THE STUMP FEBRUARY 22, 2012
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Jon Chait asks the key question in response to the internal administration memo I uncovered while researching my book--the one in which Christy Romer wrote that it would take $1.7-to-$1.8 trillion to fully revive the economy by 2011. Chait writes:
It’s important to keep in mind, though, that this still does not resolve the question of whether or not Obama could have gotten a larger stimulus. ...
[T]he ultimate decision-making power here was where it always was: with Ben Nelson, Olympia Snowe, and Arlen Specter, the senators who stood at the decision-making point. It’s clearly those senators who were exerting the direct pressure to limit the cost of the stimulus, and the administration, including Summers, was responding to them.
The counterfactual is what would have happened if Obama had proposed a much larger stimulus to begin with. His political team believed it would have risked delaying the bill or caused it to collapse entirely. Perhaps. It’s also possible it would have simply shifted the frame of the debate, so that “large” was now defined by $1.8 trillion rather than $800 billion, and the “centrist” position would settle in at, say, a trillion and a half or thereabouts.
I think that's about right. As I say in my piece today, even if Obama knew the economy needed a $1.8 trillion stimulus, that doesn't mean he was going to be able to pass one. But a figure like $1.8 trillion might have focused the mind a bit more and persuaded him to re-calibrate upward. And not just for his initial stimulus proposal, but over the course of the next three years. Had Obama grasped that he was $1 trillion off the mark (and, as it happened, much more, since the economy turned out to be in even worse shape than Romer realized when she wrote this memo), I suspect he would have put a higher priority on stimulus throughout his first term.
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7 comments
Or, Obama goes with Romer and proposes a much larger stimulus, Congress blocks it, Republicans and skeptical Democrats respond by stiffening their resistance, CW moves toward austerity, the economy craters, the financial system completely collapses, and we face armageddon. And Summers gets the blame.
- rayward
February 22, 2012 at 4:29pm
Fantastic reporting by Scheiber, as is being confirmed across the internet by people much smarter than I. As I live in the reality universe (a limitation not applicable to some), that's the only way I can assess Summers's advice to the President.
- rayward
February 22, 2012 at 4:37pm
Clearly the only thing to do would be to try for a much larger stimulus than 800 Billion. Where's the downside to that? Worst case it gets to 800 Billion and the Senators can claim a temporary victory but the WH now has a comeback and can make hay in 2012 knowing that the stimulus isn't enough. Or, they get a larger stimulus and the economy recovers quicker and stronger. Seriously struggling to see how accepting and crucially promoting a much smaller stimulus has any kind of upside.
- IggyPop
February 22, 2012 at 6:22pm
Then again O'bama screwed Ireland out of 30 Billion against the wishes of the IMF and a Tory Chancellor, no less, so American financial institutions didn't have to pay out on CDS. So, I suppose anything's possible with this administration. Watch heroic public servant Gheitner get a fat payday in one of the big American Banks for services rendered and watch how it's not even considered corruption, not even mentioned.
- IggyPop
February 22, 2012 at 6:26pm
Rayward, if your point is that alternative history is to some degree a fools' errand, fair enough, but it is hard for me to see how Obama's asking for a bigger stimulus ever would have resulted in no stimulus. Sure, if he doubled down promising to veto anything less than $1.8 trillion it could have backfired. It probably would have backfired. But no one is suggesting he should have taken that line. All anyone is saying that maybe he should have put the $1.8 trillion number as a starting point for his negotiations. It flies in the face of everything we now about political psychology to suggest that the mere suggestion that the larger number might be required would somehow cause the Senate's trio of moderate Republicans to go from supporting a moderate stimulus to rejecting any stimulus whatsoever. If anything it would have given them cover to go even a little bit bigger. They could tell their constituents, "President Obama and the Democrats wanted to mortgage our children's future spending nearly two trillions dollars that we don't have, but I held firm at one."
- AaronW
February 23, 2012 at 6:02am
If my memory serves me correctly, I remember GOP congressional representatives claiming that the stimulus cost "a trillion dollars." That's when the Tea Party movement began, and the whole narrative that President Obama was a huge tax-and-spend liberal. It would be interesting to know--albeit impossible now--whether President Obama would have calibrated his stimulus figures differently had he received Romer's recommendations. But I think Chait is right: the politics probably wouldn't have changed much. "A trillion dollars" just sounds like an enormous amount of money to the average person, let alone a politician. Hell, ordinarily eight-hundred billion dollars would be a massive sum; it just turns out that we had a multi-trillion dollar economic hole to plug. However, I believe the urge to entertain alternate political histories is misguided. We cannot possibly predict what would have happened for certain. Maybe Summers was right that a trillion-plus figure would have spooked the markets. Or maybe the economy would be perfectly recovered now, had Obama taken Romer's advice. My sense is that economics is far from an exact science. Politics, too. And we can no more perfectly recreate the private deliberations in the Oval Office from 2008-2009, let alone counterfactually envision preferred decisions and outcomes.
- maxhencke
February 23, 2012 at 9:54am
Actually, job 1 for BHO was to work to insure that the Senate filibuster rule be eliminated. In Feb of 2009, the Dems had 59-60 Senate votes... and 50 were needed (plus Biden: Google nuclear option) to eliminate the current filibuster rule and restore democratic government to the Senate, as even the sainted Founding Fathers envisioned it. Progressives suggested it-- and BHO was a bright Senator who knew the rules and the problems. The entire political dynamic then changes. And such speculation is NO LESS speculative than saying BHO could do no more than he did. Please put the stone tablet where it is written beside a constantly burning bush so that others can also verify what God has told you. In the absence of tablets and a burning bush, begin to recognize that BHO is really a good ol' boy member of the Senate Club with political tendencies to the right of Bush I, Eisenhower, Ford, Nixon-- hell, even Dewey. And with rare exceptions, more of a political chameleon than any of them.
- drofnats1
February 23, 2012 at 3:37pm