Monday, November 7, 2011

Klein's Obamanomic Lament

Young Ezra Klein is a coming man in LiberalLand, and so he's the chap The New York Review of Books selected to push back on Ron Suskind's White House tell-all Confidence Men.

Take an Obama announcement in September 2010 where Treasury Secretary Tim Geithner was "looking sheepish," according to Suskind.
So I went back to the tape... I paid special attention to Geithner. Suskind’s right: his suit is too big. But he doesn’t look sheepish or ashamed. He looks, by turns, bored and interested. He clasps his hands behind his back. He nods attentively. He tries not to fidget. He looks like every experienced bureaucrat looks when they’re asked to stand like a prop near the president. Blank, and trying not to make any news. He failed.
OK, so we liberals can ignore Ron Suskind.  But Klein has bigger fish to fry: the failure of Obamanomics.  What went wrong?  It wasn't the clash of the "confidence men."  It was political reality.  Theoretically, if your program isn't big enough to turn the economy, you make it bigger.
If the initial stimulus is too small, you make it bigger. If your housing policies are too modest, you toughen them up. If the private sector sheds jobs and long-term unemployment becomes a problem, you begin hiring workers directly.
Sound great, but this ignores political reality.  The reality is simply that there is no way that Obama could have got a bigger stimulus through Congress.
When Obama angrily dismisses Romer’s umpteenth argument for more stimulus, it’s not because he disagrees. It’s because he can’t get it passed. “Enough!” Suskind quotes him as shouting. “I said it before, I’ll say it again. It’s not going to happen. We can’t go back to Congress again. We just can’t!”
And then there is Ben Bernanke; he's too "timid."  A more activist chairman could have goosed QE2 with a bigger boost.
This raises the question of whether the Obama administration made a mistake in reappointing Bernanke. If it had managed to install a more activist chairman at the Federal Reserve, then its inaction might have been more effectively offset by the Fed’s actions.
 Of course, what Klein doesn't do is question the caloric content of the Keynesian menu.  Suppose "stimulus" is just empty calories that leaves the economy hungry after a quick sugar high? Then a bigger stimulus wouldn't have made a difference.  Suppose that Fed easing just feeds through into inflation.  Suppose that supporting the housing market just puts off the inevitable need to clear the overhang of underwater mortgages?  Klein doesn't even consider that.

The reason the Republicans oppose the Obama economic menu is that we believe that Reaganomics showed that Keynesian fiscal and monetary stimulus isn't nutrititous for the economy.  When you have a big crash the Reagan menu says you need to cut government spending and lower tax rates and reduce government regulation.

The Obama menu says you should fatten up on subsidies to Democratic client groups, get ready to raise taxes on the rich, and boost government regulation on energy and health care.

Young Ezra Klein never even begins to wonder if that kind of food is economic poison.

But don't despair.  Ezra Klein is young.  But surely he is smart enough to know the difference between science and pseudo-science.  When he has reached the age of wisdom.

No comments:

Post a Comment