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links for 2009-10-15

Nine Months into the Obama Administration: A Look

Glenn Greenwald issues marching orders:

How to avoid the GOP's mistakes during the Bush years?: The Atlantic's Marc Ambinder makes the following observation: "From day one of his administration, the left has held Barack Obama's feet to the fire way more than the right ever did to George W. Bush..." Is there any doubt that this is accurate?  I can't imagine how there could be.  And is there anyone who believes that this is a bad thing?  

It's worth remembering how the GOP and the Right treated Bush and the role they played in his presidency.... The Right's leading commentators saw their role as defending the Bush administration no matter what it did, rather than expressing their honest opinions.... Personalized hagiographies were churned out glorifying the President in borderline-religious tones. Conservative groups devoted themselves to blind defense of the White House.... Conservatives who criticized Bush were deemed the enemy and were excommunicated.... Those who, in general, criticized the President too harshly were deemed unpatriotic, standing with Terrorists, and suffering from personalized and emotional hatred (Bush Derangement Syndrome)....

One need only look at the entrenched rot that is now the conservative movement and the Republican Party to see what happens when that mentality prevails, when internal dissent is treated as blasphemy and well-intentioned critics are deemed suspect and even harmful to The Cause...

We hear and obey.

On my issues:

(1) The Obama administration argued in December and January that it should seek a consensus position on dealing with the financial crisis and recession rather than push for first-best policies--larger short-term deficit spending, more money for banking recapitalization, more stringent regulation of and control of financial services (especially much more aggressive regulation of executive compensation to make every thirty-five year old a risk manager who prospered only in the long run, only if the firm's strategies proved profitable over several cycles, and only if the firms never blew up).

This was a mistake: the 80-20 votes in the Senate and the 390-40 votes in the House for "national unity" economic policies did not materialize, and we are left with insufficient regulation of the financial system to protect the consumer and guard against the next crisis, and with too-small a stabilization policy that threatens now to give us 10% unemployment as far as the eye can see.

(2) The Obama administration started by proposing a cap-and-trade environmental policy with current greenhouse polluters grandfathered in--and with the political dynamic such that, as with the AMT and the R&D tax credit, the grandfathering will be extended year-by-year forever as legislators find one-year-at-a-time extensions to be an extraordinarily good tool for raising campaign contributions from corporate PACs.

This was a mistake. The administration should have started with the right first-best policy: a carbon tax with the revenues dedicated to paying people's FICA contributions. Then, if necessary, it could have let itself be negotiated down to cap-and-trade with some--not 100%--grandfathering.

(3) I simply do not know what the Obama administration's desired health-care reform bill looks like, or what steps the Obama administration is taking to make the congressional reform process reach a good end, or what the economic theory is that suggests that these particular reforms are the right thing to do. I am scared of guaranteed issue and community rating without a real mandate to curb adverse selection and a strong public option as a safety valve. I am very scared of a congress that seems to, with every day, seek to bend the curve of health care costs upward by prohibiting things like comparative effectiveness research. And I am very, very scared of a mandate without an adequate subsidy pool.

I want to see real white papers from the administration explaining why whatever is going to emerge from the congress is a good thing--and why it is the best thing that we could have gotten out of congress this year or next year.

(4) Tim Geithner should have gone to the wall for the requirement that [banks offer "plain vanilla" mortgages and credit cards. The Democratic Party should not be in the business of encouraging banks and other financial service companies into making money by tricking households into bearing risks that they do not understand. And he certainly should not say that he is "supportive of the changes." If he really is, he is in the wrong job. If he is merely grudgingly willing to accept the changes, he should say that instead. The Treasury Secretary's credibility is, after all, his onlly asset.

(5) Nor has the Obama administration yet gone to the wall for long-run fiscal discipline: by now we ought to have standby tax increases or spending cuts written into the law for the out-years a decade or more from now to reassure everyone that the American government does understand and take seriously what the long-run trends--the aging of America and medical-care cost growth--mean for public finances

Don't get me wrong: My complaint is not that the Obama administration has not been liberal enough. My complaint is that the Obama administration, so far, has not been devoted enough to good policy--to the good technocratic policies of what I used to see as the bipartisan center--and has been unwilling to use any leverage at all against a congress that is underbriefed, unfocused, and easily captured by special interests. You can only use such leverage if you have a moment arm--allow daylight to open up between the President's position and the position of the marginal senator, and say that the President's policies are those he and has staff have concluded after sober reflection are best for the nation but that he will take what he can get from congress.