Not Making The Case

Mother Jones' Kevin Drum laments the findings of a recent poll which indicate that most people don't associate stimulus funding with helping the economy recover and are obsessed with the national debt. He concludes

If you want to know why President Obama is willing to cut a deal with Republicans to drastically cut federal spending, this is it. We liberals have miserably failed to make the case for stimulus spending, and as a result conservatives have spectacularly succeeded in reverting the American public to its default state of believing that the federal books should always be balanced, the same as household books.

Even on the left: President Obama is the one willing to cut a deal- but it's Democrats who "have miserably failed to make the case for stimulus spending."

Yes. And no. President Obama started by offering the GOP a sweet deal, 3 parts spending cuts to 1 part revenue increases and he reportedly has raised the ante to 5 or 6 to 1. At some point there will be a deal, on Repub terms, because that's simply the way this President does it.

But the responsibility for "making the case" does not rest with Harry Reid. Nor does it rest with the Democrats' leader in the House, Nancy Pelosi, who does not even head her chamber. No one ever has referred to the Senate Majority Leader's bully pulpit or the House Minority Leader's bully pulpit. The bully pulpit belongs to the President of the United States.

And Barack Obama either has spectacularly failed to use that bully pulpit to make the case for stimulus spending and other needed progressive policy- or he has spectacularly succeeded. On the face of it, he has failed. But Paul Krugman suggests

OK, here’s an unprofessional speculation: maybe it’s personal. Maybe the president just doesn’t like the kind of people who tell him counterintuitive things, who say that the government is not like a family, that it’s not right for the government to tighten its belt when Americans are tightening theirs, that unemployment is not caused by lack of the right skills. Certainly just about all the people who might have tried to make that argument have left the administration or are leaving soon.

Like former President Clinton though, thankfully less enthusiastically, President Obama has embraced the concept of structural employment. Matt Yglesias cites Obama arguing on the Today Show

There are some structural issues with our economy where a lot of businesses have lerned to be much more efficient with fewer workers..... What we have to do now, and this is what the jobs council is all about, is identifying where the jobs for the future are going to be, how do we make sure that there's a match between what people are getting trained for and the jobs that exist....

Yglesias notes, however, "while consumption has ticked back up, it hasn't returned to its pre-recession trend level. All else being equal, if households spend fewer dollars, then fewer people will be employed in providing them with goods and services." If President Obama chose to make that case, it would be an effective rationale for more stimulus spending, which may or may not account for his failure to do so. Credit Obama, though, at least with not putting the blame for unemployment squarely on the backs of the unemployed, unlike the former President and some ideologically-driven economists.

As Krugman observed, Obama does seem to buy the idea that government should be like a family and tighten its belt when families are tightening theirs. Unfortunately, though it seems counter-intuitive, that is precisely when government should not cut back on its spending; someone has to create demand when individuals and the private sector reduce their spending.

It is just not bad economics, however. When the President claims "Government has to start living within its means, just like families do," he cannot help but know that he's making it up. As the graph (from the Federal Reserve Bank of St. Louis, via intellectualtakeout.org) below indicates, household debt (green line) is far more than half of U.S. government debt (red line; blue is population). Families in the United States simply do not live within their means. To paraphrase one sage, it may not be good, it may not be bad- but it's the way it is.

The President stretches his credulity further when he maintains, as he did in Tuesday's press briefing (text here)

Most of us already agree that to truly solve our deficit problem, we need to find trillions in savings over the next decade, and significantly more in the decades that follow. That’s what the bipartisan fiscal commission said....

Yes, the bipartisan fiscal commission did say that- but it didn't recommend that. When the President established the National Commission on Fiscal Responsibility and Reform, he specified that 14 of its 18 members would have to approve a final report before one could be issued. When the Commission failed to come to such a consensus- and not aching to be attacked as a committee which spent a lot of taxpayers' money and did nothing- it issued a report (text here), knowing that the group lacked the agreement set out by the President. Still, on July 5, Obama had no compunction against asserting "that's what the bipartisan fiscal commission said"- even though he had expressly proscribed issuance of such a report.

While the President has failed (intentionally or otherwise) to make to the American people the case for the Keynesian policies which could deliver the nation from the economic downturn and instead has repeated right-wing talking points, he has demonstrated saviness far exceeding that of any of us critics. He sets up a commission but, recognizing that the both the left and the right are wary of the recommendations it's likely to make, establishes a high bar for issuance of a report. Though consensus is lacking, a report is released but the President legitimately chooses not to present its findings to Congress, nonetheless embracing them when convenient. It is a craftiness which serves him, and hopefully the country, well.

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