dagblog - Comments for "The Deal doesn't matter"

yes

Flavius — Thu, 14 Jul 2011 10:53:20 +0000

yes

Obama is offering just as

Dan Kervick — Thu, 14 Jul 2011 05:26:23 +0000

In reply to Agree that if all or at least

Obama is offering just as much nonsense as the Republicans. They are both talking about sucking money out of the economy with a new austerity budget. That's just dumb in the present context. Maybe its clever politics. But it's dumb and irresponsible public policy.

Agree that if all or at least

Flavius — Thu, 14 Jul 2011 01:14:00 +0000

In reply to Right, I agree that business

Agree that if all or at least some major portion of the Republican nonsense were actually implemented that's what would happen.

But CEOs I knew (remember I'm long past it) evinced a sort of schizophrenia. Ask them (they wouldn't volunteer a comment) and some some large % would nod heads sagely and say they agree with Eric Cantor. "Fine fellow."

And they can count. So you'd think they'd draw the same conclusions as you. But they don't.

What they actually do is wait and see. Which on the whole is a lot smarter than acting as if we were about to be Cantorized. Might explain why they're CEOs.

Right, I agree that business

Dan Kervick — Wed, 13 Jul 2011 11:44:35 +0000

In reply to You could be right about

Right, I agree that business forecasts have nothing to do with the federal deficit. But they are based on estimates of consumer demand, and consumer demand is dependent on consumers' level of disposable income. If the government pursues policies that are likely to result in consumers having less income to spend, businesses are usually able to see that fairly quickly, and adjust their plans accordingly.

You could be right about

Flavius — Wed, 13 Jul 2011 09:52:29 +0000

In reply to I don't know. It seems to me

You could be right about individual motivations. Certainly I have no basis for disagreeing.

As for businesses' hiring or firing., That's pretty much unaffected by media(or economists') chatter about the projected trend in the deficit. That goes into the My Eyes Gloss Over pile. Certainly doesn't affect hiring.

Sure it might have an indirect effect on operations............ unless something happened to change it. Which usually does.

But so would a bunch of unforcastable things from wars to tsunamis.

What does affect hiring is forecasted short term profit..Every company has a forecast for the next 12 months , revised quarterly and tweaked monthly. And just about every CEO knows on the first day of the quarter what his EPS will be, From operations or book keeping

.Decisions on hiring or layoffs are based on the forecast of the following couple of quarters. .

I don't know. It seems to me

Dan Kervick — Wed, 13 Jul 2011 02:06:07 +0000

In reply to The Deal doesn't matter

I don't know. It seems to me that if people are convinced they are going to have less Social Security and less Medicare ten years from now, a lot of them are going to shift even more of their income from consumption to savings right now. After all, that was one of the big results of the evaporation of retirement assets, which also weren't due to be paid out for most people until some time in the not-to-near future. People treat these programs as money in the bank, and the rational response to a loss of savings is to save more.

And business's current investment and hiring decisions are based on current estimates of future orders. Anything that persuades businesses that their customers' disposable income will be contracting - including due to increased household savings - will dampen business confidence and investment.

Yes

Flavius — Wed, 13 Jul 2011 01:13:25 +0000

In reply to I think that is this a fair

Yes

I think that is this a fair

Michael Wolraich — Wed, 13 Jul 2011 00:27:00 +0000

In reply to The Deal doesn't matter

I think that is this a fair counterpoint to those who are worried that the results of a deal will wreck the economy, but I submit two caveats:

1. Even if the deal doesn't negatively effect the economy in the short run, it distracts us from addressing a weak economy right now--which as miguelitoh points out, will have a bigger impact on the deficit than any spending or revenue changes.

2. I think that the debt deal has mainly served as platform for addressing larger issues about the role of the federal government, which has fueled most of the debate.