The White House has made a very odd political/policy decision

[Kurt_and_Hunter]

In the near-term (1-4 years) we can either work on the economy or work on the deficit.

We cannot do both. A politician might claim we can do both but you can't.

The White House has decided that the deficit is more important than actually doing things about unemployment or real estate. This has to be a political decision because as policy is almost malicious.

I have no doubt that focus groups are happy to complain about the deficit. Conventional wisdom zombies on TV who have never met an unemployed person complain about the deficit. It is kind of a national pass-time to complain about the deficit.

But is anyone actually stupid enough to think the deficit is a more decisive political issue than the economy?

Quick, name a president who was bounced because the deficit was too big...

George HW Bush was somewhat more fiscally responsible than Reagan. That's why he broke his 'no new taxes' pledge. (Which was also a major example of bipartisanship, BTW)

And despite winning two wars quickly (Panama and Iraq) and presiding over the fall of the Berlin Wall and having a 90% approval rating and being relatively responsible on deficits and entitlements and such he was bounced out of office because unemployment hit 6% or whatever it was during the shallow recession of 1992.

People TALK about the deficit. People VOTE the economy.

I would like to ascribe the current bizarro stance that we should just accept tons of unemployment and a stagnant non-recovery so we can talk about the freaking deficit to chess... that this is some awesome plan.

If the WH had a track record of sound political decision-making (or, for that matter, sound economic decision-making) then the chess scenario might make sense.

Paul Krugman
February 13, 2010, 6:41 pm
Premature Exit

While looking at the Economic Report of the President, I was inspired to make this chart, which actually doesn’t come from the ERP (more ERP blogging in a day or two). It shows the contribution of the ARRA, aka the Obama stimulus, to the deficit — a rough measure of the amount of stimulus — with the CBO’s projection of the unemployment rate, by fiscal year:



Basically, the stimulus fades out fast starting in fiscal 2011, which starts in October 2010. Yet the consensus view is that unemployment will be around as high as it is now.

The point is that we’re doing a 1937 — or actually worse, since unemployment had in fact fallen dramatically before FDR made his big mistake. Fiscal support for the economy will be pulled away with the economy having barely begun to recover.

http://krugman.blogs.nytimes.com/2010/02/13/premature-exit/

[tbyg52]

1. K&R

Yeah, I know it's at zero as I type this, but, really, I *did* rec it....!

[ProSense]

2. Wait,

The White House has decided that the deficit is more important than actually doing things about unemployment or real estate. This has to be a political decision because as policy is almost malicious.

Do you always make bogus speculation without anything to substantiate it? First of all, Krugman's piece is about the ARRA. It doesn't deal with the jobs bill or other stimulative measures that the administration is pushing.

[Kurt_and_Hunter]

9. blah, blah, blah

Yeah, the jobs bill... that 15 or 20 billion a year is sure to turn the tide!

[Name removed]

11. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Kurt_and_Hunter]

13. Your hate is noted, but it won't fix the economy

[RainDog]

3. it's still the economy...

this is like being in a nightmare.

[dkf]

5. It should have been the economy, but it was about healthcare

Now its probably too late. For the 2010 elections anyway.

[ProSense]

6. AARA was about the economy, and it wasn't and shouldn't have been

one or the other. That's a bogus argument.

[dkf]

4. Tell that to Greece

At some point it does matter.

[JVS]

8. Greece is running under a very constrained condition of having someone else...

do their monetary policy and needing to constrain their deficits to quite tight levels in order to please the EU. The greeks are essentially getting shafted because they've been playing with the Europeans big boys who make the rules to suit their own interests.

[Kurt_and_Hunter]

12. WTF?

Greece's problem is not reckless spending. It is that Greece doesn't have its own currency.

When the economy went to hell in Greece harder than it did in the totla euro-zone they were not able to have a monetary response. And overall euro policy cannot be pegged to the problems of Greece.

So without the ability to do monetary stuff their only way to deal was fiscal.

Imagine what would have happened in the US if the Fed had not done anything.

[dkf]

16. Greece may soon have its own currency back after it gets

kicked out of the Euro. I highly doubt that will solve all their problems.

[dkf]

17. Germans say euro zone may have to expel Greece: poll

BERLIN (Reuters) - A majority of Germans want debt-ridden Greece to be thrown out of the euro zone if necessary and more than two-thirds oppose handing Athens billions of euros in credit, a poll published on Sunday showed.

Vocal opposition to aid for Greece from members of Chancellor Angela Merkel's coalition also grew at the weekend with several senior politicians expressing skepticism, especially as Germany's own recovery is fragile.

The Emnid poll for Bild am Sonntag newspaper showed 53 percent of Germans asked said the European Union should, if necessary, expel Greece from the euro zone.

Athens has struggled to convince investors it is tackling its debt crisis and markets are nervous about a default.

EU leaders discussed the issue last week and offered words of support but failed to outline concrete steps, further unsettling markets. Euro zone finance ministers are expected to discuss Greece again on Monday and Tuesday.

http://www.reuters.com/article/idUSTRE61D0ZC20100214

[Autumn]

7. It doesn't seem odd to me,

stupid maybe, if I am understanding this right. The republicans and the media are screaming their heads off about the deficit, (yeah I know that's a real joke) so they have to do something to appease them. edited to ask Do you have a link to that chart and article?

[Kurt_and_Hunter]

14. My bad. Link added to OP

[JVS]

10. Bush I was a one termer because he made the mistake of taking the deficit bait and...

put the economy into the tank when he tried fixing it.

Deficit reduction was also part of his reason to raise the taxes, thus breaking his pledge.

[xchrom]

15. Recommend

[asdjrocky]

18. K&R!

They've got jobs, why should they care if the People have jobs?

I'm pretty sure this white house knows exactly what it is doing.

[TheBigotBasher]

19. Budget deficits do count and can affect jobs.

The US risked losing its AAA credit rating and quite shamefully the Republicans played politics in an attempt to get that to happen when they voted en-masse against raising the debt limit. If that had of happened the consequences would have been disastrous.

Not increasing the debt limit would have forced major cuts to all areas of areas of Government services, with some having to shut down immediately.

The loss of credit rating would mean that interest rates would have had to increase and the interest payable on the deficit would also have had to increase, resulting in a need to increase taxes or cut mores services. Increased interest rates at this time would have a devastating impact on jobs and housing.

Only in the school of Dick Cheney economics would people suggest deficits do not count.

[gulfcoastliberal]

20. Great post. And to top it off, Obama is creating political cover to allow fulfillment

of the GOPs biggest wet dream: destroying social security & medicare via "commission" created by executive order.

Quite disturbing.

[tranche]

21. Aren't post people saying there's no REAL deficit reduction plans anyways?

:eyes:

[Kurt_and_Hunter]

22. Yes, but the stance precludes large additions to it

This deficit concern won't do much, if anything, to reduce the deficit.

But what it does do is preclude consideration of steps that would add a lot to the deficit, even if they are the right thing to do today in order to have a healthier tax base tomorrow.

Anything that would actually reduce the deficit in the next few years would be economic suicide, even including raising taxes on the rich. (If taxes were raised on the rich to divert the money to the less-rich that would be fine. But raising taxes to pay down deficit/debt would be crippling.)

[timeforpeace]

23. "People TALK about the deficit." Trouble is, those people are us. He's just listening.

[ChicagoSuz219]

24. They go hand in hand. n/t