Accepting the Loss
The more we learn about how we wound up with a too-small stimulus the more I wonder about the slightly odd aversion of American presidents to accepting legislative defeats. After all, in our system of government it’s just a fact that you can only enact the legislation that congress is prepared to enact. Given that we don’t expect presidents to have views that are identical to those of the median legislator, and especially given the rise of the de facto supermajority rule in the Senate, it should be expected that the policy preferences of the White House will substantially diverge from those of the pivotal members of congress.
So would it be so terrible for the President to just say, “I’m glad congress passed this bill and I’m signing it because I think it would help the economy, but the considered judgment of the Council on Economic Advisers and the rest of the staff is that we could use hundreds of billions of dollars of stimulus over and above what Ben Nelson and Susan Collins were prepared to vote for?” Why is it felt necessary for the president to pretend to believe that what congress will pass is the same as what the country needs? It seems to me to create a weird confusion about who’s responsible for what. We’ve got Paul Krugman blogging about “Obama’s Anzio” instead of “Kent Conrad’s Anzio” or whatever. It’s just not the case that the White House gets to make domestic policy unilaterally.
41 Responses to “Accepting the Loss”
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October 5th, 2009 at 11:36 am
With the stimulus, timing was everything. Better to have something too small immediately because the longer it waits, the bigger it needs to be.
What they need to do now is put a JOBS program into the 2010 budget.
October 5th, 2009 at 11:42 am
Krugman’s Anzio analogy is apt, but not in the way he thinks it is. Gen. Lucas was cautious in his advance from the beachhead, but that was because the initial landing of little more than a division of infantry was, in Gen. Kesselring’s later judgment, not enough of a force to seriously threaten the German rear. (Not having Allied armor at Anzio was a serious mistake.)
In the end of course a breakout finally did occur from Anzio as part of Operation Diadem’s breaking of the German defense line around Monte Cassino. Unfortunately, Gen. Clark’s zeal to get to Rome first bungled the opportunity to bag the German Army in its retreat.
So let’s hope that the follow up to the first stimulus actually reduces unemployment, instead of allowing the recession to drag on that much longer.
October 5th, 2009 at 11:44 am
Ignoring the question of accepting legislative defeats, its still the case that its appropriate to call this Obama’s Anzio – ESPECIALLY in the context of Krugman’s post. Obama sent an intentionally modest proposal to try and win republican votes. Instead, it got basically none, and was further watered down by Ben Nelson and Kent Conrad and their ilk taking their “centrist” pound of flesh. That’s how the game is played, Repubs are the party of no, and centrists will always shake their heads solemnly and say that its just a bit too much, and if we just take out a little bit then it’ll be ok. I’m pretty sure if I went back and looked at MY blog posts contemporary to the stimulus, MY would have understood this and wished BO suggested a bigger stim so it would be of a more sufficient size once it got through the sausage grinder. Of course, now MY has forgotten this fact…
October 5th, 2009 at 11:46 am
Since Keynesianism is a giant evil hoax without any historical, logical or factual basis, we can all be thankful that we didn’t get more catastrophic debt, I mean “stimulus”.
October 5th, 2009 at 11:49 am
Bob Roddis Says:
October 5th, 2009 at 11:46 am
Since Keynesianism is a giant evil hoax without any historical, logical or factual basis, we can all be thankful that we didn’t get more catastrophic debt, I mean “stimulus”.
Hey! I read that pamphlet too!
October 5th, 2009 at 11:51 am
It sort of feels like a sympathetic reaction to the parlimentary system, where a defeat on major legislation can become a vote of no confidence. Then we have the usual horse-race political reporting, exploited to the hilt by the opposition: any defeat/dissapointment can be claimed to be a major setback, hopefully (from the standpoint of the opposition) setting up major momentum against the incumbent.
October 5th, 2009 at 11:56 am
The stimulus that included $25 billion in tax breaks for corporations buying back debt for pennies on the dollar? That was courtesy of Dirty Max Baucus.
The stimulus that had a small amount of infrastructure spending, so Uncle Sam wouldn’t horn in on any private equity infrastructure funds, Goldman Sachs, Carlyle Group, etc.?
The stimulus that would keep unemployment below 9% according to President Obama’s economic advisers? I know the White House doesn’t like progressive bloggers holding the administration to its promises.
President Obama spoke of the bill at signing.
Obama said: “We will need to do everything in the short term to get our economy moving again” as well as “begin restoring fiscal discipline and taming our exploding deficits over the long term.”
The last line didn’t suggest it’s too small.
October 5th, 2009 at 12:02 pm
Ignoring the question of accepting legislative defeats, its still the case that its appropriate to call this Obama’s Anzio – ESPECIALLY in the context of Krugman’s post. Obama sent an intentionally modest proposal to try and win republican votes. Instead, it got basically none, and was further watered down by Ben Nelson and Kent Conrad and their ilk taking their “centrist” pound of flesh.
I agree with Matt that Obama believed that the stimulus we got was better than no stimulus. Why do you believe no stimulus would have been better?
October 5th, 2009 at 12:02 pm
Glenn Greenwald, who could be talking here about little Matty and more foreign adventure and more insane “stimulus” debt says:
October 5th, 2009 at 12:05 pm
Why is it felt necessary for the president to pretend to believe that what congress will pass is the same as what the country needs? It seems to me to create a weird confusion about who’s responsible for what.
Um, maybe because he is trying to preserve a healthy working relationship with Congress, and that it is of the nature of such relationships that the participants in the relationship try to avoid pointing fingers, casting blame and passing the buck?
October 5th, 2009 at 12:11 pm
Hey! I read that pamphlet too!
Do Not Mock The True Believers Of Zombie Mises!
October 5th, 2009 at 12:12 pm
$13 trillion and counting. The day we can’t float this debt the jig is up. When the world starts moving to other reserve currencies and we can’t sell the debt and impoverish our grandchildren; that is when we will figure out what our politicians are made of.
October 5th, 2009 at 12:12 pm
“We’ve got Paul Krugman blogging about “Obama’s Anzio” instead of “Kent Conrad’s Anzio” or whatever. It’s just not the case that the White House gets to make domestic policy unilaterally.”
You just keep lying through your bared teeth for Heather Podesta, Matthew.
Obama got exactly what he requested from Congress on the stimulus, even though his own shop was saying the stimulus needed to be twice as large.
The American public gets screwed, and Matthew and his cronies get lobbying gigs for life.
Fucking scumbag.
October 5th, 2009 at 12:13 pm
I assume that the president felt that praising congress would be better for his long term relationship with the body than criticizing the congress. Still he probably should have admitted that the stimulus may be to small.
October 5th, 2009 at 12:20 pm
Care to elaborate, Bob? Not all of are as smart as Ron … Dr. Ron Paul.
October 5th, 2009 at 12:26 pm
We’ve got Paul Krugman blogging about “Obama’s Anzio” instead of “Kent Conrad’s Anzio” or whatever.
Columnists and bloggers aren’t forced to write this way. It’s just accepted form on the left to spend precious opinion time pointing out:
a) opinion makers on the right are going to win the debate
b) I keep telling you, Democrats are pussies
Maybe these are accurate points but as an advocacy strategy they’re stupid and self-defeating.
October 5th, 2009 at 12:31 pm
Obviously you don’t pay attention to and have little understanding of bond markets. My guess is that you don’t even understand the difference between a stock and a flow.
October 5th, 2009 at 12:33 pm
It was just before dawn
One miserable morning in black ‘44
When the forward commander
Was told to sit tight
when he asked that his men be withdrawn
And the generals gave thanks
As the Other Ranks
Held back the enemy tanks for awhile
And the Anzio Bridgehead
Was held for the price
Of a few hundred ordinary lives
October 5th, 2009 at 12:42 pm
Paul Carbone:
Start here for the short version.
There’s also a new book by Hunter Lewis, “Where Keynes Went Wrong” (where didn’t he?) which I received and read after writing the previous comment.
October 5th, 2009 at 12:45 pm
Matthew – How can you know that the Stim Bill was too small when only $100B of the total $308B in spending has actually been spent??
Most economists have said that they expect more positive effects to come to light as lagging economic indicators in Q4 and Q1CY10.
If the bill had been bigger, there is almost no chance that the $$ would have or could have been spent faster & sooner …
October 5th, 2009 at 1:02 pm
We don’t know.
The simple fact is we don’t know if the stimulus is working, did work, will work and how much work it did. The reason why is none of us will ever live in a world where a different sized stimulus was passed. We can build models that say it did or didn’t save jobs. Of course those models depend on assumptions on what would have happened if there hadn’t been a stimulus. The only place we can really see the stimulus saving or creating jobs is in state spending, where the states, facing balanced budget amendments, would have needed to cut (or cut more) jobs.
As to whether a bigger stimulus would have worked better, this too is something we don’t know because it depends on your definition of worked. Would a bigger stimulus have saved more jobs? Arguably yes. Would the cost of the marginal job saved or created been a good return on the money invested, who knows?
As to Krugman, his thesis goes like this. Stimulus is an effective way to intervene in the economy. The economy is still not healthy. Therefore more stimulus is needed. Gone is any question about the marginal return on investment or the durability of the jobs created or saved.
In my own opinion (and I will be the first to admit it’s an opinion), the stimulus helped some but probably not enough to justify all of the spending. Just do the math…$787 billion/number of jobs saved or created. Let’s take the high end of the administration’s range of 3 million jobs saved or created. That’s about $260,000 per job saved or created. It would have been better to just give people the money when they lost their jobs, cheaper too.
If, on the other hand, the stimulus was a convenient excuse to fund some infrastructure and other projects that people wanted funded, that’s fine too but it’s got nothing to do with saving jobs.
October 5th, 2009 at 1:05 pm
Neither Yglesias, Krugman, Obama, nor Congress really know what, if any, stimulus is needed.
Why not just say that? Why start with a supposition, pretend it is fact, then make an argument? If the readers are that stupid, then why bother at all?
October 5th, 2009 at 1:05 pm
Weird shit. You’re against fractional reserve banking? How would that work? You’d have to pay the bank to store your money? You austrian folks are fucked up/
October 5th, 2009 at 1:10 pm
Nothing is ever Obama’s fault. So Says Matt Y. Every. Fucking. Time. Strange how he refused to blame congressional Democrats for any fucking thing from 2006-2008, because then Bush was in charge and thus the Presidency was a monolith.
Everyone has situational ethics, you guys have situational facts.
October 5th, 2009 at 1:11 pm
Steve, I’d say that if Unemployment is at 10%, the stimulus didn’t fucking work. Maybe things could have been worse, but that’s not actually the same as the stimulus having worked. either it succeeded or it failed, and the judgment of everyone but a few sycophants is that it failed.
October 5th, 2009 at 1:21 pm
I’m hardly a sycophant. I just think the arguments on both ends of the spectrum are BS.
The argument that the stimulus created or saved zero or negative numbers of new jobs is wrong. You can see the impact in state employment. You may also have your own opinion on how public versus private sector jobs should be prioritized or counted. To argue there was no impact to me fails a reality test.
To argue the stimulus had a good return on the $787 billion investment also strains credibility as I posted above. So what we know is that the return on the stimulus was mostly likely negative but better than negative 100 percent. Since the marginal job created or saved probably comes as a higher price than the first job, more stimulus will have a more negative return.
That’s a hard proposition to invest behind. If you find that point of view sycophantic, perhaps we have a different definition of the word.
October 5th, 2009 at 1:26 pm
Mr. Carbone:
You read the first 3 chapters of the book by Jesus Huerta de Soto very fast. He explains why the process is fraudulent and the cause of pre-Fed panics. He proposes solutions. His book is only 875 pages long. Why don’t you try refuting him with facts and logic? Which would be a first for an anti-Austrian.
By the way, one can always tell when a reviewer of END THE FED hasn’t even read the book because the review contains the usual snipe that Ron Paul “conveniently fails to acknowledge pre-Fed panics”.
October 5th, 2009 at 1:39 pm
I think you’re neglecting the importance of consumer confidence. Obama may fear the stimulus will be to small to turn the economy around. He may be 99% certain that it’s going to fail. But once he says he thinks it likely to fail, he guarantees failure. Consumer confidence is a fragile thing.
October 5th, 2009 at 1:48 pm
Petey @ 13: Jeez, man, why don’t you tell us how you really feel? I agree on substance. Soullite, too. It is going beyond frustrating. Frank Rich nails it today. NYT.
Unemployment headed to 10% to stay there for years. Lots more mortgage defaults to come through 2012. CITI on the verge of collapse. Local/Regional banks eated (tm Atrios)every Friday afternoon. And states and local gov’t laying off people in droves.
If the purpose of the stimulus was to prop up Summers’s, Geithner’s, Rubin’s, et al’s buddies at Goldman, it was a roaring success. If it was to get the economy going for people…not so much.
One big piece Obama gave away to get token Republikan support was aid to states. Another was to substitute tax-cuts for direct fiscal stimulus. But the major strategic error was to pre-compromise (Just like health care reform. Do we have a pattern here?) on the size of the stimulus, despite internal analysis that said it should have been $1.2T.
BTW, Matt, you don’t have the chops to criticize Krugman on economic policy, no matter how faintly.
Krugman today: “So Christy Romer’s math looked similar to mine: even given what we knew last December, the straight economics said that we should have a stimulus much bigger than the Obama administration’s initial proposal. And given what happened to that proposal in the Senate — we actually ended up with only about $600 billion of actual stimulus — what we eventually got was half of what seemed appropriate in December. And the actual news on the economy since then has been worse than was expected back then, so that the stimulus now looks way short of what we need.”
“Maybe that was all that could have been done, politically. But it does not sound, from the Lizza article, as if either the economic team or the political team thought much about the risks of finding themselves where we are now — with the economy still failing to deliver job growth despite the stimulus — even though those risks were completely apparent at the time.”
October 5th, 2009 at 1:50 pm
“Consumer confidence” is just about the most worthless, nonsensical, irrelevant concept imaginable (it’s up there with “aggregate demand”, “the multiplier” and “the paradox of saving”).
The public should have no confidence whatsoever in this insane Keynesian econonic mess and they should save everything they can while preparing for the worst.
October 5th, 2009 at 1:55 pm
SteveinCH:
We don’t know.
The simple fact is we don’t know if the stimulus is working, did work, will work and how much work it did.
No, we know. The fact is some of these commenters are in denial and willfully ignore evidence for their own purposes.
Take Bear Stearns and Lehman for example. People said we shouldn’t bailout an investment bank Bear Stearns. We did anyway but couldn’t prove they were wrong.
Lehman was next and was allowed to fail. Then we see what would have happened with Bear Stearns. But the Denialists still fail to acknowledge the evidence in front of their eyes because they are fundamentally dishonest.
Take Petey for example. He has some sort of weird grudge against Matt, so anything he says can be written off immediately. Fact is these same people said if we didn’t nationalize the banks and didn’t have a bigger stimulus we would have Japan II and/or Great Depression II, but turns out they were wrong. We’ll probably top out at 10.5% next summer and the Democrats will probably suffer in the polls in fall. Maybe not, but the global economy avoided collapse which is the main thing.
October 5th, 2009 at 2:21 pm
A simple point: Stimulus money is being spent far more slowly than expected. See
http://www.propublica.org/ion/stimulus
In connection with the above see the following, which appeared June 3:
http://keithhennessey.com/2009/06/03/will-the-stimulus-come-too-late/
This is from Keith Hennessey, a former Bush admin official and is far more interesting than the mumblings and speculations of the Obama team. I’m trying to keep the Left informed.
October 5th, 2009 at 2:32 pm
This is more to the point. It is a very good question indeed, and I am not sure that Obama and Emanuel and co are necessarily doing the wrong thing. 1.2 trillion may be what the models say, the ‘honest’ figure, but it is a tough sell–if they had said that is what we should be doing when half that was all they were ever going to get then they would probably be taking a terrible pasting for no good reason.
October 5th, 2009 at 2:38 pm
@2 David W: “Unfortunately, Gen. Clark’s zeal to get to Rome first bungled the opportunity to bag the German Army in its retreat.”
I liked the Anzio analogy. Stimulus was given just enough resources to establish a beachhead, but does not have efficient enough force strength to BREAK OUT and race northward up the Boot toward the underbelly of the Reich, toward victory, and more importantly, toward vindication of Churchillian strategy!
I think what Krugey is saying is we need to reinforce the beachhead bigtime. Not only that, but the next stimulus package must be carefully and ruthlessly designed in house and by smart people -no Mark Clark types can be involved. Meaning, OBVIOUSLY, the Congress can have no part in the process whatsoever other than to vote yea, or nay.
Good old China. Their stimulus package was the equivalent of Operation Bagration, the massive Soviet offensive launched in the spring of 44 that completely annihilated Hitler’s Army Group Center; close to 1 million German landsers disappeared from the face, just like that, never to be heard from again. It was perhaps the greatest military victory in history, and certainly the greatest of WW II.
China, clearly, is operating on a different scale than the United States.
October 5th, 2009 at 2:48 pm
Max424, the reason why in real life that there wasn’t a bigger force landed at Anzio was that most of the available landing craft were needed for DDay.
Like it or not, Obama was faced with the simplistic mindset that Deficits Are Always Bad, so he could only get so much through Congress as a result. At this point the focus needs to be less on how much an additional stimulus is needed than on what we need to stimulate economically. As far as I’m concerned, with the banks enjoying a gargantuan spread between the rates they borrow money from the Fed today and the rates they now charge their credit card holders, they don’t need any more help. Better to do right by the unemployed, either by extending benefits yet again, or preferably, employ them.
October 5th, 2009 at 3:04 pm
@35 David W: “Better to do right by the unemployed, either by extending benefits yet again, or preferably, employ them.”
That is why stimulus must be designed in house. In the White House. Every single dollar we spend from now on must be spent with the thought “from the bottom up.” I have voted once in my 49 years, I cast that vote for Obama. The reason, he promised, he promised ME, that he would create a bottom up economy -the exact antithesis of Reagan’s “trickle down urine on the American people Theory of Economics.”
October 5th, 2009 at 3:05 pm
and especially given the rise of the de facto supermajority rule in the Senate,
There is not now nor has there ever been a “de facto supermajority rule in the Senate.”
Want to test me on this? Elect a Republican majority and see what happens.
October 5th, 2009 at 3:26 pm
David W
I don’t understand most economists. They so so often, ignore employment. Employment is paramount. It is your foundation. Employment is your offensive line! No Super Bowl champion, ever, has had a weak offensive line. Piss poor owners have won, bad coaches, weak quarterbacks (TDilfer), teams starting 3 rookies in their secondary (SF49’s 81), I watched my team, Buffalo, get to the big game, 3 of our 4 times, with horrible defenses.
But the Bills had a great offensive line all 4 years. Look at the Patriots dynasty now. Offensive line. They went 11-5 last year without Brady. Build a great offensive line and everything will, eventually, fall into place. It is the same, the exact same relationship, as employment is to a Nation’s strength.
October 5th, 2009 at 5:16 pm
Deficits ARE ALWAYS BAD.
Duh.
October 6th, 2009 at 5:37 am
I don’t recall Conrad making trouble during the stimulus debate. I recall Nelson, Snowe, Collins and Specter making trouble.
Yes it would be nice if the reputations of senators whose choices hurt the country suffer as a result. However, rather than wishing Obama blamed those who were to blame, how about making sure that you are blaming the right ones ?
If I am correct that Conrad was a good soldier during the stimulus debate, he now knows that you will criticize him no matter what he does. This is not a useful message to send.
Of course if I am wrong about the facts — I apologize.
October 6th, 2009 at 11:55 am
[...] 6, 2009 Health Leave a Comment Tags: hrc, Ideology, Medicare, Public Option Here is Matthew Yglesias from yesterday on the Stimulus act: The more we learn about how we wound up with a too-small [...]