JONATHAN CHAIT SEPTEMBER 7, 2011
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My piece in the New York Times magazine last weekend about President Obama and the left kicked up a lot of debate. The thesis was that the left's criticisms that Obama failed to secure enough stimulus. Let me address a couple objections I've seen. One argument claims that my argument hinges on the premise that those who argued for more stimulus are unimportant. Here's what I wrote:
It’s worth recalling that several weeks before Obama proposed an $800 billion stimulus, House Democrats had floated a $500 billion stimulus. (Oddly, this never resulted in liberals portraying Nancy Pelosi as a congenitally timid right-wing enabler.) At the time, Obama’s $800 billion stimulus was seen by Congress, pundits and business leaders — that is to say, just about everybody who mattered — as mind-bogglingly large. News reports invariably described it as “huge,” “massive” or other terms suggesting it was unrealistically large, even kind of pornographic. The favored cliché used to describe the reaction in Congress was “sticker shock.”
David Sirota paints this as an attempt to call Paul Krugman unimportant, all of course in the name of my Corporate Beltway Elitism:
In declaring who "matters" and who doesn't, Chait took a cue from Dick ("Public Opinion Doesn't Matter") Cheney, who famously insisted that the American people are insignificant serfs. Only, in this case, Chait shows us the obverse of the Cheney-ism -- he tells us the only people who supposedly do "matter." In the nation's capital, that's Washington politicians, Washington pundits and corporate executives. Everyone else -- tens of millions of Americans who think differently -- are of little concern.
Blue Texan at FireDoglake agrees. ("That’s just wrong. Unless you think Paul Krugman didn’t matter.")
Of course, the trick here is to take a descriptive statement and turn it into a prescriptive statement. Obviously I don't believe it's a good thing that people like Paul Krugman were marginalized, and that the decisive weight all rested with those who feared the stimulus was too large. To describe that reality is not to endorse it. You know who else thinks Paul Krugman was ignored during the stimulus debate? Paul Krugman!
Meanwhile, Brian Beutler makes a better, but still unpersuasive case, citing the oft-mentioned point that Americans care, or cared, more about jobs than deficits:
By late October 2009, according to Gallup, 14 percent of the public thought the President's top priority should be the deficit, double what it had been at the end of Bush's term. The same poll found 41 percent of the country thought the economy should be his top priority -- down from 64 percent in 2008, before the stimulus had helped end the country's employment free fall. The wars in Iraq and Afghanistan and health care also bested the deficit. Other polls showed similar figures, though many asked questions in different ways, and still others asked respondents to name their top economic priorities. Jobs always trounced the deficit, but public concern was starting to bud. Prior to about 2009, the deficit wasn't even listed as an option on similar polls.
In his 2010 State of the Union, Obama announced a discretionary spending freeze. "[F]amilies across the country are tightening their belts and making tough decisions," he announced. "The federal government should do the same."
In the year and a half since, "stimulus" has fallen into political disrepute, jobs have remained a high priority for the country, and anti-deficit mania has climbed.
The problem here is that Beutler assumes the public views stimulus and deficit reduction as a binary choice. I've seen no evidence that most Americans see it that way. No, it is true that increasing short-term deficits boosts short-term growth. But the whole problem is that Americans don't believe that. They tend to grow more anti-deficit when the economy is in a recession and, indeed, seem to identify the deficit as the cause of economic problems. So presenting a lot of data showing they care more about jobs than deficits when they (wrongly) see the two problems as linked doesn't really get you anywhere.
21 comments
"Everything is for the best in this the best of all possible worlds." Magical thinking to the rescue? This best stinks. Obama continually validates the Republican narrative that deficits are our most important problem and has both cut off any ability to do any more about jobs (a speech is nice, isn't it?) or to blame the Republicans for preventing him from doing enough. Gross political incompetence, regardless of the policy and whether it was or was not the best that could have been obtained on that day. Your argument stinks because it misses the important point. But do keep at it. Even while I type this, I see on my screen, courtesy of TNR, a headline from Political Wire "Obama Approval Keeps Sinking. What a triumph! I do hope you won't be joining the White House political staff any time soon.
- roidubouloi
September 7, 2011 at 6:23pm
The bottom line in all this? No matter what they may say to polltakers, what Americans want in a president, above all, is someone who is tough. "Only adult in the room" is simply not the job description of the President of the United States in the public imagination.
- roidubouloi
September 7, 2011 at 6:27pm
Of course, the political problem with the stimulus wasn't the amount, but the timing. A crass politician would have postponed the stimulus until America felt the full brunt of the Bush Depression. Instead, Obama chose a middling course immediately upon becoming president that not only didn't avoid the Depression but had him take responsibility for it. No good deed goes unpunished.
- rayward
September 7, 2011 at 6:27pm
The "middling" nature of Obama's course only became clear many months after the fact. Many people at the time of the passage of the stimulus did not realize how badly the economy was actually doing. And it's silly to say that Obama had the option of waiting for the economy to worsen further before enacting a larger stimulus. You never want to delay action when the economy is in free fall, and the greater depth of the recession following that delay would have been blamed on Obama's failure to act sooner.
- kluhman
September 7, 2011 at 7:39pm
I think in a deep recession, it is wrong to justify economic stimulus as something that creates jobs or soothes the pain of the unemployed. It's purpose should be to shallow the depth of the economic trough, so that recovery can happen sooner. When large groups of individuals become unemployed, diminished consumption spreads more unemployment and the cycle continues. Short term jobs that provide public benefit are preferred over unemployment compensation, and unemployment compensation is preferred over the burning wildfire of diminished consumption. Our economy will come eventually back, but it will come back much sooner than if it must climb out of a deep cavern.
- Nusholtz
September 7, 2011 at 8:10pm
Chait should know better than post such misdirected spinning.. Not just Krugman, but most every well-known Keynesian economist calculatedthat the stimulus was too little-- and misdirected so that it's multiplier effects for much of the spending was low. Some were among his advisors. And BHO repeatedly touted it as "just right"! How's that working out, Jon? And since the stimulus bill passed, BHO has made it clear that he either doesn't understand or care about supporting Keynesian economics or effective Keynesian policies --as opposed to small-ball policies that effect our sinking economy as much as re-arranging the deck chairs to the stern would affect the sinking of the Titanic. Re-arranging the deck chairs has an effect-- and makes passengers feel better-- but doesn't solve the basic problem.
- drofnats1
September 7, 2011 at 8:15pm
Are you done proofreading, Jonathan? I ask because it seems a pity that your final blog for TNR has such a messed-up introductory paragraph. I know -- blogs and all that. But still.
- ironyroad
September 7, 2011 at 8:30pm
Nus and Kluh are simply ignorant of Keynesian economics--- the equivalent of physicists who argue that F=mv, E=mc, and gravity works onlyto attract smaller to larger masses. You could get lots of voters to agree with them.. But Presidents should have- and listen to- experts that know their science.
- drofnats1
September 7, 2011 at 8:32pm
Hmm...I'm not sure how my comment illustrates anything about my knowledge of Keynesian economics. I think that my statement that many people didn't realize the poor state of the economy is fairly undisputed.
- kluhman
September 7, 2011 at 8:39pm
Who died and made drofnats1 an expert?
- Nusholtz
September 7, 2011 at 8:50pm
Does someone have tpo die to state authoritatively that 2+2=4, rather than 22?. It's Macroeconomics 101. An unknown science to most.
- drofnats1
September 7, 2011 at 9:07pm
Nus is correct-- i misread. apologies.
- drofnats1
September 7, 2011 at 9:51pm
Chait's argument (his last at TNR?) boils down to this: the American people's belief about what best to do to fix the ailing economy is 100% ass-backwards and so the best that Obama could do is damage control. Forget for a moment, that in the event Obama has done considerably less than control the damage and in fact has contintributed significantly to the propagation of GOP economic flat-earthism, I'd like Chait to explain to us what, exactly, he sees as a president's role in American life. Is it to guage prevailing public opinion and then do whatever that dictates no matter how counterproductive? Or is it instead to take an active role in shaping public opinion? If the public echoes the Republicans in its belief that deficits are the problem it would seem that, broadly speaking, there are two ways for Obama to proceed: A. Accept that deficits are the problem and go about cutting the deficit B. Deny that deficits are the problem, do whatever he can to educate the public as to the real nature of our economic difficulties and oppose, as far as possible, the Republican's short-term budget cutting efforts, and paint a picture of contrasts between himself, who understands economics and cares about the people's suffering, and the Republicans who do neither Obama has, until now, opted for choice A. This is a good thing why?
- AaronW
September 7, 2011 at 10:37pm
"Chait's argument (his last at TNR?) boils down to this: the American people's belief about what best to do to fix the ailing economy is 100% ass-backwards and so the best that Obama could do is damage control. Forget for a moment, that in the event Obama has done considerably less than control the damage and in fact has contintributed significantly to the propagation of GOP economic flat-earthism, I'd like Chait to explain to us what, exactly, he sees as a president's role in American life. Is it to guage prevailing public opinion and then do whatever that dictates no matter how counterproductive? Or is it instead to take an active role in shaping public opinion?" Superb points, AaronW, but I'd take the argument even a step further. More than any president since FDR, Obama came to office when most people were desperate for strong leadership, a cohesive explanation of what went wrong and a sound prescription for curing our ills. Thus, even more than most presidents, he had the power to take an active role in shaping public opinion. Instead, he bought into some Republican arguments and let them off the hook for the mess they made.
- Thunderroad
September 8, 2011 at 6:04am
People should recall that O's stimulus package passed with one (1) vote. Politics is the realm of the possible, whatever people make from regugitated and bastardized Keynes. "Who counts" are those that voted in Congress, not which experts said what. Chait is completely correct here. Except for his denial of the connection between debt and slow growth (read slow job creation). There is lack of demand because millions of Americans burned their fingers with easy credit while their government did the same. Now they're paying down debt, which doesn't necessarily mean they think government should also do so in the short term, but certainly hammers demand. Moreover, it seems undeniable that failing to take measures that will long-term cut into our enormous overhang of unfunded obligations contributes to the atmosphere of uncertainty which also hammers demand and job creation. I guess the tip-off was the TV shots and the NYT piece. Looking forward to seeing where Chait ends up. Anyway, good luck.
- Robert Powell
September 8, 2011 at 6:18am
drofnats1 - Rereading and correcting is an admirable trait.
- Nusholtz
September 8, 2011 at 7:49am
Mr. Powell has cause and effect backwards. The reason for the debt-fueled consumption is that government policy, victimized by supply-side nuttery, starved the working class and middle class of income. Not enough income there to sustain the demand that capital needs to generate an adequate current return. The solution is that capital then lends back to workers the difference. This maintains demand with the appearance that it is still income to capital and lack of income to workers. Then the debt goes bad and capital, making the accumulated excess income to capital go poof. But capital turns to government to bail it out and socialize the private debt. Consumer-debt driven debt is, of course, unsustainable. Short-term or periodically, okay. But as a permanent means of matching consumer income and consumption, no. The core problem is that we have this mismatch between labor income and productive capacity. The sustainable solution is quite simple, government policy that takes income from the investor class and increases income for the middle and working classes. The simplest means of doing this is progressive taxation, as progressive as it needs to be. The wacky supply-side fantasy is that more income for the investor class promotes growth. No, it doesn't. It promotes instability and unemployment as productive capacity outstrips sustainable demand. Then it promotes asset bubbles as the excess investment funds look for investment opportunities where there aren't any. Powell leaves the supply-side fueled asset boom and financial crash out of the history entirely. He also omits the colossal financial fraud that had Wall Street pocketing billions by selling phony paper. Blame workers? Someone was lending them that money. And when the day came, we bailed out the lenders and stuck it to the workers. Hence, we are stuck with a huge shortfall in demand.
- roidubouloi
September 8, 2011 at 11:48am
I can't believe we're all arguing about the size of the stimulus, and what could have been possible. I happen to think Chait is right about what Obama achieved given political constraints, but the entire issue is moot. It's what Obama did about jobs after the stimulus passed that matters. And he simply did not do enough. He got distracted and absorbed into Republican priorities which were wrong for the country. It was poor leadership that he's now trying to turn around.
- polcereal
September 8, 2011 at 11:49am
Police. Do ou not recognize that the size and the followup are seamless examples of the same problem?
- drofnats1
September 8, 2011 at 11:58am
I'm beginning to think that Obama may be doomed no matter what he does, or was doomed no matter what he did, by the bad luck of his timing. Roosevelt, for instance, was lucky that he ran and was elected in 1932 rather than 1928. If he had been in power in 1929, he would have been Hoover. He was lucky that a good and well intentioned man had to try everything the conventional economic and political wisdom of the time could conceive of, and fail, in order to arrive in 1933, at the depths of dispair, and try things that nobody had ever tried before. The box had to be exhausted before we could get outside of the box. Had he been the guy in power in 1929, he would have been the guy trapped in the conventional wisdom. I'm beginning to fear that Obama is more Hoover, in his timing, than Roosevelt, and may be doomed, no matter what he does, to suffer Hoover's fate. It doesn't help, however, that he has been more Hoover, in many ways, in his response to the question of stimulus and jobs, than Roosevelt. He (or folks in his administration) swore they had studied their New Deal and promised "constant action, bold experimentation", and then proceeded to treat an imperfectly designed stimulus as a box they had checked off and moved on to other things. When it didn't show the results the country expected (and they had predicted) they had no reservoir pf public trust in government or public patience with spending in the face of mounting debt to draw on to experiment some more. And now we are left with no tools in the tool box and a seemingly permanent recession that Obama owns whether he deserves it or not. And he is the guy trapped in the conventional wisdom and the rising alternative is not Roosevelt and the New Deal, but Perry or Bachman or Palin and the Tea Party. It's like a bizzaro world version of the Depression. And the future may not be pretty. In fact, it may pretty bizarre. We may be lucky if we get Romney.
- vanwurs
September 8, 2011 at 4:22pm
As usual I agree with a lot of what roi has to say: a lot of the problem was caused by reckless tax cuts and other unfunded spending, indicating to me that a lot of the solution is to be had by tax and entitlements reform; that asset bubbles created at least in part by the aforementioned tax policy fiasco played a huge role in the train-wreck of 2008; and that outright fraud in the banking system made things a lot worse than they would otherwise have been. I think the latter should be addressed by requiring major restructuring of mortgage debt by banks marketing crap mortgages in the first place, and I wouldn't mind seeing some of the clowns managing them going to jail. That said, no one made me take out a home equity loan to buy the bass boat, no one made the $24k per year strawberry picker get a loan to buy a $750,000 house or for the cocktail waitress in Vegas to buy five houses, and there is no evidence anywhere to support the thesis that all that consumer debt was undertaken in a desperate attempt to avoid starvation by our impoverished WalMart shoppers. I'm as concerned with the growing wealth gap as the next guy, but I've spent too much time in countries with really stressed middle-and-working classes to panic over the alledged plight of average Americans. Tom Joad has left the building.
- Robert Powell
September 9, 2011 at 8:09am