Monday, February 09, 2009

Obama's lost opportunity? - A different perspective on the economics and politics of the crisis

The message below is part of an exchange with a reader who wrote to disagree with my observation on Friday that the Congressional Republicans had decided "to pursue a strategy of straightforward obstructionism and cynical political demagogy." (I stand by that.)

More fundamentally, while I am convinced by the arguments of Paul Krugman and a raft of other economists (along with the hovering spirit of John Maynard Keynes) that there's an urgent need for government action to inject a big jolt of demand into the economy, my correspondent is less convinced. He argues that it would be a mistake to pass such a big, important, and expensive set of measures hastily and in a panic. Instead, it's more important to take enough time "to do this carefully and right."

In principle, and for normal circumstances, it's hard not to sympathize (strongly) with that last sentiment. In terms of how we should apply that principle in assessing this concrete situation, though, we disagree on a number of points. (Which is perhaps not surprising, since--among other things--he's a Republican and I'm not.)

But we certainly don't disagree on everything. For example, beyond the specific issues involved in the fight over the "economic stimulus package," my correspondent argues that it would be valuable and important to try to move our whole style of political discourse, policy consideration, and legislation toward a more open, honest, and substantive process of "serious deliberative democracy." Broadly speaking, and in the long run, I would definitely sign on to that. (Obviously, a politics of serious deliberation and concern for the public interest would not involve an end to conflict, disagreement, or party divisions--that's a thoroughly misleading utopian fantasy.) He also argues that, in this respect, Obama had an important opportunity and blew it. On that, I'm not convinced.

But you can judge for yourself. Whether or not one fully agrees with all his contentions, my correspondent makes a serious case in a thoughtful and cogent way, and I think a number of points in the message below are perceptive and usefully thought-provoking. He gave me permission to guest-post it here. (I won't try to reproduce our whole exchange, but I think this message can stand alone.)

--Jeff Weintraub

You're right that the Congressional Republicans did not, to put it mildly, distinguish themselves in the past 8 years -- or, actually, the past 14 years. (The handling of Monica Lewinsky turned out to be, as distracting the President, and indeed the whole government, could be predicted to be a national security catastrophe).

You're probably right about the high speed rail. I say probably because the USA is a vast country with lots of infrastructure projects -- real infrastructure, not as one moron said, "arts infrastructure," that need to be done. But executing intelligently requires priorities, priorities require analysis, and analysis in politics requires reasoning transparently and clearly articulated. I would have been very impressed if Obama had said on January 21 (or now) that infrastructure spending is a top priority, and explained why (he would not have found any serious disagreement, I think). Then he could have explained why he was prioritizing certain types of projects over others -- and which specific projects in each type would get funded and why. My personal choice would have been airports -- as the airports in Singapore and Hong Kong (and the transportation to them) are so vastly superior to anything in the USA. But my personal choice doesn't matter, and it is ill-informed (as I have not considered all the possible infrastructure projects and prioritized them according to some rational criteria -- it's just what I personally have noticed).

Then he should have said that the era of big government is back (like it or not -- he won, as did his Party, and they have that mandate) -- but spending is going to be allocated intelligently, methodically and rationally. And here's how, and here's what I think the result looks like. Having seemingly every liberal wish thrown in and funded indiscriminately immediately, calling it stimulus or reinvestment or whatever and castigating all opponents as dithering obstructionists who would hurl us into economic catastrophe is the precise opposite of that. Obama had the opportunity to expand government -- and to do so in a new (much more rational and transparent) way ... and he did the precise opposite. Even if it's a first step, and I think we simply cannot afford -- we can't borrow or tax enough -- for that to be true, he could have made it clear that he was going to govern in a very different way ... and he didn't. I think he was very sincere about wanting to bring Republicans into the tent with him -- but inviting a bunch of them to watch the Super Bowl and taking out spending on sex education from a "stimulus bill" doesn't even come close to qualify. So that -- I don't understand.

I think the fundamental lesson unlearned is that economic policy cannot be made in a long weekend -- that immediate solutions will backfire, and in a very expensive and sustained way. This was reflected in his defense of Geithner. The American tax system depends upon, essentially, voluntary compliance. Defending Geithner after so many examples of his voluntary and seemingly systematic noncompliance was another reflection of the lesson unlearned -- no one man is so important that we can't wait for another to be found (particularly when the best man for the job, Larry Summers, can step right in!)