Economics

How Obama Blames Democracy for Weak Economy

Washington Post columnist Ezra Klein recently spent nearly 7,000 words explaining why voters might want to consider cutting the Obama administration a break for the terribly weak economic recovery. Especially since it’s kinda-sorta their own fault.

It’s a two-part argument. First, Klein says, the depth and nature of the downturn was worse than almost everybody realized back in early 2009, including government statisticians. He notes that the infamous stimulus chart created by White House economists Jared Bernstein and Christina Romer showed unemployment peaking at 9 percent in 2010 and falling below 7 percent by the end of 2011; with the stimulus, unemployment would supposedly never even hit 8 percent and be back in the 5-percent range by 2012. Reality: It’s been 8.6 percent or higher for 31 straight months even with the stimulus.

Yet Bernstein himself said in December 2008 that double-digit unemployment was quite possible. So did Moody’s economist Mark Zandi, whose forecasting model the White House used. In January 2009, Zandi predicted unemployment would rise to 11.1 percent with no stimulus. So it’s really baffling that the official White House forecast was so relatively benign.

But maybe it was wishful thinking. That would also explain why the White House initially dismissed the idea—proposed by economists Carmen Reinhart and Ken Rogoff—that recessions after debt-induced financial crises tend to be lengthy and the eventual recoveries sickly. Team Obama, particularly all-star economists Larry Summers and Peter Orszag, disagreed and argued that the rebound would be a robust one.

Second, by the time the White House better understood the Great Recession’s dynamics, politics—by which Klein means Republicans and the Tea Party—limited a more dramatic Keynesian response, i.e., lots more stimulus and mortgage debt relief. Klein, again: “These sorts of economic crises are … inherently politically destabilizing, and that makes a sufficient response, at least in a democracy, nearly impossible … The policies that are vastly better than whatever you are doing are not politically achievable, and the policies that are politically achievable are not vastly better.”

Do I detect here a bit of the China envy that’s now so commonplace among liberals and the Left? Maybe the problem isn’t democracy but zero recognition by Team Obama that a) its Keynesian-inspired economic formula is anyway mistaken, b) federal debt levels place the economy at risk of another financial crisis, c) taxes and regulation are suffocating the private sector. But it’s easier to make excuses than to admit error.

8 thoughts on “How Obama Blames Democracy for Weak Economy

  1. I love watching people like Ezra Klein try to explain why things didn’t work the way they predicted. They never, ever conclude the obvious: gee, our ideas are wrong. They always assume they are right, then argue from there. Amusing when not infuriating.

    From 2007 (last year before recession) through 2011, the federal debt held by the public climbed from $5.0 trillion to $10.9 trillion. Yet the Kleins and Krugmans of the world still contend the stimulus was not enough. Their own economist, Christina Romer, said fiscal policy never got us out of a recession or the Great Depression. They cannot be convinced by evidence, yet call us the benighted and superstitious fools.

  2. a) its Keynesian-inspired economic formula is anyway mistaken

    Based on what evidence?

    b) federal debt levels place the economy at risk of another financial crisis

    Public borrowing has gotten cheaper, not more expensive. There’s no evidence of any short term risk from debt levels.

    c) taxes and regulation are suffocating the private sector

    Tax collections are at the lowest levels in decades. Regulations are a scapegoat.

    There is “zero recognition” of those items because they’re politically-inspired fantasy.

    • Jim:

      You are deriving your rhetoric from EPI, a socialist (at best) “think” tank that loves all economic policies that gives away other people’s money. Filling out more Federal forms always stimulates the economy. Minimum wage increases always stimulates the economy. Deficit spending always stimulates the economy. Tax increases always stimulates the economy.

      How about leaving the economy alone?

    • Yeah, waiting for public borrowing to become more expensive, when there is gargantuan amounts of public debt, that has worked so well for Greece, Italy, Spain and Portugal. Why don’t we just keep on borrowing the cheap money until it becomes a crisis? Let’s wait until it threatens our solvency before we try to do something about it.

    • @Jim:
      a) its Keynesian-inspired economic formula is anyway mistaken

      Based on what evidence?

      Based on the evidence of the two economists that just won the Nobel prize for there theory that Keynesian economics is flawed? I mean, you could start there ;)

  3. In a certain roundabout way of thinking, democracy IS to blame. After all, it was democracy that made it possible for this witless bunch to become the Executive Branch of the nation. It really makes you wonder about the wisdom of granting a vote to anyone with a heartbeat.

    At the least, it makes me question the minimum voting age. I’d bring it up to 25, although 30 is what I’d really prefer. With an exception for military service. When we had a draft the rationale was that you shouldn’t be forced to fight in a war you had no opportunity to vote for or against. With the draft no longer an issue, I’d reserve the privilege for those who made the commitment.

    • If you look at the original U.S. Constitution, our Founding Fathers got it right. Liberals have since mucked it up.

      The Constitution originally called for elections to be based on the votes of property owners (those with skin in the game as Pres. O likes to say), not every person who happens to be in the country. Also, the Senate was to be elected by the individual state legislatures, giving the States representation in the national government. The House was where the People were represented. Each House member was to represent the wishes of about 40,000 people, not the millions they represent now. How can they possibly represent the views of so many people? They can’t. The People’s representation has been watered down now to where each individual is ineffective and irrelevant as far as Gov. is concerned.

      I think we should go back to the original intent of the Founding Fathers, and reclaim this Nation for the People and not the Elites.

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