Wednesday, January 18, 2012

Bill Clinton's post-mortem on 2010

In an in-depth interview in Esquire, Bill Clinton delivers a detailed recap of recent U.S. political history that's for the most part economically determinist: Democrats were bound to win in '08, Republicans in '10.  But I have one bone to pick. Clinton alleges a couple of messaging errors & omissions on Obama's part, starting with this:
There was no way people could feel fixed in 2010. So I wish now, and I'm not — I didn't see it, either — but I wish now that we had all known enough about this on September 16, 2008, when we still had a debate or two to go, and that the president could have said, "You know, I've just looked at this. This kind of thing is happening to us now, first we gotta keep everything from cratering, and that means we'll have to help some people who contributed to the problem. I hate that, but I can't let your financial system go down. I can't let it be so you can't use your credit card.

True, there was a debate or two to go. And on October 7, 2008 Obama was asked by an audience member how the $700 billion bank bailout would help ordinary people who are "having a hard time." His response:

Well, Oliver, first, let me tell you what's in the rescue package for you. Right now, the credit markets are frozen up and what that means, as a practical matter, is that small businesses and some large businesses just can't get loans.

If they can't get a loan, that means that they can't make payroll. If they can't make payroll, then they may end up having to shut their doors and lay people off.

And if you imagine just one company trying to deal with that, now imagine a million companies all across the country.

So it could end up having an adverse effect on everybody, and that's why we had to take action. But we shouldn't have been there in the first place.
Maybe he didn't say it often enough over the long course of bailouts?  Well, there was this on April 14, 2009:
Of course, there are some who argue that the government should stand back and simply let these banks fail – especially since in many cases it was their bad decisions that helped create the crisis in the first place. But whether we like it or not, history has repeatedly shown that when nations do not take early and aggressive action to get credit flowing again, they have crises that last years and years instead of months and months – years of low growth, low job creation, and low investment that cost those nations far more than a course of bold, upfront action. And although there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks – "where's our bailout?," they ask – the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth.
The second half of Clinton's riff on Obama's should-have messaging is more on target. Picking up where we left off:
I can't let — and then, at five hundred years every one of these things takes between five and ten years to get over. My goal is to beat that. I'm gonna try to get it done for you in less than five years. That's my goal, that oughta be America's goal, we oughta beat the odds, we oughta do something nobody has ever done before, but it won't be fixed in two years. It can't be.
The "five hundred years" is a reference to Kenneth Rogoff's historical argument that financial collapses always cause deep recessions.  And while it's hard to imagine a president suggesting that five hard years lay ahead, Clinton is certainly not the first to lament that the Obama administration consistently underestimated the downturn, and encouraged the American people to underestimate it, and fell to a degree into the Hoover prosperity-is-just-around-the-corner trap.  On that count I think Obama would have to plead guilty.

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