Where Obama’s economic policy went wrong: In one of his biggest errors as economic advisor to the president, Larry Summers told Barack Obama that “It is easier to add down the road to insufficient fiscal stimulus than to subtract from excessive fiscal stimulus. We can if necessary take further steps.” He was absolutely wrong….
[Obama] makes it seem as though the administration tried to get America to see the effects of the stimulus, and failed. But in fact, the opposite is true: a large part of the stimulus — the payroll-tax cut — was specifically designed to be invisible…. [T]he Obama administration… reasoned that people would be more likely to spend a small, recurring extra bit of money that they might not even notice, and that the quicker the money was spent, the faster it would cycle through the economy….
There’s evidence that the [second] Obama economic team wasn’t entirely unhappy with the lack of a second stimulus[. Noam Scheiber]:
By January 2011, two months after Democrats suffered a rout in the congressional midterm elections, the West Wing again faced a critical choice… Should they tackle the trillion-dollar deficit, co-opting the anti-government zeal that Republicans had ridden to power? Or should they try to lower the stubbornly high unemployment rate, which had exceeded 9 percent for 20 straight months?
The president’s team quickly concluded that the deficit was the higher priority…. The decision to focus on the deficit in 2011 was defensible at the time. It wasn’t until much later that the economy’s weakness became clear.
This is simply bonkers: I was describing the stubbornly-high unemployment rate as “Obama’s Katrina” as early as June 2010, when unemployment stood at 9.6%. By January 2011, nothing much had changed: the unemployment rate was still 9.4%. It’s hard to see what’s happened since then which has made the economy’s weakness any clearer. Scheiber saves his harshest words for the White House political tacticians who ignored the debt ceiling issue for too long and overestimated the tractability of the House Republicans. But… Obama’s economic strategy has been a victim of political miscalculations more or less since day one. Obama’s economic team has been consistently modest in what it considers politically possible…. It’s almost as though the Obama economic team — with the notable exception of Christy Romer — was consistently looking for excuses to do less rather than more…