Paul Krugman has a disturbing take, though well-informed, about how the next couple of years could go in Washington. He argues that the half-measures offered to stem joblessness this year will lead to an unsustainably high unemployment rate:
And politically it’s hard to do anything about that. Those economic half-measures have landed the Obama administration in a trap: much of the political establishment now sees stimulus as having been discredited by events, so that it’s very hard to come back and scale the policy up to where it should have been in the first place. Also, with the apocalypse on hold, the deficit scolds have come back into their own, decrying any policy that actually involves spending money.
The result, then, will be high unemployment leading into the 2010 elections, and corresponding Democratic losses. These losses will be worse because Obama, by pursuing a uniformly pro-banker policy without even a gesture to popular anger over the bailouts, has ceded populist energy to the right and demoralized the movement that brought him to power.
There are probably ways out of this in the next 100 days, with a legitimate jobs bill that gets public support from the White House, but there doesn’t seem to be a whole lot of energy for that. The CBO report today could be a huge catalyst, but people don’t seem to be picking up on it. They’re trying to win some vindication for past efforts, but talking the public into thinking that the economy is better won’t work. There’s a roadmap, through direct government action, to make tangible gains, but little political will in the executive branch. Better for “job summits” of dubious import than, you know, jobs.
Krugman’s vision gets even darker:
Despite all this, the midterms probably won’t give Republicans the majority in the House. But the losses will be big enough to deny Obama a working majority for any major initiatives in the rest of his first term. (My guess is that he’ll be reelected thanks to the true awfulness of the Republican nominee). Since Republicans are dead set against any of the things I think could help pull the economy out of its rut, this means more economic stagnation.
Along with this will come a process of defining prosperity down. All the wise heads will tell us that 8 or 9 percent unemployment — maybe even 10 percent — is the “new normal”, and that only irresponsible people want to do anything about the situation.
So what I see is years of terrible job markets, combined with political paralysis.
It’s hard to argue with that when you see insiders like Nancy-Ann DeParle saying that the insurance industry cannot be forced to take all comers until the individual mandate kicks in, literally bowing to a talking point from AHIP rather than moving with a sense of urgency to give real, legitimate benefits to the American people. There’s the same drift on jobs.
As I said, there are no shortage of ideas to create jobs, and they can even be fully paid for. Krugman advises that progressives have to amp up the pressure to force the President to take the kind of risks necessary to move the country out of political paralysis and economic stagnation.