As I’ve been discussing here for quite a while, commentators from across the political spectrum have been busy criticizing the job performance of President Obama. The mood of most critics seems to have progressed from disappointment to shock. The situation eventually reached the point where, regardless of what one thought about the job Obama was doing – at least the President could provide us with a good speech. That changed on Monday, August 8 – when Obama delivered his infamous “debt downgrade” speech – in the wake of the controversial decision by Standard and Poor’s to lower America’s credit rating from AAA to AA+. This reaction from Joe Nocera of The New York Times was among the more restrained:
When did President Obama become such a lousy speech-maker? His remarks on Monday afternoon, aimed at calming the markets, were flat and uninspired — as they have consistently been throughout the debt ceiling crisis. “No matter what some agency may say,” he said, ”we’ve always been and always will be a triple-A country.” Is that really the best he could do? The markets, realizing he had little or nothing to offer, continued their swoon. What is particularly frustrating is that the president seems to have so little to say on the subject of job creation, which should be his most pressing concern.
Actually, President Obama should have been concerned about job creation back in January of 2009. For some reason, this President had been pushing ahead with his own agenda, while oblivious to the concerns of America’s middle class. His focus on what eventually became an enfeebled healthcare bill caused him to ignore this country’s most serious problem: unemployment. Our economy is 70% consumer-driven. Because the twenty-five million Americans who lost their jobs since the inception of the financial crisis have remained unemployed — goods aren’t being sold. This hurts manufacturers, retailers and shipping companies. With twenty-five million Americans persistently unemployed, the tax base is diminished – meaning that there is less money available to pay down America’s debt. The people Barry Ritholtz calls the “deficit chicken hawks” (politicians who oppose any government spending programs which don’t benefit their own constituents) refuse to allow the federal government to get involved in short-term “job creation”. This “savings” depletes taxable revenue and increases government debt. President Obama — the master debater from Harvard – has refused to challenge the “deficit chicken hawks” to debate the need for any sort of short-term jobs program.
Bond guru Bill Gross of PIMCO recently lamented this administration’s obliviousness to the need for government involvement in short-term job creation:
Additionally and immediately, however, government must take a leading role in job creation. Conservative or even liberal agendas that cede responsibility for job creation to the private sector over the next few years are simply dazed or perhaps crazed. The private sector is the source of long-term job creation but in the short term, no rational observer can believe that global or even small businesses will invest here when the labor over there is so much cheaper. That is why trillions of dollars of corporate cash rest impotently on balance sheets awaiting global – non-U.S. – investment opportunities. Our labor force is too expensive and poorly educated for today’s marketplace.
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In the near term, then, we should not rely solely on job or corporate-directed payroll tax credits because corporations may not take enough of that bait, and they’re sitting pretty as it is. Government must step up to the plate, as it should have in early 2009.
Back in July of 2009 – five months after the economic stimulus bill was passed – I pointed out how many prominent economists – including at least one of Obama’s closest advisors, had been emphasizing that the stimulus was inadequate and that we could eventually face a double-dip recession:
A July 7 report by Shamim Adam for Bloomberg News quoted Laura Tyson, an economic advisor to President Obama, as stating that last February’s $787 billion economic stimulus package was “a bit too small”. Ms. Tyson gave this explanation:
“The economy is worse than we forecast on which the stimulus program was based,” Tyson, who is a member of Obama’s Economic Recovery Advisory board, told the Nomura Equity Forum. “We probably have already 2.5 million more job losses than anticipated.”
Economist Brad DeLong recently provided us with a little background on the thinking that had been taking place within the President’s inner circle during 2009:
In the late spring of 2009, Barack Obama had five economic policy principals: Tim Geithner, who thought Obama had done enough to boost demand and needed to turn to long-run deficit reduction; Ben Bernanke, who thought that the Fed had done enough to boost demand and that the administration needed to turn to deficit reduction; Peter Orszag, who thought the administration needed to turn to deficit reduction immediately and could also use that process to pass (small) further stimulus; Larry Summers, who thought that long-run deficit reduction could wait until the recovery was well-established and that the administration needed to push for more demand stimulus; and Christina Romer, who thought that long-run deficit reduction should wait until the recovery was well-established and that the administration needed to push for much more demand stimulus.
Now Romer, Summers, and Orszag are gone. Their successors – Goolsbee, Sperling, and Lew – are extraordinary capable civil servants but are not nearly as loud policy voices and lack the substantive issue knowledge of their predecessors. The two who are left, Geithner and Bernanke, are the two who did not see the world as it was in mid-2009. And they do not seem to have recalibrated their beliefs about how the world works – they still think that they were right in mid-2009, or should have been right, or something.
I fear that they still do not see the situation as it really is.
And I do not see anyone in the American government serving as a counterbalance.
Meanwhile, the dreaded “double-dip” recession is nearly at hand. Professor DeLong recently posted a chart on his blog, depicting daily Treasury real yield curve rates under the heading, “Treasury Real Interest Rates Now Negative Out to Ten Years…” He added this comment:
If this isn’t a market prediction of a double-dip and a lost decade (or more), I don’t know what would be. At least Hoover was undertaking interventions in financial markets–and not just blathering about how cutting spending was the way to call the Confidence Fairy…
President Obama has been oblivious to our nation’s true economic predicament since 2009. Even if there were any Hope that his attentiveness to this matter might Change – at this point, it’s probably too late.