It's Not the Republicans in Congress Who Are Blocking Most Stimulative Policies Right Now

Ezra Klein:

What Washington should have done to create jobs: Housing is a clearer case of the administration failing to get anything near the boundaries of the possible. No one I spoke to inside the administration is happy with how its housing policies turned out. In this area, the two clear missed opportunities were the administration’s failure to move quickly in appointing a friendlier regulator to lead Fannie Mae and Freddie Mac — it didn’t nominate anyone until November 2010, by which time emboldened Republicans were filibustering Obama’s nominees — and to push legislation allowing bankruptcy judges to reduce mortgage principal. Together, the two moves could have led to more refinancing for underwater homeowners and more recourse for bankrupt homeowners.

The game changer, however, would have been massive debt forgiveness. This could have been done through a federal program to purchase troubled mortgages and give homeowners better rates, as John McCain proposed late in the 2008 campaign, or by nationalizing the banks and taking the bad debts off their books, or some other option….

[W]e could have taken a page out of the German playbook and launched a program to pay employers who cut hours rather than fired workers. In the second case, the government could have provided more help to state and local governments, which have lost more than 500,000 jobs, and tried direct-employment schemes like Christina Romer’s idea to hire 100,000 teacher’s aides….

A more aggressive Federal Reserve could have used everything from jawboning the market to purchasing larger quantities of housing and corporate bonds to ending interest payments for banks that are simply socking away the money.

Would any or all of these policies have turned the unrecovery into a real recovery? They certainly could have helped. The good news, of course, is that they could help now, too. The problem isn’t that we are out of policy ammunition. It’s that Republicans in Congress don’t want to pull the trigger.

It is not Republicans in Congress that kept and are keeping Fannie Mae and Freddie Mac from offering to refinance every mortgage in the country at the Treasury rate--if the homeowners give them warrants for non-conforming mortgages.

It is not Republicans in Congress that kept and are keeping the Treasury and the Federal Reserve from establishing facilities to greatly ease the cost of borrowing to finance infrastructure and operations by states that have credible debt amortization plans in place.

It is not Republicans in Congress that kept and are keeping the Federal Reserve from charging for reserve balances or engaging in more quantitative easing or targeting the nominal GDP growth path.