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Today’s Pickings have a singular focus – an article from last Sunday’s NY Times Magazine about the disarry of the administration’s economic team In it Peter Baker gives a center-left perspective on the president’s efforts to create jobs. Pickerhead likes this for the perspective you get from reading between the lines. A fundamental illustration of the president’s narcissism and shallowness exists in the first paragraph when he reacts to a presentation with, “I’ve told you before, I want you to come to me with ideas that excite me.”
Three days before Christmas, President Obama gathered his economic team in the West Wing’s Roosevelt Room to review themes for his State of the Union address. The edge-of-the-cliff crisis he inherited had passed, but with more than 14 million Americans still out of work, he was looking for bold ways to bring down unemployment. The ideas presented to him, though, seemed familiar and uninspired. “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.” Nothing he was hearing excited him.
…Obama has been casting about for ideas. He held two unpublicized meetings last month with outside economists, a group of liberals one day and a group of conservatives the next, soliciting suggestions while deflecting criticism. (He was “a bit defensive,” one participant told me.) He likewise met with labor leaders and convened a four-hour meeting with chief executives from Google, General Electric, Honeywell, Boeing and other corporations. Obama was so intent on the conversation that he canceled a lunch break and asked the executives to bring their chicken, fish and pasta back from a buffet so they could keep talking.
…There is a compelling case that Obamanomics has produced results. An economy that was shrinking in size and bleeding more than 700,000 jobs a month is now growing at 2.6 percent and added 1.1 million jobs last year. The American Recovery and Reinvestment Act, known as the stimulus, produced or saved at least 1.9 million jobs and as many as 4.7 million last year, according to the Congressional Budget Office. The much-derided Troubled Asset Relief Program, or TARP, started by George W. Bush and continued by Obama, stabilized the financial sector, and the big banks have repaid the money with interest. According to a Treasury Department report sent to Congress this month, TARP will cost taxpayers $28 billion instead of the $700 billion originally set aside. The nearly $80 billion bailout of the auto industry may cost taxpayers only $15 billion, as the restructured General Motors and Chrysler come back to life with strong sales. The stock market has surged; corporate profits are setting records.
All of which seems offset by one simple figure: 9.4 percent. Or perhaps two, if you add $1.3 trillion. The first, of course, is the unemployment rate, which has remained stubbornly above 9 percent for 20 straight months, the longest since the Great Depression. Counting those who are seeking full-time jobs while working part time and those who have stopped looking altogether, it’s closer to 17 percent. At the current rate, it could be 2017 before the country replaces the more than eight million jobs lost since December 2007. The second figure is this year’s federal budget deficit, which has touched off a prairie fire of public protest and emerged as the central issue of the newly installed Republican House. In a recent poll by The Times and CBS News, 82 percent of Americans rated the economy bad, and just 43 percent approved of the way Obama was handling it. “People look at the economy today, and they’re disappointed by what we’ve achieved,” Treasury Secretary Timothy Geithner told me last month. “But that just misses the fundamental reality — it could have been so much worse.” The program Obama managed to enact represented an “unbelievably heroic, implausible accomplishment,” Geithner argued, yet one that requires patience. “Even if we had a magic wand,” he said, “it was going to take a long time to dig out.”
The path from crisis to anemic recovery was marked by turmoil inside the White House. The economic team fractured repeatedly over philosophy (should jobs or deficits take priority?) and personality (who got to attend which meetings?), resulting in feuds that ultimately helped break it apart. The process felt like a treadmill, as one former official put it, with proposals sometimes debated for months before decisions were reached. The word commonly used by those involved is “dysfunctional,” and in recent months, most of the initial team has left or made plans to leave, including Larry Summers, Christina Romer, Peter Orszag, Rahm Emanuel and Paul Volcker.
…While Obama and his team were hardly the only ones to underestimate the depth of the problem they inherited in early 2009, their failure to define it from those early days has undermined a bedrock idea of American liberalism, the faith in the capacity of government to play a constructive role in the markets and make up for the limits of individuals to cope with them. Since unemployment has remained so high for so long while deficits have soared, it must mean the stimulus did not work and the money was wasted. Smaller government, less regulation and lower taxes, therefore, would be the only answer. And so, Obama’s challenge may be more fundamental even than reducing unemployment and winning re-election; he wants to prove that liberal economic theory can be adapted to the 21st century.
…Liberals like the Nobel Prize-winning economists Joseph Stiglitz and Paul Krugman argue that the $800 billion package of infrastructure projects, aid to states and tax breaks that Congress eventually passed was inadequate and poorly targeted. “The stimulus was too small and not well-enough designed,” Stiglitz told me. “Most of my concerns have turned out to be valid.” Romer, who has returned to teach at Berkeley, told me she now agrees about the size. In Washington, she said, “you’re not supposed to say the obvious thing, which is that in retrospect of course it should have been bigger. With unemployment at 10 percent, I don’t know how you could say you wouldn’t have done anything different. Of course you would have made it bigger.”
…The crisis forced Obama to confront the larger question of government’s role in the economy. Should taxpayers save large enterprises from failure? When is the risk of not intervening too great? How much should politicians dictate to business? His team engaged in a fierce debate about whether to nationalize the biggest banks, as Stiglitz and Krugman advocated. Summers entertained the idea, at least for purposes of discussion, for banks that could not pass a “stress test” examining their solvency. Geithner and Ben Bernanke, the Federal Reserve chairman, argued against it. Ultimately the tests found the banks were in better shape than feared, a critical moment in shoring up confidence. …
…A January 2009 study by Romer and Jared Bernstein, the economic adviser to Vice President Joseph Biden, predicted that if the stimulus passed, unemployment would be at 7 percent at the end of 2010.
“I truly believed that forecast,” Romer told me. “I consulted with every good forecaster who would talk with me, including the Federal Reserve.” …
…The renewed focus on the economy goes back to last August, when after months of grappling with health care, the oil spill and the financial-regulation bill, Obama resolved to redouble efforts to create jobs. While he was on vacation in Martha’s Vineyard, Obama called his economic advisers and told them to develop a new agenda for the fall, which led to a September proposal to invest more money in infrastructure, make the research-and-development tax credit for businesses permanent and allow companies to deduct more expenses right away. His advisers also began discussing ideas for his next State of the Union, like a payroll tax holiday, ideas that ultimately were worked into last month’s tax deal with Republicans instead.
The president’s search for an agenda that will excite him, and the rest of America, has taken him to the far corners of the economic conversation. He recently asked advisers to present arguments about whether the slow recovery is part of an economic cycle that will ultimately turn around or something different, a “new normal” signaling stagnation as in Japan in the 1990s. “He’s trying to gather different ideas and different perspectives both on where we are and where we’re going,” Goolsbee said.
…Instead, the debate will shift to curbing deficits and redesigning the tax code. Republicans have made shrinking government the core of their economic message, appealing to many Americans who think Obama (and before him, Bush) let spending get out of hand. “We’re at that transition moment,” Lew told me. “We’ve got to look ahead at the very serious fiscal challenges we have.” Obama plans to use the State of the Union to present himself as a fiscal conservative. But it will be a delicate balance for someone who believes government spending helped turn the economy around; he hopes to make the case that he can rein in the deficit but that the deepest cuts should wait until after the recovery gathers momentum. …