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July 07, 2010

Dick Morris: Make Obama Own the Double-Dip

In a good column about the economy, he expresses an interesting political take:

The increasing consensus that we are entering a "double dip" recession is seeping into the conventional wisdom, posing a further obstacle to Obama's attempts to keep control of Congress. Even when the conventional wisdom was that the economy was slowly emerging from recession, the president was having his problems keeping Congress. But now that all indicators - from employment to housing to consumer confidence to the Dow - are trending downward, the task is likely to become even harder. The days are fading when Bush could be blamed for the economic problems we are facing as a nation. The passage of time and, interestingly, the very perception that things had been getting better earlier in the year both make this second dip the Obama dip rather than just a continuation of the "Bush recession."

The facts are that we have likely never emerged from the recession at all. The Economic Conference Board has never declared the recession over since so much (or even all) of the anemic but still somewhat positive growth recorded in the past three quarters stems directly from public sector cash transfer payments. These transfusions may mask the symptoms of recession, but they are no indication of emerging prosperity.

As we predicted in Catastrophe and in our latest book: 2010: Take Back America - A Battle Plan, we are now coping with the damage, not of the original recession that started in 2007, but with the cures administered by Obama when he took office in 2009. It is his big spending, big borrowing, and his looming tax increases in 2011 are driving the economy down.

History will probably record the Obama Administration of 2009-2013 (hopefully his only time in office) as one long recession/depression just as we see the Hoover Administration of 1929-1933. We make no allowances for the "false dawn" of rising markets which engendered a great deal of hope in 1930-1931 before these expectations were crushed by the Hoover tax increases of late 1931 and the Federal Reserve Board's increase of interest rates that same year. In retrospect, we will see the slight uptick of the early months of 2010 as our own "false dawn" interrupting but not punctuating our four year recession.

He's right about history not making any distinction between the recessions, but he's also right about the usefulness of pinning the likely-coming second dip on Obama himself.

After all, it was he who allowed Nancy Pelosi to do his job and craft the stimulus package. And only $600 billion of that trillion was actual stimulus; the rest was pork and payoffs to Democrats that did nothing to help the economy.

Says me? No, says liberal Democrat economist Brad DeLong:

The good news is we have avoided another Great Depression. But it seems ill-advised for Barack Obama to stand up on a Friday morning in early July and say that the economy is "headed in the right direction" (even if, as he said, "we are not headed there fast enough") and to highlight "the sixth straight month of job growth in the private sector." The employment-to-population ratio has been flat since November. Over the past six months--since the downturn ended--the U.S. economy has not been recovering from its near-depression, and not been putting a greater and greater portion of its potential labor force to work. Rather, it has been bumping along the bottom. There is a big difference between the economy getting "better" and the economy "no longer getting worse rapidly."


Go back to December 16, 2008, when Ryan Lizza reported in The New Yorker on the Obama Administration’s thinking. Council of Economic Advisors Chair-Designate Christina Romer believed the following: that the appropriate total value for the American Recovery and Reinvestment Act fiscal stimulus was something more than $1.2 trillion, but that to ask for a stimulus that large would risk gridlock in the Senate. (The result was an ARRA of about $600 billion of real stimulus tax cuts and spending increases alongside ineffective ornaments dear to the hearts of legislators.)

And getting that $1.2 trillion would have been easy, by the way. DeLong himself is pushing for more stimulus, and he is quite catholic in his tastes in stimulus -- he urges either greater spending or tax cuts or both.

Tax cuts are Keynesian tools, too, of course.

So how could Obama have gotten the $1.2 trillion in stimulus he thought he needed?

Easy. Give the Democrats the $600 billion in stimulative spending, skip the "ornamental" pork, and give Republicans $600 billion in tax cuts. (My preference: A holiday in the payroll taxes for businesses to encourage hiring and employee retention.)

Not only would he have had his Shock and Awe stimulus, he would have gotten it with more than half of the GOP caucus voting for it, and thus would now have the useful political cover of bipartisan action (not the mention the unifying aspect of same -- if you coopt your opponents into joining you, they have skin in the game as far as scoring a victory, too.)

But he didn't. Because he decided he didn't need Republican votes, and would rather have a delectable partisan victory.

And so we spent a huge amount -- $1 trillion plus with interest -- to no discernible effect and in fact really can't shoot another stimulus bullet, even if our lives depended on it. (And, you know, they might.)

And this Bush's fault?

No, this is the Miserable Failure's fault.

digg this
posted by Ace at 04:07 PM

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