Did Obama Try To Do Too Much? Krugman Says No, He Did The Wrong Things.

I try to walk that line between being supportive of Obama - and being blind to his very real failings. I don't like a lot of his policy decisions - and neither does Paul Krugman. Today, Krugman writes that the administration's problems aren't the fault of "trying to do too much," but rather bad policy decisions on Obama's part:

paul_855fe.jpeg

The stimulus was too small; policy toward the banks wasn’t tough enough; and Mr. Obama didn’t do what Ronald Reagan, who also faced a poor economy early in his administration, did — namely, shelter himself from criticism with a narrative that placed the blame on previous administrations.

About the stimulus: it has surely helped. Without it, unemployment would be much higher than it is. But the administration’s program clearly wasn’t big enough to produce job gains in 2009.

Why was the stimulus underpowered? A number of economists (myself included) called for a stimulus substantially bigger than the one the administration ended up proposing. According to The New Yorker’s Ryan Lizza, however, in December 2008 Mr. Obama’s top economic and political advisers concluded that a bigger stimulus was neither economically necessary nor politically feasible.

Their political judgment may or may not have been correct; their economic judgment obviously wasn’t. Whatever led to this misjudgment, however, it wasn’t failure to focus on the issue: in late 2008 and early 2009 the Obama team was focused on little else. The administration wasn’t distracted; it was just wrong.

The same can be said about policy toward the banks. Some economists defend the administration’s decision not to take a harder line on banks, arguing that the banks are earning their way back to financial health. But the light-touch approach to the financial industry further entrenched the power of the very institutions that caused the crisis, even as it failed to revive lending: bailed-out banks have been reducing, not increasing, their loan balances. And it has had disastrous political consequences: the administration has placed itself on the wrong side of popular rage over bailouts and bonuses.

Comments

We welcome relevant, respectful comments. Please refer to our Terms of Service for information on our posting policy.