Paul Krugman agrees with me

Back when  Paul "the stimulus was too small!" Krugman was in full Cassandra mode, just after the November 2010 shellacking, I took issue with one of his numerous whacks at Obama:

...take this sideswipe at the stimulus in Krugman's latest crie de coeur about the Fed's refusal to raise its inflation target:

...fearing opposition in Congress, the Obama administration offered an inadequate plan, only to see the plan weakened further in the Senate. In the end, the small rise in federal spending was effectively offset by cuts at the state and local level, so that there was no real stimulus to the economy.

Wasn't one of the core purposes of the stimulus to offset spending cuts by state and local governments? That's what stimulus does -- offset drops in demand. Of course, Krugman believes that there was too little state aid, along with too little of everything, in the Recovery Act, and naturally a stimulus should do more than offset other government spending cuts. But still, offsetting those cuts is a "real stimulus to the economy." The Recovery Act unquestionably preserved hundreds of thousands of state and local government jobs, and GDP would have been lower if this hadn't been done.

This may seem a semantic quibble. But it's a symptom, I think, of an oversimplified narrative. Krugman has implied elsewhere that the right-sized stimulus would have set the economy roaring back to life (as has Martin Wolf). To what degree is that credible? If Obama had asked for $1.2 trillion and got $950 billion, what's the math on the counterfactual? Unemployment at 8.3%?  And the effect of such a drop on the electorate? I confess it could be substantial. But there's an awful lot of what-ifs there, beginning with the premise that a substantially larger stimulus could have got through the Senate. And the narrative leaves out some externalities, such as the Euro sovereign debt crisis, which seemed to stop a decent-looking recovery in its tracks. Not to mention the credible possibility, forecast now by a growing number of economists and business leaders (e.g., here and here), that a substantial recovery may be on the horizon now. 

Some time in 2012, Krugman had a change of heart about Obama, and now he is out with a defense of Obama's record just as a host of ex-cabinet members and in-office Democrats is piling on (he himself notes the irony in this). Now behold his retrospective view of the (still too-small) stimulus:

In which Krugman borrows Martin Wolf's scalpel, possibly via Geithner

[n.b. see update in mid-post. I seem to have misread...]

In October 2010, Financial Times columnist Martin Wolf led off a column with a heroic simile to describe Obama's economic performance:

An ambulance stops by the roadside to help a man suffering from a heart attack. After desperate measures, the patient survives. Brought into hospital, he then makes a protracted and partial recovery. Then, two years later, far from feeling grateful, he sues the paramedics and doctors. If it were not for their interference, he insists, he would be as good as new. As for the heart attack, it was a minor event. He would have been far better off if he had been left alone.

That is the situation in which Dr Barack Obama finds himself...more stimulus was needed. After all, it was quite modest: fiscal stimulus was less than 6 per cent of GDP and so accounts for less than a fifth of the cumulative deficits of 2009, 2010 and 2011, while monetary policy is caught in a liquidity trap.

The truth is not that policy was foolhardy and failed, but that it was too timid and so could not succeed.

Lo, now cometh Paul Krugman to review Tim Geithner's memoir:

What McConnell could cook up with Reid

Well, the rumors are flying thick and fast this Sunday, and this post probably won't be worth the pixels it's printed on. But based on Mitch McConnell's past dealmaking history, his acknowledged relative lack of leverage this time, and the drop-dead taboos against raising spending levels or taxes that a primary challenge imposes on him, I can't resist a bit of speculation as to what he may be cooking up with Reid (Dick Durbin called the talks between them a "breakthrough" today, though Reid himself has sounded far less sanguine).

Recall that the Budget Control Act negotiated by McConnell in the last days of July 2011 created a mechanism whereby the executive branch could raise the debt ceiling and Congress could register a vote of disapproval -- or override the hike with a two-thirds majority in both houses. That deal was end-stopped by the amount required to raise the debt ceiling high enough to get past the 2012 election; it ran out in March of this year.

Recall too that progressive éminence grise Norm Ornstein has floated an acceptable exception to the Dems' current no-concessions-for-debt-limit-hike stance: trade a single concession to end debt ceiling terrorism forever:

Pulping the bully approach to presidential politics, VI

Ezra Klein is replaying that whole paradox of power thing: When Obama comes out for a policy, the GOP will demonize it -- so if Obama wants to get anything done with a GOP House, how can he jump off his shadow?  This time, Klein brings Jon Favreau to bear, affirming the White House's not-at-all-surprising hyper-awareness of this conundrum:

Jonathan Favreau, who in February stepped down as Obama’s chief speechwriter, said that dealing with the Republican Party’s reflexive opposition is a pervasive reality in the White House. “People take a very realistic approach to it,” he said. “They’re not frustrated or upset. It’s more, ‘This is just the way things are and this is how we’ll deal with it.’ The strategy always comes to ‘What gives us the best chance to get something passed?’”

The counter-scenario: Republicans cave on sequestration

Since January, I have periodically vented my mounting frustration over the apparent fact that Obama, by yielding at the pressure points of the debt ceiling on Aug. 1, 2011 and the fiscal cliff on Jan. 1, 2013, effectively inflicted the sequestration cuts on the country.

For the record, I am inclined by character toward regret and self-reproach, which I'm arguably projecting onto Obama. There is always the possibility that his chosen pressure point, the pain imposed by the sequestration that the Republicans have learned to love, will work.  A few days ago, I cited a Times article by Robert Pear about the rising chorus of lobbyist lamentation over the cuts as evidence of the long-term damage the sequester will inflict. The article could also be read, however (and in fact more or less asked to be read), as evidence that the lobbying pressure will at some point prove irresistible to the GOP:

Obama, the GOP's enabler

The president's powers are limited. The president's powers are limited. The president's powers are limited.

It's the mantra both of political scientists and progressive commentators like Greg Sargent and Steve Benen, driven mad almost on a daily basis by "both-sides-are-to-blame" commentators on the budget impasse who won't acknowledge that Republicans refuse to compromise, i.e. consider any new revenue as a component of deficit reduction.

In the legislative arena, the president really has one concrete power: the veto. When it comes to budgetary matters, that power is closely related to his ability to "set the agenda," since appropriations must be renewed on a regular basis (and new debt authorized) or the government ceases to function. Sunsetting legislation like the Bush tax cuts also sets up deadline/crisis points.

As a funding (or tax) deadline looms, the president can set out parameters for what he regards as fair and prudent legislation and say, I will sign when satisfactory legislation reaches my desk.

That's what Bill Clinton did in response to the massive cuts to Medicaid and Medicare that the GOP-controlled Congress wrote into their bills in 1995. He faced down their threats not to raise the debt ceiling (not taken too seriously at that stage in our development) and to shut down the government by not sending funding bills that met his terms (which happened twice).

That's what Chris Christie did in his first legislative battles in New Jersey. He set his terms and announced that he would sit back, crack open a beer and wait for legislation that met them.

The catch is, you have to be willing to trigger a crisis if the "qualifying" legislation never arrives. That's what Obama has never been willing to do.

Woodward is peddling a nonsense conclusion. Why?

For who knows what reason, Bob Woodward is blowing smoke on the sequester deal.

In an article published yesterday, he makes an allegation about the sequester and the grand bargain it was supposed to stimulate that is so absurd no one even noticed what he now says he meant:

In fact, the final deal reached between Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) in 2011 included an agreement that there would be no tax increases in the sequester in exchange for what the president was insisting on: an agreement that the nation’s debt ceiling would be increased for 18 months, so Obama would not have to go through another such negotiation in 2012, when he was running for reelection.

So when the president asks that a substitute for the sequester include not just spending cuts but also new revenue, he is moving the goal posts. His call for a balanced approach is reasonable, and he makes a strong case that those in the top income brackets could and should pay more. But that was not the deal he made.

There is a major sleight-of-hand embedded here. Woodward is saying, first, that the sequester includes no revenue -- which is plain fact -- but also that it was therefore understood initially that the replacement for the sequester would also include no revenue.

That is palpable nonsense, as I demonstrated yesterday: before the deal was signed, Obama said that the supercommittee would be charged with striking a deal that would include revenue.  The White House elaborated the point that most parties expected the supercommittee to consider a mix of tax hikes and spending cuts from the start.

Now Woodward is back with an email to Politico's Mike Allen spelling out his initial  point, which no one noticed because it was so absurd:

No, Bob Woodward, the White House did not move the goalposts on the supercommittee's charge

Bob Woodward claims to have proof, in the form of statements by the principals, that the idea of using sequestration as an enforcement mechanism in the Budget Control Act of 2011 originated with the White House. That may be.*

Woodward also asserts that "the final deal reached between Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) in 2011 included an agreement that there would be no tax increases in the sequester." He provides no quotes in this article to back that statement up. If there was any such agreement, it was never put in writing and it is not reflected in the legislative language or in official descriptions of the deal immediately following its announcement.

A CBO statement put out on August 1, 2011, described the supercommittee's task as follows:

Create a Congressional Joint Select Committee on Deficit Reduction to propose further deficit reductions, with a stated goal of achieving at least $1.5 trillion in budgetary savings over 10 years

The BCA itself describes the supercommittee task as follows:

GOAL.—The goal of the joint committee  shall be to reduce the deficit by at least $1,500,000,000,000 over the period of fiscal years (Sect 401b, p. 52).

"Reduce the deficit" does not mean "by spending cuts only."

Publicly, from the moment the deal was announced, Republicans insisted that the supercommittee was tasked with considering cuts only, and Democrats insisted that new revenues would be part of the mix.  Announcing the deal on July 31, 2011, Obama said this of the supercommittee (my emphasis):

Fever breaking?

In meetings with donors and editorial boards during the 2012 campaign, Obama suggested that his reelection would "break the fever" of fanatic GOP opposition to everything he proposed. The fiscal cliff brinksmanship at the turn of the year did nothing to suggest any such "break"-through, as Obama acknowledged in a New Republic interview conducted in mid-January and published just yesterday:

Chris Hughes: You spoke last summer about your election potentially breaking the fever of the Republicans. The hope being that, once you were reelected, they would seek to do more than just block your presidency. Do you feel that you've made headway on that?

Not yet, obviously.

CH: How do you imagine it happening?

I never expected that it would happen overnight. I think it will be a process. And the Republican Party is undergoing a still-early effort at reexamining what their agenda is and what they care about. I think there is still shock on the part of some in the party that I won reelection. There's been a little bit of self-examination among some in the party, but that hasn't gone to the party as a whole yet.

Now, just a day after that interview appeared, the doctor may be looking up and offering some cautious optimism.  For a day at least, the stonewall seems to be cracking at three points:

"Not this time": Obama revises himself

The headline takeaway from Obama's press conference yesterday is that he's talking tough about the debt ceiling. And indeed, he elaborated his case against holding the faith and credit of the nation hostage in new and forceful ways. What also struck me, though, is the extent to which Obama implicitly admitted that the obstacles he is now facing are partly of his own making. In fact, since late in his reelection campaign he has been casting is second term as an edited version of the first.

On the economic front, Obama reiterated three core messages yesterday:1) The debt ceiling is no frame within which to negotiate deficit reduction; 2) deficit reduction is not our chief problem; and 3) Republicans' chief goal is to weaken core government functions and commitments, radically altering the social contract. Each was to some degree a revision of a past stance.

Regarding the debt ceiling, as Ezra Klein pointed out yesterday, Obama has been unequivocal since the election: it is not a negotiating chip in budget battles.  Yesterday he stated this simply, forcefully and repeatedly.  Here is the first iteration, in his opening remarks:

Paul Krugman closes his own private enthusiasm gap

No one on the more or less mainstream left has been harder on Obama than Paul Krugman, who began tearing out his hair at the proposed size of the stimulus before Obama took office and did not let up for almost three years thereafter. The nadir came as details of the debt ceiling deal emerged last summer: Krugman's July 31, 2011 column was originally titled "Capitulation" and lives on online as The President Surrenders.  His bitterness reached this crescendo:

In fact, Republicans will surely be emboldened by the way Mr. Obama keeps folding in the face of their threats. He surrendered last December, extending all the Bush tax cuts; he surrendered in the spring when they threatened to shut down the government; and he has now surrendered on a grand scale to raw extortion over the debt ceiling. Maybe it’s just me, but I see a pattern here.

Yes, the debt ceiling deal was disillusioning, and droves of Democrats followed Krugman into the slough of despond.  Nine days later, the disgust peaked with Drew Westen's What Happened to Obama, a 3000-word screed on the front page of the New York Times Sunday Review that portrayed Obama as a craven conflict-averse surrender monkey while belittling his legislative accomplishments.  As I pointed out at the time, this rhetorical nuke dropped on ground zero in the liberal heartland relied almost entirely on Krugman's critique of the stimulus for its substantive attack on Obama's record.

Yet Krugman has had a change of heart over the past year. His esteem for the president has grown more swiftly than the economy -- to the point where, if Obama's base followed Krugman's lead, there would be no enthusiasm gap. Perhaps it's an accelerating case of 'you don't know what you've got till it's [almost] gone.

Obama freezes out extremists and hysterics

In the last year, it seems Obama has learned when not to negotiate, and how to back adversaries into a corner when he has public (or world) opinion on his side. Two apparent instances struck my eye within 30 seconds a few minutes ago.

First, this:

House Republicans have dropped their demands to cut spending on domestic programs, for the time being, and instead unveiled bipartisan legislation to keep the government funded through the end of the year at previously-agreed-upon levels.

The real problem with Obama's June 8 press conference

I am not going to opine on whether Obama's "the private sector is doing fine" gaffe will hurt him in the long run.  Sullivan assumed yes, and when I read his lament I jumped immediately for comfort to Jonathan Bernstein, who, right on cue, assured that ultimately it will matter not a whit. 

I am distressed, though, by a more conscious word choice of Obama's in that June 8 press conference below, though -- on that recalls the political summer from hell, 2011.  Wanna guess what I'm thinking?  I will refrain from putting the (repeated) keyword in italics:

Last September, I sent Congress a detailed jobs plan full of the kind of bipartisan ideas that would have put more Americans back to work.  It had broad support from the American people.    It was fully paid for.  If Congress had passed it in full, we’d be on track to have a million more Americans working this year.  The unemployment rate would be lower.  Our economy would be stronger.

Hey, maybe the Budget Control Act was a 60-yard punt for Obama after all...

so I wondered when the supercommittee failed and Obama coolly let it:

If you assume that a) Obama wanted a deal that included at least as much in cut spending as the BCA mandates; b) he is willing to live with the large defense cuts if he can't renegotiate them on his own terms; c) he will finally make a firm stand on the Bush tax cuts in 2012, insisting on either a restoration of the Clinton era top marginal rate or tax reform that provides more revenue than just that sunset would yield; and d) once Boehner backed out of the summer deal, a good outcome was impossible without and until Obama's reelection... then maybe he tacked his way to the lowest risk/highest yield strategy available to him.

Now lo, Republicans are loathe to let the ax they rigged let fall, reports Jonathan Weisman:

Capitulation, revisited

My hope is that today, with its terrible jobs report, is the darkest hour of the Obama reelection campaign.  Or, more realistically, that it's not the start of a lethal slide, for the economy and for the president.  But as Democrats cry sabotage on Twitter, and Michael Cohen, who joins that chorus, then laments that the federal government has done nothing substantial to boost jobs in three years, my mind goes back to the most stinging indictment that Democrats, led by Obama, let that sabotage happen.

That indictment came down on July 31, 2011, as the details of the debt ceiling deal emerged.  The original headline as I recall it, online or in print, was Capitulation.  It lives online now as The President Surrenders:

For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.

Is Obama still paying for the debt ceiling debacle?

On  Marketplace this evening, Gallup's Frank Newport delivered  bad news for Obama: by a nine point margin, Americans think that the economy will be in better shape for years from now if Romney is elected than if he is. The question is, why do they think that?  They prefer Obama's tax policies and "balanced" approach to deficit reduction. They would hate the massive cuts to domestic spending necessitated by Romney skeleton of a budget if they could be made aware of them. They support the separate elements of the job creation package Obama put forward last fall.

I would have thought that the answer is, first, that an incumbent president inevitably gets blamed for a weak economy, and second, that they have so far bought the Romney pitch that a highly successful businessman is well equipped to turn the economy around.  But Newport said something that turned my head around and brought me back to August 1, 2011:  "Romney does better than Obama in terms of being able to manage the government."

Obama through the looking glass(es)

Obama is a radical socialist who vastly increased government spending, saddled our grandchildren with debt and expanded government control of every aspect of Americans' lives.

Obama is a naive weakling who let Republicans frame the agenda in 2011, was seduced by a siren song of compromise, and capitulated to the Tea Party hostage-takers, agreeing to massive spending cuts without winning any revenue increases. 

I'd like to accuse Republicans of the doublethink required to embrace both narratives, but they never really bought into the second -- at best, they projected "weak Obama" onto the foreign policy stage (a bit of a stretch in light of Obama's apparent 'got the sucker' lethality, whatever you think of the wisdom of his various covert and low-key military operations). The capitulator-in-chief narrative belongs to disappointed progressives.

Still, given the Rube Goldberg two-stroke spending cut apparatus that Obama signed onto on August 1 this year, I have a hard time wrapping my head around the Wall Street Journal editorialists' lump-of-coal lament today:

Ezra Klein, what about that Paradox of Power?

It's not often that I feel impelled to dispute a conclusion with Ezra Klein, but today is one of those occasions.

Noting the irony inherent in the fact-set that a) Republicans continue to make sympathetic noises about the Bowles-Simpson plan, b) Obama has floated plans that are both less substantive and to the right of Bowles-Simpson, and c) Republicans reflexively reject -- nay, demonize -- anything with Obama's stamp on it, Klein makes a case that Obama should press "reset" and throw his weight behind the plan:

Either way, there’s no reason Democrats should be rejecting Simpson-Bowles on behalf of the Republicans. And, to be fair, that’s not all that’s going on here: The Obama administration doesn’t like the defense cuts or Social Security reforms in Simpson-Bowles, and they’re skeptical that the tax reform process could really generate as much revenue as the document promises. So their thinking was that they could work off of the Simpson-Bowles proposal and come out with something better.

That’s pretty much what they tried to do in April. But because that plan had Obama’s name on it, it was dismissed as a liberal nonstarter. Their strategy, in other words, was a huge failure, and over the past year, they’ve watched the deficit debate move far, far, far to the right.

Let's leave aside for the moment the question of whether Obama stands to gain now by embracing Bowles-Simpson.  I think Klein misconstrues the cause of Obama's "huge failure" in the spring and summer of this year. The failure lay not in the composition of his plan nor in his abstention from wholehearted advocacy of Bowles-Simpson.  It stemmed from his agreement to negotiate under the debt ceiling deadline, which he not only accepted but embraced as "a unique opportunity to do something big."

Obama's 60-yard punt, continued

Yesterday I suggested that if the Budget Control Act passed in early August was Obama's punt, it may be shaping up as a 60-yarder.  To sketch that out a bit further, consider Obama's short-term and long-term goals: a) to scratch out some immediate stimulus/employment improvement and so increase his chances of re-election; and b) to strike a deal for approximately $4 trillion in long-term deficit reduction, "balanced" by his lights.  Some thoughts on his progress:

a) Obama does want to cut $2-3 trillion in spending over ten years, including by controlling growth in Medicare and Medicaid spending. Approximately $2 trillion in cuts are now current law, or about to be.  If and when new revenue is put on the table, the sequestered cuts may be reduced and/or restructured, but they are there as a baseline.

b) He would be content with $1.2 -- $1.5 trillion in additional revenue over ten years, compared to what we'd have if all the Bush tax cuts were extended. That is roughly $2 trillion less than would result from letting all the Bush cuts expire.

c) He is seeking to get a (hopefully improved) version of his busted grand bargain with Boehner passed piecemeal by Dec. 31, 2012 -- to be built on thereafter if the election goes well and the economy recovers.

d) He is now the one holding "hostages"  -- the Bush tax cut expiration and the $600 billion in sequestered defense spending cuts.

Was the Budget Control Act a 60-yard punt for Obama?

Like Paul Krugman, Jonathan Chait is pleased with the supercommittee failure:

[The Budget Control Act] forced Congress to agree to $1.2 trillion in deficit reduction, or else automatic budget cuts would go into effect. But the key detail was that the budget cuts would not happen until 2013. Meanwhile, the debt ceiling would be lifted through the 2012 election. Between now and then, the two parties can fight over what to do about the automatic budget cuts scheduled to take effect. That’s not really the important thing. The important thing is that the debt ceiling is no longer on the table.

The whole plan was to start talking about something other than the debt ceiling, in hopes that the tea party would find some different shiny object to pick up and try to smash with a rock. And it worked!

Progressives have pretty much given up their multidimensional chess fantasies about Obama in this bruising year, and Chait does not explicitly credit Obama for this not-bad outcome.  But basically he's crediting Obama with a 60-yard punt.  If you accept the premise that no budget mandates past 2012 in this year's legislation matter, then in the summer negotiations Obama achieved his chief goal -- raising the debt ceiling to carry him past the 2012 elections -- at a net cost of $21 billion cut out of the 2012 budget, or about 2/3 of 1% of outlays.