How Different Was This Time?
Mike Konczal on the Obama administration:
Was This Time Different On the Economy?: Ezra Klein wrote a 7,000 word summary of what went right and wrong on economic policy during the first three years of the Obama campaign. It’s well-reported and fun to read.... I’m going to throw out some critical thoughts....
Obama is much more of a fiscal conservative than I had imagined.... Noam Schieber at the New Republic was getting word from Treasury as early as late 2009 that they thought that they needed “some signal to U.S. bondholders that it takes the deficit seriously” and “spending more money now [on stimulus] could actually raise long-term rates, thereby offsetting its stimulative effect.” This naturally lead to wanting to strike “grand bargains” with the other side, a path that lead the administration down some bad roads in terms of the agenda. The flip side of this is the administration’s focus on “confidence” – financial markets, Wall Street and business community – as a way of bringing growth up and unemployment down. This has most obviously driven policy in regards to Wall Street and the financial markets (more on that in a second), but we see this in terms of dealing with the deficit. It has also brought in approaches emphasizing positions that are much more “supply-side” – patent reform, regulation cutting, appointing senior business leaders to key positions, a key State of the Union based on “Winning the Future” through education investments – that can’t be justified as getting us back to full employment. By the debt ceiling fight these administration talking points were becoming a parody of right-wing talking points and Hooverism....
I’ve had staffers tell me on background that members of Congress would approach the administration in 2009 looking to build out huge, New-Deal style infrastructure as a separate track, only to be told that the recovery would be fully underway by the time it kicked in – thus wasted. There was no response to this....
Ryan Avent has tackled the Federal Reserve problem here. There’s a new Federal Reserve iPad app. It is pretty rad. You can click on all the members of the FOMC. You can also click on the two vacant seats and it says that they are vacant. Even iPad apps are mad at Obama for not being aggressive on the Fed appointments!...
Housing.... The Obama administration was either indifferent or hostile to changes in the bankruptcy code – cramdown – following this crash, even though Obama campaigned on it. Technical: cramdown isn’t about making the banks eat the loss, it’s about the loss coming from credit writedowns versus a firesale of a house in foreclosure – hence evidence that cramdown wouldn’t raise costs. But either way, in addition to forgetting things since Keynes, we are also in the business of forgetting things from the 19th century.... The Administration set aside $75 billion through TARP for HAMP, and to date have used $1.6 billion or so on a program that is effectively irrelevant at this point (and they have cleverly revised history to claim that it was only a $50 billion allotment, to make this look a little better). Without any need to clear Congress, the Administration had all the authority they needed to put this $75 billion to work, including the ability to punish servicers who failed to comply with guidelines….
Then, for two years, Treasury swore up and down there was nothing they could do to punish servicers who didn’t comply. Finally, a few months ago, they started withholding incentive payments for noncompliance, as if they just magically acquired the power. It turns out, as Paul Kiel from Pro Publica displayed in a story this week, that Treasury wasn’t even checking on servicer compliance for at least the first year of the program…
The truth that emerges from all of these facts is that the Administration had no interest whatsoever in using more than a token amount of the TARP authority they had already husbanded for mortgage relief and foreclosure mitigation…