Examining Obama’s Economic Beliefs
Ron Suskind’s book looks like it will be the talk of the entire week. The dispute with Anita Dunn over a truncated quote is sucking up a lot of oxygen. I haven’t read the book, but I think the context does indicate that the President stepped in when the old boy’s network was getting to be a problem, and that Anita’s quote still makes it clear that the work environment was hostile to women – or maybe just plain hostile – before that.
But the passages on Obama’s economic beliefs are really consequential, and perhaps getting lost. Brad DeLong has been excerpting parts of the text and I think they make a bunch of things clear.
First, Tim Geithner very clearly made a bureaucratic play in favor of the banks and against any wind-down of Citi or any other firm, and Rahm Emanuel was right behind him on it. The President’s instinct was to use a wind-down of Citi as an example to the financial industry of the consequences of its recklessness, and Geithner made sure that no plan would be put forward except his plan to whitewash the situation with stress tests and use his special accounts (the “Hobbit accounts,” Emanuel called them, because they had names like TALF and PPIP) to prop up the banks. Whether he slow-walked the plans or not, he certainly ensured his plan was prominent.
On the greater economy, Obama seems to have developed some very peculiar opinions for someone in the midst of a jobless recovery. He came up with the idea that productivity gains were responsible for high unemployment rather than a shortfall in demand, and in late 2009 he didn’t want to hear about any more money for stimulus, raging at Christina Romer when she broached the idea. When told that the economy wasn’t coming back fast enough and that unemployment could be as high as 9.8% by the end of 2010 (it ended up pretty close to that), Obama half-heartedly wished Mark Zandi would be right and that they should “start talking about” a jobless recovery to get out in front of it. But this was pretty weak tea, and the realization of a jobless recovery seems to have come very late.
It also came at a time when the President clearly wanted to steer a new course toward deficit reduction. He requested a memo from Peter Orszag to go to him directly, around the National Economic Council which is supposed to ferry that information to the President. What crucial memo had to come from Orszag? Options for a bond market failure and a fiscal crisis. This is about 10th on the priority list by the spring of 2009, behind jobs, jobs, jobs, jobs, jobs, jobs, jobs, jobs and jobs.
The first thing that jumps out is similar to Digby’s take:
It certainly does clear up any thought we might have had about whether or not the president is a real fiscal conservative or whether he was just flogging this deficit obsession for political effect. He’s a true believer. And we know this because of his reliance on other deficit hawks and that when the political bloodbath that the jobless recovery had predicted came true, his first move was to validate the Republicans’ manufactured narrative about what had motivated their voters and launch his program of budget cuts and deficit reduction.
I have thought that his fetish for a Grand Bargain was mostly born of a delusional belief that he was someone who could bridge unbridgeable differences and be remembered as the man who brought cats and dogs together. But it looks as though he was just as motivated by the fact that he’s a true blue, Concord Coalition, Pete Peterson deficit hawk.
It is nice to know what’s in the man’s head, but this also colors the current debate over the American Jobs Act and the deficit plan the White House just put out (class warfare!). We have the makings of a serious global crisis, with Japanification across much of the industrialized world, and the Obama plan represents one of the few out there among world leaders that actually would increase deficits in the near term.
However, unlike Britain or Italy or Japan, in a Presidential system with a bicameral legislature, the President doesn’t have the unilateral option to set all fiscal policy into action. And so you have to look to his core beliefs, and between the two you understand that the jobs bill and the deficit plan are political documents, blueprints for a re-election campaign, rather than serious attempts to pass legislation.
And that’s fine, since Republicans aren’t likely to sign onto anything that will make much of a difference anyway. But this mindset, this favoring of deficit reduction over jobs, something apparent for years, still lurks somewhere. And you have to wonder whether this new agenda is a turning away from that or a temporary expedient. Indeed, it’s not even temporary; the deficit plan still cuts budgets by $3.6 trillion, after all. So no let-up there.
This is why people like John Judis see little but doom in our economic future.