James Kwak Is Now Grand Heresiarch of the Ancient, Hermetic, and Occult Order of the Shrill!!
Slides for December 2009 Macro-Finance Talks...

Oh Dear...

What House Majority Leader Steny Hoyer should be saying:

Because of the uniquely high unemployment rate, the benefits to government spending are much greater than usual--not only does it deliver needed services and build necessary infrastructure, but it puts people who otherwise would be jobless and broke to work. Because of the uniquely good terms on which the government can borrow, the costs of bringing government spending forward into the next three years from the distant future are much smaller than usual. But a commitment to spend more by the government over the next three years must not be allowed to destabilize expectations of the long-run fiscal soundness of the American government--that could produce an economic disaster.

Hence our commitment to create jobs by spending more in the next three years shall and must be accompanied by putting in place the institutions and procedures--automatic triggers on both the spending and tax side--to close the deficit and keep the debt from exploding should congress prove unable to do its job through the normal legislative procedures.

Thus next year the focus will be on jobs and fiscal responsibility...

What House Majority Leader Steny Hoyer is saying:

Coming Up In 2010: All About The Deficit: Top aides on both ends of Pennsylvania Avenue say 2010 will be the year of fiscal responsibility, even if President Obama has to battle with progressive Democrats to make cuts they won't like. "Next year the focus will be jobs and fiscal responsibility," House Majority Leader Steny Hoyer told TPMDC in a briefing with two reporters Thursday. Hoyer (D-MD) said one reason Democrats are having a tough time one year before the Congressional midterm elections is that voters are concerned about the nation's fiscal health, and they also want to see the unemployment rate shrink. He said he knows there may seem to be disconnect with those two things in short term, but in long term they make sense. "The American public are right, we have to do both," Hoyer said.

Deficit reduction over the long term will be the White House's primary focus next year, and Chief of Staff Rahm Emanuel said at the Wall Street Journal's CEO Council conference last month it will be a "key component" of the president's State of the Union address. "It is foremost on his mind and the mind of the economic team," Emanuel said.

Office of Management and Budget spokesman Ken Baer told TPMDC it will be a top priority. "As part of the FY2011 Budget process we are exploring a range of options to put the country back on a fiscally sustainable path," Baer said.

These strike me as very different things.

It is certainly true that you can enact bad economic policies and win both the applause of the Washington press corps and reelection--look at Ronald W. Reagan and George W. Bush. The race is not always to the swift or the battle always to the strong, nor does food come to the wise or wealth to the brilliant or favor to the learned; nor does good economic news always come to the enactors of good economic policies. Time and chance happen to them all.

But if you want the odds on your side, enact policies that make sense--not policies that leave you stammering to reporters about how you know " there may seem to be disconnect with those two things in short term," but "in the long term they make sense" even though I cannot explain how...