Tuesday, June 12, 2012

The kernel of truth in blaming Obama

Greg Sargent and Steve Benen share a tic.  Almost daily, both expose the big lies and small lies on which Romney's economic case is founded.  Almost invariably, after highlighting the falsity in the Romney narrative, they warn: it could work.

One underlying assumption, inculcated by the political scientists, is that voters blame the president for the state of the economy because they don't understand how limited the powers of the presidency are, particularly when the out-party is determined to block all action proposed by the president. Hence Benen today:

The level of national cynicism is so intense, many Americans may simply assume Republicans are undermining the national economy deliberately, but take their frustrations out on the president anyway.

Voters' understanding of the political process is quite limited, and many Americans may very well fail to appreciate the role Congress must play in policymaking -- no matter how hard the president fights for job-creation proposals, he needs the approval of lawmakers who are eager, if not desperate, to see him fail.

As a result, there are no doubt plenty of voters thinking, "Sure, Republicans are sabotaging the economy, but why can't Obama just go around them?" unaware of the fact that, on a grand scale, this isn't an option.
Not to deny that Romney has taken systematic mendacity to new levels, that he's signed on to prescriptions for economic disaster, that Obama would be a far more prudent economic steward going forward, or that the Republicans have relentlessly sabotaged the economy and may reap the reward.  Nonetheless, there is an element of truth in the voter assessment imagined above, and an element of denial in the responses of us Obama defenders.

The truth is that from January 2009 through at least August 2011 Obama could have more forcefully pursued job growth and more sustained economic stimulus. Few among even his fervent supporters would claim that he maximized what he could do unilaterally, advocated forcefully for more stimulus when he could still get it, held the line on job-killing spending cuts in 2011 and 2012 (not to mention through 2022), or set the country's economic agenda in 2011. 

Last August, when Ezra Klein wrote his encyclopedic account of the various constraints on the Obama administration's ability to stimulate the economy more than they did, Brad DeLong responded with this list of coulda shouldas:
  1. Use Reconciliation to get a second stimulus through Congress in the fall of 2009.
  2. Expand the PPIP to do $3 trillion of quantitative easing through the Treasury Department.
  3. Have a real HAMP to refinance mortgages.
  4. Use Fannie and Freddie to (temporarily) nationalize mortgage finance, refinance mortgages, and rebalance the housing market.
  5. Announce that a weaker dollar is in America's interest.
  6. Nominate a Fed Chair who takes the Fed's dual mandate seriously and pursues policies to stabilize the growth of nominal GDP.
  7. Appoint Fed governors who take the Fed's dual mandate seriously and support policies to stabilize the growth of nominal GDP.
  8. Take equity in the banks in January-March of 2009 and keep them from lobbying against financial reform.
  9. Use Reconciliation to pass an infrastructure bank.
  10. Use TARP money as a mezzanine tranche to fund large-scale additional aid to states and localities to reduce their fiscal contractions.
Ramming another substantial stimulus through Congress may not have been feasible. But note all the executive action options, particularly with respect to the housing market. 

Again, for me the bottom line is that Romney is proposing ruinous spending cuts and tax cuts while Obama understands basic macroeconomics and knows how to balance long-term spending restraint with needed tax hikes while combining long-term fiscal discipline  (mainly via healthcare cost control)  with current stimulus. But there is a measure of poetic justice in voters blaming him  for insufficient vigor in stimulating job and GDP growth.

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