No Fighting in the Money Room
Obama’s economic team failed—and still produced the best possible result.
The other was a strain of political advice verging on malpractice.
Aides assumed, incorrectly, that while wending its way through Congress the original stimulus would grow, not shrink. Underestimating the potency of anti-stimulus arguments, they drastically overestimated the ease with which they could come back for more should the economy prove to need an additional boost. Most of all, they insisted on taking the public’s professed concern with the deficit literally rather than as a symptom of discontent with the overall economy. Scheiber describes David Plouffe’s bizarre belief that, though proposing cuts in widely popular programs like Social Security and Medicare might “enrage” the Democratic base, “the political upside with the rest of the country would more than make up for it.” In fact, moderate voters like those programs every bit as much as Democrats, and as negotiations dragged on in Washington, the labor market limped forward and Obama’s approval ratings kept sinking. By October of last year, when the administration returned to job creation, Plouffe had changed his tune, telling his colleagues that “the president’s approval rating on the economy is tied to the economy itself”—but this was weirdly late in the game for such a banal point.
The greatest question about Obama’s economic policies, however, isn’t why the administration made the choices it did. It’s why some ideas don’t seem to have been considered at all. The flubs of Obama’s economic advisers seem to have as much to do with their failure of imagination as with any disagreements that raged between them.
Why was there no effort to tie either the first stimulus or the later payroll tax to objective economic circumstances? Did anyone mention to the president the wacky—but apparently true—fact that he could have ducked the entire debt ceiling debate by ordering the Treasury to start minting $1 trillion platinum coins? How did an administration that knew perfectly well it was facing a housing-finance crisis not manage to get a regulator for Fannie Mae and Freddie Mac confirmed?
Most of all, given the crucial role of central bank policy in combatting recessions—especially in the face of congressional intransigence—why was so little consideration given to replacing Ben Bernanke, and why have vacant seats on the Federal Reserve Board lingered for so long? These issues apparently didn’t even result in meetings memorable enough to blab about to an enterprising reporter like Scheiber. Now they look like some of the administration’s biggest missed opportunities.
Here, though, may be where the deficit-mania did its greatest damage. The White House is a busy place, and each hour people spent pondering doomed debt-reduction strategies was an hour not dedicated to thinking creatively about the immediate economic crisis. If the past few months of decent jobs growth keep up, Obama will likely be re-elected, his team will claim vindication, and Scheiber’s book will seem moot. But it’s not; it provides a template for future administrations—even a future Obama administration—to avoid the trap of thinking too narrowly and too politically in a crisis.
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