Fiscal Policy During the Great Depression
The Gang of Six Proposals Are a Bad Idea...

Obama Has Always Been for Premature Fiscal Austerity

Paul Krugman sends us to Mark Thoma who sends us to Jonathan Schwarz, who points out that there is evidence that Obama rejected his economists' judgment that the economy needed a bigger stimulus back at the start of 2009.


A Tiny Revolution: If Only the Czar Knew: This is tough for me, because I was hating on Larry Summers before hating Larry Summers was cool. But I'm going to defend him.... One of the stories... is that some of Obama's economists believed that a stimulus package of over $1.3 trillion was needed—but Larry Summers prevented this news from getting to the president. And here we are in 2011 with a hideous economy that may be getting worse, and it's Larry Summers' fault. This seems to be based mostly on this New Yorker article from October 2009....

But if you go back and look, it's clear Obama was well aware many economists wanted a much larger stimulus bill. Here's a story from January 5, 2009:

President-elect Barack Obama said economists are suggesting a U.S. stimulus may have to be as large as $1.3 trillion, Senate Majority Leader Harry Reid said. Obama “has indicated that there’s at least 20 economists that he’s talked with, and all but one of those believe it should be from $800 billion to $1.2 trillion or $1.3 trillion,” Reid said after meeting with Obama on Capitol Hill.

Then two days later on January 7, Obama held a press conference:

TAPPER: Your team has talked about the stimulus package being $675 to $775 billion. But at the same're going to distribute a memo in which economists say it should be between $800 billion and $1.3 trillion. How do you reconcile that difference...?
OBAMA: Well, we are still in consultation with members of Congress about the final size of the package. We expect that it will be on the high end of our estimates, but [it] will not be as high as some economists have recommended because of the constraints and concerns we have about the existing deficit.

The same day Obama was interviewed on CNBC:

MR. HARWOOD: Tomorrow you're going to give a speech and talk about your economic stimulus package...It looks like it's going to be at the high end of your range, around $775 billion. If it's correct that, as your aides have said, the danger is doing too little rather than too much...why stop at $775 billion? Why not go to the 1.2 trillion (dollars) that some economists have recommended?
PRESIDENT-ELECT OBAMA: ...We've seen ranges from 800 to 1.3 trillion, and our attitude was that, given the legislative process, if we start towards the low end of that, we'll see how it develops.... MR. HARWOOD: So it's going to get bigger.
PRESIDENT-ELECT OBAMA: Well, we don't know yet.

And on January 16, four days before Obama was inaugurated, the Washington Post published an article about a long interview with him:

Obama repeated his assurance that there is "near-unanimity" among economists that government spending will help restore jobs in the short term, adding that some estimates of necessary stimulus now reach $1.3 trillion.

So it's obvious Obama knew what his economists were saying. He had all the information he needed. You can't pin this one on my dear friend Larry Summers.

I am struck by the rhetorical difference with Clinton. Clinton would always say: "This is what the technocrat-economists say is the first-best public policy, and we ought to do that", and then begin the political bargaining. Obama, by contrast, seems to glory in splitting the difference--even when you split the difference between those who know something and those who don't--without ever saying: "we really ought to do the right thing".