The Mistaken Pivot To Deficits: The Obama Administration's Biggest Unforced Error
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Any Open Road at All to a Strong Recovery?

Jared Bernstein:

What Went Wrong and What to Do About It: [P]owerful people have decided that too many voters don’t believe that what’s needed—temporary spending to offset the persistent demand shortfall—actually works. You can blame those powerful people for a) not fighting hard enough, b) not pushing a big enough stimulus in the first place, c) overselling the package they (ok, we) came up with, d) failing to effectively tout its benefits, e) not just doing what’s right regardless of electoral opinion…and you’d have some merit on all points. But there’s also this argument I recently came across.  It’s a framing discussion, much of which sounded right to me, suggesting that traditional ways in which Democrats talk about Keynesian measures no longer resonate the way they used to.

I think this diagnosis is important.  When I/Krugman/Romer/DeLong, etc. say “there’s a lot more gov’t should do right now to target job creation,” too many people hear “there’s a lot of new ways politicians can waste your hard-earned, much-needed money on their pet projects which only gets in the way of the private market’s vast job-creation potential.”

Indeed. That is why--from the political point of view--stimulative macroeconomic policy is best done through:

  1. monetary expansion (including quantitative easing)
  2. banking policy--loan guarantees, anyone?--coupled with regulatory enforcement
  3. fiscal expansion that actually builds things you can see

Jared Bernstein:

If that’s true—and yes, no small part of this is self-inflicted by Democrats who agree too readily with the above—what do we do about it?  I found the analysis long on diagnosis and short on prescription, but this ‘graf caught my attention:

On the issue of jobs and unemployment, for example, a typical statement from a person of this kind would be something like the following. ‘Well, you know, I can’t see any evidence that the stimulus really worked and I don’t think just making phony leaf-raking jobs is a real solution. But I also think there must be some way the government can get people back to work and I don’t think just laying off state employees or giving rich people lower taxes is the answer either.’...

[S]uch sentiments... do map onto:

  • another round of fiscal relief for states;
  • infrastructure investments;
  • protecting entitlements;
  • balance between revenues and spending cuts in budget negotiations.

I’m skeptical of framing debates because they seem to suggest that if you frame things the right way, you’ll win, when of course, life is more complicated.  Power often trumps frames, for one.  But I’m not ready to go gentle into that good night without a fight.  So instead of depression, I recommend common sense, fueled by a little bit of genuine anger about how screwed up our economic policy debate has become.