THE STUMP APRIL 30, 2012
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The Washington Post had a nice piece out Monday on the way state spending cuts have crimped the economy these past few years, and on the difficulties Obama encountered trying to mitigate that problem.
As the piece reports:
Obama had tried to address the problem in the 2009 stimulus bill by including more than $150 billion in aid to state and local governments to fill budget gaps.
But as his second year began, economic advisers told the president that state and local governments were still poised to lay off huge numbers of workers, posing one of the biggest threats to the burgeoning economic recovery. Independent analyses by an organization consulted by administration officials suggested that states and localities together still faced at least a $180 billion shortfall. Up to 900,000 jobs would be at risk.
Obama asked his legislative advisers if there was any chance Congress would step in if he made an all-out effort.
None, they responded. The politics were terrible.
It’s worth unpacking what was going on here. As I understand it, the vast majority of state aid that Obama procured in the stimulus was designed to be doled out in 2009 and 2010. But, as it happens, that stimulus money didn’t quite pack the punch it was supposed to. The reason, as Bob Greenstein of the Center on Budget and Policy Priorities explained to me a while back, is that state fiscal years generally end in June. And because there was no sign that the state aide would be extended when most states crafted their 2011 budgets back in early 2010, they simply operated under the assumption that no more aid was going to materialize. Which is to say, they started firing a lot of teachers and first-responders in mid-2010, not at the end of the year, depriving the economy of six months of stimulus that had already been approved. “You could see the state cutbacks in the second half of 2010, further dampening the economic recovery,” Greenstein told me. (The administration did procure $26 billion in extra state aid late in the summer of 2010 to bring back some of the laid-off personnel, but not nearly enough to offset this effect.)
This was one reason the economy was even weaker than a lot of analysts realized heading into 2011, when we came close to sliding back into recession. And it was an especially maddening development given how glaring the needs were at the state level, how easily they could have been plugged in principle, and how damaging it was to the economy that they weren’t (even when some of the money was technically available).
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3 comments
It is extremely important that this is not forgotten, not so much because of the politics (what's done is done) but the policy, for memories are short. Here's the irony. FDR's strength as President, we learned as children, was that he was willing to try about anything to get the economy moving again, and would risk a few klunkers along the way (and there were a few). Obama (or his advisors), on the other hand, "knew" what needed to be done, and then went about doing it, with lots of happy talk soon to follow about green shoots and the rest. Scheiber has written an entire book on the Obama plan for economic recovery, a plan that was based as much on psychology as economics (my assessment). It's quite a contrast to FDR, who faced an economic crisis at a time when Lord Keynes was an unknown. What Obama needed were more economists and fewer psychologists.
- rayward
May 1, 2012 at 8:02am
What Obama needed was fewer "experts" advising him to compromise with the Republicans. The Republicans weren't going to compromise with him, no matter what he did, and the steps he took to compromise with THEM simply weakened Obamacare and the economic recovery. I think it's important to mention that, from the close of the election in November 2010, to now, the Republican majority in the House has "held America hostage" on three occasions -- first to get the Bush Tax-Cuts extended, then to get a budgeet passed without shutting down the Government, then from April through August to extend the Debt-Limit. And at NO time during this was ANY kind of "stimulus" on the table -- in fact a cut of $50 billion was negotiated in March 2011. So first, Obama pre-compromised on the size of the stimulus in 2009. Then, when it appeared the stimulus was too small (due to Republican Governors firing people) an additional stimulus couldn't even be discussed due to Republican intransigence. We forget these things at our peril, as Romney daily promises prosperity based on yet more bogus tax-cutting and Government shrinking. These issues should be the FIRST thing in people's minds this election.
- AllanL5
May 1, 2012 at 10:03am
From the article and the comments, what we have in 2012 is a choice between a political bumbler advocating inadequate policies and a political bumbler advocating disasterous polices. Either choice is likely to produce poor results-- BHO in the longer term and Mittens in the shorter term. Short term thinking suggests Progressives vote for BHO-- longer term thinking suggests that a Mittens victory might actually produce a better outcome in 2016 and beyond.
- drofnats1
May 1, 2012 at 4:14pm