In the 2010 State of the Union address, President Obama stated that he would freeze 2011 discretionary spending even though unemployment was projected to be above 8 percent,The President put it a little differently:
So tonight, I am proposing that starting this year, we freeze annual domestic spending for the next five years. [..] Now, most of the cuts and savings I've proposed only address annual domestic spending, which represents a little more than 12 percent of our budget.How many of Konzcal's readers know that the President proposed freezing 12% of the budget: not Medicare, not Medicaid, not health care reform, not Social Security, not Pell Grants, and certainly not spending on energy or education? "The President proposed freezing 12% of the budget" kind of lacks the impact of Konzcal's formulation, but has the virtue of being accurate.
Near the beginning of the President's speech we find:
Two years ago, I said that we needed to reach a level of research and development we haven't seen since the height of the Space Race. And in a few weeks, I will be sending a budget to Congress that helps us meet that goal. We'll invest in biomedical research, information technology, and especially clean energy technology an investment that will strengthen our security, protect our planet, and create countless new jobs for our people.So the President proposed first a targeted stimulus and industrial policy and then a long term emphasis on balancing the budget. There are good economic and good political reasons for the Presidents approach. The political value should be obvious: the President has taken the budget balancing and "entitlements" story that the GOP has successfully used to bludgeon the Democrats for decades and turned it into a debate on why the rich and wealthy corporations have been allowed escape paying their share. The failure of the "left" to understand this not all that subtle strategy is not surprising considering their usual level of political acumen.
[President Obama] said, if “we don’t take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery,” which “would have an even worse effect on our job growth and family incomes.” This conventional wisdom gave the Republicans the leverage they needed to destroy any pro-active economic agenda.If this means what it says then it's a claim that if only the President had made a different speech the Republicans would not have had "the leverage they needed to destroy any pro-active economic agenda". To me, that seems the like the argument of a "political rookie" -to borrow Spandan's phrase - an academic who does not have the faintest glimmer of understanding of how to persuade or how power works. The Republicans were not going to be won over in any scenario - their agenda of obstruction is not a secret and their command of the media and corporate sponsorship gives them a strong platform. It's possible that Konzcal has a case to make, but that would require polling data and political knowledge and a strong argument - no evidence of any of those can be found in his article. FDR found it impossible to implement a full Keynsian recovery until he had a world war to fight, but Konzcal, like practically every other center left economist thinks it would be simple for Obama if he just, you know, made a tough speech or maybe some recess appointments. That's the first of three big opportunities the President, according to Graduate Assistant Konzcal has neglected to turn in - magicking away GOP leverage with the right speech!
Here's Konzcal on the second error.
President Obama has shown less interest in monetary policy [than the Sainted FDR] , reappointing the moderate Republican Ben Bernanke to office and leaving seats open for years.The bolded phrase (my bolding) is about seats on the Federal Reserve Board. How many readers of The Nation, reading Mr. Konzcal's account would know that the President has appointed 3 of the 5 members of the board, plus Mr. Bernanke and that one of his nominees, the Nobel Prize winner Peter Diamond withdrew from consideration after 14 months of GOP filibuster? It's apparently not possible that the President thinks it better strategy to try to place a few board members in long term positions instead of having a some ephemeral appointments- his failure to follow Konzcal's impatient demand for recess appointments indicates "less interest". But what would those recess appointees have done if the President had turned in his homework on time and paid attention in class?
At the end of 2011, key liberals like Christina Romer and Paul Krugman started talking about a new way of doing Federal Reserve policy based on “nominal GDP targeting,” which would allow for higher inflation in weak economic times. Meanwhile, Chicago Federal Reserve President Charles Evans put out a plan to allow 3 percent inflation while unemployment is above 7 percent. These are good ideas; the administration could put them into practice by filling vacancies with appointees who understand their value.
"Nominal GDP targeting" turns out to be this spectacular policy where the Federal Reserve bank buys more bonds on the open market (like it has been doing for 3 years) and also - buckle on your seatbelt - says it wants inflation at say 3%! There you go, the powerful, liberal/left economic policy we've been deprived of by the President's poor behavior is the Federal Reserve bank doing more of what it has been doing and also saying something mild about inflation. That's a policy, by the way, that the great Keynes himself said would never work. It's intended to get financial institutions to stop investing in treasury bonds (because interest rates on them will drop as the FRB buys them) and be so flush with cash that they are forced to make productive investments. But we know that the problem is not a lack of cash: US companies are sitting on trillions. The problem is money managers do not want to invest in building factories or hiring workers when they can invest in speculation. We recently found out that the investment managers at supposedly cautious TIAA were so desperate for places to get returns on their cash that they bought bonds paying 6% interest from M.F. Global, a company leveraged 40/1 in a completely wild speculation on European debt - yet our liberal/left econo pundits have not been able to wrap their heads around it.
The third and final missed opportunity is to prosecute the banks for foreclosing because allowing more Americans to stay in homes that are financially underwater (with mortgages bigger than the market value of the home) is going to create more jobs in some unspecified way.
There are ways forward; it is just a question of whether the administration is prepared to take them.
But in reality, none of the proposals he advances has a chance of creating millions of jobs. None of them. The obvious way to improve the economy is to push the GOP out of the House and strengthen the Democrats in the Senate so that Conservadems cannot work with the GOP to sabotage Democratic policy initiatives. How the incessant and poorly thought out bitching about the President is going to get us there, however, is not something I can understand.