Geithner calls stimulus "sugar."
Zach Goldfarb via Brad deLong:
Once, as Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was “sugar,” and its effect was fleeting
In other words, the thing to do was to clear up the budget deficit and let the lower interest rates grow us into growth, as in the 1990s. Except, interest-rate-based monetary policy had already been exhausted by the time Obama took office, which is the only reason a fiscal stimulus was being discussed by the Very Serious People.
Furthermore, as Felix Salmon points out:
In this debate, Romer is right and Geithner is wrong. For one thing, economic growth isn’t necessarily the only or even the best way to create jobs.... And even if you agree that economic growth is a great way to create jobs, it’s not at all obvious that deficit reduction is a better way to jumpstart growth than stimulus....
Nobody could have predicted that promoting one of the architects of TARP would have been a not-so-great idea (after all, isn't his reputation largely based on that having "solved" the problem??)
I tend to agree with Dibgy:
I'm sure people will say that he had no choice because the presidency is a very weak office that the only power it has (except to wage war unilaterally) is to gently gently beg the congress for permission to adopt its agenda. This, however, is not true. Others will say that there was no point in pursuing further stimulus because the congress wouldn't pass it. But if this account is true, the "pivot" to deficit reduction wasn't a political surrender -- it was a policy choice going back to 2009.
If it's their choice, then they are--bluntly--wrong as Salmon says.
Here are the facts as I see them at this point:
(1) Certain unemployment statistics are worse than during the Great Depression.
(2) The federal government has decided to prioritize deficits over unemployment.
(3) The states are, mostly, completely broke and contracting the economy.
(4) The Republicans want even more austerity than the Democrats.
Here are my opinions on this:
(A) The Obama administration are not only making a policy error here, but a political one that is making what should be a cakewalk of a reelection something scary.
(B) The people who warned you that Obama was not a liberal were right.
(C) That Obama is still capable of handling this in time.
The way towards victory in 2012 is to get jobs coming back and to give relief to the middle class, not to talk about the budget being balanced in 2020 or the GDP (or even the stock market) going up if there's still such high unemployment.
Obama, despite this, is still a very good President. I also think that he is pragmatic enough to see the problems with what has been sold to him. Fingers crossed