The stimulus wasn't big enough. It wasn't big enough because Republicans (what else is new) wouldn't accept a large stimulus. They didn't want a stimulus at all, saying it would lead to "disaster" -- "to skyrocketing interest rates and soaring inflation."
Wrong! Or should we say "wrong again"? The right can't seem to get it right and the results are paid for by the rest of us.
Paul Krugman and many economists like him -- from Republican centrists to Democrats in the center and left -- got it right. Interest rates and inflation have remain low -- in fact very low. A much bigger stimulus was needed, these economists said, and they predicted the effects of the stimulus would wear off in early 2010. It did. We need more and we need a bigger commitment. As they predicted.
So why is anyone listening to Republican scare stories now?
Beats me.
The actual lessons of 2009-2010, then, are that scare stories about stimulus are wrong, and that stimulus works when it is applied. But it wasn’t applied on a sufficient scale. And we need another round.
I know that getting that round is unlikely: Republicans and conservative Democrats won’t stand for it. And if, as expected, the G.O.P. wins big in November, this will be widely regarded as a vindication of the anti-stimulus position. Mr. Obama, we’ll be told, moved too far to the left, and his Keynesian economic doctrine was proved wrong.
But politics determines who has the power, not who has the truth. The economic theory behind the Obama stimulus has passed the test of recent events with flying colors; unfortunately, Mr. Obama, for whatever reason — yes, I’m aware that there were political constraints — initially offered a plan that was much too cautious given the scale of the economy’s problems.
So, as I said, here’s hoping that Mr. Obama goes big next week. If he does, he’ll have the facts on his side.
Will Obama go big next week? Does he ever? Is he handing power to the Republicans? I don't like the answers political "common sense" is giving to those questions. Most of us wearily believe the president will look for compromise and the unemployed will continue to pay for his tepid response for a long time. The president's party will get the boot in November.
David Brooks, over on the other side of the New York Times op-ed page, fantasizes a different Obama, a successful Obama.
Obama and his aides wanted to pick fights with Republicans, but on their own terms. Above all, they wanted to avoid the big government versus small government debate of the past few decades. This was the one argument Republicans knew how to fight and the one argument Democrats were bound to lose. Instead, they sought to frame the argument around growth and productivity — Democratic growth plans versus Republican growth plans.
At about that time, General Motors and Chrysler started teetering. Obama decided to help the companies if they were willing to make the tough choices that would boost long-term competitiveness. It occurred to him that this was the template for the whole country.
For decades, Obama told the nation, America had squandered its advantages and now the crisis had come. There would be no quick fixes. But in this winter of recession, America could rebuild its foundations. It could lay the groundwork for real and lasting prosperity.
Obama put signs around the White House: “No Quick Fixes.” Administration officials were forbidden from promising a short-term summer of recovery. They talked incessantly about long-term productivity. Democrats were going to define themselves as the economic Back to Basics Party. They wouldn’t let Republicans define them as somehow “alien” or “socialist.”
Obama not only bailed out Detroit, he created an infrastructure bank to rebuild roads and bridges for the long term.
In March, Congress passed an omnibus spending bill, stuffed with earmarks. Obama vetoed it. By this time it was clear that Republicans were going into rejectionist mode. They were opposing everything. To maintain their majority, Democrats would have to separate independents from the Republicans. They had to reassure independents that spending was being controlled.
Then the president and his advisors made a decision: they would postpone health care and go for energy.
By doing energy first, Democrats were able to spend the entire summer talking about technological advances, private sector growth and breakthrough productivity gains.
Obama toured one small business after another, and got his energy bill. In the fall, he gave a series of major speeches under the heading: “Our Children’s Economy.” He laid out a strategy for a century of growth.
Americans didn’t like all of it. But this wasn’t conventional big government liberalism. The Democrats seemed to be a serious party attending to serious things. When November 2010 rolled around, the unemployment rate was still high, but Democratic leaders had prepared voters for that. In the meantime, America was rebuilding its core, strengthening itself for better days ahead.
Dream on.
