City: EAU CLAIRE
State: Wisconsin
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Tuesday, March 10, 2009
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Recent Thoughts about Obama’s Economic Policy
Hi, everyone:
After spending a year or so posting to my favorite discussion site (Democratic Underground, or DU) about my support for electing Barack Obama to the U.S. Presidency, I have settled into the task of following President Obama’s economic policy closely. It was an exhilarating election season, but now it’s time for the challenging task of governing our country in difficult times, with troops overseas, Iraq and Afghanistan still hot, and some major problems in the U.S. economy.
So, here’s a sample of my thoughts from recent discussions on DU. I’ll give a bit of background before each set of comments.
Some of the discussions have focused on Treasury Secretary Tim Geithner, who met controversy in his confirmation hearings due to his late tax payments and his record as president of the New York Federal Reserve Bank. I’m a bit skeptical of his potential to lead us through this crisis myself due to some questions about his effectiveness at the New York Fed – did he see the fiscal crisis coming? My first excerpt challenges another poster who characterized my skepticism about Geithner as an attack on Obama’s policies, and called Obama’s critics armchair economists:
There are a lot of slams here against the posters rather than discussion of the Secretary's merits. I agree that the nation’s economic problems can't be solved in a month, but the fact is that the Treasury Secretary at this point needs to excel in communicating his strategies to the public, at being a chief administrator of a BIG pot of money that has multiple claims on it, at being able to challenge Wall Street behavior when it's called for, and at moving beyond comfortable assumptions about the market and the banking industry. So far, I haven't personally seen any of that from Tim Geithner, and this is a critical time. If America's public money continues to be handed out the door by the tens of billions to AIG, Citi, etc., I at least want a clear and coherent explanation from the Treasury Secretary about the grand strategy.
What do you like about Tim Geithner? Has there been _any_ policy change in this agency since Paulson - I don't see much.
BTW, last I heard, armchair economists are still citizens with a very important stake in what happens to our financial system. Leaving it to the "experts" hasn't helped us lately.
This editorial from today's NYTimes is well worth reading too...part of an increasing chorus of voices in favor of bank nationalization or at least greater transparency in these bailouts.
http://www.nytimes.com/2009/03/03/opinion/...
Second post: I’m responding to a discussion about Obama’s health care strategy, and whether or not Obama’s choice of Kathleen Sebelius to lead the Department of Health and Human Services is a sellout to the insurance industry:
It comes down to a couple of things. First, it's a matter of paradigm shift (single payer) vs. incrementalism (Obama's reform strategy). While I agree that single payer makes the most sense and that advocates should certainly be allowed at the table, I think we should judge the reform effort by its results. If within a reasonable time frame we get significantly more Americans covered at a bearable cost, it's a victory. That's why I support Sebelius as a Secretary more than some do on this site, because I think she gets results and can bridge some current divides in American public opinion on this issue. Yes, a majority support single payer, but then again a majority support abortion rights, and we all know that a restive minority can still make an issue difficult to legislate.
Secondly - it will continue to take public pressure to make more progressive health care, economics, and war policies happen. The last three Democratic nominees before Obama - Kerry, Gore, Bill Clinton, all had problems at times connecting with the liberal Democratic base on issues like trade, deregulation, incarceration, and the War on Terror. We are constantly trying to get our own moderate-Blue Dog Democrats (Heath Shuler, Ben Nelson, Evan Bayh, and many others) to respect the policy positions of the Democratic left. It's no different with Obama. Even though I support Obama myself and have great respect for many of his policy positions so far (Guantanamo, more oversight over military procurement, emphasis on infrastructure, aid to states), I still find that progressive ideas on health care reform, Iraq and Afghanistan, and even monetary policy are not getting a full hearing from Obama. Our own party is divided on these issues, and thus pressure from the liberal side is always needed to help us sustain a genuine political conversation in this country - and in my view, to stop ignoring obvious needs for change until it is too late. As much as Ralph Nader gets bashed here, at least he does not suffer the corporatist wing of the American political system (although that's also why he's never been elected, whereas Obama has been).
The last few posts discuss the stimulus package. Famously, Nobel Prize winning economist Paul Krugman has said that the stimulus is of insufficient size. Also, the stimulus included a high percentage of tax cuts, which is a nod to the supply-side assumption that the most important priority for government fiscal policy is to stimulate consumer demand through tax cuts. For myself, I think that a higher percentage of spending in the Reinvestment Act should have focused on infrastructure for our future economy (light rail, the power grid, school construction, internet infrastructure, bridges) and on aid to cities and regions that are suffering particularly tough times due to recession. I’d also like to see a Marshall Plan for small business, including credit to smaller borrowers that start sustainable businesses (the work of Muhammed Yunis on micro-lending in Bangladesh could help in the USA too). Anyway, here are some of the comments I have left on President Obama’s stimulus plan, on the need for more investment and fewer tax cuts:
It took a lot of bad luck and bad decisions to get in this economic mess, and it will take more innovation than has been shown so far to get us out. I don't envy the job that Obama faces, but it's a job we desperately need done well.
IMO, short-term stimulus makes sense as part of a package, but there are opportunity costs to the stimulus that we must account for in the equation. Every time we throw $20 billion (AIG last weekend) or $120 billion (the first Bush stimulus) or hundreds of billions(Obama's/Bush's tax cuts) at the problem of demand, we're not creating transportation or education infrastructure. We're not giving aid to states, where $20 billion would make a HUGE difference in what's available for services. We're not helping our industries develop new business models that can carve out a new share of international markets. We're ignoring regions of our country that are suffering negative economic shifts (Michigan, Ohio, inner cities and rural towns alike). We're ignoring escalating energy needs and dwindling supplies. And the amounts of the bailouts keep climbing. While I understand that a crash landing of the economy would bring all sorts of problems, right now we're spending good money after bad.
What I'd like to see in a stimulus package is greater aid to states because they spend money in more targeted and efficient ways, moderating the pace of tax cuts so we do not create a devastating fiscal hole (and that's where even Obama has to stop playing politics with the popular notion of endless tax cuts), and a SERIOUS ECONOMIC SUMMIT that gives us a chance to evaluate what future industries will thrive in the private economy. Green technology, light rail so that metro systems can build connected and powerful regional economies, MICRO-LENDING and a small business Marshall Plan so that entrepreneurship can thrive beyond the corporate level, this would be where I would start.
Anything too big to fail that eats up money by the tens of billions is no longer a good investment.
I hope fervently that the economic conversation at the presidential level continues, and Obama is not hesitant to bring in new talent if Geithner, Summers, etc. prove to be not up to this monumental task, and I'm not personally confident in that team, sad to say.
Is there anything wrong with an attentive public and constructive criticism? As much as knuckleheaded Bush policies on every front ravaged the finance and fiscal systems, he didn't do it alone. We need real debate and real paradigm shifts in our economic thinking, and opposition voices always have a role in democratic governance. I supported Obama because he can be part of a major policy shift, and I still think he can be. But not with Tom Daschle. Not with escalating the war in Afghanistan without a full policy reassessment and clear strategic goals (which he appears to be moving away from now, and I think that's great).
People have fears about the economy because it's struggling right now, with the economic team's prediction of recovery by Christmas not as likely as it seemed a month ago. I understand the need for significant public sector spending at this point, but we darn well better have a robust discussion/debate on what to spend on, how much, and when. How much more will the big banks need? What about the automakers that are teetering on the edge? What tax reductions/rebates work best for stimulus, and have we provided enough for energy, infrastructure, and other investments in a new economy? Plus, we all know that the real unemployment rate is significantly higher than 8.1% due to the funny math that gets us that figure, and state budgets are tighter than tight.
So, people are engaged and paying attention, and expressing skepticism when it's warranted, and that's how it should be. The _lack_ of attention and skepticism on the public's part got us here. There's nothing we need more than the public to keep its voice, especially the left, in my opinion. There's a chance now that our voices will be heard and we can go forward in a better direction.
Here's the last post, on a similar subject:
One legacy of living under Bush and other neocons for so long is that we regard individual people as heroes/villains and consequentially do not think enough about the policies themselves. This is why we get so many characterizations of Krugman as hero/villain, depending on who you ask, and an obsessive worry that every criticism of Obama's policies is an attack on Obama. This excessive personalizing of policy discussions doesn't help us. Instead of that, I hope that we have a genuine conversation about economic policy, one that certainly includes economists to the left of Obama's inclinations so far, some of whom have noted the high percentage of income tax cuts in the recent Reinvestment Act - and the relatively low percentage of infrastructure spending and aid to cities. This would include the case Krugman builds for a very large package of stimulus/infrastructure/industry bailouts, etc., and the case that Krugman makes for the urgency of putting that package together.
I would personally like to see us think in terms of microeconomies as well as larger economic institutions and structures, including using some of the stimulus/infrastructure money to invest in states and cities, some of which are having a spectacularly bad time, and all of which can make a $2 billion dollar investment (small by Washington terms) go a very long way. Obama seems very good at initiating those conversations with mayors/governors, and even with Congress, so I hope that the conversations are sustained and perhaps a lengthy economic summit is convened to look at the economic picture in regions and cities. I would like to hear more about the Obama team's contingency planning in case of an outright failure of one of the larger banks or one of the Detroit automakers. I think it's important to lay the groundwork for a major emergency investment in Michigan, for instance, if the Big Three do not stay afloat.
Maybe it's also time to dust off some of the anti-trust legislation for these institutions that are supposedly "too big to fail."
So, I think that as we get away from the shirts and skins mentality of the whole New Right era, we need to welcome criticism of the president that is thoughtfully given, as Krugman's generally is. We need to welcome attempts to diagnose and address the economic crisis, though I think we also need to disaggregate our thinking about the economy so we can tend better to individual sectors: finance, hard industries, international trade, and local economies.
7:37 PM
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