Posted by: Jeff | November 23, 2009

Know Your Limits

Paul Krugman has been arguing for a while now that the economic stimulus package passed in the early months of Obama’s term was too small. I have no reason to doubt him on this point. But economic logic is often counter-intuitive, and rarely more so than with the fact that massive deficit spending by government during a recession is actually a good thing. Most Americans remain persuaded by the “when American families are tightening their belts, government should tighten its belt too” meme. As a result, responsible economic policy is often also politically unpopular policy.

So I get frustrated when Krugman writes things like this:

Most economists I talk to believe that the big risk to recovery comes from the inadequacy of government efforts: the stimulus was too small, and it will fade out next year, while high unemployment is undermining both consumer and business confidence.

Now, it’s politically difficult for the Obama administration to enact a full-scale second stimulus. Still, he should be trying to push through as much aid to the economy as possible. And remember, Mr. Obama has the bully pulpit; it’s his job to persuade America to do what needs to be done.

Oh, that’s all he needs to do! Thank goodness. And I thought convincing a few hundred million voters of extremely diverse political persuasions to coalesce around a particular policy would be hard.

This is not helpful. Political feasibility, with all the questions and negotiations required to get to it, is the hurdle to enacting further economic aid at this point. Simply assuming Obama’s ability to deliver because he “has the bully pulpit” gets us no where. It’s borderline magical thinking, along the same lines as the complaints that Obama wasn’t doing enough to push through health care reform. The American public is a complex and mercurial beast, and simply pointing a finger in its face and speaking forcefully is not going to get you domesticated acquiescence. At this point, if Obama were to start pushing hard for more economic aid, what he’d most likely get himself is a failed agenda item and an even more brutal punishing for the Democrats in 2010 than they would otherwise receive.

On a more practical level, I think Krugman undersells the continued effect of the stimulus that has already been passed. Yes, it will fade out after next year, but between now and that fade out is when the bulk of the stimulus will actually be spent.

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