Sign of the apocalypse

Matthew Hoy
By Matthew Hoy on July 12, 2009

Paul Krugman and I agree: President Obama makes little sense.

Some explanation:

President Obama took to the Washington Post editorial page today to defend his economic plans. (Obama's article is aptly rebutted by Keith Hennessey here. I encourage you to read it.)

However, the point I want to highlight is this one by President Obama:

The American Recovery and Reinvestment Act was not expected to restore the economy to full health on its own but to provide the boost necessary to stop the free fall. So far, it has done that. It was, from the start, a two-year program, and it will steadily save and create jobs as it ramps up over this summer and fall. We must let it work the way it's supposed to, with the understanding that in any recession, unemployment tends to recover more slowly than other measures of economic activity.

Ignore the re-writing of history if you can. The stimulus was not sold as a two-year plan designed merely to stop the free fall. It was sold as a jobs bill now, as evidenced by the famous chart showing how the stimulus would prevent the unemployment rate climbing to 9 percent. For your information, here's the latest chart by Geoff at Innocent Bystanders.

What's important in that paragraph is Obama's implicit rejection of a second stimulus plan -- which puts me (however briefly) on Obama's side and not on Paul Krugman's.

The point is that it's very hard to imagine what would lead you to say that $800 billion in stimulus, which leaves the economy deeply depressed, is just right. You could make a case that no stimulus at all - in fact, fiscal retrenchment - is appropriate. Or you could, like me, call for substantially more. But ratifying what we've done, and no more, makes very little sense...

The odd thing about this is that Krugman did something that he doesn't usually do -- he got ahead of where the Democratic political class was on a subject. During nearly all of the Bush administration, Krugman was a predictable attack dog that was regularly sicced on the GOP. When it came to actually advocating a position, Krugman would almost always wait until the Democrats on Capitol Hill had come up with a strategy and then defend whatever it was. It was years before Paul Krugman wrote a "crossover" column -- one mainly attacking Democrats -- according to the authoritative "Lying in Ponds."

It will be interesting to see if Krugman continues forward and criticizes Obama for not wanting a second stimulus plan or instead does an about face and falls back in line like the good soldier he is.


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July 2009



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