The Larry Summerses of the world agree with the DFH's on identifying the problems, but as Robert Kuttner says, they are too chickenshit or too stubborn to actually agree with us when we call out the right things to do.
If you want to understand why the Obama administration’s heart is in the right place but it suffers from a chronic lack of political nerve, you need look no further than former chief economic advisor Larry Summers. On Sunday, Summers published a piece in the Financial Times warning that the recovery was at risk of sputtering out. His analysis was spot-on. But his proposed solutions were feeble, bordering on pathetic.
Summers declared boldly:
The problem in a period of high unemployment, as now, is a lack of business demand for employees… After bubbles burst, there is no pent-up desire to invest. Instead, there is a glut of capital caused by the over-investment during the period of overconfidence - vacant houses, malls without tenants, factories without customers.
Exactly so. And Summers went on to debunk such usual remedies as training programs, tax cuts, and deficit reduction for its own sake. Increasing the supply of qualified workers, he added, may even make things worse:
Training programs or measures to increase work incentives for those with high and low incomes may affect who gets the jobs, but in a demand-constrained economy will not affect the total number of jobs. Measures that increase productivity and efficiency, if they do not also translate into increased demand, may actually reduce the number of people working as the level of total output remains demand-constrained.
So, what’s solution? A big infrastructure program, or Stimulus II, right? Surely, that logically follows. Well, no.
Atrios continues: All Wind-Up And No Pitch
It's basically the same with Klain, who spent time arguing with the imaginary hippies who were obsessed with the stimulus involving Big Projects. Now as a certified dirty hippie, I think there was a blown opportunity to make the case for big projects, though I don't think that's the same thing as thinking big projects should have been central to the stimulus. And thinking that some big projects would be a good thing isn't just Hoover Dam nostalgia, it's thinking that...there are some big projects that we should be doing!
Klain then goes on to make the case that we should be repairing things instead of focusing on big new projects. Well, this dirty hippie mostly agrees! Or, at least, agrees that while there shouldn't necessarily be a tradeoff, there are basically limitless fast opportunities to spend money repairing water systems.