This isn’t a recovery, in any sense that matters. And policy makers should be doing everything they can to change that fact. ...Paul Krugman
The only bright spot is the growing GDP*. That's a constant. But the growth is slow. It looks like perceptions of a paralyzed economy will insure a big GOP win in November, a very dumb reaction which will insure that we are, indeed, "paralyzed" for years to come.
Why are people who know better sugar-coating economic reality? The answer, I’m sorry to say, is that it’s all about evading responsibility.
In the case of the Fed, admitting that the economy isn’t recovering would put the institution under pressure to do more. And so far, at least, the Fed seems more afraid of the possible loss of face if it tries to help the economy and fails than it is of the costs to the American people if it does nothing, and settles for a recovery that isn’t.
In the case of the Obama administration, officials seem loath to admit that the original stimulus was too small. True, it was enough to limit the depth of the slump — a recent analysis by the Congressional Budget Office says unemployment would probably be well into double digits now without the stimulus — but it wasn’t big enough to bring unemployment down significantly.
Now, it’s arguable that even in early 2009, when President Obama was at the peak of his popularity, he couldn’t have gotten a bigger plan through the Senate. And he certainly couldn’t pass a supplemental stimulus now. So officials could, with considerable justification, place the onus for the non-recovery on Republican obstructionism. But they’ve chosen, instead, to draw smiley faces on a grim picture, convincing nobody. And the likely result in November — big gains for the obstructionists — will paralyze policy for years to come.
The administration still has some moves to make but they'd be blocked by Republicans right down the line. Krugman lays out a series of actions, starting with admitting that we're not and have not been in a "recovery."
What's left? There are some moves the Fed could make to help us towards a real recovery. Listen to Bernanke's Colorado speech today and see if he talks about any of them:
The Fed has a number of options. It can buy more long-term and private debt; it can push down long-term interest rates by announcing its intention to keep short-term rates low; it can raise its medium-term target for inflation, making it less attractive for businesses to simply sit on their cash.
Otherwise? We can look forward to stagnation and high unemployment along with Republican malfeasance that goes on and on and...
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The Post reports this morning that "senior Democrats" are moving towards retaining all of Bush's tax cuts, at least for the time being.
A growing cadre of Democrats - alarmed by evidence that the recovery is losing steam and fearful of wounding conservative Democrats in a tough election year - are advocating a plan that would permanently extend tax cuts benefiting the middle class while renewing breaks for the wealthy through 2011, senior Democratic aides said.
That idea has long appealed to some conservative Democrats in both chambers, who argue that Congress should not raise anyone's taxes until the economy is more stable. But Democrats said it has gained momentum since economist Mark Zandi, a key adviser to House Speaker Nancy Pelosi (D-Calif.), adopted that view during a presentation at a Democratic issues conference in California in mid-August.
The more of this we see, the easier it is to conclude that both parties are in complete disarray. The Republicans are split, floundering, shouting, paranoid, and hitting out. The Democrats are flummoxed and in a kind of paralysis but at least they're focused. There is little if any leadership coming from Congress. The White House has plan for now...
Obama administration officials and the Democratic leaders of the House and Senate, meanwhile, say they are determined to stay the course and still hoping to spend September and October on a debate that forces Republicans to defend expensive tax breaks for a tiny, wealthy minority.
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*And the GDP 2nd quarter numbers aren't encouraging. According to a WaPo report just posted, the estimate has dropped from 2.4 to 1.6.
