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How much worse could it have been?

Barack Obama, stimulus, deficits, tax cuts, Alan Blinder, Mark Zandi, Keynesian economics Critics of the $787-billion stimulus package that Democrats pushed through Congress in early 2009 frequently point out how much worse the economy has fared since then than the Obama administration predicted when it proposed the legislation. For example, they cite a report by two top administration advisers that predicted unemployment would hit 9% if Congress did nothing but that the stimulus package would keep it below 8%. In fact, unemployment soared above 10% after Congress passed the American Recovery and Reinvestment Act,  and it's still about 9.5%. Ergo, the Recovery Act made things worse, not better.

It's fair to debate the Keynesian assumptions that underlie ARRA, but it's not fair to say it's a failure just because the economic realities were worse than the projections. That's because projections are guesses. The real question is whether we're better off than we would have been without the extra spending. That's hard to quantify, but economists Alan Blinder of Princeton University (and formerly of the Clinton administration and the Federal Reserve) and Mark Zandi of Moody's Analytics (who advised John McCain's presidential campaign) try to do so in a study released Wednesday titled "How the Great Recession Was Brought to an End." Their conclusion: The country would have been significantly worse off without the stimulus measures passed by Congress in the past two years, and it would have been in truly desperate straits today had Congress and the Fed not taken extraordinary steps to save the financial markets as well.

The report is likely to be trotted out repeatedly on the campaign trail ...

... and may embolden Democrats eager for another stimulus package to combat unemployment.

The fact that Blinder and Zandi are both Keynesians will no doubt undermine their results in the minds of some conservatives. In particular, the economic models by Moody's that Blinder and Zandi rely on show federal spending having a "multiplier effect" (e.g., $1 in unemployment benefits generating $1.61 in economic activity) that critics such as Harvard's N. Gregory Mankiw dispute.

Having said that, it still seems to me that Blinder and Zandi have offered a powerful defense for what the Bush and Obama administrations (and Ben Bernanke's Fed) did to help the economy, including more than $1 trillion worth of stimulative tax cuts and spending increases. Here are a few nuggets of data from their study:

  • Had Washington done nothing, unemployment would have reached 16.5%, compared to the actual peak of 10.1%, with almost twice as many job losses as there have been. The gross domestic product would have continued to drop through 2010, instead of growing nearly 3%. And the federal deficit would have peaked at $2.6 trillion this fiscal year, instead of $1.4 trillion.
  • The biggest impact came from the Wall Street bailout (a.k.a. the Troubled Asset Relief Program) and the Fed's effort to ease the credit crunch. With the TARP and the Fed's efforts but no stimulus, Blinder and Zandi say, GDP would have grown about 1% this year, unemployment would have reached nearly 12% by 2011, and the deficit would have been $1.6 trillion in fiscal 2010.
  • With just the $1 trillion worth of stimulus, Blinder and Zandi estimated, GDP would have grown only slightly this year, unemployment would have peaked at 13%, and the federal deficit would have been $1.75 trillion in fiscal 2010. Still, their analysis asserts that the stimulus spending produced a lower deficit than the federal government would have been left with had it done nothing to rescue the economy. Under their model, a laissez faire response by Washington would have yielded a deep and prolonged recession, slashing federal revenues. The resulting deficit would have been larger than the one caused by the stimulus measures.
  • The cumulative impact of the Wall Street bailout and the stimulus measures was greater than the sum of their parts because "the policies tend to reinforce each other," the report states.

"When all is said and done," Blinder and Zandi conclude, "the financial and fiscal policies will have cost taxpayers a substantial sum, but not nearly as much as most had feared and not nearly as much as if policymakers had not acted at all. If the comprehensive policy responses saved the economy from another depression, as we estimate, they were well worth their cost."

It's a safe bet that other economists will produce different models soon that support a much different conclusion about what might have happened had Washington done nothing, or had Senate Majority Leader Harry Reid (D-Nev.) not found the necessary GOP votes to pass ARRA. There's just no way to know for sure how bad things would have gotten had Washington not intervened because, well, it did.

-- Jon Healey

Credit: AP Photo / Pablo Martinez Monsivais

 

Comments () | Archives (34)

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e pearse

It does not matter, worse or not, it is pretty bad and will continue to get really worse if November is a failure. But...

...The dye is cast.The November election is now known if you care to study the irrefutable figures and predictions of the piece “The Coming Crash of the Social-Democratic Madness”.

Find it at http://www.robbingamerica.com


Anonymoose

Could the author cite the reasons the deficit would have grown had it not spent the money? Citing the report fully in the aspect would allow me to follow his argument. Currently, the article lacks any proof that the stimulus helped because of course GDP increases when money is spent--Government spending is part of GDP. The point is whether there would have been growth in other sectors.

Jon Healey

@Anonymoose -- You'll have to read the report, and particularly the two appendices, to get deeply into the details of the models and their methodology. The short answer, as I said above, is that the economy was collapsing -- GDP was dropping at an annual rate of 6%. When the economy turns sharply south, the unemployment rate skyrockets, driving up the cost of all the federal safety-net programs while shrinking the amount of tax revenue. Considering that the government was running huge deficits under Bush even before the meltdown, there's just no way to avoid the deficit ballooning.

quatidion

LOL. Since we're dealing in counterfactuals, it is equally and just as rationally relevant to say that had we not spent the $852 Billion Dollars (Add the Fannie Mae and Feddie Mac Bailout or the GM and Chrysler Bailout), please, that money would have been available as capital, for investment, and the economy would have roared back to life.

But because the government squandered it on paying off unions, and it wasn't available to small business for loans, it created a drain on our economy.

Now, let's get to the other points of this 'Recovery' Act.

The Democrats promised this money would go to 'Shovel-Ready' projects that would spur the growth of our economy with a multiplier effect that would return $1.60 for every $1.00 Spent by the Democrats. They owe us a return on that investment of 2.72 Trillion Dollars.

They lied, plain and simple. Only 3% of all those borrowed dollars was spent on infrastructure.

The rest went to pay off their constituency.

There's a revolution coming in November. We're going to get the full list of Journolists on the list.

There's a reckoning coming.

Ben

It is still going to get worse. Government continues to grow itself even as the tax base shrinks. The jobs have left the country, and we have a populace that is ignorant and obese. The only way the government is going to facilitate this fake economy is by printing money. I believe the standard of living is going to plummet in this country. I just can't believe we let it get to this point. Government intervention and size caused this.

Will

Why is it that there are those that forget that the stimulus package was proposed by Bush, before being accepted by Obama?
It was not a one sided deal, and if it was...the one side was the one that destroyed the economy before Obama took office. Six years of a Republican Congress and president ruined this economy. I'm not saying that Obama is blameless, but let those that are blameless cast the first stone. That lets out the entire Republican Congress etc.

quatidion

Why is it, Will, that you keep pushing the Obamatron Party line? The 'stimulous' stimulus package was NOT proposed by Bush. This was a bill put together by Rangel and Pelosi, rubber stamped by a Democrat Senate, and two RINOs from Maine.

You're either uninformed, or a liar, sir.

Lou

You know if we instilled the policies of Nazi Germany of the early 1930s, we could have almost 0% unemployment. But do you want to live under those policies? Is low unemployment worth all that?

This is what I cannot stand about people who defend the TARP and stimulus. They say "it could been worse" but don't realize what they created. They created an oligarchy of mega Wall St banks who are stronger than ever before. They created record deficits. They continued the same Wall St system that got us in this mess instead of letting it sort itself out.

So choice is 10% unemployment with mega Wall St banks, or 16% unemployment with the banks getting what they deserved and Americans reshaping our economy not beholden to Wall St? I choose the latter.

Jon Healey

@quatidion -- Leave the name-calling in the schoolyard, please. The first stimulus -- a $100+ billion tax rebate in mid-2008 -- was Bush's initiative. The TARP was Bush's initiative, and though that wasn't a stimulus, it was $700 billion in emergency spending authority. The $787 billion stimulus that Congress enacted in early 2009 had its roots in legislative proposals that were kicking around in November and December 2008, but I think it's fair to say that the Dems were driving that bus, not the outgoing administration.

Jon Healey

@Lou -- I see we're back to Godwin territory -- Nazis instead of socialists. Nice change of pace!

Historians tell us that even Herbert Hoover regretted the laissez-faire approach his administration took to the banking collapse that led to the Great Depression. Ben Bernanke -- a Republican appointee and a former top economic advisor to a Republican White House -- has said that the country was on the verge of a second Great Depression after Lehman Bros. folded. Without TARP and the extraordinary interventions that the zero-bounded Fed took to get credit flowing again, we'd probably be mired still in epic misery. I don't think anyone who's studied (or lived through) the Great Depression thinks it was necessary or productive. Why do you?

Granted, my opinion is based on what the models from Moody's Analytics show, not something that anyone can prove beyond debate. If you can cite other models showing different outcomes, please do.

quatidion

LOL. A $100 billion tax rebate is not the same as a $787 Billion dollar wealth redistribution, nor are the two anywhere close to TARP, which did not transfer any funds, for any spending. It was an automatic uptick to accounts already held at Treasury to allow banks to remain within the reserve limit.

All of the TARP funds, with a few exceptions of new 'banks' from Freddie, Fannie, the car companies, and GE financial divisions, have been paid back, with interest.

Tell me again, how GMAC has an interest in sub prime mortgages? What? For their Union Members?

There was also almost universal Republican objection to car companies being included in TARP.

Fannie and Freddie still owe us over $140 Billion and democrats refuse to allow any reform of those institutions.

And we just saw the new Volt from Government Motors, so we know that government owned company, and the other one (Chrysler) is never going to pay us back the $124 Billion the Democrats gave to the unions.

And a tax rebate is money that belongs to U.S. citizens. It is not a loan to them.


Mitchell Young

From a brief reading of appendix B, where Moody's explains its model in very general terms, it seems they place great weight on the 'wealth effect' -- the tendency of people to spend more when they feel wealthy or, in fact, have access to capital by leveraging assets. But that is exactly what got us into this trouble -- and it is still going on -- in the first place. People bought homes they couldn't afford, people who had homes they could afford took out second mortgages to take advantage of ephemeral 'equity' in their properties. This led to massive misallocation of resources; as can be seen from the half built or half occupied 'developments' that dot Southern California and the 'sand states'.

Moody's model credits tax credits for maintaining housing prices -- but ignores the trade offs. Had housing prices fallen further, buyers would have benefitted by having lower mortgages. They would have had more disposable income, and thus helped prop up the economy. Even renters would have benefitted; rental and owner occupied housing are near perfect complimentary goods, so rental prices would have fallen in tandem new and used home prices fell. Again more disposable income would have been available to those who hadn't overextended themselves during the real estate bubble. I see no evidence that Moody's model accounts for these countervailing wealth effects. In essence, they and their model seems to favor the status quo.

Now IANA[Econometrician] -- then again, as Moody's is a Credit Rating Agency, and Credit Rating Agencies are among the chief villains in the bubble and bust story of the 'naughties', maybe Econmetricians and their current models are overrated [no pun intended]

Lou

@Jon Healey "Ben Bernanke -- a Republican appointee and a former top economic advisor to a Republican White House -- has said that the country was on the verge of a second Great Depression after Lehman Bros. folded."

Other things Ben Bernanke said:

10/20/05 – Testimony before the Joint Economic Committee

“House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”

2/15/07 - Semiannual Monetary Policy Report to the Congress

“Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”

5/17/07 - At the Federal Reserve Bank of Chicago’s 43rd Annual Conference on Bank Structure and Competition

“All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”

I got a lot more. So Ben Bernanke is one to be trusted?

"Granted, my opinion is based on what the models from Moody's Analytics show, not something that anyone can prove beyond debate."

Why dont' you do a Google search on "Moody's", "AAA", "subprime CDOs", etc....

Moody's was rating junk subprime CDOs with AAA ratings. So Moody's is one to be trusted?

Nancy

John Maynard Keynes, the father of failed modern macroeconomics, is most often referred to as driving Obamanomics. The concept of Keynesian economics made a come back in late 2007 as the U.S. economy devolved into recession. Franklin Roosevelt attempted the same experiment during the 1930's and the result was a depression. Were it not for WW ll culminating in a broad expansion of factory development and wartime purchasing things certainly may have turned out very differently.

With the victor comes the spoils. Britain, the U.S., and the Soviet Union, each had expendable capital that shaped the world. The wartime high tax rates which continued in the U.S. were preventing substantial growth. It wasn't until John F. Kennedy proposed an across the board tax cut, and the printing of United States Notes for legal tender in Executive order #11110, that economic expansion became a driving force for growth.

After Kennedy was shot, http://video.google.com/videoplay?docid=8440302925206489846# the United States Notes were removed from circulation and the federal reserve corporation was again able to charge the U.S. government interest on all fiat money created. This resulted over time to inflation and stagnation and the term stagflation was coined during the Carter administration. Interest rates rose to 21 1/2% in the fall of 1980. Construction stopped and a deep recession followed.

Reagan was elected in a landslide and proposed an across the board tax cut which grew the economy after 18 months into the longest peacetime expansion ever recorded in U.S. history. Interest rates dropped by more than 1/2 and the U.S. economy was moving again. Naturally opinions differ but what drove up deficits was spending. America was being taxed enough but spending was out of control.

Fast forward to Clinton/Bush eras and bubbles created by the dot.com episode and the housing bubble resulted in a continuation of peacetime expansion started during the Reagan administration.

The current administration of Obama rejects historical evidence of dealing with downturns in economic activity and most closely resembles FDR's Keynesian experiment and is producing similar results. Growth is anemic and deficits are soaring. After 18 months we should be seeing what current economic policies are likely to produce.
.

Jon Healey

@Mitchell -- (pausing to get over the shock of a commenter actually reading the Moody's report) -- IANAE, either. And I see the value to a housing-price correction. My only pushback to your analysis is that you're ignoring the feedback loop caused by the plunge in house prices. It's not just new developments in the exurbs that being hit. As more homeowners default across the country, the value of neighboring homes goes down as well, leading to more "strategic" defaults as homeowners realize they'll never recover their investment.

Also, the possibility of rents declining depends in part on landlords being able to refinance, which can't happen if their mortgages are underwater. I've seen data for commercial leasing rates in LA that support your assumption -- see http://www.loopnet.com/Los-Angeles_California_Market-Trends -- but the one data set I found for apartment rents in LA shows a much smaller drop -- http://www.rentjungle.com/rentdata/average-rent-in-los-angeles-and-los-angeles-rent-trends/.

Jon Healey

@Nancy -- Umm, FDR didn't cause the Depression. It was raging full on when he was elected. And the Depression was prolonged at least in part because Congress and the Fed moved too quickly to curb spending and tighten the money supply. You're right, WWII brought the Depression to an end. But the country's response to WWII was to vastly INCREASE deficit spending. Look at the deficit- and debt-to-GDP ratios from that period, they're stunning. That stimulus finally pulled the country out of its tailspin. Hardly an argument against Keynesian economics.

"What drove up deficits was spending." You could say that, but it would be more accurate to say that the deficit ballooned after the Reagan tax cuts. And yes, the economy grew, but we don't know if the tax cuts were responsible for that growth because they weren't deficit neutral -- they weren't accompanied by spending cuts. They were pure stimulus, in other words. And it's wrong to connect the tax cuts to lower interest rates -- Paul Volcker's moves at the Fed get the credit for that.

You seem to be arguing that fiscal stimulus is good when necessitated by war or when proposed by Republicans, but it's bad when Obama does it. Why ignore the extensive fiscal stimulus carried out by George W. Bush (two wars, tax cuts and a new prescription-drug entitlement all financed by borrowing)? It was buttressed by the monetary stimulus from Greenspan, but didn't seem to work out that well, did it? And would you explain the growth in the 1990s after Clinton raised taxes?

Jon Healey

Ezra Klein interviewed Alan Blinder yesterday and asked him about the Moody's model. The exchange is instructive. See http://voices.washingtonpost.com/ezra-klein/2010/07/blinder_bank_profits_collatera.html for the full interview:
[Klein] There’s some argument as to whether you can trust these models, or whether they’re really just a reflection of the biases of the authors. Why should we believe your results?

[Blinder] First of all, you shouldn’t trust it completely, and that’s why we say we welcome others to try and estimate this, too. Different models do give different answers. In the past, I’ve used two or three models and tried to get a sense of where they agree and disagree. So I agree you can never rely on one model totally. But you can’t make anything come out that you want. These models are fitted to real data. They’re not just made up. They describe how the U.S. economy worked in the past. And when you shove something new through them, it’s really hard to guess the answers. I didn’t have any idea for many of these unusual financial policies that we modeled, what would come out. And we didn’t do it over and over to get the answers we wanted. It was an honest simulation of the model.

Lou

It's really no surprise the LA Times is on the side of Wall St. I mean, during the bubble, the LA Times did no stories regarding the subprime situation even though the majority of subprime lenders were based in SoCal. No stories regarding predatory lending or unsustainable home prices? A house in Van Nuys was selling for $750,000 and no one at the Times bothered to investigate?

Instead of doing their job as journalists, they took money from the real estate industry to put that fake "Homes" section in their paper. They probably want their cash cow back since print media is dead. Like Moody's wants their cash cow back of getting paid to dole out AAA ratings.

The only good journalist the Times had, Peter Viles, is gone.

quatidion

Jon Healey, I'm quite suprised you quoted Ezra Klein, creator and moderator of the Center to Far Left News Manufacturing Outlet, Journolist.

That guy is not a credible authority on anything. And anyone loses credibility by reference him or anyone who was a member of Journolist.

BTW. LA Times gonna disclose any of their crew who was on that list?

Jon Healey

@quatidion -- Wait, it's a Washington liberal conspiracy to question the value of econometric modeling? Geez, that means THEY GOT TO MITCHELL YOUNG!!! (see above) Poor guy -- I thought he honestly doubted Moody's models. He seemed, I don't know, so grounded in empirical data. The Journolist Cabal is more powerful than anybody thought!

If those evil Journolist guys can get to Mitchell, quatidion, they can get to you. Maybe you should take a break from the Internet just to stay safe.

Jon Healey

@Lou -- I did a quick search of our archives from 2002 to early 2007, before the subprime meltdown hit. We ran more than 100 stories about accusations of predatory mortgage lending. 300 more stories from 2002 through early 2006 refer to the housing bubble, although many of them were about California's prices continuing to go up in the face of doubts about the sector. That's not to say we did enough to cover the asset bubble in housing, but we didn't ignore it.

Lou

@Jon Healey

What would've been great is if the Times put the effort they did for the Bell city council reports into the OBVIOUS UNSUSTAINABLE housing bubble that was happening IN THEIR OWN BACKYARD.

What's the difference? Bell didn't pay the Times a ton of money to put a fake "Bell" section in the paper.

quatidion

Jon, condescending repertoire is not your strong suit. Try to stick to that facade of objective journalist. And what makes a good journalist?

Stanley Walker, "
“He hates lies and meanness and sham, but keeps his temper. He is loyal to his paper and to what he looks upon as his profession; whether it is a profession or merely a craft, he resents attempts to debase it.

http://www.politico.com/news/stories/0710/40308_Page2.html#ixzz0v6M2Ay3f

So I take that as a "No" on full disclosure of LA Times personnel on Journolist.

But my comments still stand about Ezra Klein. He's a hack. You become a hack trying to rehabilitate his name.

You all do disservice to journalism when you refuse to honestly address the issue.

quatidion

Welcome to the Obama Recovery.

How about a story on the four million '99ers', the people who's extended unemployment benefits have run out after 99 weeks.

I heard on the Ed Shultz program, tonight, that 50,000 a day are losing that extended benefit, and that there are four million now, that have exhausted it.

I have also heard that the Treasury estimates that corporations are sitting on 1.8 Trillion dollars in cash, that they could use to expand their business and employ people, but the regulatory environment coming out of the democrat tyranny is so risky and uncertain, that no one will invest.


Lou

Jon Healy

Can you post a link to all your editorials prior to the bubble bursting warning us of all the questionable mortgage lending practices and the dangers of the unsustainable housing bubble? I mean, for you to be all high and mighty to people who justifiably feel ripped off from all the help to Wall St, you have to be an economic genius. For you to know for a fact that the TARP/stimulus worked, you also should have seen this coming. Like when you justified the TARP by saying Bernanke said it was necessary, nevermind all the idiotic things that he said prior to the bubble bursting.

TARP did not help anything except the bonuses of Wall St execs. Why are people still complaining about the lack of credit in the market? Is it because the TARP money and 0% Fed rate led banks to do simple carry trades to fatten their profits and bonuses?

Full disclosure, I graduated in college in 02 and went to work at a major subprime lender packaging mortgages to Wall St. (Yes, I'm incredibly sorry for my part in destroying the economy) I realized 2 years into the job that what we were doing and I quit. The most disturbing thing I found was that no news organization cared or covered what was obviously going on when it was right in everyone's face. All I ever saw was cheerleading from the Times and OC Register regarding the housing market. And for me to see all these opinions pages now justifying bailouts that happened because journalists did not do their jobs makes me sick to my stomach.

The Times cheerleading the bubble and justifying the bailout is no different than Fox News cheerleading the Iraq War and justifying the surge.

And no, I am not one of those Tea Party nutjobs. I am a regular American who is disgusted with our Wall St owned gov't. And every article like this that states the TARP/stimulus was necessary even though I know a ton of unemployed people, people up to their eyes in debt, and people who are just suffering in general makes me not want to vote for the people in charge.

Jon Healey

@Lou -- Points well taken. I wasn't writing about the economy until late 2007 or so, and that was after the fact of the bubble bursting. Prior to that, most of what we on the editorial board said about housing was that LA needed more of the affordable kind, not that underwriting standards were evaporating at lenders like your former employer.

Still, holding the Times responsible for the excesses of Ameriquest and Countrywide is a bit like blaming baseball fans for the performance-enhancing drug scandal. Do you really think there would have been no bailouts if, while home prices were skyrocketing in So Cal, we'd run story after story and editorial after editorial warning about asset bubbles? Some of the worst-performing loans were issued in the first half of 2007, *after* the bubble burst and *after* sub-prime lenders were reaching giant settlements in predatory lending lawsuits, going bankrupt or both. That's the definition of mania -- continuing to believe in something that's already been shown to be a fraud.

As far as Bernanke goes, his powers of prediction and real-time analysis are certainly suspect. His comments about the need for TARP were retrospective, however. And you or I could find any number of other Bush administration folks who would make the same point, people who had access to the best data available.

And you're right, one can't point to TARP as the savior here, or even as a well-crafted bit of policy. It's part of a package. The point I was trying to make in response to your first comment was simply that you seem to be advocating the same hands-off path that the Hoover administration took in 1929, something that even Hoover bitterly regretted later. And again, I invite you to point to some models or empirical data showing why that would have been better for the country this time around.

Bruno

Hoover did not use laissez-faire to fight what was then a recession. After inauguration, he signed into law the highest tariff in U.S. history. He then began an Obama like series of targeted federal subsidies (and loans) to farmers, bankers, industrialists, and those unemployed. To top it off, he then more than doubled the highest income tax rate to 63%. Unemployment zoomed to 25% allowing Roosevelt's victory.

The entire recession occurred because ethnic pressure groups pushed congress to lower loan standards. Look up Brownstein's article in LA Times from around 1999 on redlining and how banks were "discriminating" against minorities. Or check any of number of YouTube videos of Barney Frank and Waters actively thwarting regulation of Fannie Mae et al.

The constant drumbeat of propaganda from the LA Times is noxious. The Media have so poisoned the atmosphere of the country with your nonsense that anything is now possible.

No matter, it's all good. With the massive amount of debt the US is now carrying, Obama has made sure that the economy will not recover for years, if ever. Which means the whole entire rotten structure of the welfare state is going to topple down. And it's going to happen soon.

avatar666

I don't think active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability. In fact, the European model and what is now happening in our economy is proof that Keynesian policys are wrong and don't work. Yesterday Obama announced he would like to provide $30 billion to bail out small banks. Why? Small banks are a dime a dozen. If they can't survive providing a service they should fail. Obama and the democrats refuse to acknowledge the record deficits and the national debt is our #1 problem.

tomdavis

No amount of "stimulus" will save the train wreck of California's economy. Over a hundred business have left the state. Look at the list (http://thebusinessrelocationcoach.blogspot.com/) and you'll see for yourself. California business are the 4th highest taxed in the nation. And California's regulatory costs are now the highest in the country. That's why companies are moving jobs from California to states that actually want their business -- places like Texas, Utah, South Carolina and Tennessee. John Chambers, CEO of CISCO systems, said he would never open another facility in California again. Apple Computer opened their $1B assembly plant in South Carolina. The Automobile Club of Southern California has moved over 1000 jobs to facilities outside of California. Over 60% of all large employers in California now have policies against opening new facilities in the state. Even if the national economy recovers, California unemployment will still be over 10%.

quatidion

Hilton Hotels and Northrup-Grumman, both based in Los Angeles, moved their corporate headquarters to Virginia this year, and took their jobs with them.

Why are Californian companies moving to Virginia?

http://www.wtvr.com/news/dp-va--statefinances0714jul14,0,239137.story

A Republican Governor, Bob MacDonald announced, on 14 July 2010, that Virginia has gone from a $1.8 billion budget deficit in January to a $220 million surplus for Fiscal Year 2010. This was achieved during this year's General Assembly session. While the Governor was leading on balancing that budget, he was also working with members of both parties to close an unprecedented $4.2 billion shortfall in the budget for the next two years, once again without raising taxes.

Stefano888

The American and global bankers received their fair share. I wonder, who really rules this nation?

Socorro Varela

This whole concept of how much worse it could have been is nothing more than a white wash cop out for not knowing how to fix what over-spending broke. Obama has no clue of what to do and articles like this one serve as cover-ups for his ineptness. Too bad we cannot vote the LA Times out in 2 years like we can vote out Obama.

PandoraBracelet

I think it will be more worse.

Maisey

Things always seem to go worse than the government predicts. They need to be more realistic when they are making those predictions so they can know what changes to expect and plan accordingly. Thanks for the article; it was very informative in areas I wasn't super familiar with.


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