Since ARRA passed in February 2009, many have stated over and over again that:
1) It was too small
2) It would largely discredit fiscal stimulus
3) It was poorly constructed as a result of politics, not economics
4) It would hurt Democrats in 2010 and would go on to hurt the President in 2012
Those people have been right. I don’t think it gives any of them any pleasure and if they’re anything like me, they’ve been feeling a bit like Cassandra, doomed to know the future but never to be believed. Now it’s becoming clear that #4 is coming to pass.
President Barack Obama is closely matched against each of four possible Republican opponents when registered voters are asked whom they would support if the 2012 presidential election were held today. Mitt Romney leads Obama by two percentage points, 48% to 46%, Rick Perry and Obama are tied at 47%, and Obama edges out Ron Paul and Michele Bachmann by two and four points, respectively.
It should be obvious to everyone at this point that, when it comes to the economy, the President and his advisors are absolutely clueless. It’s becoming increasingly clear that when it comes to the politics, they’re clueless as well. Sure, much can happen between now and November 2012, but given what’s happened since President Obama took office in 2009, do you see him taking the kind of bold action that might pull the country out of this funk and guarantee his re-election? Brad DeLong has a rather good piece on just what has happened since the end of 2008…
Back at the end of 2008, our questions (at least my questions) were: “What if the downturn is bigger than we currently think it will be? What if worries about a jobless recovery and the absence of labor-market mean-reversion turn out to be true? What if–as has happened in the past–this financial crisis turns into sovereign crises and the world economy gets hit by additional shocks? Then your polices will not be bold enough. What is Plan B?” And the answers were all along the lines of:
You are a pessimist. We are already doing unprecedented things to stabilize the economy–and odds are that in a year we will be worrying about inflation and unwinding the stimulus rather than about unemployment.
Obama is genuinely post-partisan, and won’t have anything like the trouble Clinton had negotiating with Republicans: our policies will evolve as the situation evolves.
Back in the late summer of 2009, our questions (or at least my questions) were: “You aren’t getting any cooperation from Republicans–they appear to have doubled down on the Gingrich-Dole strategy that you win the next election by making the Democratic President a failure. The economy really needs more stimulus. What are you going to do? Isn’t it time to use the President’s powers more aggressively–to use Fed appointment powers and the Treasury’s TARP authority and Reconciliation to do major stimulus?” And the answers were:
We are doing all that we can.
This is really hard.
Things will probably still work out all right.
If worst comes to worst, we will trade long-run budget balance via a spending cut-heavy package of long-run spending cuts and tax increases for short-term stimulus to get us out of the short-term unemployment mess.
By the late summer of 2010, our questions (or at least my questions) were: “You are in a total war with the Republican Party. They aren’t giving you anything. It is time to seriously push the envelope of executive authority to put policies in place that will reduce unemployment.” And the answers were:
The best policy is to achieve long-run fiscal discipline so that the confidence fairy will show up.
And now it is the late summer of 2011. Our big question still is: how is Obama going to use executive branch authority to reduce unemployment? There are lots of options: adjourn congress and do some recess appointments to get the Federal Reserve more engaged in actually pursuing its dual mandate, quantitative easing via the Treasury Department, shifting Fannie Mae and Freddie Mac from their do-nothing position by giving them a microeconomic stabilization mission, talking about how a weak dollar is in America’s interest.
And this time what I am hearing back is only:
The reality is that on one side, the President has people who supported him begging him to do the right things and take positive action to turn the economy around. This group has offered consistently good advice from the standpoint of economics, not ideology or politics, because they know that there is truth to the adage that if you do the right thing, the politics will work out on their own. If that doesn’t work, let the votes you need know in no uncertain terms that if they don’t vote for the bill, you’ll take them out or the R’s will.
On the other side are the prehistoric Republicans for whom ideology is all, save for their singular drive to make sure the President serves only one term. It’s really shocking when you consider the fact that it’s this group the President is catering to, rather than the folks actually trying to help. It’s especially stupid since the primary goal was to steal an issue (austerity and deficit demagoguery) from the Republicans that he should have buried them in since it’s clear, from the local level on up to the global level, that austerity is not working to create economic growth. It’s failed to create a stronger economy, to stabilize Federal finances and win independent voters. The end game itself, being settled largely on Republican terms despite multipage explanations to the contrary, was the final straw that’s started the inevitable demoralization of the Democratic base the President absolutely has to have.
Left completely unstated during the entire debate over deficits is the reality that the only solution to the problem is economic growth. In fact, the spending cuts will likely make deficits worse (not to mention that the comparisons between families cutting
back and tightening belts were text book examples of the fallacy of composition).
It’s not too late for a real change. There’s still time, but it will require something from President Obama that he has not shown he possess… courage and a genuine understanding that doing the right thing is always better than the politically expedient thing, because in the end the right thing will drive the politics, not the other way around. It’s time for our post partisan President to stand up and be a Democrat.
Just for kicks, there’s this for those of you who, in a whiny voice, complain that I’m being too mean and you just can’t see what the President could have done differently.