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View Diary: Obama on the Economy: 'We Didn't Know How Bad It Was' (300 comments)

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  •  Summers makes a (39+ / 0-)

    convenient demon, but as this post, demonstrates, the call for a larger stimulus package was wide and widely known -- msm journalists were asking him why he wasn't going for a package as bit as economists were recommending --and President Obama went for smaller because of a concern about deficits and perceptions about what he could get through Congress. He was afraid of starting out with a defeat--but his "victory" turned out to be a defeat that largely shaped his presidency.

    But if you go back and look, it's clear Obama was well aware many economists wanted a much larger stimulus bill. Here's a story from January 5, 2009:

        President-elect Barack Obama said economists are suggesting a U.S. stimulus may have to be as large as $1.3 trillion, Senate Majority Leader Harry Reid said. Obama “has indicated that there’s at least 20 economists that he’s talked with, and all but one of those believe it should be from $800 billion to $1.2 trillion or $1.3 trillion,” Reid said after meeting with Obama on Capitol Hill.

    Then two days later on January 7, Obama held a press conference:

        TAPPER: Your team has talked about the stimulus package being $675 to $775 billion. But at the same time...you're going to distribute a memo in which economists say it should be between $800 billion and $1.3 trillion. How do you reconcile that difference...?

        OBAMA: Well, we are still in consultation with members of Congress about the final size of the package. We expect that it will be on the high end of our estimates, but [it] will not be as high as some economists have recommended because of the constraints and concerns we have about the existing deficit.

    The same day Obama was interviewed on CNBC:

        MR. HARWOOD: Tomorrow you're going to give a speech and talk about your economic stimulus package...It looks like it's going to be at the high end of your range, around $775 billion. If it's correct that, as your aides have said, the danger is doing too little rather than too much...why stop at $775 billion? Why not go to the 1.2 trillion (dollars) that some economists have recommended?

        PRESIDENT-ELECT OBAMA: ...We've seen ranges from 800 to 1.3 trillion, and our attitude was that, given the legislative process, if we start towards the low end of that, we'll see how it develops....

        MR. HARWOOD: So it's going to get bigger.

        PRESIDENT-ELECT OBAMA: Well, we don't know yet.

    •  As the New Yorker makes clear (5+ / 0-)

      at the time Summers prevailed in the debate.  Obama is NOT an economist.  He can be blamed for many things, but he was following the advice of his chief economist.  

      You can't discuss Obama's decision without discussing Summers role.  

      It is worth noting that Stiglitz wasn't for that much bigger of a stimulus either.

      There are two huge unknowns in this debate:
      1.  To what extent was the economic recovery derailed by Europe?  Certainly it had an enourmous effect in the summer of 2010, and also in the summer of 2011.  Holding Obama accountable for that seems unfair - but I really can't quantify the effect.
      2.  Had Obama been more aggresive in resolving the mortgage mess, would the stimulus have been enough?  There has never been an economic recovery, until this one that was not lead by housing and construction.  The continued problems in the housing market are a direct result of White House passivity to some degree (though in part it is inevitable in any financial meltdown).  The failure to force a resoution of the absolutely amazing misfeasance in mortgage documentation is far less forgivable than missing the size of a stimulus package because the numbers behind it were wrong.

      I wrote in 2009 that I worried that Obama's failure to clean house on Wall Street would be his Katrina - the mistake that he could never undue.  He is running better than I though he would given unemployment, and we don't seem headed for a double dip that would destroy him.

      But I still don't think he will get re-elected.  And that failure to put distance between himself and Wall Street will be one reason.

      The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

      by fladem on Wed Dec 14, 2011 at 01:22:55 PM PST

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      •  I don't know-- (24+ / 0-)

        If I took over the White House just a few short months after the larges financial collapse since the Great Depression, I'd become an economist - quickly.

        And what I am really saying here is that such a momentous and important event like this one that requires government response should not have been managed by advisers to the degree that it apparently was.

        I will add that even if a President doesn't become an economist, the politician should have understood that a bad economy makes for poor political prospects; and had I been in his shoes all I would have done was focus on how not to just save a portion of jobs, but also ways to create as many damn jobs as I could possibly think of with or without Congressional assistance.  I would have pulled out all of the stops in the first 100-200 days.

        Finally, FWIW, the $780 Billion was not really all allocated as much of it was in tax credits and other such deals that people were unable to capitalize on.  I would have made sure that it was an all cash deal and that the money got out immediately - not delayed as it was.

        •  That's why neither of us would be able to get (9+ / 0-)

          anywhere near the legislative process.

          What you propose is an attempt at an authentic solution. What we got was a bank bailout because our government's corporate and financial sponsors called in their markers.

          These bank and corporate markers will continue prevail until the present system has some systemic changes. What those might be is to be determined.

          If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. ~ George Washington

          by 4Freedom on Wed Dec 14, 2011 at 03:45:39 PM PST

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        •  I completely opposed the stimulus (3+ / 0-)
          Recommended by:
          marty marty, soros, inclusiveheart

          Just as I continue to oppose our horrific level of deficit spending, but I generally agree with your comment that the President should "become an economist" and is completely accountable for what happens.

          "He relied on his chief economist" means "he hired the wrong chief economist" which equates to "he failed".

          By the way, the disaster that Obama is presently leading us into with 100% GDP debt with 10% deficits will not be apparent for some time, but when it finally comes crashing down the wreckage will be massive. People on any kind of leverage (commodities, stocks, etc) will all be crushed.

          (-5.50,-6.67): Left Libertarian
          Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

          by Sparhawk on Wed Dec 14, 2011 at 09:05:17 PM PST

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        •  According to the book (3+ / 0-)
          Recommended by:
          marty marty, ybruti, skyounkin

          Confidence Men Obama actually understood the coming crisis pretty early.

          Answering the question how bad things would get is fundamentally an exercise in econometrics.  I have no expectation that the president is going to know the ins and outs of what goes into those models.

          The irony, of course, is he had someone who knew the stimulus package was too small, but she didn't get heard.

          The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

          by fladem on Thu Dec 15, 2011 at 04:54:56 AM PST

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      •  Obama hired Summers, (22+ / 0-)

        and I gotta say, I cried the day he did.

        The two things Teabaggers hate most are: being called racists; and black people.

        "It takes balls to execute an innocent man." -- anonymous GOP focus group member on Rick Perry

        by Punditus Maximus on Wed Dec 14, 2011 at 03:26:58 PM PST

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      •  I remember that article (1+ / 0-)
        Recommended by:
        mightymouse

        and i think the final negotiations over the size came down to Rahm, Ben Nelson, and Arlen Specter, with Specter wanting something bigger than Nelson, despite being an R at the time.  Note as well Specter also knew of these different economists' projections, but what i think Obama meant was overselling how fast unemployment would fall.  I think everyone recognized in the short term at least, a bigger stimulus means bigger unemployment, but i dont know that krugman said the projections romer and summers had were off in their internal numbers.

        "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

        by Loge on Wed Dec 14, 2011 at 08:44:46 PM PST

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    •  Of course (12+ / 0-)

      Even as this whole thing was unfolding and things weren't going well in terms of the unemployment rate as just one obvious indicator that the stimulus wasn't enough, President Obama - even before ACA was passed - put together Simpson-Bowles and went off for 18 months on the deficit quest to nowhere ride. This was despite the fact the the deficit was not even in the top 3 concerns amongst the people according to Gallup coming in at 5% or less while Jobs and the economy were getting 30%+ each. Even at the time of the 2010 elections no other issue but those two were above double digits and both were over 30%.

      If it wasn't for the fact that Republicans are crazy and they only have unelectable candidates to field he would be facing the largest electoral defeat of a sitting president since Taft.

      Rest assured, since I have seen in the last day or so that both Simpson and Bowles have been out talking again, if the President goes off on a deficit hunt or tries to revive his "Grand Bargain" he may just end up losing come November.

      •  The deficit is a probelm, (1+ / 0-)
        Recommended by:
        fladem

        and the drivers of it-- tax cuts and spiraling health costs, can and should be liberal priorities.  What Obama has been trying to find ways to do is decouple tax cuts for the rich from those for everyone, see recent news about upcoming recesses, millionaires surtaxes, etc.  There were commissioners other than bowles and simpson, and some very good ideas to come out of it, schakowsky's proposal for example.  Politicslly, anything that shows the gop wants to cut entitlements but refuses to raise taxes for the rich is a winner.  You would pass up this opportunity, but what instead on the deficit.  Simply ignore it? Much of it is cyclical, but far from all.

        "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

        by Loge on Wed Dec 14, 2011 at 08:50:26 PM PST

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        •  Too bad Obama made it worse, extended tax cuts (5+ / 0-)

          ...the least effective form of stimulus (and a major part of his original stimulus unfortunately.)  

          That bit of idiocy was the last straw for me, and why he will never get another vote from me.  He is not even the faintest shadow of the candidate I voted for.  Instead he has positioned himself to the Right of Reagan.  

          Worse than that, he did nothing to control health care costs!  There is no system wide cost control.  It's a fucking joke that did exaclty what the insurance and health care industry wanted.  

          "Money is like manure. You have to spread it around or it smells." J. Paul Getty

          by Celtic Pugilist on Wed Dec 14, 2011 at 11:45:52 PM PST

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          •  Thats a vote for the gop (0+ / 0-)

            and by extending in the lame duck, it kept the terms out of the current house, and there were pro stimulative provisions to go along with the deal.  They also expire next year because Obama made the deal when he did.  Had congress voted on them before the election, different story perhaps, but you already saw what happens with taxes when republicans win one election.  This very week, Obama is pushing tax increases on millionaires.  

            The medical loss ratio regs are cost ontrol, but there is no price control.  60 years, no dems pass comprehensive health care, and here its either forgotten or misrepresented.

            "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

            by Loge on Thu Dec 15, 2011 at 06:31:57 AM PST

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      •  Even Krugman (1+ / 0-)
        Recommended by:
        MindRayge

        would agree with the following:
        1.  Short term stimulus
        2.  Long term deficit reduction

        The commision was Obama's attempt at fixing the second part of the problem, and it is worth noting the Commision didn't propose deficit reduction until the economy recovered.

        Which is not to say that the Commision's recomendations weren't completely wrong headed.  The Commision reduced the deficit by 4 Trillion over 10 years.

        Repealing the Bush tax cuts does the same thing.

        The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

        by fladem on Thu Dec 15, 2011 at 06:43:40 AM PST

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    •  How would a legislative defeat on stimulus (0+ / 0-)

      have improved things?  This is exactly what people mean by "purity". I suppose the whole ACA should have been voted down, too.

        Obama was a member of the senate when tarp got voted on, he knew the capacity and tolerance of the 55th to 61st most conservwtive member to vote for a whole lot of deficit spending.  

      "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

      by Loge on Wed Dec 14, 2011 at 08:41:04 PM PST

      [ Parent ]

    •  What happened to the Buck Stops Here? The (3+ / 0-)
      Recommended by:
      miningcityguy, ggwoman55, cslewis

      President is guilty of having a faulty inner circle of advisers .  He picked them.  The Buck Stops with the President.  Look at Obama's cabinet - mostly GOP.  And people still think Obama is a progressive.  What a laugh!

      •  Obama's cabinet is mostly (0+ / 0-)

        Republicans?

        That is not true.

        The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

        by fladem on Thu Dec 15, 2011 at 06:49:41 AM PST

        [ Parent ]

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