Despite what everyone says Obama's stimulus WAS successful, it kept us (and possibly the world) from going over the cliff. The problem was that it was too small, which Paul Krugman tried to warn them about.
The Obama team made 2 major miscalculations; the first was that they underated the severity of the recession, they didn't think they need something huge, that the economy would bounce back like it always does, boy, were they wrong. The second was that they thought they would be able to come back and do a second stimulus, not realizing that there was no rationality left in the Republican party, they were perfectly willing to let the economy collapse in order for them to get elected and win back majorities in both houses.
Ezra Klein goes into more detail, here's an excerpt:
Ten percent unemployment and a terrible recession ended up discrediting the people trying to do more for the economy, as their previous intervention was deemed a failure. That, in turn, empowered the people attempting to do less for the economy. So rather than a modestly sized stimulus leaving the door open for more stimulus if needed, its modest size was used to discredit the idea of more stimulus when it became needed.
On his own blog Krugman has a post called Health Reform Myths. He addresses the myths and knocks them down - easily. It's easy to do because all of the complaints the right has raised are non-existant. In other words, they are lying.
All they want to do is have Obama fail and they don't want any kind of health care reform anyway, so they lie in order to get their ignorant base all riled up over things that doesn't exist. They think they have succeeded because the polls show a majority of Americans disapproving of the bill, but the fact is when parts of the bill are broken down and polled people like all the individual parts of it.
And a lot of those that don't like it are liberals who think it's a government give-away to health care insurance companies and is lacking a public option. But Krugman says this:
For a real piece of passable legislation, however, it looks very good. It wouldn’t transform our health care system; in fact, Americans whose jobs come with health coverage would see little effect. But it would make a huge difference to the less fortunate among us, even as it would do more to control costs than anything we’ve done before.
This is a reasonable, responsible plan. Don’t let anyone tell you otherwise.
Obama gave a speech today. We all know he’s good at speeches but for this one he dropped the soaring and inspiring prose and settled into the role of an economics professor and explained in simple terms why he was doing the things he’s doing to get the economy going again. All very good and, unfortunately, very necessary for the stupid American public who are getting mad about things that they don’t even understand.
Obama is doing what any smart guy would do, looking at history and learning it’s lessons. The best example we have of our situation is The Great Depression.
Very easy to look at the things Hoover did, all of which caused a deeper and worse depression. And look at what FDR did that started us back on the road to being able to live.
The first thing Hoover did, and which he is most known for is - nothing. He just stood there and said there was nothing he COULD do, the economy would correct itself. As we can see, Republicans have followed ideology over reality for over 75 years. FDR showed (and this is actually Keynesian economics, FDR didn’t invent it) that spending at a time when only the government has the muscle for any kind of big spending, is the necessary thing for a completely stagnant economy. Another thing Hoover got raked over the coals for was raising taxes, which was like throwing gasoline on a fire. This is why Obama hasn’t raised taxes for the rich yet like he said he was going to. He’ll just wait for the Bush tax cuts to expire next year and hope the recovery is far enough along that it won’t hurt.
This I have some doubts on, that raising the top tax rate from 36% to 39% is going to cause much of a problem. It might even be stimulative as the rich might want to make business investments to lower their taxes. Keep in mind that we have a marginal tax, which means the percentage increases with quantity - the 39% kicks in at amounts over $400,000. And that rate is ONLY paid on income over that limit, not below it. Still, I can understand being cautious and won’t fault Obama for not wanting to risk raising taxes right now.
But where I do find fault is what Obama said about not nationalizing the banks the way Paul Krugman has been saying he should. I kind of felt like Obama couldn’t justify that either and gave the least amount of explanation on that part. I think he is just staying away from what most of the country sees as socialism. But Krugman actually IS an economics professor at Princeton, unlike Obama who only plays one in speeches, and he recently won the Noble Prize in Economics, no small feat.
First we need an explanation of what Krugman means by nationalizing the banks, he doesn’t mean for the government to start running banks, they aren’t in the banking biz and shouldn’t be. It means the government steps in and seizes a failing bank and pretty much guts it, getting rid of it’s toxic assets, shareholders and officers. Then they sell it and let new management come in and start fresh. The best part of this is that it throws the assholes out on the street who brought the entire world’s economy to it’s knees. The bailout is giving these very same assholes billions of dollars to do what they want with, like give themselves million dollar bonuses and buying company jets. I think this is the single worst thing Obama is doing, letting the same guys remain in their positions to wreck more havoc. The big disadvantage to nationalizing is that all the shareholders suffer 100% loss, no chance of ever getting it back. With all the IRA’s out there right now that could mean a big hit to a lot of middle class people, not just rich guys.
That kind of hit could be worse than raising taxes in today’s economic climate. That’s probably what Obama is worried about, although I’m sure he’s more worried about looking like a socialist.
Cover via AmazonJonathan Alter, who has been on Countdown and Rachel Maddow Show often as well as on many progressive radio shows, wrote a book called "The Defining Moment: Franklin Roosevelt and the First Hundred Days". It's been said that Obama read the book several times and was very impressed, and he has used the phrase "This Is The Defining Moment" several times.
This is something I've wanted to see, that Obama realized that we are in a situation eerily similar to when FDR entered the presidency in 1932. It's important because FDR gave us 50 years of prosperity and a large middle class for the very first time. It only started falling apart when Reagan came into office and started dismantling all of it, which has led us directly to where we are now.
My favorite economist Paul Krugman wrote a long article on this called "What Obama Must Do" and brought up what FDR did. Image by Getty Images via DaylifeBut he had more detail:
The last president to face a similar mess was Franklin Delano Roosevelt, and you can learn a lot from his example. That doesn't mean, however, that you should do everything FDR did. On the contrary, you have to take care to emulate his successes, but avoid repeating his mistakes.
He then goes on to say that creating universal health care would be his biggest legacy:
Back in 1993, when the Clintons tried and failed to create a universal health care system, Republican strategists like William Kristol (now my colleague at The New York Times) urged their party to oppose any reform on political grounds; they argued that a successful health care program, by conveying the message that government can actually serve the public interest, would fundamentally shift American politics in a progressive direction. They were right — and the same considerations that made conservatives so opposed to health care reform should make you determined to make it happen.
Think for a moment about what Kristol said - they should oppose health care not because it is bad for America but because it is good for America. It would destroy their myth of government always bad and turn us in a proghressive path. He was perfectlyt willing to let people die due to lack of health care in order to advance the Republican political agenda. This is why I call Republicans evil.
Universal health care, then, should be your biggest priority after rescuing the economy. Providing coverage for all Americans can be for your administration what Social Security was for the New Deal. But the New Deal achieved something else: It made America a middle-class society. Under FDR, America went through what labor historians call the Great Compression, a dramatic rise in wages for ordinary workers that greatly reduced income inequality. Before the Great Compression, America was a society of rich and poor; afterward it was a society in which most people, rightly, considered themselves middle class. It may be hard to match that achievement today, but you can, at least, move the country in the right direction.
What caused the Great Compression? That's a complicated story, but one important factor was the rise of organized labor: Union membership tripled between 1935 and 1945. Unions not only negotiated better wages for their own members, they also enhanced the bargaining power of workers throughout the economy. At the time, conservatives warned that wage gains would have disastrous economic effects — that the rise of unions would cripple employment and economic growth. But in fact, the Great Compression was followed by the great postwar boom, which doubled American living standards over the course of a generation.
So we need health care and robust unions, the very things Republicans fight tooth and nail to stop. I very much recommend reading all of Krugman's article. It is long but easy to read and chock full of details. You will understand just how bad off we really are right now and what needs to be done to fix it.
Here is a good article by Paul Krugman on what Obama should do about the economy:
But it would be fair for the new administration to point out how conservative ideology, the belief that greed is always good, helped create this crisis. What F.D.R. said in his second inaugural address — “We have always known that heedless self-interest was bad morals; we know now that it is bad economics” — has never rung truer.
And right now happens to be one of those times when the converse is also true, and good morals are good economics. Helping the neediest in a time of crisis, through expanded health and unemployment benefits, is the morally right thing to do; it’s also a far more effective form of economic stimulus than cutting the capital gains tax. Providing aid to beleaguered state and local governments, so that they can sustain essential public services, is important for those who depend on those services; it’s also a way to avoid job losses and limit the depth of the economy’s slump.
So a serious progressive agenda — call it a new New Deal — isn’t just economically possible, it’s exactly what the economy needs.
The bottom line, then, is that Barack Obama shouldn’t listen to the people trying to scare him into being a do-nothing president. He has the political mandate; he has good economics on his side. You might say that the only thing he has to fear is fear itself.
That last line is a good one. Maybe next time Krugman will win the Nobel Prize for literature to go alongside the one for economics.
But it's a very true statement. Nancy Pelosi said they would govern down the middle. Screw that! Obama was elected for change and that is what people want. We certainly don't want cowardice and timidity, this is the time for bold action along the lines of what FDR did in the 30's.
The polls just before the election showed that McCain's cry of "redistribution of the wealth" actually raised Obama's numbers. People want that. Even those who don't know all the details know the rich have been ripping us off for years and we have a collapsing economy to show for it. Obama does have a mandate, let's hope he uses it.
Paul Krugman is my favorite economist because he is one of the few who doesn't have his head stuck up the rightwing a-hole. And he really is a well known and highly respected economist. Check out his bio at the NY Times from which this is just a small piece:
Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed Page and continues as professor of Economics and International Affairs at Princeton University.
Mr. Krugman received his B.A. from Yale University in 1974 and his Ph.D. from MIT in 1977. He has taught at Yale, MIT and Stanford. At MIT he became the Ford International Professor of Economics.
He's a heavyweight in the field. And he said something today on the Rachel Maddow show that scared me and made me realize what I forgot to mention yesterday in my post on the economy; namely, that we could be heading for another Great Depression just as bad, if not worse as in 1932. This is something I've worried about for years because anyone who knows even a little bit about the economy and what the idiot Republicans were doing to it were worried. Another Great Depression is, of course, the worst of all possible outcomes so I always thought it wasn't too likely (I hoped). But Krugman said today that if the Fed hadn't bailed out AIG we might have been only days away for a GD. Days. This from his blog 2 days ago:
And there’s a lesson there for those ready to hear it: government takeovers may be the only way to get the financial system working again.
Some people have been making that argument for some time. Most recently, Paul Volcker, the former Fed chairman, and two other veterans of past financial crises published an op-ed in The Wall Street Journal declaring that the only way to avoid “the mother of all credit contractions” is to create a new government agency to “buy up the troubled paper” — that is, to have taxpayers take over the bad assets created by the bursting of the housing and credit bubbles. Coming from Mr. Volcker, that proposal has serious credibility.
If everyone loses faith in the ability of banks to borrow money then the whole system comes crashing down because all credit will end which will bring most business to a halt and put all of us out of work. In 1932 they had an unemployment rate of 24%, we could see that again.
So what do we have going on here? We can now proudly proclaim ourselves a socialist country in the style of Europe. That's what Republicanism has done for us. But we aren't out of the woods yet. Krugman says he wants to know the details of what the the Fed, SEC and Congress are cooking up to see if it will do what it needs to do, and hopefully without the CEO's and stockholders of failed companies walking away with millions.
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