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The Magic Trillion

[ 132 ] October 9, 2011 |

Ezra Klein’s article on the stimulus and the devastated economy of 2009 is very much worth reading in its entirety. This is a key takeaway:

But it is hard to credit the argument that the stimulus could have been much larger at the outset. This was already the biggest stimulus in U.S. history, and congressional leaders had been quite clear with the White House: Don’t send over anything that passes the trillion-­dollar mark. To try and double the bill’s size based on a suspicion that the recession was much worse than the early data indicated would have been a hard sell, to say the least.

It is very possible that the Obama administration could have gotten a marginally better stimulus package with a marginally higher opening bid. But as I’ve said before, the idea that Obama could have gotten a marginal reduction of a much higher opening bid is implausible in the extreme. Regardless of what some people seem to think, offering $80,000 for a Park Avenue penthouse is not a clever, sophisticated negotiating tactic. As the fact that many opponents of the stimulus tried to portray the stimulus as a trillion dollar package anyway, it seems pretty clear that the trillion dollar mark is where the median votes in the Senate would have gotten off the bus. Even without knowing that the congressional leadership had actually taken that position, if a lot of money had been left on the table the bill wouldn’t have passed that narrowly.

Comments (132)

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  1. This was already the biggest stimulus in U.S. history

    Roger Marris could have hit 65, no 70, home runs if he’d just fixed his batting stance. Here, let me show you what I mean. See how my right foot is pointed? If he’d…

    “Play the game?” Why, no, but I watch a lot of baseball on TV.

    • dangermouse says:

      It’s the furthest opposite of surprising that you, like Lemieux, would latch onto a claim which is both incredibly weak and, even allowing for its incredible weakness, still doesn’t prove anything like what either of you need it to prove.

      • dangermouse says:

        Like as long as Ezra (or whoever he’s sockpuppeting for) is telling stories, he could at least have gone with something like “congressional leaders had been quite clear with the White House: Don’t send over anything that passes the trillion-­dollar mark or we will absolutely refuse to pass any stimulus whatsoever, even the 700 billion dollar one which ultimately did pass, even if doing so crashes the stock market, no honest for realsies“; then at least you’d be pretending to have a leg to stand on.

  2. Charrua says:

    I think that a better argument is not that they could have gotten a much bigger stimulus, but that once they got the smaller, probably not big enough stimulus, they convinced themselves that it had been enough, that the economy was gonna be vastly improved by 2012 and that they could focus on bigger, long term things. And when that assumption proved wrong, they were unable to change course until it was too late.
    As for the democratic congressional leaders, I hope they enjoy Perry’s presidency.

    • I go back on forth on this. Those “bigger, long term things” included stuff like health care reform, THE defining issue of liberal politics for the past fifty years. He had an unsustainably large Congressional majority, and knew for damn sure that he was never going to see on as large again once those two years were up.

      So, he put everything into moving as much of the Democratic legislative agenda as possible. Heck, from his point of view, he spent his honeymoon – both in terms of the time, and the political capital he came into office with, on economy-saving actions like the auto bailout and the ARRA, pushing the rest of his agenda down the road, and probably sacrificing immigration reform and an energy bill.

      Even knowing everything we know today about the performance of the economy, I don’t think it’s an obvious call to say that he should have taken Rahm’s advice and sacrificed even more of the once-in-a-lifetime opportunity to achieve long-sought-for legislation in order to focus on the economy. It’s a genuinely tough call.

      • Charrua says:

        Well, they sort of had to focus on other things besides the economy too, at least while it seemed like the economy was gonna recover on its own. But they should have been aware that a V shaped recession wasn’t very likely, that they needed to keep trying things on that front and be ready to change course quickly. I understand the logic of using the majority when you have it, but you can’t lose track of the economy (if you care about being re-elected, at least).

    • Bijan Parsia says:

      I don’t think the pivot was so much the problem as the fact that the Republicans, esp. in the Senate, unified in opposition. It’s pretty clear that Obama was hoping (against hope) to partner with at least a few Republicans esp. on critical issues (but really on everything). The fact that Snowe et al put party before everything else wasn’t a given, nor was it a reaction to overreach (on any sensible standard).

      I’m willing to bet that they thought if they were reasonable (and generous to Republican ideas) that they could come back for another try if it became necessary. It was necessary, but now hopeless. 9% employment isn’t a crises for the Republicans.

    • This. Well, sorta. The problem wasn’t so much moving on to healthcare reform or other issues that required attention, it was framing the too small and inefficiently designed ARRA as some great achievement that was going to fix a lot of things. The correct response was a “this is a good first step but much more action will be required because the GOP insisted on watering this down” attitude.

      • Scott Lemieux says:

        And they needed to be way more creative with the funds Congress actually appropriated.

      • homunq says:

        They would have had a better chance of getting a second chance if they hadn’t run and hidden under a bed every time somebody suggested they might be considering the eventual necessity of perhaps one day thinking about moving in that direction.

    • howard says:

      so i read this link right up to the idea that it would have been better to have “lost well” than to have settled for a half a loaf of stimulus.

      and then i stopped reading, because i think that’s a moronic position to take.

      where i criticize obama is rhetorically settling, being slow on federal reserve appointments, and not having a fallback in place much earlier.

      i do not criticize them in the slightest for not pushing for a stimulus that wouldn’t have passed at all. why is that better?

      • Ken B. says:

        It’s not an argument over the size of the bailout but that forcing banksters to take a haircut was never even discussed. The core of the argument I think is this:

        Widely adhered norms of fair play are among the most valuable public goods a society can hold. A large part of why the financial crisis has been so corrosive is that people understand that major financial institutions violated these norms and got away with it, which leaves all of us uncertain about what our own standards of behavior should be and what we can reasonably expect from others. When policy wonks, however well meaning, treat fairness as a public relations matter, they are corroding social infrastructure that is more important than the particular problems they mean to fix.

        • howard says:

          well, if that’s the point, i happen to agree with that: i have said from the day obama took office that the justice department should have formed a white-collar crime task force to investigate all the major banks and shadow banks for fraudulent conveyance, since they all should have known that a lot of the cdos based on late-boom mortgages were crap.

          but that’s not an argument about the stimulus and that’s not an argument in favor of losing well rather than at least getting enough of a package through to reverse what we now know was the largest gdp decline since the depression.

      • There are times when losing well would be preferable, or at least equal to, significantly compromising, but the stimulus clearly wouldn’t fit that bill. Clearly, any amount of stimulus above $0 would be preferable to $0 of a stimulus.

      • lawguy says:

        Well since in the end he and we did lose and lose quite badly, I really can’t understand your realpolitic point.

        • This is an argument that the difference between an $800 billion stimulus and a $1.2 trillion dollar stimulus is the difference between winning and losing, while the difference between an $800 billion stimulus and none is beneath notice.

          • BradP says:

            Well, in his defense, Krugman has been extremely vocal in stating that no stimulus actually occurred, and at this point, it isn’t hard to take the viewpoint that the stimulus was virtually ineffective for the 99%.

            Have you happened to see any revised estimates as to what sort of stimulus would have been needed? Stiglitz was arguing for around a million, and I think Romer was estimating a $2 Trillion shortfall that called for something aroun $1T as well.

            I’ve seen a lot of arguments that the stimulus was laughably underfunded because of “austerity hawks”, but I have yet to see the amount that would have been actually necessary.

            • wengler says:

              The stimulus filled in a lot of gaps that are getting exposed now that it’s gone.

            • mark f says:

              Friday, January 30, 2009:

              The $819 billion spending package passed by the House of Representatives this week is about $1 trillion short of what’s needed, Krugman said. Achieving sustained recovery will probably require spending $600 billion per year for three years on projects that put people to work while building a lasting infrastructure to support ongoing economic growth.

  3. Rob says:

    Ezra’s transformation to the perfect press courtier is complete. He uses what one unnamed administration source says and asserts it as fact.

    • jeer9 says:

      It’s just more Panglossian spin. Not much of a surprise that Drum and DeLong are lapping it up either. The real shock would be Lemieux and Farley expressing their solidarity with the hippies Wall Street protest. Not holding my breath but I am enjoying their silence.

    • howard says:

      perhaps you could both tell us what isn’t “fact” here, and perhaps you could both tell us what the administration could have done better on the initial stimulus: we really want to know.

      • Furious Jorge says:

        I don’t think Rob’s saying any particular thing definitively is or isn’t fact; instead, I think he means that Ezra is assuming something is a fact based on the word of an unnamed administration official, and since that official is unnamed, we have no way to judge for ourselves how much stock we should put in those words.

        • Murc says:

          Honestly, that’s the weakest part of Ezra’s piece.

          I’m inclined to believe the piece, but only because it matches my own predilections for what happened with the entire stimulus situation.

          If Ezra is indeed basing this entire thing off one unnamed administration source, that he’s not openly listing as a source, and, more importantly, he’s given someone inside the administration anonymity for a story that makes the administration look GOOD.

          Anonymity is for ‘I will go to jail for twenty years if they find out I’m talking to you.’ It is not for ‘hey, we’re actually doing all we can’ or for ‘we’d like to leak this, will you be our mouthpiece?’

    • UberMitch says:

      Maybe my reading comprehension is off today, but I can’t find the use of an unnamed source in the piece.

      • Rob says:

        Its the part Scott highlighted. There was no public Congressional announcement. Ezra got that from someone at the White House, doesn’t even show it off as a quote and then asserts what was said as a fact.

        • howard says:

          that’s what your questioning? honest to god, rob, please show us one little itty bitty tiny piece of evidence that the manic keynesians in congress were held back by a timid administration.

          • Rob says:

            Please show Congress’s entire position wasn’t “give Obama 75% of what he asks for.” This is the second rationalization from the White House after all. The first was they were fine for asking for less than needed because they expected Congress to add to it and move it back above $1 trillion.

            • howard says:

              rob: we have a great test case right now. loads of senators are just piling on to support the new jobs billl, right? i mean, you’ve get senators showing up every sunday morning on the talk shows complaining that the jobs bills is too small.

              it’s a complete fantasy that the u.s. senate either is a hotbed of keynesians or simply mechanistically gives obama 75% so if only obama had asked for $3T he would have gotten $2.25T. there’s not a shred of evidence that supports either of these contentions.

              • Bill Murray says:

                Please explain how you made a time machine that makes now early 2009

              • jeer9 says:

                It’s hard to believe that a President who has acted as conservatively as Obama has on foreign policy (drone attacks, assassinations), fiscal policy (no implementation of HAMP despite billions at their disposal, extension of the Bush tax cuts), civil liberties, and now drug enforcement really worked hard to get the best liberal stimulus he could through Congress. I usually applaud a rich fantasy life but that seems to be pushing it a bit far.

                • Michael Drew says:

                  It’s hard to believe that a president who proposed spending $800B of money we didn’t have – last I checked an unpopular thing in this country – was incented to try to have it end up being able to accomplish what was necessary to turn the economy around in such a way that in three years he could run on having done what was unpopular but that he did what was necessary to save and create enough jobs that we were able to enjoy a stable, non-jobless recovery, rather than a highly fragile, jobless one? Yeah, what possible motivation might he have had to get the stimulus right?

  4. c u n d gulag says:

    Don’t forget how many hundreds of billions of dollars in that “stimulus” were Tax Cuts, meant to appeal to what were then seen a potentially moderate Republicans like Snowe and Collins, among others.
    That money would have been far, far more helpful if it had gone to states to further shore up their economies, provide new construction jobs, and keep teachers, cops, and firemen on their jobs.
    But, there would have no, or certainly less money, had there been no tax cuts included in it.

    Whether it was that a trillion was the cap or the money that was settled for, it should have gone directly INTO the economy, and not in the form of more Tax Cuts.

    I don’t want to hear about tax cuts anymore. They’re not the solution. They’re a large part of the reason we’re in this fucking mess in the first place.

    • Davis says:

      You beat me to it. Less tax cut, more spending. But that, too, may have been necessary to get the conservative Democrats on board.

    • Not all tax cuts are created equal.

      The further down the income scale you go, the greater the percent of that “extra” money in people’s paychecks that gets spent.

      • howard says:

        to a degree, joe from lowell, but the problem is that given the degree of household debt, it was (and remains) questionable how much tax cut was spent and how much was used to reduce debt.

      • Furious Jorge says:

        Direct government spending almost always has a larger multiplier effect than tax cuts, even the most carefully targeted ones.

        And given the mentality and priorities of congressional Republicans, it’s safe to say that these were not the most carefully designed of tax cuts.

        • c u n d gulag says:

          All you need to do is just mention the words ‘tax cuts,’ and Conservatives go into a masturbational frenzy.

          They don’t care who gets them – as long as it’s not the lower and middle classes – at least not until they’re back in power, where I wouldn’t be surprised if they found their inner Keynesians.
          They’ll want the economy to improve so that they can take credit for it.

          Of course, they won’t mention Keynes. It’ll be called “The Ronald Reagan, ‘Tear Down These Regulations’ Growth Plan,” or some bullshit like that.

  5. Sev says:

    I don’t agree. The banking crisis could have been handled differently, and the sense of crisis leveraged to much greater effect. The fact that some senators were resistant only meant that Obama had to make his case- he could have rallied his supporters to exert pressure- he chose not to. If you want to budge a nearly immovable object, you’d better summon an almost irresistible force.
    Consider the way Reagan handled the PATCO strike- demonstrating that he was not to be trifled with. (Yes, of course I deplore his action; only talking about the grasp of politics). Ya ya, the stimulus involved Congress. Even so, Obama showed a lack of political instinct- assuming that he’d wanted a bigger stimulus- as he has continued to do.
    In general, I think this argument Scott has been making about Presidential limits has merit, but he’s overstating the case- particularly regarding moments of crisis. Look at what Bush was able to do after 9/11. Obama also came in at a time of crisis. He didn’t seize the opportunity.

    • Davis X. Machina says:

      Look at what Bush was able to do after 9/11.

      9/11 gave Bush the power to pass stuff Congresspeople already liked, with increased majorities.

    • Scott Lemieux says:

      SO the fact that Reagan did something under his power to do proves that Obama could gotten Senators to do things they didn’t want to do although he needed them more than they needed him. Right.

      • Sev says:

        Ok, I guess I’m just smoking dope; at least I’m doing it in good company:

        http://krugman.blogs.nytimes.com/2011/10/09/was-failure-inevitable/

        • calling all toasters says:

          Ha, Krugman? Sure, he’s been right on policy all along, but he’s never allowed for the LGM Axiom of Presidential Powerlessness.

          • Incontinentia Buttocks says:

            As Krugman points out in that linked article, the Obama administration’s assumption that recovery was going to come rapidly, perhaps even without a stimulus, was fatally incorrect, as Krugman himself pointed out at the time.

            The prosperity-is-just-around-the-corner attitude of the administration not only made it ill-prepared for the failure of recovery to arrive quickly, but also played into the “stimulus was a failure” meme of the GOP.

            • Bijan Parsia says:

              Given the stimulus that they had, what should they have done to block this? “Hey! This stimulus sucks! Really sucks! It’s no good! Sorry we made you pass it!”

              Isn’t that in tension with getting the stimulus passed at all?

              From a general voter perspective, the current state of the economy seems to matter a hell of lot more. The stimulus just doesn’t seem to animate people the way that TARP does. As for Republican’s and the elite, well, they’re pretty impervious to reality so it’s hard to see how being upbeat made that worse. I mean, currently job loss is primarily due to public sector contraction and yet the line is that a bloated public sector is crowding out job growth.

              • Incontinentia Buttocks says:

                Obviously, the current state of the economy is more important than how you spin that state.

                But if that state sucks and its going to be a political liability, sounding like Harry Truman and blaming a “do nothing” Congress beats the heck out of sounding like Herbert Hoover.

                Or to put this another way: in a hypothetical alternate universe, the Obama administration’s desire for a large-enough stimulus package would have been thwarted by the Senatorial intransigence that even made their (actual world) plans for an inadequate stimulus plans politically tricky.

                In this universe, the Obama administration, like the Senate, grossly underestimated the economic challenges it faced. And that is not the Senate’s fault.

    • The fact that some senators were resistant only meant that Obama had to make his case

      Oh my God.

      And people accuse Scott of attacking straw men.

  6. bob mcmanus says:

    I would suggest people follow the comments to Klein’s piece over at Mark Thoma’s. They are just beginning, if they even bother

    Winslow R:”Ezra isn’t about staking out new public space, instead wastes more time justifying the status quo. Time for OccupyWallStreet to realign the political system.” Winslow R links to Michael Hudson, who is more honest and useful.

    Even giving Klein the benefit of the doubt, that all his excuses and rationalizations are fair and accurate

    cfaman:”What should one say about a system where the possibility space doesn’t include the necessary? Intolerable.”

    If we were that broken, or if in retrospect we see that all our institutions are that broken, Obama needs to say so and act like it, not act like tweaks and shaming can fix us. It can’t.

    Reinhart & Rogoff are also simply intolerable and unacceptable (and wrong, but that is a long argument. Again, Mark Thoma is a great resource.) We cannot bear twenty years of miserable growth and hysteresis ensuring generations of underemployed. And we won’t, we will get a reactionary possibly quasi-fascist Republican who will deal with the economy his way if Klein’s “nobody’s fault” Democrats fail to get us out of the doldrums.

    • bob mcmanus says:

      Mark Thoma latest post shows that under current trends (and they will get worse) unemployment will be above 9.0% in 2017 will no downward trend.

      That is unacceptable and intolerable, and I don’t care who or what has to fall to get it fixed.

      “Mitch McConnell is such a meanie” is not gonna cut it. Oh Jesus, that’s contemptible. Get that bum and his apologists out of the way.

  7. fourmorewars says:

    I would just like there to be more of a focus on this phrase of Ezra’s:

    To try and double the bill’s size based on a suspicion that the recession was much worse than the early data indicated would have been a hard sell, to say the least.

    I mean, what the *!#@? I’m 53, I’ve lived through several recessions, EVERYF’INGBODY knew this one was once-in-several-generations. Is this lie part of the same spin package that has seen the punitocracy pimp the ‘it’s-the-overspending-that-caused-the-crisis’ bullshit?

    The ‘early data’? The early data was that there was more bad money generated by the housing collapse than was in circulation on the planet by several times, if I’m not mistaken. As Atrios put it, it wasn’t a ‘liquidity problem,’ it was an ‘insolvency problem.’ Vastly worse.

    • Davis X. Machina says:

      I’ve lived through several recessions, EVERYF’INGBODY knew this one was once-in-several-generations…

      I’m exactly your age, and for my entire life ‘Economists have predicted ten of the last three recessions’ was already a cliché.

      • Bill Murray says:

        I think you left off the work Austrians from that quote. Austrian economists predict as huge number of recessions, because their methods are based on a specific praxis that has no relation to actuality

    • Bijan Parsia says:

      It clear that it was once in a lifetime before it was clear how bad it was. Key graf:

      The Bureau of Economic Analysis, the agency charged with measuring the size and growth of the U.S. economy, initially projected that the economy shrank at an annual rate of 3.8 percent in the last quarter of 2008. Months later, the bureau almost doubled that estimate, saying the number was 6.2 percent. Then it was revised to 6.3 percent. But it wasn’t until this year that the actual number was revealed: 8.9 percent. That makes it one of the worst quarters in American history. Bernstein and Romer knew in 2008 that the economy had sustained a tough blow; t hey didn’t know that it had been run over by a truck.

      If your first number is 3.8%, you might pessimistically imagine it was 5%, but it’s hard to guess that it’s 9%. My understanding is that if the shrinkage had been 4-5% or even 6% the stimulus, however underpowered and mistargeted (to appease Republicans) would have been enough. The recovery would have been slower than necessary, but it would have been a recovery.

    • UserGoogol says:

      Not all once in a lifetime recessions are created equal. If unemployment had (as projected in that infamous chart) peaked at 9% without a stimulus, that would have still been a pretty serious and unique recession. I mean, most recessions don’t even require 787 billion dollar stimulus packages, let alone two trillion dollar stimulus packages.

    • I mean, what the *!#@? I’m 53, I’ve lived through several recessions, EVERYF’INGBODY knew this one was once-in-several-generations.

      You’re missing the point: the too-low estimate on which the stimulus bill was based was already assuming a worst-since-the-Great-Depression-sized recession.

      It turned out to be even worse.

      • Sev says:

        But many, such as Krugman, were saying AT THE TIME that it was far too small. Even Christy Romer wanted 1.3 Trillion.

        • lawguy says:

          The other point was that Obama chose to surround himself with people who wanted to believe that the recession wasn’t as bad as it was. He wanted to hear that less was more. He made sure there were no Krugmans or Galbreths around him or in power to suggest anything more.

          • This is a comforting myth for you, but as Sev says, there were plenty of people surrounding Obama who were pushing for a larger number. One of whom was that betw noire Lawrence Summers.

        • Bijan Parsia says:

          Again, there’s “rather too small relative to what they believed” and “unbelievably too small relative to the reality which wasn’t clear at the time”.

          Overall, I think Krugman makes a reasonable case both now and then. (Key point being that the CBO forecast at the time was of a $2 trillion output gap. With the right multipliers, $800 billion might have worked. With the particular mix, maybe not so much.

          My guess is that a bit of optimism, coupled with data underestimating the damage, plus perceptions of political realities, plus some hope for helicopter Ben, plus some genuine hesitance about going all in resulted in the policy. How you weigh each bit can vary, but it remains hard to see how getting hugely better was possible.

          I think it overstates the case to say that the perception that the “stimulus failed” is what’s keeping us from doing more now. There’s no world where the Republicans are going to support more stimulus: Recall how they blasted the package but took credit for the particular money coming to their states.

          • Michael Drew says:

            My hunch is that even during the nearly-but-only-very-briefly 60–Senate-Dem 111th Congress, had Obama gone back to congress and said, hey, it looks like the Stimulus was too small/incorrect/insufficient in some way or other, he’d have faced the dynamic of losing members over simply coming back for a second lick on the ice-cream cone, which was now seen to be failing. Perhaps he could have made a big deal out of trying a different approach, but that would have been putting lipstick on a pig. I don’t think you can overstate the extent to which second stimulus before the effects of the insufficiency of the first one were undeniable (and egregiously harming the country) was a non-starter. The entire game was the first lick. And not fucking up unfucking mortgages.

            • Hogan says:

              he’d have faced the dynamic of losing members over simply coming back for a second lick on the ice-cream cone, which was now seen to be failing. Perhaps he could have made a big deal out of trying a different approach, but that would have been putting lipstick on a pig.

              And once the pig gets lipstick all over the ice cream cone, that trial balloon starts weighing Obama down like an albatross.

        • But many, such as Krugman, were saying AT THE TIME that it was far too small.

          While many more important people, such as Senate Votes 57, 58, 59, and 60, were saying something quite different.

          I think it’s pretty clear that, in both the overall size of the bill and its makeup, the administration and their supporters in Congress had to accede to political reality.

  8. LosGatosCA says:

    Tax cuts in the package were a mistake.

    And Obama and crew should have been on it from the bill signing to saying if we need to do more, we will. But reappointing Bernanke was the huge tell they never embraced the unemployment/demand problem and thought it would solve itself.

    They don’t deserve reelection, but the American people don’t deserve the alternative.

    • DocAmazing says:

      They don’t deserve reelection, but the American people don’t deserve the alternative.

      That’s the essential summary right there. The administration does not deserve the defense that it gets from this blog, but the alternative is, of course, worse. That doesn’t mean that the current administration approaches “good” or even “adequate”, just that the Republicans are openly fascist.

      • Bijan Parsia says:

        Whether they “deserve” it or not isn’t really related to whether the defense, or rather, the analysis is correct. Getting the analysis right is, one hopes, useful to planning next moves.

        And perhaps nothing much is to be done. It’s hard to imagine that this generation of Republicans will ever become even marginally better. Perhaps enough of the elite will turn against them that serious work can get done. Still hard to imagine. If 2012 is a Democrat wave election (with a big boost from Occupy Wall Street) such that they control Congress and the Presidency (a la 2010), I think there’s reason to hope that they’d do even better.

        I don’t have much hope for civil liberties, etc. But who knows. Perhaps that’s like gay rights: They’ll do it if their feet are held to the fire.

      • Incontinentia Buttocks says:

        This.

        I’m going to cast my (entirely symbolic) Oklahoma presidential ballot against the GOP nominee (who will of course win all of my state’s electoral votes). And the only way to do this will be by voting for Obama. So I’ll do so.

    • Tax cuts in the package were a mistake.

      Another way of saying this “getting a stimulus bill passed was a mistake.”

      But reappointing Bernanke was the huge tell they never embraced the unemployment/demand problem and thought it would solve itself.

      Ben Bernanke is the most activist, pro-growth Fed Chair in several decades. The actions this Fed has taken to try to goose the economy are unprecedented.

      • bob mcmanus says:

        Paying interest on reserves gave huge incentives to the banks to not make loans. I doubt he tricked you. The other part of Bernanke’s plan was QE while holding inflation, i.e. wage gains, under 2%. He is getting what he wants, record profits with disinflation.

        I am sure you read Sumner and the rest of the econoblogs.

        • Paying interest on reserves gave huge incentives to the banks to not make loans.

          But it’s not as if paying interest on reserves was something novel, or as if Bernanke was paying anything except notably-low interest on reserves. Pointing out that he didn’t do any and everything you can dream up doesn’t rebut the point that what he has done amounts to putting the pedal to the metal in rather dramatic fashion. The correct measure by which to determine whether or not he’s been an activist pushing pro-growth measures far beyond those of any of his predecessors isn’t whether he measures up to the most activist, most pro-growth vision you can come up with, but rather, how he measures up against the field.

          • Walt says:

            Bernanke introduced the policy of paying interests on reserves. Before him, the Fed did not pay interest on reserves. It’s entirely a Bernanke-era innovation.

            And if you’re the President, you can appoint the most activist, pro-growth vision that the Senate will approve, and thus change the field.

      • LosGatosCA says:

        Ben Bernanke is the most activist, pro-growth Fed Chair in several decades. The actions this Fed has taken to try to goose the economy are unprecedented.

        Bernanke expanded the balance sheet in return for the least possible value (monetary and regulatory reform) he could get in return. Unlike the RTC back in the late 80′s/early 90′s Bernanke let way too many of the incompetents remain in place and even protected equity holders and counter parties who deserved no consideration at all.

        The AIG case was atrocious and well documented. But the Bear, Stearns deal is even easier to understand. How the Fed could provide bail out money to INCREASE the share price (over the negotiated price) on the fire sale of a portfolio the Fed was guaranteeing to JP Morgan is simply unbelievable. That was $10B simply handed over to Bear Stearns shareholders for no value whatsoever. The approach Bernanke took to all these deals was the same – least immediate pain to the parties possible without any thought to what the long term, negative growth consequences were.

        Pro-growth in this setting means clearing the deadwood and shaping better regulations in place to allow for new, healthier growth. Bernanke did none of the necessary cleansing so the old guard and the bad assets continue to clog the system stifling new growth. He’s not the sole actor in this bad drama but he hasn’t put his reputation behind pro-growth political policies like Greenspan did when he greenlighted the Bush tax cuts on Jan 25, 2001.

        Bernanke has done unprecedented things no doubt, but that doesn’t mean they were done well in the least or that they were the most pro-growth things that could be done.

        • LosGatosCA says:

          That was $1B – sorry for the typo.

          In return – “The U.S. Federal Reserve rewarded Bear Stearns’ shareholders in the deal by taking responsibility for $29 billion in toxic assets in Bear Stearns’ portfolio.”

          That’s indicative of the whole series of decisions made at Treasury and the Fed, US and NY.

          His reappointment was a travesty.

          • Asteele says:

            It would be nice if Democratic presidents would learn not to re-appoint conservative republicans to the second most powerful position in the government. It didn’t work out with Greenspan, and it didn’t here either.

        • I was thinking about his actions on monetary policy when I wrote my comment. On that score, he’s been extremely pro-growth in historical terms.

    • LeeEsq says:

      Oh I don’t know if the American people don’t deserve the Republicans. If millions of Americans refuse to get involved in politics as citizens and if millions believe the dribble of the Republicans than maybe they deserve the Republicans until they learn their lesson. Unfortunately this means that they also need to inflict misery on Americans who know better.

  9. Walt says:

    I find this hard to believe, just because it’s the exact bullshit excuse I would give in their shoes. It’s like “the dog ate my homework.” It could be true that the dog ate your homework — my wife used to have a dog in college that would chew up her homework if she left it where he could reach — but it’s also a mighty convenient thing to say when you just didn’t do your homework.

    But if it _is_ true, I don’t see how this doesn’t provide a strong argument that the Democratic party should be smashed and replaced. This was the single most critical piece of economic legislation for a long, long time, and the Democrats couldn’t get it done. They passed an inadequate stimulus because they weren’t willing to bypass the filibuster, and because they had leeches like Evan Bayh in the caucus. These are not accidental, contingent effects, but intrinsic to the nature of the party at it is currently constituted.

    But as I said, I don’t believe it. The Obama administration has consistently been overoptimistic about the course of the crisis and recovery, so they were inclined to push for a too-small and not well-targeted stimulus.

    • Scott Lemieux says:

      This is precisely backwards. It’s the assertion that Ben Nelson and Evan Bayh and Joe Lieberman and Olympia Snowe would have supported a more than trillion dollar stimulus had the president acted differently that is the implausible “dog ate my homework” position.

      • Walt says:

        I forgot your role as Official Arbiter of which counterfactuals are plausible, and which aren’t.

        • Bijan Parsia says:

          Can you flesh out the counterfactual where Bayh and Snowe support $1 trillion in “bad” stimulus, much less good stimulus?

          • Incontinentia Buttocks says:

            It’s pretty clearly true that the Democrats (not Obama, but Obama + Senate Democrats) couldn’t get it done.

            Had Obama had the votes of all the members of the Democratic caucus, once Franken was seated, he didn’t need a single GOP vote.

            There’s no need for us to share the President’s bizarre obsession with convincing mythical reasonable Republicans to join with him.

            The issue here is Lieberman, Bayh, Nelson, McCaskill, Lincoln etc. Snowe and Collins are a distraction.

            • IM says:

              You forget Specter. Still a republican then and so there weren’t sixty votes. Obama had to compromise with Specter, Snowe and collins. And he did need two or three instead of one because of the ill health of Byrd and Kennedy.

              Furthermore the so called moderate democrats probably were as frightened by big numbers as the moderate republicans.

              • Incontinentia Buttocks says:

                Furthermore the so called moderate democrats probably were as frightened by big numbers as the moderate republicans.

                Exactly.

                When the Democratic Party itself could not agree on a reasonable policy, one needn’t even discuss the GOP to explain the policy failure. The problem with the Senate Democrats on the economics front isn’t a few bad apples, but rather a very sizable minority of the Democratic caucus.

                • but rather a very sizable minority of the Democratic caucus

                  5/60 X 100 = 8.33%, a tiny minority.

                  It all comes down to the filibuster rule.

                • Scott Lemieux says:

                  If the problem is the “Democratic Party” per se, then why was the legislation passed by Peslosi’s House so much better? Hmmm, it’s almost as if there’s something about the apportionment and rules of the Senate push outcomes to the right…

                • Incontinentia Buttocks says:

                  Yet somehow, Scott, the GOP has relatively little trouble keeping its blue state Senators (e.g. the Maine duo, Brown, and Kirk) and its far more numerous purple state Senators in line.

                  Yes the structure of the Senate makes the problems with the Democratic Party worse in that body. But Pelosi, too, had to struggle with the Blue Dog caucus in the last Congress on, e.g., HCR.

            • Bijan Parsia says:

              I’m confused…Franken was seated in July 2009 and the stimulus passed in Feb 2009 (not to mention Spector). And, well, Bayh is sufficient.

              So, again, what’s the counterfactual that preserves the actual structure of the Senate at the time that the stimulus was on the table such that a $1 trillion dollar stimulus would get 60 votes in the senate.

              I’ll spot anyone a complete disregard of the rest of the legislative agenda and any thought of changing the tone, bipartisan(crap)ship, or holding the caucus together afterwards.

              I’m reluctant to spot changing the rules to break the filibuster, since it’s hard to see that *that* was ever in the cards, but I suspect that would have worked and worked well.

              • Incontinentia Buttocks says:

                I’ll spot anyone a complete disregard of the rest of the legislative agenda and any thought of changing the tone, bipartisan(crap)ship, or holding the caucus together afterwards.

                I’m reluctant to spot changing the rules to break the filibuster, since it’s hard to see that *that* was ever in the cards, but I suspect that would have worked and worked well.

                I’m not sure we’re really disagreeing here. There’s never been anything remotely like fifty Democratic votes to get rid of the filibuster (though last week Reid got enough votes to muster what one might call a tactical nuclear option…but only to prevent his caucus’s embarrassment at the hands of the GOP, not to pass legislation). And forcing through a reasonable economic policy in the spring of 2009–even if you could have found fifty votes for it–would have, as you say, torn the Democratic caucus apart.

                Just to reemphasize my point here: I’m not arguing that Obama could have gotten a bigger stimulus bill through Congress. I’m arguing that he didn’t particularly want to. And if he did, his own party would have stopped him.

                The problem isn’t Obama. The problem is the Democratic Party (though, of course, the GOP is even worse).

          • Walt says:

            Sure. The administration floats a trial balloon that the US needs $3 trillion in stimulus. The sensible moderates do their sensible moderate rain dance, and they compromise on $1.5 trillion. Or you compromise on $800 billion now, and then automatically another $800 billion if unemployment doesn’t fall below 8% in a year.

            You have to believe that $1 trillion has a totemic significance that the White House is completely unable to change to think that there’s no way they could do better. They had no principled argument against $1 trillion, and there aren’t concentrated interests (other than the Republican party, obviously) against a bigger stimulus, the way there were concentrated interests against a public option in health care.

    • I find this hard to believe, just because it’s the exact bullshit excuse I would give in their shoes. It’s like “the dog ate my homework.” It could be true that the dog ate your homework — my wife used to have a dog in college that would chew up her homework if she left it where he could reach — but it’s also a mighty convenient thing to say when you just didn’t do your homework.

      This reads exactly like the justifications for global warming denialism I used to read on Reason’s blog. Climate science is just too convenient for the soshulists, so I’m not going to believe it.

      • BradP says:

        It should be noted, however, that while you are correct in seeing that attitude, Reason’s principle writer (Matt Ridley) on climate issues is not a denialist.

        • David Nieporent says:

          Not sure who Matt Ridley is, but I know who he isn’t: Reason’s principle writer on climate issues. Ron Bailey is. That having been said, your point stands: Bailey is not a “denialist.” He was originally a skeptic (not “denialist”), and then years ago said, “Okay, I’m convinced by the evidence.”

  10. bob mcmanus says:

    “anne” at Thoma’s has some BLS numbers

    “October 7, 2011

    The Bush-Obama experience in monthly job loss has been,

    - 8,920 x 129 months = – 1.15 million jobs lost in all;

    enough job creation to keep up with civilian work force growth would have meant,

    138,520 x 129 = 17.87 million jobs created in 129 months;

    the Clinton experience was,

    240,310 x 96 = 23.07 million jobs created in 96 months.”

    Counting dependents, as a ballpark guess of those damaged by Bush/Obama bankster policies I think we need 25 million to march on Wall Street and another 25 million to march on the White House and OCCUPY. Golly, I hope they don’t damage anything or hurt anybody.

    Occupy.

    What do you want?

    Jobs and equality.

    But considering the circumstances and the institutions and the opposition and the unprecedentness and blah whimper blah whine blah snivel…

    Jobs and equality now!

    Just bring it all down. Don’t listen to the hacks. Occupy. Be the monkeywrench in the gears.

    • Scott Lemieux says:

      the Clinton experience was,

      240,310 x 96 = 23.07 million jobs created in 96 months.”

      SO the lesson is…we need a more conservative Democrat with even more pro-bankster policies? Help me out here.

      • The lesson is that Obama should have used the bully pulpit to bring the Senate on board with a $2T stimulus, the way Clinton did when he created all those jobs. Instead, all Obama does is talk.

        Occupy the comment threads!

      • bob mcmanus says:

        I just want you to think about being approximately 50 million jobs down from a full-employment wage-gaining economy and gaining about a million jobs a year with no improvement in trend in sight, and a higher probability of another dip than a boom.

        Know any history? Will this go well?

        Maz Sawicky told me:”We don’t make policy.”

        Just fix it, elites. Now.

        Occupy.

      • jeer9 says:

        Clinton was lucky regarding the economy but occasionally competent. Obama has been unlucky but consistently incompetent. If only the stimulus bill had been some useless piece of currency legislation that could be turned to good effect on the campaign trail, Reid might have amended the rules to get it through. But they’re Democrats after all and kabuki is what inspires them. At least the performances around Zuccotti Park might lead to something productive – rather than the re-election of a bungler whose only good fortune is the absence of a quality opponent. “I suck but you’ve got no other choice” remains the winning slogan. So stop whining and clap louder. The Theater of the Absurd is unpredictable yet cathartic and may lead in any direction – but never to the Left.

        • So when you assert Clinton’s economic competence, what are you talking about — the economic team Obama largely recycled? The wingnuttier Federal Reserve Chair? The passage of Gramm–Leach–Bliley? Help me out here.

      • SO the lesson is…we need a more conservative Democrat with even more pro-bankster policies? Help me out here.

        Clinton more conservative than Obama?

        Next time I need help counting the number of angels dancing on the head of a pin, I’ll head right over here!
        ~

      • Walt says:

        At this point, Obama is to Clinton’s right. Clinton called for using the Constitutional option in the debt ceiling fight, for example.

        • It’s telling that you don’t mention anything Clinton actually did as president, which is rather crucial to claiming that he’s to Obama’s left.

          • Walt says:

            My impression is Obama’s health care plan is to Clinton’s right, but it was a long time ago so maybe I’m not remembering it very well.

            Obama’s foreign policy is certainly not to Clinton’s left, though it’s hard to say what Clinton would do with roles reversed.

            So what’s the affirmative argument that Clinton is to Obama’s right? NAFTA? Defense of Marriage Act? Repeal of AFDC? Deregulation of finance? I don’t see any reason to believe that if the political environments were reversed that Obama would have behaved very differently. Though I don’t have access to the Oracle of Counterfactuals, so what do I know?

            • My impression is Obama’s health care plan is to Clinton’s right, but it was a long time ago so maybe I’m not remembering it very well.

              I don’t see any reason to believe that if the political environments were reversed that Obama would have behaved very differently.

              You can’t only use the political environment to weigh one side of the scale.

        • Michael Drew says:

          At this point, Obama is to Clinton’s right. Clinton called for using the Constitutional option in the debt ceiling fight, for example.

          This is right up there with the funniest blog comments I have ever read.

          • Walt says:

            Then I suggest you acquaint yourself with some actual comedy. I hear Parks and Recreations is good.

            The differences between the two are surprisingly small, which I think shows how ossified Democratic thinking has become.

            Clinton campaigned on stimulus, health care, and gays in the military. He backed off the first one because US interest rates were very high, lost on the second one, and settled for an awkward compromise on the third after serious pushback. Then he pivoted to deficit reduction.

            Obama campaigned on health care and gays in the military, and turned to stimulus when the economy imploded. He had more success with Congress than Clinton did, and proposed a bigger stimulus in the face of a bigger crisis, but the agendas were broadly similar.

            Then both Presidencies were swallowed up by confrontations with the Republicans.

            • Scott Lemieux says:

              I think that’s about right. But the basis you use to claim that Clinton is to Obama’s left is mysterious.

              • Walt says:

                Specifically the debt ceiling. While President, Clinton didn’t allow the Republicans to make an issue out of the debt ceiling, and he said that if he were President now he would have gone the “debt ceiling is un-Constitutional” route. In the same situation, Obama opted to try to make a deal on entitlements. I think that puts Obama to Clinton’s right, at least on this one issue.

                • Michael Drew says:

                  Clinton didn’t allow it, or they just didn’t do it?

                  I wasn’t saying the suggestion that Obama is to Clinton’s right is funny. It’s plausible, since, as we’ve agreed, they’re comparable. What’s funny is trying to demnostrate this by citing what one president says about the other president’s actions in office – once he’s out of office, commenting from the peanut gallery. it’s just not a comparison, and it demonstrates nothing about either man’s actual stances. We don’t know from what Clinton says while out of office what he’d do in office in a given situation, and we don’t know from Obama’s actions in office what he’d say looking in from out of office would be the right thing for a different president to do in the same situation. These just are unsound ways to compare two figures’ net political position. I found it truly funny for a blog comment.

                  Of course, given your inability to recognize an apples-to-oranges comparison in the first instance, it’s not particularly surprising that you respond to “This is right up there with the funniest blog comments I have ever read” by saying that I must not know what funny is, since Parks & Recreation is a clear refutation of my assertion that your blog comment is funny for a blog comment.

                  I prefer Community myself.

  11. bob mcmanus says:

    There are no excuses left. Either you join the revolt taking place on Wall Street and in the financial districts of other cities across the country or you stand on the wrong side of history. Either you obstruct, in the only form left to us, which is civil disobedience, the plundering by the criminal class on Wall Street and accelerated destruction of the ecosystem that sustains the human species, or become the passive enabler of a monstrous evil. Either you taste, feel and smell the intoxication of freedom and revolt or sink into the miasma of despair and apathy. Either you are a rebel or a slave.

    Chris Hedges truthdig

    This may fail, and Berube and Lemieux may remain safe, secure, comfortable, respected.

    I am so glad I am not like them.

  12. Anonymous says:

    FWIW, Krgthulhu remains skeptical that this was the best that they could do. Have to say that I agree with him.

    • DrDick says:

      That was me. Damned computer crashed earlier today and wiped out all my cookies.

    • TT says:

      I think Krugman’s right up to a point, especially on the inability to recognize at the time that the downturn was far worse than the BLS numbers indicated. Sadly, I highly doubt that even if the 8.9% contraction had been accurately reported in January 2009 that conservative Democrats in the Senate would have been moved to address a $2.5 trillion shortfall in output in as dramatic a fashion as would have been required.

      I do believe Krugman oversells the amount of “shovel ready” projects as part of a stimulus, at least those requiring anything more intensive than road reconstruction (not that I object–I work in the paving industry).

  13. soullite says:

    Again, if this argument was going to convince people, it would have the first billion times someone screamed ‘not politically feasible!!1!!!’.

    Nobody believes you all at this point. You’ve been making excuses for 3 years, and you seem to be convinced that if you find just the right way to say the same damn thing, then everyone will bow down to your eternal wisdom.

    Nobody believes you. The results were a bit too close to what the results of neoliberal always are – the impoverishment of the man for the benefit of the few, while you minstrel-show clowns make excuses and promise that this time, it really was all you could do and it really will bounce back to the benefit of working people. Like with NAFTA, and the WTO, and TARP, and HAMP and all of the other shit you people do that only ends up fucking us all in the collective ass.

  14. soullite says:

    Cramdown was possible. ‘Republicans will say mean things if I do it!’ does not actually make something politically unfeasible.

  15. BradP says:

    That magic trillion could have shored state budgets enough to allow the federal government to get around to actually stimulating the economy.

  16. soullite says:

    Nobody really believes you because it looks like you’re just using ‘political feasibility’ as an excuse not to do things that Obama’s donors don’t want him to do. If it was just a matter of ‘what could get passed’, then TARP wouldn’t have been the complete and utter cock-up that it is.

    If it seemed like Obama and congressional Dems actually wanted to do some of this stuff – from Glass-steagell to the public option to the EFCA – that would be one thing. But it is completely obvious from the way they act that never wanted any of that, so political feasibility comes off as an excuse and nothing more.

  17. bobbyp says:

    SO the lesson is…we need a more conservative Democrat with even more pro-bankster policies? Help me out here.

    I would, but the banksters got just about everything they wanted from Clinton. That, I assume, was your point?

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