Yesterday, in a post titled “The Non-Existent Confidence Crisis,” Jonathan Chait poured scorn—largely borrowed from Paul Krugman—at any hint, suggestion, or argument that lack of business confidence in the economy has anything to do with our economic doldrums generally and the failure of businesses to invest and hire in particular. Ever the Keynesian, Chait asserts flatly: “Investment is lower because there’s not enough consumer demand. That’s the whole story.”
And it is more than just politics: Obama’s aides believe confidence in the general direction of White House policy has an effect on the willingness of corporations to hire, invest and push the economy toward a more solid recovery.
The stakes are high. Nearly every economic report suggests that corporate America, flush with cash and generating strong profits, is waiting to unleash a wave of hiring if only they have confidence there will be no double-dip recession and that consumers will have money to spend.
So the White House has launched a campaign to help instill that confidence, highlighted by Obama’s remarks on Wednesday stressing his commitment to lifting trade barriers as a way to spur economic growth. That was followed by Treasury Secretary Timothy Geithner’s interview on CNBC’s “Kudlow Report” last night—following his spot on PBS’ “NewsHour” on Tuesday. Obama talked up the economy in Missouri Thursday as well.
But wait a second! Don’t Obama’s political advisors know, thanks to Krugman and Chait, that lack of government-fueled demand is the “whole story”? And what are these blinkered businessmen thinking? Someone get them a subscription to the New Republic.