Paul Krugman writes, and not for the first or second or 10th time: "Back when the original 2009 Obama stimulus was enacted, some of us warned that it was both too small and too short-lived." Well, give yourself a gold star, Paul, but even if you were right, which you are not, your repetition of this point is deeply counterproductive.
- Suppose Krugman is 100% on the mark and that a failure of nerve or vision or personal integrity or something caused the Obama administration to miss an opportunity for a bigger stimulus that would have fixed the economy - then what? It's not early 2009 anymore and certainly "we shouldda" is not going to get a single person a job. What does Professor Krugman propose? Where's a plausible policy for the Federal Reserve Bank or the Obama administration given the Republican party's open commitment to destroying the economy and the short sighted, self-destructive, yet enormously powerful efforts of Wall Street and the corporate media? The media is 24/7 attempting to sell the message that we must cut and one of the few voices of dissent allowed in the media devotes his time to "I was right". It's almost as if we are only permitted to see two opinions: the far right opinion and the opinion that resistance is futile and all we can do is bemoan the failure of the government to read memos from the wise. And just to show how it could be done here are two proposals:
- The Federal Reserve should purchase the GSE holdings of agency mortages and mortgage backed securities. This would inject a bunch of money into the system, lessen Federal borrowing (which will push more money into productive investment), and teach Republicans in Congress a lesson about obstruction.
- The US should temporarily station soldiers in urban areas for training purposes. The huge military engineering/construction groups can build and renovate and weatherize local housing that can be turned over to residents when the temporary stationing is over. This would divert tax dollars in DOD expenditures from a pointless war and Beltway bandit contracting firms to local economies that could really do with some customers.
- Suppose Krugman is 3/4 right and the Obama administration could have added a few hundred billion more to the stimulus in 2009. Actually, they did! They just didn't call it "stimulus" so it requires some thought to see what they were doing. The expansion of medicare, the expansion of health insurance to under 26 year olds, removing the banker tax on student loans (the system where private banks got paid for taking no risk on federally guaranteed student loans), the tens of billions of dollars in DOE loans and grants that went out to green energy companies, the auto rescue (remember the auto rescue?), a reform of the Ex-Im bank, pushing down the dollar (to help exports), the enormous mortgage refinancing wave caused by low interest rates, and a host of other programs have been "stimulating" the economy even though the "left critics" like Krugman rarely if ever notice and certainly do not ever try to rally support. I could say something snarky about the difference between textbook economics where everything is neatly classified under chapter headings and practical economics where "stimulus" might be called something else, but I'm not going to resort to such low rhetoric.
- Suppose Krugman was 1/2 right right and the Obama administration could have magicked up some more Senate votes for a larger stimulus measure by, you know, talking tough on the bully pulpit or something. What would have happened to additional money for states? Well, I can tell you that the Republicans running or disrupting state governments in the key states and the weak Democratic administrations in some other key states would have used Federal money to offset further cuts. For example, Texas Republicans took tens of billions of dollars of Federal stimulus and used it to patch a state budget they had just destroyed by with irresponsible tax cuts to help the oil industry and to subsidize real-estate speculation. They would have been happy to use even more. Republican controlled state houses and Republican stymied states like CA and NY and ineffective Dem governors like the one in Ohio created an anti-stimulus that would have easily chewed up a couple of hundred extra billion. And we haven't even touched the problem of trying to spend money wisely through a Federal bureaucracy that had been systematically destroyed by GW Bush for 8 years after a much longer period of decay.
- Suppose that Krugman was 1/4 right, and congressional opposition and state anti-stimulus and Federal bureaucracy problems had all been whisked away, we would STILL have unemployment. The US lost 5 million manufacturing jobs since NAFTA passed (although Krugman swore it would not damage US manufacturing and would help Mexico - see how well that's worked out!). The effects of this job loss also pushed down wages in the remaining manufacturing industries and encouraged managers to increase profits by outsourcing and wage cuts and not by investment in technology and process and new products. But through the twenty years preceding the current crash, the effects of this collapse in manufacturing was hidden by a big increase in malls, retail, and, especially construction jobs. When the real-estate market bubble collapsed all that went away. There was no quick fix unless the government had created a massive new WPA , much larger than the original, and that was both politically impossible and STILL would have taken two or three years to get going.