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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: JohnM who wrote (119360)	8/24/2009 5:18:59 PM
From: JohnM	Respond to of 543151

No credit. Good deeds go unrewarded. My bold. ------------------------------- August 24, 2009 PREVENTING A CRISIS VS. FIXING A CRISIS.... In most of his recent public speeches and town-hall events, President Obama talks a great deal about health care, but not before setting the stage a bit with some talk about the economy. "This is obviously a tough time for families all across America," the president tends to say. "Six months ago, we were in the middle of the worst recession of our lifetimes. I want you to remember what things were like in January and February. We were losing about 700,000 jobs per month. And economists of all stripes feared a second-coming of the Great Depression. That was only six months ago. That's why we acted as fast as we could to pass a Recovery Act that would stop the freefall...." Now, from there, Obama talks up his strategy that prevented an economic catastrophe, before transitioning to the importance of laying a new foundation for future growth -- starting with health care reform. But the implicit message of these introductory remarks always strikes me the same way: the president wants us to know he saved the United States from catastrophic economic consequences, and he'd probably like a little credit for it. E.J. Dionne Jr. noted today that it's not an easy pitch to make. The hardest slogan to sell in politics is: "Things could have been a whole lot worse." No wonder President Obama is having trouble defending his stimulus plan. If governments around the world, including our own, had not acted aggressively -- and had not spent piles of money -- a very bad economic situation would have become cataclysmic. But because the cataclysm was avoided, this is an invisible achievement. Many whose bacon was saved, particularly in the banking and corporate sectors, do not want to admit how important the actions of government were. Antigovernment ideologues try to pretend that no serious intervention was required. So everyone goes back to complaining about high deficits and the shortcomings of government as if nothing had happened. But something did -- we were on the cliff, partially hanging over. The possibility of a full-blown depression was very real. Australian Prime Minister Kevin Rudd told Dionne, "This is a case study in bringing the world back from the brink, and it was American leadership from President Obama that was the key to that." Ezra Klein added, "[T]he Obama administration made the mistake of effectively managing the financial emergency when they entered office. They faced a serious threat, but they never let it become a serious crisis. As such, the normal laws of political gravity never lifted, and everything went on pretty much as normal.... That's to the Obama administration's credit. Serious crises are bad things. It's one of the system's more perverse incentives that you don't get political capital from preventing them so much as pulling the country out of them." I haven't spoken to anyone at the White House directly about this, but I imagine there are probably a few folks in the West Wing who, in their weaker moments, might admit, "Our guy just prevent Great Depression II! His approval ratings should be huge. The Republicans who voted against the stimulus -- and recommended a five-year spending freeze instead -- ought to be laughed at when appearing in public. After steering the ship away from the abyss, health care reform should be easy." Alas, it doesn't exactly work that way. The default of the American political system is institutional resistance to change. Cataclysmic disasters open the door wide to systemic change; averted cataclysmic disasters apparently don't. —Steve Benen 4:45 PM washingtonmonthly.com

To: JohnM who wrote (119360)	8/24/2009 5:21:58 PM
From: Dale Baker	Respond to of 543151

I just chuckle when I see people compare this year to 1930; between the bank rescues and the stimulus plan, the parallel is very weak now. But 1937 could still happen if we yank the chain too soon.

To: JohnM who wrote (119360)	8/24/2009 5:40:43 PM
From: Steve Lokness	Read Replies (1) \| Respond to of 543151

John; Ah those graphs. The chart shows GNP "changes" from a year earlier - so a near zero means the GNP is almost the same for the year previous. Not realy so bad, especially given the big increases of the previous couple of years. The big down year of 37 wasn't but just a tick down and so a chart showing just GNP numbers would be not so dramatic. Here is a better chart; housingbubblebust.com

To: JohnM who wrote (119360)	8/24/2009 5:56:11 PM
From: Sam	Respond to of 543151

Ms. Romer is "sending the absolutely wrong message -- that we can't do anything to worry about inflation until the recovery is locked in because of concern for unemployment," says Allan H. Meltzer, a political economist at Carnegie Mellon University. "The reason economists and central bankers have two eyes is so they can do two things at once." Actually, Meltzer has it wrong--we have two eyes so that we can have depth perception on the one hand, and on the other hand (we are talking economists here) we can see many things at once, not just fixate the on one thing in the immediate field of vision--in Meltzer's case, inflation. Not that inflation is a good thing, but under the circumstances, unemployment and deflation are worse things, IMHO. We are still far from out of the woods economically. And, at the end of the day, whether the Chinese and our other creditors like it or not, one of the ways that we will manage the debt we are piling up will be inflating part of it away. There simply is no choice about that, IMHO. It is preferable to having the economy grind to a halt and a subsequent default. Even the Chinese leaders, if they examine the real possibilities, would agree with that. They profited mightily from our profligacy in the first 7 years of the decade; they will have to give back some of those profits in the form holding dollars that get inflated to some extent.