I’m offering this post to expand on something Richard posted today:
If anyone wants to know why Americans who represent the 99 Percent are camping out on Wall Street, in Pioneer Park, and in dozens of cities, this is why: a majority of us voted for change in 2008, and we didn’t get it. Three years later the rich still have their tax cuts, and the debate in Washington is all about budget cuts and eliminating public sector jobs. None of the Wall Street criminals have been sent to jail, instead the Obama DOJ is trying to work a deal to keep state attorneys general from conducting fraud prosecutions.
To my mind, the Obama team and Congressional Democrats were too timid. Faced with a massive meltdown, they played it “safe” and that’s why too little change has been enacted and hope was allowed to fade.
Over the weekend, Ezra Klein published a lengthy and interesting piece Could this time have been different? that examined the policy concerning the economic crash and questioned if better policy could have been crafted and if so, could it have passed and what would it the effects have been. It’s a thoughtful and long piece so difficult to excerpt but here’s a passage that jumped out at me:
But the Cassandras who look, in retrospect, the most prophetic are Carmen Reinhart and Ken Rogoff. In 2008, the two economists were about to publish “This Time Is Different,” their fantastically well-timed study of nine centuries of financial crises. In their view, the administration wasn’t being just a bit optimistic. It was being wildly, tragically optimistic.
That was the dark joke of the book’s title. Everyone always thinks this time will be different: The bubble won’t burst because this time, tulips won’t lose their value, or housing is a unique asset, or sophisticated derivatives really do eliminate risk. Once it bursts, they think their economy will quickly clamber out of the ditch because their workers are smarter and tougher, and their policymakers are wiser and more experienced. But it almost never does.
The Great Recession has not been different. Policy makers underestimated the severity of the crash and overestimated the power of the stimulus; they were wrong and ignored the people who were right.
Paul Krugman offered a response to Klein’s piece – Was Failure Inevitable? Krugman’s short answer is “No, it wasn’t inevitable, but. . .” Krugman’s most key insights:
Politically, the administration was wildly naive in believing that it could easily come back for more if the initial stimulus proved inadequate. Again, this isn’t hindsight; I was frantic about this too, right from the beginning. If they thought this likely — as they should have — they should have laid the legislative groundwork for a second round, through reconciliation if necessary, right at the start.
The political response to the new jobs bill has been pretty good — which in turn strongly suggests that the “pivot” from jobs to deficit reduction in early 2010 was a big mistake. Maybe — probably — nothing could have passed; but the White House might have been able to make a better case by accusing Republicans of blocking job creation rather than adopting their rhetoric.
Lots of folks around the blogosphere have commented on these articles. Steve Benen summarized the whole issue thus:
One of the more unsatisfying political fights in America is over whether the 2009 stimulus “worked.” The debate itself is mind-numbing, in large part because there’s no way to win when the truth — it could have been worse — is something no one wants to hear.
Was the effort successful? In so far as it prevented a calamity, of course it was — the stimulus took an economy that was shrinking and made it grow; it took an economy that was hemorrhaging jobs and created conditions in which it created jobs. There are millions of Americans working today who’d be unemployed were it not for the Recovery Act.
And yet, it was terribly unsuccessful insofar as the economy still stinks and the jobs crisis hasn’t gone away.
I also like his response to the Republicans:
. . .Republican critics of the administration’s efforts have been so wrong, they deserve to be laughed out of the room — any room. Every GOP instinct since the start of the recession in 2007 has been entirely backwards, and the fact that they’re strutting around in 2011, as if the high unemployment rate somehow lends credence to their twisted economic worldview, borders on criminal. If Republicans weren’t permanently discredited by the crash itself, their hilariously wrong responses to the downturn should remove any doubt about their intellectual bankruptcy and ruined credibility.
ARRA worked, just not enough. That’s not the same as it not working at all. The Administration and Congressional Dems badly misjudged what was needed and at a time that called for bold action made the mistake of being insufficiently bold.