Tuesday, March 10, 2009


From the New York Times, new Krugman:

So here’s the picture that scares me: It’s September 2009, the unemployment rate has passed 9 percent, and despite the early round of stimulus spending it’s still headed up. Mr. Obama finally concedes that a bigger stimulus is needed.

But he can’t get his new plan through Congress because approval for his economic policies has plummeted, partly because his policies are seen to have failed, partly because job-creation policies are conflated in the public mind with deeply unpopular bank bailouts. And as a result, the recession rages on, unchecked.

O.K., that’s a warning, not a prediction. But economic policy is falling behind the curve, and there’s a real, growing danger that it will never catch up.

More here.

Republicans have been bashing Obama's stimulus bill relentlessly, from a decidedly neoliberal perspective--you know, not enough tax cuts, let the market enforce its harsh discipline, bad deficit bad! They even pull out the cliched maxim that it was WWII, rather than FDR's New Deal, that pulled us out of the Great Depression, which, to them, means that Keynesian economics, which is the driving philosophy behind the entire concept of economic stimulus, just doesn't work.

I've already addressed elsewhere on this blog the problems with using the economic philosophy that caused this mess, neoliberalism, as the point of view from which to criticize the only mainstream economic philosophy, Keynesianism, that stands a chance of pulling us out. I mean, it's far worse than apples and oranges. So I'll let that lie for today.

But the right wing inadvertantly makes a decent point with the WWII thing. That is, the fact that World War II is what finally ended the Great Depression doesn't at all disprove Keynes' theories. Quite the reverse, in fact. What it shows is that FDR's New Deal spending was too timid. Think about it. During WWII, we were at full employment. Industry was at full capacity. This only happened because the federal government pulled out all the stops. I'm not sure about the actual figures, but I know that war spending dwarfed New Deal spending. The lesson learned here is that when you're trying to head off a depression, you can't let deficit hawks, "socialism" haters, and tax cutters grab your balls and yank. You've got to pop 'em on the nose with a rolled up newspaper and do what needs to be done.

Sadly, frighteningly, President Obama, maybe out of his misguided desire for "bipartisanship," or maybe because he's just too conservative, is failing to do what must be done. The stimulus bill, for all its billions, isn't enough to kickstart the economy. We've got to get it up to WWII levels relative to the overall size of today's economy. And as Krugman asserts, we've got to do it now or Obama's window of opportunity may be forever lost. We really are in that much trouble.

And then there's the banking thing. What I'm reading from actual economists, even conservative economists, is that we've got to nationalize them. Not all of them, of course, just those dubbed "too big to fail," you know, the banks and investment banking firms up to their gills in "toxic assets." I mean, they're "zombie banks," banks that have already failed, kept alive only by these tens of billions both Bush and Obama have been sending their way: these zombie banks are black holes and will continue to burn tax dollars until there are none left to burn. Then it's Road Warrior America.

But President Obama refuses to take over these failed institutions, instead preferring to hand them warehouses full of money. Maybe he's too close to the industry. Maybe he's afraid of being called a socialist, which is already happening, anyway. I really have no idea why he's not doing what most economists are strongly urging.

But I do know that he's fucking up. Badly.

Told ya so.