The topic of the week here was economics, where Zach asked if we need another stimulus or if spending cuts are enough. Economist Dean Baker recently weighed in on this topic with a not so kind to President Obama essay, where he points out that exactly what we need is another stimulus!

President Obama is no longer paying attention to economists and economics in designing economic policy. Instead, he will do what his campaign people tell him will get him re-elected, presumably by getting lots of money from Wall Street.

The article said that President Obama intends to focus on reducing government spending and cutting programs like social security and Medicare. This is in spite of the fact that: “A wide range of economists say the administration should call for a new round of stimulus spending, as prescribed by mainstream economic theory, to create jobs and promote growth.”

The “tea party” and current republican leadership would have you believe that spending cuts is the final answer. The problem with that is it just does not make sense.

There, of course, is a theory as to how budget cuts could boost growth. The theory is that lower deficits in the present and/or near future will reduce fears that government spending will be crowding out private economic activity. This would lead to lower interest rates. Lower interest rates will provide a boost to investment and consumption. Also, lower interest rates in the United States will make dollar assets less attractive to investors. This will cause the dollar to decline against other currencies, improving our trade balance.

However, no part of this story makes sense in the current economic environment. US interest rates are already at ridiculously low levels, with the 10-year Treasury rate falling below 2.2% in the wake of the recent euro crisis. Does anyone really believe that the rate will go much lower even with large cuts to the budget?

Furthermore, even if interest rates did fall, it is difficult to believe that it would have much impact on either investment or consumption. Investment is not very responsive to interest rates even in the best of times. It is extremely unlikely that firms will rush to buy new equipment even if interest rates were to take another large plunge, when most are still operating with vast amounts of excess capacity. Consumers remain heavily indebted due to the collapse of house prices. Furthermore, the huge baby boom cohort is going to feel more need to save than ever with the government slashing its social security and Medicare benefits.

The trade side of the picture doesn’t look much better. The dollar continues to be a safe haven in uncertain times. Furthermore, China and other export dependent countries care little about US interest rates; they want to protect their markets in the United States. They are likely to keep the dollar from falling too much against their currencies no matter how low interest rates fall.

Of course when was the last time people like Paul Ryan and John Boehner even made real sense? I can’t remember either!

Just as we have many politicians who ignore climatologists in the design of energy policy, and politicians who think that biology has no place in teaching the origins of species, we now have politicians who think that economics has no place in designing economic policy.

This could be viewed as comical, but tens of millions of lives stand to be ruined. Ever since Keynes, we have known how to bring an economy back to full employment after it has fallen into a slump. Keynes’s basic insights have been supported by a vast amount of economic research over the last seven decades. And we have solid evidence showing that the limited stimulus pushed through by Obama in 2009 worked pretty much as predicted in generating growth and jobs.

But evidence, apparently, doesn’t matter at the White House any more.

Did the stimulus work? Of course it did!

By the way Wisconsin’s very own lightweight Senator Johnson has his own idea on how to stimulate the economy, and continues to embarrass himself and our great state!

30 Responses to Evidence – Based Economics

  1. jimspice says:

    The T-Party economic simpletons have exactly one tool for all jobs: cut taxes, cut spending. How naive is it to think that one response is appropriate in the face of every situation?

  2. econ101 says:

    As “mainstream economic theory” states (I can’t even begin to describe how laughable that statement is), a fiscal stimulus policy will increase GDP by funneling funds into value added activities such as construction, manufacturing, consumption, etc. On paper this works wonderfully. Whenever a business cycle nears its end and a recession is due, all government needs to do is inject funds into the aggregate economy to keep economic activity booming. Indeed, when the government is funding such a program without debt, that would be the end result.

    However, deficit stimulus spending complicates matters by adding the effects of crowding out, changing interest rates, exchange rates, and inflation. Without the Federal Reserve manipulating interest rates, government deficits “crowd out” private investment in credit markets by stealing demand for debt instruments away from riskier corporate debt. The obvious effect is that private industry will not have access to credit otherwise available in normal conditions. The Federal Reserve can counter this effect by manipulating interest rates in open market transactions (basically printing money… they buy government debt and pay cash). Basically, these actions just debase our currency. It’s great for foreigners, but bad for us as our currency can buy less. It also creates inflationary pressures in commodity markets that eventually raise domestic price levels. If domestic price levels rise, the wealth effect informs us that consumer spending will decline as people feel poorer. As a result, a deficit stimulus program may raise nominal GDP, but considering these other effects, real GDP growth may remain flat or negative.

    Also, keep in mind that there is no deficit based stimulus program in history that has ever worked in the long run. FDR’s was basically a bust, but we can’t very well tell because of the fiscal and societal effects of WWII. Japan’s program contributed to its “Lost Decade”, and our most recent program is about to collapse back into recession. Once the funds stop flowing, the underlying pressures force a negative correction. The only difference is that there is more national debt to deal with, and borrowing costs may have expanded.

    The entire basis for believing that government spending increases real GDP revolves around the “Keynesian Multiplier”… which would need to be above 1 to yield positive effects… yet studies conclude that this value ranges from 0.5-2… so it’s hard to say that it is a rock solid assumption that government spending creates real wealth.

    In addition to these theoretical hurdles, there are the practical issues of a stimulus program. How should it be spent? Where is the money spent? When should it be spent? In ideal circumstances, the stimulus funds would be spent immediately and flow straight into consumers hands. In practice, programs have focused on short term construction/infrastructure projects, education research grants, or government programs. Additionally, the funds are spent over long periods of time. As soon as the money stops flowing, the projects die, and any economic activity resulting from the investment ceases. It’s not a long term solution.

    I would refer to these types of investment (construction, government programs, educational research grants) as superficial. Their existence alone does not generate economic growth. What you need is money flowing into the hands of entrepreneurs who create products that create demands and force a growth in supply thereby creating and generating economic growth organically. That is the golden goose… is it possible to achieve? Probably not. The best bet is for government to get out of the way and allow innovation to occur. The way to do that is not through stimulus, but instead with tax cuts, tax simplification and regulatory cutbacks.

    Government regulation creates many things… cleaner air, cleaner water, safer cars, safer food, etc… but with all of these things it also creates something ugly… deadweight loss. Last year, it was estimated that the federal government killed about $1 trillion of economic activity through regulatory compliance costs. To put that into perspective, that is about 7% of our GDP. If that economic activity were to have been allowed to occur, our economy would have grown by at least 6% in real terms last year. That is a HUGE effect. In general, its probably best to address some of these issues with a Pigovian taxation system while relaxing some other asinine standards. Not only would this address tragedy of the commons scenarios, it also would general tax revenues where traditional regulation does not.The fewer barriers of entry the government requires, the easier it is for organic economic activity to occur. Right now in the immediate future, a regulatory freeze is just what the doctor ordered. This is not a good time to set even more stringent ozone and car emission standards. I can’t even begin to understand why someone would think a regulatory crackdown would be good for the economy right now. Mind boggling.

    • JCG says:

      Also, keep in mind that there is no deficit based stimulus program in history that has ever worked in the long run. FDR’s was basically a bust, but we can’t very well tell because of the fiscal and societal effects of WWII.

      WWII was a massive stimulus program in and of itself. Neat trick you tried to pull there.

      Japan’s program contributed to its “Lost Decade”

      Japan’s “lost decade” began when they cut short their stimulus measures because they started panicking over short-term deficits and pulled the plug on the economy.

      and our most recent program is about to collapse back into recession.

      Because the stimulus wasn’t big enough, and now we’re panicking over short-term deficit spikes with GDP and job killing austerity.

      • econ101 says:

        It’s a little more complex than that. There were a lot of social dynamics at work as women went back home and returning troops went into the workforce. Families started to spring up as the baby boomers came into being. All these factors organically created demand for basic products and fueled growth for a while. Our society isn’t even close to being in that sort of position anymore.

        Finally… no one was really in debt at that period in time, and the credit card was yet to be invented. The de-leveraging of the American public is one of the huge reasons even consumer stimulus wouldn’t contribute to forward growth… it would only pay down debts of past consumption.

        Oh, and Japan poured money into infrastructure projects… projects that really didn’t contribute to forward growth as they didn’t open up new markets.

        This lesson applies to us, because we aren’t building the Hoover dams of the future… we’re repaving existing (suitable) roads and rebuilding old bridges…

        • JCG says:

          It’s a little more complex than that. There were a lot of social dynamics at work as women went back home and returning troops went into the workforce. Families started to spring up as the baby boomers came into being. All these factors organically created demand for basic products and fueled growth for a while. Our society isn’t even close to being in that sort of position anymore.

          First, though, the main point was that the stimulus of that massive wartime machine pulled us out of the depression for good. That was, by definition, before the “postwar” effects leading to the sustained growth you’re talking about.

          Second, as to the postwar sustained growth (which has nothing to do with the stimulus argument, but I’ll bite), I’d argue, and the evidence would also support, that the effects of the planned wartime economy, especially vis-a-vis hard caps on executive income and corporate profits, extended long past the war and long after the planned economy was dismantled (i.e: the hard caps turned into soft caps, enforced both by high top bracket taxes and by broadly enforced societal norms). Combined with the peak strength of unions, there was more money flowing into the middle class than anytime in mankind’s history before or since.

          This lesson applies to us, because we aren’t building the Hoover dams of the future… we’re repaving existing (suitable) roads and rebuilding old bridges…

          Well…some of us (ahem cough) wanted to, but others among us (ahem cough) decried such proposals as boondoggle islamofacist socialism.

          • econ101 says:

            It’s an interesting argument, but I think that the sheer growth in population would far outweigh any effect of salary caps and union intervention. Without a surge in demand, I don’t think any of that would have mattered.

            Also, to get the same stimulus effect from war spending… government would have to expand its budget out to nearly $11 trillion (remember… government spent about 45-50% of GDP during WWII). I don’t think that’s in the cards…

            About infrastructure… some of us *cough* seem to prefer low efficiency high cost subsidized green energy to low cost high efficiency nuclear energy… but oh well… might as well blow billions on something that does’t work very well first. Right?

    • JCG says:

      PS: Inflation?!?! Why would the markets be gobbling up U.S. treasuries with voracity if they were worried about inflation?

      • econ101 says:

        They are gobbling up treasuries because equity markets are poised for a fall when earnings reports start to weaken going forward… and when we fall back into recession, the last thing you need to worry about is inflation. If you’re an institutional investor, where are you going to put cash? Bernake will be dealing with deflationary pressures with his back already pressed up against the zero bound. My guess is that the Fed will be buying more commercial paper in the likely event of another downturn…

        • Super Id says:


          T bills are at historic lows and gold is at historic highs, which is odd since it appears that the market is simultaneously pricing on both infation and deflation. In reality, I believe that both are flights to safety as you suggest.

          I thought your initial post was interesting as Obama announced today that they were reducing regulations:

          They suggest a 10 billion dollar savings for business over 5 years., which in my opinion, is insignificant as it is less that that even the goog purchase price of mmi. But it’s a start.

          That being said, I’m not totally on board with your suggestion that Pigovian taxation is the solution. isn’t that the foundation for capp and trade?

          • econ101 says:

            Yes. Pigovian is the basis of cap and trade, however in a dream scenario, it would go hand in hand with cuts to income taxes. Also, I’m not looking to tax carbon emissions, but instead come up with mechanisms to replace some regulations with a simple tax to balance out the negative externality the regulation attempts to curb. At least then we would take in some revenue.

            P.S. I was wrong with my regulatory burden value… that costs us $1.75 trillion annually in lost economic activity.

        • JCG says:

          … the last thing you need to worry about [right now as fear of a double dip recession dominate] is inflation.

          [brackets mine]

          You’re contradicting yourself now. Inflation fears were brought up by…you:

          The Federal Reserve can counter this effect by manipulating interest rates in open market transactions (basically printing money… they buy government debt and pay cash). Basically, these actions just debase our currency. It’s great for foreigners, but bad for us as our currency can buy less. It also creates inflationary pressures in commodity markets that eventually raise domestic price levels.

          That’s not something that needs to be left to theoretical discussion, as you’re well aware. We’ve been in money printing, rock bottom interest rate mode for quite some time now.

          You’re right, of course, that such actions in a strong economy create real inflation problems. But we’re not in that environment. And that’s exactly the point of all of this, and exactly where you go off the rails: your other, contradicting assessment is correct in that inflation should be the last thing on our minds now, and therefore the short term inflationary danger in strong federal action, stimulus measures, etc. should take a back seat.

          • econ101 says:

            You’re right. I’m not at all worried about hyperinflation. With deflationary market pressures, Fed policy isn’t hurting much other than increasing volatility in commodity markets. And maybe that helped create some uncertainty in equities markets too… and the net result is that investors will feel poorer and will want to flee to safety (gold and T-bills) as markets go nuts. Who knows…

            Anyways, that wasn’t the base of my argument. I was basically just walking through how monetary policy’s effects are basically pointless in the current climate.

            To be honest… I just think we’re pretty screwed. There is nothing reasonable that government can do to control the effects of American consumers and business de-leveraging.

  3. Jeff Simpson says:

    Not sure where you cut and paste that from but your rewriting history eco101

    • Zuma Bound says:

      Yep. He’s even willing to re-write it at the very same time that he is admitting that he has no evidence to support the re-write:

      “Also, keep in mind that there is no deficit based stimulus program in history that has ever worked in the long run. FDR’s was basically a bust, but we can’t very well tell because of the fiscal and societal effects of WWII.”

      Econ 101, my eye. Cut And Paste 101, maybe. Even if the Econ 101 “college days” reference was a positive reference (and what teabagger/wingnut hasn’t disparaged academia and/or “college boy” smarts), it’s pretty clear that our Econ 101 needs to pay more attention to the real world, and less time reading (not to mention “cutting and pasting” from) rightwing economic talking points.

    • econ101 says:

      There is zero cut and paste. Go look for yourselves. Last I checked Google still works… that was custom written just for you.

      …but good work refuting my comments. Oh wait… you couldn’t… do you guys understand current macroeconomic theory? MSNBC talking points don’t count…

  4. Zuma Bound says:

    @ Econ 101

    “There is zero cut and paste.”

    And yet, it struck two intelligent readers as exactly that.

    “do [sic] you guys understand current macroeconomic theory?”

    Yes, which is why your freshman-level, ” [more like] Econ [1]” proselytizing seems like little more than just another “cut and paste” jo, cobbled together from the conservative economic talking points that are presently circulating, and reinforced by watching a couple of hours of the Fox Business Channel.

    “…but [sic] good work refuting my comments.”

    Look, “Professor”, maybe you’re just not as erudite as you clearly give yourself credit for being. Maybe the rest of us aren’t hanging on your every word. And maybe, just maybe, every self-important “pronouncement” from you on economic matters doesn’t actually merit a substantive response

    Isn’t being a legend in your own mind enough?

    • econ101 says:

      I have plagiarized nothing. If you choose not to believe me, so be it… but I am an intellectually honest person.

      I want people to pick apart concepts I raise, look at the mechanics, and challenge me if they think I’m wrong. I want to put more meat on the bones for people, you don’t have to agree, but I’ll bring forward anything relevant that comes to mind. Most people just read simplified concepts out of Krugman and friends and call it a day… I merely want to expand.

      Besides, isn’t the point of all this discussion to learn? I would hope that is the highest ideal for a forum such as this…

      Anyways, a few points…

      1) I’m no legend in my own mind. I simply want someone on this blog to say something intelligible about economics for once rather than just posting some ad hominem crap. Props to JCG.

      2) I watch CNBC and MSNBC… the former for decent information, the latter to keep up on what crazy is being spouted by the left. I don’t watch Fox… their populist baloney annoys me more than even MSNBC’s. Besides, at least I can laugh at MSNBC…

      3) I don’t do talking points. I do economic theory and concepts. If that doesn’t match up with MSNBC, then maybe you should remember that those anchors are journalists… not economists:

      • jimspice says:

        I cannot speak for the blog powers that be, but I always enjoy fresh perspective. But I do not have time to read lengthy posts, digest them and respond. Perhaps this is what several commenters are trying to suggest, albeit indelicately. Of course your comments are welcome, but perhaps you could make points more succinctly.

      • jimspice says:

        As for supply/demand: corporations are doing exactly as expected sitting on $1.5T+ waiting for the demand to kick in (demonstrating trickle down is bullshit). The only way that happens is if people have jobs, any jobs, and the surplus income/bunable cash that brings. I’d prefer these jobs were creating or shoring up crumbling infrastructure, which would have benefits that last decades, but moving a pile of shit from one place to the next would do.

        And by the way. That $1.5T? They’ll sock it in the market once it hits their expected low and come out the other side with even a greater share of the pie, yet contributing to the uncertainty that makes the market overly volatile.

        Was that long enough and economic enough for you?

        3 beers. Thanks you.

        • jimspice says:

          Thank you very much.

        • econ101 says:

          Is that shit moving job self-sustaining when the government money goes away? -No.

          Is it worth $100k-$400k to create that one shit moving job? -Probably not.

          Is the employee really going to spend so much of that earned income on sneakers that Nike is going to hire them into their marketing department? -They’ll probably use that income to pay down debt… not exactly stimulating much.

          • Jeff Simpson says:

            Nike doesnt have much real debt….Lets hope they dont go buy a nike anyway. Let us hope when the yget done moving the shit around they go to the locally owned restaurant and get dinner and then to the locally owned bar and buy a couple of New glarus spotted cows.

      • Zuma Bound says:

        “I don’t do talking points. I do economic theory and concepts. If that doesn’t match up with MSNBC, then maybe you should remember that those anchors are journalists… not economists.”

        You know what, Econ? I’m just going to take you at your word with respect to the “talking points” thing. The only problem we are left with then in that regard is the simple fact that what you write “matches up” quite nicely with current rightwing economic talking points. Maybe you should check in with your subconscious.

        Beyond that, you need to reconsider your obsession with the assumption that progressives, in general, and progressives here, in specific, look to MSNBC for their economic worldview.

        While, unlike Fixed News viewers, who are periodically determined to be the least informed of cable news viewers, MSNBC viewers, in my experience, don’t come to an understanding of economics by watching television, so you’re not only assuming facts not in evidence, you are, in point of fact, wrong in making that assumption.

        I attended the University of California at Berkeley, a renowned institution and one of the best universities in the country. While there, and while majoring in Economics, I took, among other courses, Economics 1 (Econ 1 in your and a college student’s parlance), “Macroeconomics” in my first year, and Economics 101 (Econ 101, as you would probably call it), “Microeconomics”, in my second.

        So, my dear Econ 101, a couple of things:

        (1) If you actually don’t watch Fixed News, first of all, congratulations. I’ve never met another conservative like you. You should spread the word regarding Fox amongst your conservative brethren. I know that the rest of us would be grateful.

        (2) Since “macroeconomic” theory seems to be what gets you off, and given your apparent affinity for back-in-the-day college references, maybe you should change your name to Econ 1 from Econ 101 (see above, if you don’t get my drift).

        (3) Keep in mind the possibility that people on the opposite side of the political spectrum are every bit as erudite as you apparently see yourself as being, and develop their political/economic worldview based upon more traditional sources of knowledge and information, like college and professional life. MSNBC, indeed. Swing and a miss, Professor.

        P.S. Kudos to Jimspice, whose “succinct” analysis was, in all respects, right on the money [(*chuckling*). . .Pun unintended, but apt].

        P.P.S. By the way, Professor, JCG seems to have you on the ropes.

        P.P.P.S. You never really substantively addressed my point up above about how comfortable you seemed in denigrating FDR’s accomplishments while admitting that you could offer no proof that you were right in doing so. For the record, sounding erudite isn’t the same thing as actually being erudite.

        P.P.P.P.S. It’s bears repeating, JCG is winning “the argument”.

        P.P.P.P.P.S. There are plenty of people “out here” who know a hell of a lot more about economics than you ever will, and who disagree with your take on things. I’m one of them. Don’t mistake their or my unwillingness to “do battle” with you as indicating something else. We’ve simply got better things to do.

        Parenthetically, one of those “better things to do” in my universe is to “tweak the noses” of the “college professor wannabes”/pompous twits who spend all of their time “lecturing” the masses about conservative economic theory.

        Good luck, Professor. It’s been fun, but I’m off to make a buck. (No charge for the rhyme.)

  5. Jeff Simpson says:

    YEs everyones comments are welcome. Your original post was so long that it seemed to have come from somewhere else. I apologize for accusing your of c and p! However I do not apologize for accusing you of rewriting history.

    * When FDR took over as president the unemployment rate was about 26% when the war started it was just under 10% I would consider that a significant improvement. He would have done even better have he not listened to the “conservatives” of the time and tried to balance the budget and cut spending. To say that the new deal did not work is just flat out not true. It not only worked in the 30’s it really worked until Reagan. Then you add on some of the things that came out of it and its was amazingly visionary! There is a reason he was elected 4 times.

    * The existence of infrastructure alone does not generate growth? really? It has to be $$$ flowing into the hands of the entreprenuers who create products and create demands? With the exception of lunatic fads, products dont create demand, demand CREATEs the products. We have a DEMAND based society. Demand equals wages. What makes the entrepreuners sprout up? demand for products and services. Where does the demand come from? wait for it….PEOPLE WORKING. if the private sector is NOT hiring(like now) then the public sector needs to step up and do so. So people/consumers can have money to CONSUME.

    * I would say in some cases we are overregulated but in many cases we are underregulated. Heaven forbid that we regulate companies os they cant dump pollution into the river. Yet we let them in many times pump pollution into the air. When a company comes in and say starts fracking(not sure the correct term here) and then the people in the immediate town get very sick, in a free market, the company should be forced to pay for all of the damage and sickness it puts upon the town and the people. Yet we allow them usually to get away with paying maybe a minor fine. We also continually keep throwing roadblocks in terms of “tort reform” to make sure they never have to pay. Well there is a cost to society when these things happen and when the corporation gets let off who do you think pays?

    * finally are you really suggesting that green power is more costly and less efficient than nuclear power? if Nuclear power is so great why wont any insurance company cover a nuke plant? if a nuke plant opens guess who has to insure/subsidize them(that would be THE american taxpayer) also what do we do with the waste? As my original post points out why dont we use what we know works? We know in Germany they have a very strong solar energy focus and have done great things with solar energy. i have yet to hear of a solar energy meltdown where many people have died – if you find one I will gladly post it. Then we look at Nuclear energy. How is it working in France? well they have waste in containers that will last about 150-200 years yet the waste will be toxic for 400 years( you do the math). How about Japan how is the nuclear energy working for them? What was the one thing everyone was worried about the earthquake today? was it A. a wind turbine collapsing or B. The nuclear power plant, located on a big fresh water body, having problems?

    • econ101 says:

      Sorry about the long post… Dean Baker clearly struck a nerve. Deficit funded fiscal stimulus is one of my by pet peeves in economics. As Krugman used to agree (he is a fascinating creature)…

      Anywho… This whole demand/supply thing is a bit of a chicken or the the egg issue… Some big advances do need funding up front. Other’s just require a few customers inquiring about a shelving a product. Lately, credit has been the more pressing issue as banks have tightened standards, and Dodd-Frank has confused them. So… we seem to be focused on easing credit availability…

      I looked at the FDR issue in depth before. I believe you are citing what Krugman said… and Krugman seems to have kind of fudged how that money was spent. I think I put up a table with the spending rates year to year during the depression. If I remember correctly, that whole bit about “cutting back spending” proved to be bullocks. Anyways… the moral of the story is that a FDR-esque infrastructure spending binge wouldn’t do anything to create value added in our modern economy… unless it was all nuclear energy projects :o)

      I think we’re in agreement about regulation. It’s a necessary evil, but we both would prefer a system that requires offenders to pay fines roughly equal to the negative externality that they caused… with maybe an additional penalty for gross infractions. Ya know… like how the legal system would do it.

      A few words about nuclear waste… generation III reactors produce far less waste than gen II (and apparently can take some gen II waste)… For everything else… Yucca Mountain. Unfortunately, President Obama killed that project as a favor to Harry Reid. Let it be known that the federal government spent upwards of $9 billion studying that site (the most spent on any geographical research project) and concluded that at peak radioactivity (in about 10,000 years)… walking by the entrance to the tunnels would yield as large a dose of radiation as flying in a commercial jet from New York to LA.

      • Jeff Simpson says:

        Nuclear is NOT the answer. Why do you keep wanting an old outdated technology that we have to subsidize as taxpayers?

        Why dont we maximize solar and wind and then start a new Manhattan project for alternative fuels? Thats just a start.

        As for Nukes I have an idea that needs implementing. All Ceos of nuclear plants have to LIVE with their families within 20 miles of where they dump the waste. Since its safe that should not be a problem whatsoever.

  6. Jeff Simpson says:

    Here is a nice heartwarming Nuke story you might have missed about the wonderfully efficiency of Nuclear power:

    A nuclear power plant that was shut down after an earthquake struck central Virginia Tuesday had seismographs removed in 1990s due to budget cuts.

    U.S. nuclear officials said that the North Anna Power Station, which has two nuclear reactors, had lost offsite power and was using diesel generators to maintain cooling operations after an 5.9 earthquake hit the region.

    The North Anna plant, which was near the epicenter of Tuesday’s quake, is reportedly located on a fault line.

    The U.S. Nuclear Regulatory Commission rates the plant as the seventh most likely to receive core damage from a quake. But they say the chances of that are only 1 in 22,727.

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