If You Want to Boost Employment, Push for Policies That Boost Employment!
A correspondent emails me a link to Ezra Klein and asks:
Doesn't Barack Obama know that if his economic advisors had exciting, effective, and politically viable policies to substantially reduce unemployment that did not require getting congress to spend more money, they would have proposed and implemented such policies in January 2009?
Apparently not.
Ezra Klein:
If Obama wants to be bold, he should be bold: [T]he individual who comes off worst in the article is not Larry Summers or Christina Romer or Peter Orszag or Rahm Emanuel. It's President Obama. Baker opens with an anecdote from just before Christmas. Obama... wanted a bold idea to bring down unemployment. But he didn't like anything his advisers were offering up. “You know, guys,” he said, according to someone in the room, “I’ve told you before, I want you to come to me with ideas that excite me.”
But it's not until a few paragraph later that we learn what Obama actually meant: He wanted "ways to juice the economy that are exciting, effective and politically viable." According to one adviser in the meetings, “The president wanted to lower unemployment but didn’t see a way to get more money out of Congress. He grew frustrated because the economic team didn’t have that magic combination.” Another said that Obama “was really frustrated that there weren’t solutions on the cheap.”...
If the president wants to go bold on job creation, he needs to go bold on job creation. The votes may not be there now, but perhaps it's worth mounting a very public effort to get them there. At the State of the Union, say. And if Republicans block the proposals, well, sometimes the best way to show the public where you stand on something is to go down fighting for it. Losing the House doesn't release the Obama administration from the responsibility to get things done, of course. And the White House is acutely aware that when they throw their weight behind a policy, the GOP often turns against that policy. One of the reasons the payroll-tax holiday wasn't part of the administration's pre-election jobs push was so that it would remain acceptable to Republicans when the two sides came together to cut some post-election deals.
But that strategy only applies to policies Republicans are willing to pass. There's plenty of good -- even exciting and effective -- legislation that the GOP won't move unless the public forces them to move it. For those ideas that are outside the current congressional consensus, the right question for it isn't "are there the votes" so much as "is this a good idea?" and "can we convince the people?" One of those questions is for Obama's economic team. But the other is for Obama himself....
[T]he question is whether the legislative pragmatism that defined Obama's administration so far was a smart strategy based on the math of a Democratic majority or the administration's only strategy based on the temperament of Barack Obama. You can have bold and exciting or you can have politically viable. You can't always have both.
There were, indeed, four ways to boost employment, all of which had drawbacks:
- Expansionary fiscal policy: convince congress to appropriate more money and borrow-and-spend.
- Expansionary monetary policy: staff up the Federal Reserve with governors who believed that large-scale quantitative easing and inflation, price level, and nominal GDP targeting were worth attempting.
- Use the TARP and the Treasury's powers to offer bank guarantees to engage in large-scale quantitative easing by the executive branch.
- Focus on putting into place long-run policies to balance the federal budget, and hope that their passage induces the confidence fairy to show up.
I think that the Obama administration should have gone all-in on all four of these policy dimensions.
