WILLIAM GALSTON JANUARY 26, 2010
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“The problems we inherited were far worse than most inside and out of government had expected; the recession was deeper that most inside and out of government had predicted. Curing these problems has taken more time and a higher toll than any of us wanted. Unemployment is far too high. Projected federal spending—if government refuses to tighten its own belt—will also be far too high and could weaken and shorten the economic recovery now underway.
“We’re witnessing an upsurge of productivity and impressive evidence that American industry will once again become competitive in markets at home and abroad, ensuring more jobs and better incomes for the nation’s work force. But our confidence must also be tempered by realism and patience. Quick fixes and artificial stimulants repeatedly applied over decades are what brought us the ... disorders that we’ve now paid such a heavy price to cure.
“The permanent recovery in employment, production, and investment we seek won’t come in a sharp, short spurt. It’ll build carefully and steadily in the months and years ahead. In the meantime, the challenge of government is to identify the things that we can do now to ease the massive economic transition for the American people.”
A sneak preview of Barack Obama’s forthcoming State of the Union address? Nope. It’s part of the address Ronald Reagan delivered in January 1983, when unemployment stood at 10.8 percent. If today’s Republicans heard these very words coming out of Obama’s mouth, would they applaud him or denounce him? And what if the president were to recommend a comprehensive deficit reduction strategy that included a standby tax increase, contingent on spending cuts? That’s what Reagan, who had already signed a significant tax increase in August 1982, proposed in his address. Was he a RINO?
Yes, Obama needs to focus and clarify his agenda. But Republicans have a responsibility as well—to reconsider their anti-tax theology, to reengage with the governance process, to address the country’s real problems, not just the politics of those problems. If they don’t, they may make some tactical gains this November, but they won’t be selling any durable goods the American people will want to buy. Right now the Republicans are thinking too much about 1994 and not nearly enough about 1996.
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6 comments
How about tax increases and spending cuts sufficient to produce a structural surplus as soon as unemployment gets below 5%. It is insanity to be trying to balance the budget with unemployment over 10%. The stimulus was too small and too heavily larded with inefficient tax cuts as it is; to start now on contractionary fiscal policy threatens depression. The problem in our economy is that the Idiot-in-Chief Bush sent the country into structural deficit when we were still in a boom. The exact opposite of what Clinton did and what should have continued. That turned the boom into a huge bubble and a giant bust -- too much money chasing too few assets. Not only was the Idiot's fiscal policy a strong contributor to th melt-down, it has made it considerably more painful for us to enact the counter-cyclical fiscal policies we now need as people rightly worry about the ultimate size of the public debt, especially the external debt. However, even though the Idiot set us far behind the 8-ball, shifting to contractionary policies will only make things worse. The market might and should get some assurance from policies designed to restore fiscal sanity when we are out of the current mess, but shifting gears to contraction now is the precise opposite of the fiscal policy we need.
- roidubouloi
January 27, 2010 at 12:38am
Obama ought to quote that passage from Reagan in its entirety, wait for the Republicans to sit stone-faced as the Democrats applaud, and then tell them that he is quoting Ronald Reagan in 1983. Nothing like rubbing their noses in their shit.
- roidubouloi
January 27, 2010 at 12:41am
HEAR HEAR! That is right about MR.Reagan. He put new taxes in place in 82 & won back the right to stay in the house at 1600. In Novmber 84. Reagan is all most God like for the center right!
- tnrman39
January 27, 2010 at 3:35pm
Is this Galston's response to Judis' post on Tuesday (Obama's Learning Freeze)?
- raylward
January 27, 2010 at 3:43pm
Tell me, roidubouloi, what law has Obama signed that has substantially changed how our banks lend money and work? He's made some moves to increase fed oversight. He's made some moves to limit the size of banks. But the banks that failed generally had north of 20% exposure to loans made to people with lousy credit scores. These changes prevent more of the same how? Our leaders failed us across the board. The whole lot of them should have been cleaned out over this. With jail for those the top.
- SeattleEngineer
January 31, 2010 at 1:50pm
I'm not sure what your point is, Seattle. Don't ask me to defend what has been done so far regarding the financial system. I have been a very harsh critic in these pages of the actions of Summers, Geithner, Bernanke, and hence the Obama administration, thus far. The one positive note, and it is no trivial thing, is that at least the magnitude of their response was sufficient to prevent a meltdown. However, I suspect that you are one of those who imagines that the crash is due to (1) poor people borrowing money they could not repay and/or (2) community lending requirements that "forced" banks to extend bad credits. Neither is remotely the case. The magnitude of the over-expansion of mortgage lending was due to the appetite of the mortgage-backed securities market, fueled by the benighted fiscal, monetary, trade, and anti-regulatory policies of the Bush administration. It had nothing to to with that favorite right-wing hobby horse, community lending and anti-redlining regulations. The securities market was at the point where it would have signed the dead to loans. Indeed, many of those who could not afford mortgages they undertook were misled by low introductory interest rates that were designed with the very purpose of seducing them into debt they could not afford. Had the payment schedule been relistic from the start, it would have been obvious to all that these mortgages were unaffordable -- a good argument for very strong consumer financial protection regulations. No, our leaders have not "failed us across the board," although they may yet. Bush failed us in everything he touched. Obama has so far made a barely adequate and highly imperfect effort at bailing all of us out of the colossal mess he and we inherited as a result of eight years of greed and profligacy on an unimaginable scale. I am perfectly prepared to criticize Obama and do. But I am not about to forget which party created these problems and continues now to throw up every possible obstacle to their successful resolution -- the Republicans. As for putting them in jail, I agree with. Bush, Cheney and Rumsfeld should be in the dock in the Hague for war crimes.
- roidubouloi
January 31, 2010 at 2:16pm