The story of the stimulus: Christy Romer’s math looked similar to mine: even given what we knew last December, the straight economics said that we should have a stimulus much bigger than the Obama administration’s initial proposal. And given what happened to that proposal in the Senate — we actually ended up with only about $600 billion of actual stimulus — what we eventually got was half of what seemed appropriate in December. And the actual news on the economy since then has been worse than was expected back then, so that the stimulus now looks way short of what we need.
Maybe that was all that could have been done, politically. But it does not sound, from the Lizza article, as if either the economic team or the political team thought much about the risks of finding themselves where we are now — with the economy still failing to deliver job growth despite the stimulus — even though those risks were completely apparent at the time.
One missing part of the story is why Senators Nelson and Collins and Snowe and Voinovich and Lincoln and company could not have been educated then--and why they cannot be educated now to vote for good policies.
A second missing part of the story is why the TARP money has not had a greater effect on production and employment. It has had a substantial effect on interest rate spreads, bank balance sheets, and even asset prices--but the recovery of private-sector investment spending which is the desired payoff has not come.
UPDATE: Matthew Yglesias asks an important, related question:
Matthew Yglesias: Accepting the Loss: The more we learn about how we wound up with a too-small stimulus, the more I wonder about the slightly odd aversion of American presidents to accepting legislative defeats. After all, in our system of government it’s just a fact: you can only enact the legislation that congress is prepared to enact. Given that we don’t expect presidents to have views that are identical to those of the median legislator, and especially given the rise of the de facto supermajority rule in the Senate, it should be expected that the policy preferences of the White House will substantially diverge from those of the pivotal members of congress.
So would it be so terrible for the President to just say, “I’m glad congress passed this bill and I’m signing it because I think it would help the economy, but the considered judgment of the Council on Economic Advisers and the rest of the staff is that we could use hundreds of billions of dollars of stimulus over and above what Ben Nelson and Susan Collins were prepared to vote for”?
Why is it felt necessary for the president to pretend to believe that what congress will pass is the same as what the country needs? It seems to me to create a weird confusion about who’s responsible for what. We’ve got Paul Krugman blogging about “Obama’s Anzio” instead of “Kent Conrad’s Anzio” or whatever. It’s just not the case that the White House gets to make domestic policy unilaterally.
There appear to be two reasons:
The White House fears that Kent Conrad will be mad if it says "the bill is not ideal because of Senator Conrad" and will be less likely to play ball in the future. The White House believes that it has to say that "Senator Conrad's amendments improved the bill" and pretend that they did so.
The White House fears that the press will jump on a president whom it decides "cannot dominate congress" and paint him as weak--and that that will make him even weaker than he already is.
Why these two reasons apply I leave to our national psychoanalysts...