Because It Was Always Going to be the Same – Reflections on the crash, the stimulus and the Great Recession

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.

and

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.

  1. #1 by Richard Warnick on October 10, 2011 - 3:52 pm

    The Obama campaign tried to stake out a middle of the road position on the Bush tax cuts by excepting the so-called “middle class” incomes up to $250 K. That was a mistake.

    The answer was to axe ALL the tax cuts in 2009, and use the money for economic recovery in the short term and deficit reduction long-term. It was Obama’s biggest missed opportunity. Jim Hightower was right: “There’s nothing in the middle of the road but yellow stripes and dead armadillos.”

    Senate Majority Leader Harry Reid recently overcame a GOP filibuster with 51 votes. This proves he has been lying to us all along about the supposed “60-vote rule” that isn’t really a rule.

    Even now, President Obama’s only answer to our ongoing economic crisis is to propose a bunch of Republican policies that the Republicans themselves won’t vote for. Progressives are still being ignored. Why not support Rep. Jan Schakowsky’s emergency jobs bill? Republicans won’t vote for that either, but at least it’s a worthy plan that might have a lot of economic impact if enacted.

    A let’s not forget that the accountability-free SuperCongress, which President Obama signed into law, is going to keep Washington obsessed with cutting budgets and eliminating public sector jobs until the end of the year.

    • #2 by Glenden Brown on October 10, 2011 - 4:36 pm

      Have you seen this post at Krugman’s place?

      Again and again, we’ve seen this administration behave in astonishingly politically naive. They’ve wasted years begging the Republicans to be nice while ignoring their own base and when their base gave them the finger by staying home in 2010, they doubled down on their insane strategy. But we’ve also seen Dems on the Hill pursue a different, albeit equally destructive path, of deciding in advance what was and what was not politically possible before even trying.

      Add to that a willful blindness at how bad the economy was and a lot of what we’ve seen the last few years starts making sense to me.

  2. #3 by Richard Warnick on October 10, 2011 - 4:45 pm

    I’ll give President Obama credit for one thing: he never claimed to be a progressive. But we weren’t prepared to see him govern as a Republican– was that naivete on our part?

    When you consider that Obama takes economic advice from the likes of Larry Summers, Timothy Geithner and Jeffrey Immelt, and plays golf with people like Robert Wolf, chief executive officer of UBS, is that naivete?

    What do you think about the recent revelation that 51 votes is really a majority in the U.S. Senate?

    • #4 by Glenden Brown on October 10, 2011 - 4:49 pm

      If you look at his 2008 campaign platform, though, the programs he proposed and ran on they added up to a progressive campaign. Then he got into office and immediately started doing the math about what was and wasn’t possible rather than fighting for what was best – his team wanted legislation, they preferred to have things he could sign, even if it had minimal relation to what he campaigned on. The ACA bears marginal resemblance to the health care reform the campaign proposed. But it was health care reform and so they took it as a win. That seems to have happened up and down the line. The campaign was progressive, the governance rudderless and de-centered so policy drifted ever rightward.

      My gut instinct tells me that the new found toughness is Nancy Pelosi pushing and pushing hard behind the scenes. Obama is a naturally cautious pol – Nancy Pelosi wanted a series of tough fights and had to watch helplessly while the Senate dithered. There’s nothing like the possibility of losing an election to focus one’s mind and Obama has gotten focused.

    • #5 by Glenden Brown on October 10, 2011 - 4:59 pm

      The other thing I’ve been pondering is that the Obama team seems to have been repeatedly blindsided by events that didn’t surprise the rest of us. They really seemed to believe that Republicans wouldn’t go scorched earth and when they did they had no plan b. They really didn’t know what to do when ARRA was insufficient. They didn’t imagine that the Democratic base would get pissed and sit out 2010. The rest of us saw the economy drive off a cliff, they didn’t fully grasp how bad it was. They’ve played a game that has gone wrong every time because they’ve consistently played the wrong – they brought a spork to a shoot out.

  3. #6 by Richard Warnick on October 10, 2011 - 5:36 pm

    Obama won 53 percent of the vote in 2008. Now his approval rating is 43 percent. A lot of folks stuck with him for a long time, but really got nothing for it. Obama’s campaign still likes to bash progressives. It’s hard to explain.

  4. #7 by Wyoming Cowboy on October 10, 2011 - 6:54 pm

  5. #8 by Wyoming Cowboy on October 10, 2011 - 6:56 pm

    “what we’ve seen the last few years starts making sense to me”.

    Better late than never Glendon.

  6. #9 by Richard Warnick on October 10, 2011 - 8:29 pm

    Glenn–

    Thanks for the poster link. I quit MoveOn in March 2010, when they abandoned the health care public option. Since then, we have to assume they work for the Obama administration.

  7. #10 by Wyoming Cowboy on October 11, 2011 - 7:25 am

    …on a climate note, al gore’s new digs. Nobody notices but those aware of the fraud. With hypocrisy like this the AGW religionists have not a prayer. Pick a leader, any leader.

    http://wakeupfromyourslumber.com/blog/aletho-news/stunning-pictures-al-gore-s-new-9-million-mansion-media-totally-ignored

    In other news, the coal seam north of here which is some 200+ feet thick is being fully developed. The new energy grid through the region has been fast tracked, and the wind farms will now have a better place to send their power.

  8. #11 by Richard Warnick on October 11, 2011 - 8:56 am

    So, because Al Gore bought a California mansion 18 months ago, that means we don’t have to worry about climate change?

    I don’t think it works that way. Politics has no influence on climate, which is something Faux News hasn’t figured out.

  9. #12 by jacksmith on October 11, 2011 - 11:35 am

    REALITY!!

    ( http://my.firedoglake.com/iflizwerequeen/2011/05/16/how-about-a-little-truth-about-what-the-majority-want-for-health-care/ )

    ( Gov. Peter Shumlin: Real Healthcare reform — http://www.youtube.com/watch?v=8yFUbkVCsZ4 )

    ( Health Care Budget Deficit Calculator — http://www.cepr.net/calculators/hc/hc-calculator.html )

    ( Briefing: Dean Baker on Boosting the Economy by Saving Healthcare http://t.co/fmVz8nM )

    START NOW!

    As you all know. Had congress passed a single-payer or government-run robust Public Option CHOICE! available to everyone on day one, our economy and jobs would have taken off like a rocket. And still will. Single-payer would be best. But a government-run robust Public Option CHOICE! that can lead to a single-payer system is the least you can accept. It’s not about competing with for-profit healthcare and for-profit health insurance. It’s about replacing it with Universal Healthcare Assurance. Everyone knows this now.

    The message from the midterm elections was clear. The American people want real healthcare reform. They want that individual mandate requiring them to buy private health insurance abolished. And they want a government-run robust public option CHOICE! available to everyone on day one. And they want it now.

    They want Drug re-importation, and abolishment, or strong restrictions on patents for biologic and prescription drugs. And government controlled and negotiated drug and medical cost. They want back control of their healthcare system from the Medical Industrial Complex. And they want it NOW!

    THE AMERICAN PEOPLE WILL NOT, AND MUST NOT, ALLOW AN INDIVIDUAL MANDATE TO STAND WITHOUT A STRONG GOVERNMENT-RUN PUBLIC OPTION CHOICE! AVAILABLE TO EVERYONE.

    For-profit health insurance is extremely unethical, and morally repugnant. It’s as morally repugnant as slavery was. And few if any decent Americans are going to allow them-self to be compelled to support such an unethical and immoral crime against humanity.

    This is a matter of National and Global security. There can be NO MORE EXCUSES.

    Further, we want that corrupt, undemocratic filibuster abolished. Whats the point of an election if one corrupt member of congress can block the will of the people, and any legislation the majority wants. And do it in secret. Give me a break people.

    Also, unemployment healthcare benefits are critically needed. But they should be provided through the Medicare program at cost, less the 65% government premium subsidy provided now to private for profit health insurance.

    Congress should stop wasting hundreds of millions of dollars of taxpayer money on private for profit health insurance subsidies. Subsidies that cost the taxpayer 10x as much or more than Medicare does. Private for profit health insurance plans cost more. But provide dangerous and poorer quality patient care.

    Republicans: GET RID OF THE INDIVIDUAL MANDATE.

    Democrats: ADD A ROBUST GOVERNMENT-RUN PUBLIC OPTION TO HEALTHCARE REFORM.

    This is what the American people are shouting at you. Both parties have just enough power now to do what the American people want. GET! IT! DONE! NOW!

    If congress does not abolish the individual mandate. And establish a government-run public option CHOICE! before the end of 2011. EVERY! member of congress up for reelection in 2012 will face strong progressive pro public option, and anti-individual mandate replacement candidates.

    Strong progressive pro “PUBLIC OPTION” CHOICE! and anti-individual mandate volunteer candidates should begin now. And start the process of replacing any and all members of congress that obstruct, or fail to add a government-run robust PUBLIC OPTION CHOICE! before the end of 2011.

    We need two or three very strong progressive volunteer candidates for every member of congress that will be up for reelection in 2012. You should be fully prepared to politically EVISCERATE EVERY INCUMBENT that fails or obstructs “THE PUBLIC OPTION”. And you should be willing to step aside and support the strongest pro “PUBLIC OPTION” candidate if the need arises.

    ASSUME CONGRESS WILL FAIL and SELLOUT again. So start preparing now to CUT THEIR POLITICAL THROATS. You can always step aside if they succeed. But only if they succeed. We didn’t have much time to prepare before these past midterm elections. So the American people had to use a political shotgun approach. But by 2012 you will have a scalpel.

    Congress could have passed a robust government-run public option during it’s lame duck session. They knew what the American people wanted. They already had several bills on record. And the house had already passed a public option. Departing members could have left with a truly great accomplishment. And the rest of you could have solidified your job before the 2012 elections.

    President Obama, you promised the American people a strong public option available to everyone. And the American people overwhelmingly supported you for it. Maybe it just wasn’t possible before. But it is now.

    Knock heads. Threaten people. Or do whatever you have to. We will support you. But get us that robust public option CHOICE! available to everyone on day one before the end of 2011. Or We The People Of The United States will make the past midterm election look like a cake walk in 2012. And it will include you.

    We still have a healthcare crisis in America. With hundreds of thousands dieing needlessly every year in America. And a for profit medical industrial complex that threatens the security and health of the entire world. They have already attacked the world with H1N1 killing thousands, and injuring millions. And more attacks are planned for profit, and to feed their greed.

    Spread the word people.

    Progressives, prepare the American peoples scalpels. It’s time to remove some politically diseased tissues.

    God Bless You my fellow human beings. I’m proud to be one of you. You did good.

    See you on the battle field.

    Sincerely

    jacksmith – WorkingClass :-)

  10. #13 by Wyoming Cowboy on October 11, 2011 - 6:45 pm

    Apparently not. If it isn’t worrisome for al, I’m sure as shit not going to worry about it. Can’t you see the irony of the fraud by now Richard? Don’t be the last person believing, that is a lonely place for any dying religion…or cult.

    I always claimed the only difference between a cult and a religion is numbers.

  11. #14 by brewski on October 11, 2011 - 9:19 pm

    Glenden,
    I didn’t know you were an anti-semite just like Richard.

  12. #15 by Richard Warnick on October 12, 2011 - 9:01 am

    That’s your first comment on this thread? Usually people lose a debate before resorting to name-calling. ;-)

  13. #16 by brewski on October 12, 2011 - 9:15 am

    Richard, does that mean you now concede you lost the debate by calling Tea Partiers racist?

  14. #17 by Richard Warnick on October 12, 2011 - 9:44 am

    You cannot find any example of me calling anyone a racist, because there are none.

  15. #18 by brewski on October 12, 2011 - 1:35 pm

    Then you are the only one on OU who didn’t call the Tea Partiers racist.

  16. #19 by some other schmuk on October 14, 2011 - 12:17 pm

    It’s time we all had solar collectors installed on our roof. Then the purchase of electric cars won’t be dependent on coal. And if that’s not enough, as we drive about in persuit of our new entrapenaurial endevors, the use of our little green cars will pay off our solar array – how sweet can modern life get?

    As for brewski’s trollery…some things just never change.

(will not be published)


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