, or rather, concerned that the economy might improve before November 2012?

A superb article, a real eye-opener to layman like me. Congrats on the PhD!

Great to read you again! Your insights were sorely missed over the last year. Why do we hear so much about where and how to “cut” – but so little about where and how to “grow”? If I overspend, I'm forced to cut my spending (or work nights and weekends for extra pay, put my wife to work ...nah). Since the fate of the US economy can be easily extrapolated from my own personal cashflow experience, it's as clear as the Budweiser logo on NASCAR number 29 that Obama's done spent us into the poorhouse. j/k

Your review link is garbled, a spurious "http//" http://www.amazon.com/review/R20D9KAWPHHYN5/ref=cm_cr_rdp_perm

gabriel: "It sounds like your equation for jobs saved assumes at least two factors." My assumption was explicit: perfect efficiency in a perfect world. Since we don't have such perfection, I hoped it was clear that my calculation wasn't a reasonable calculation. The Obama administration's calculation is 20% of that which implies that 80% of the stimulus is not going to job creation, at least not yet. As a rough ballpark figure, it doesn't sound too bad, hardly much to get worked up about. "it sounds like you're saying that if only one logical, rational solution exists, then it's ok to justify it using tautologies and incomplete data." No, I'm saying that if only one logical, rational, uncontroversial solution exists (Keynesian stimulus), the government bears no burden of proof to justify implementing that solution. This whole Jobs Saved issue is not meant to be an argument because one isn't needed. It's Marketing: making sure people know that the product they've already bought and paid for is working.

"Because quite frankly, thats a load of BS." I'm not sure what that refers to, but I'll assume it means the claim that the stimulus has saved 150k jobs. My estimate for perfect efficiency in a perfect world was 40 billion / $50k = 800k jobs saved. So in some sense the administration is assuming 20% efficiency at this point in time, which seems pretty conservative and hardly much to get worked up over. "Only time will tell, however, and we really don't have any way to make judgments." Exactly my view as well. A neutral reaction to the administration's claims makes the most sense to me at this point. They certainly underestimated job loss currently, but that may or may not have any bearing on their claim of jobs saved. “You created a situation where you cannot be wrong,” said the Montana Democrat. “If the economy loses two million jobs over the next few years, you can say yes, but it would’ve lost 5.5 million jobs. If we create a million jobs, you can say, well, it would have lost 2.5 million jobs. You’ve given yourself complete leverage where you cannot be wrong, because you can take any scenario and make yourself look correct.” This assumes that we had several equally logical and rational solutions to the economic crisis. In that case, choosing one over the other by justifying it with an unfalsifiable argument would be very wrong. However, that is not the case. Keynesian stimulus was the widely recognized solution on all sides from the beginning. There really was only one logical choice. The best form of stimulus is debatable, but here too, speed was of the essence, and the Democrats had lots of projects all ready for deployment.

Given they've sent 40 billion so far (Cafe Hayek link), what's wrong with estimating jobs from that? I mean the money isn't going all overseas, and it isn't going all into some CEO paycheck. Eventually most of that 40 billion will end up in American paychecks. 40 billion / $50k = 800k average paying jobs. Picking $150k seems pretty conservative.

"So economic booms increase the real interest rate by increasing the demand for borrowed money, ..." We've just come through an economic boom where interest rates stayed "abnormally" low. I'm suggesting that this is because growth of global wealth can outpace investment demand and lead to so-called "excess liquidity". Again, World GDP went from 30 trillion to 60 trillion in 8 years. People are leaving poverty faster than productive investment opportunities can be created, so I think liquidity will outpace money demand for years to come, leading to lower interest rates (and more bubbles). Now I know the last boom seems to be unusual in that part of the cause of low US bond interest rates was China fixing its currency. But managing currency rates seems to be an emerging economy paradigm anyway. Further, if China's currency strengthens, that will likely lead to a boom in domestic spending which will really boost wealth in a vast population that remembers that US treasuries were the safest investment in 2008's global meltdown.

I'm taking the "big picture" view that increased global wealth means increased income available for investment rather than consumption, which means higher demand for all forms of investment which should lead to lower interest rates in aggregate world wide. Common sense or not? I'm not denying that interest rates will fluctuate, but I'm saying that interest rates will never hold at the Clinton era rate, and that is directly or indirectly due to a doubling of global wealth.

How can you define "normal" interest rates? When the recession is over, World GDP will probably resume normal growth in excess of US 60 trillion per year (as of 2008). At the end of Clinton's presidency, that was only 30 trillion. There is a heckuva lot more money out there today that will, inevitably, find it's way to the world's richest and safest country.