Stimulating History

I think Jon Chait's point about the overestimation of Bush's domestic successes is a good one. Leaving aside the tax cuts (which as Chait notes Bush passed by reconciliation) there just isn't much evidence for Bush bulldozing his way through a weak and acquiescent Democratic congress. Memories of Bush's foreign policy debacles, as well as Democratic support for the Iraq War tends to blur our memories.

With that said, this recapitulation of the stimulus debate seems off:

Perhaps the oddest feature of the liberal indictment of Obama is its conclusion that Obama should have focused all his political capital on economic recovery. "He could likely have passed many small follow-up stimulative laws in 2009," Jon Walker of the popular blog Firedoglake wrote last month. "Instead, he pivoted away from the economic crisis because he wrongly ignored those who warned the crisis was going to get worse." 

It's worth recalling that several weeks before Obama proposed an $800 billion stimulus, House Democrats had floated a $500 billion stimulus. (Oddly, this never resulted in liberals portraying Nancy Pelosi as a congenitally timid right-wing enabler.) At the time, Obama's $800 billion stimulus was seen by Congress, pundits and business leaders -- that is to say, just about everybody who mattered -- as mind-bogglingly large. News reports invariably described it as "huge," "massive" or other terms suggesting it was unrealistically large, even kind of pornographic. The favored cliché used to describe the reaction in Congress was "sticker shock." Compounding the problem, Obama proposed his stimulus shortly after the Congressional Budget Office predicted deficits topping a trillion dollars. 

Even before Obama took office, and for months afterward, "everybody who mattered" insisted that the crisis required Obama to scale back the domestic initiatives he campaigned on, especially health care reform, but also cap-and-trade, financial regulation and so on. Colin Powell, a reliable barometer of elite opinion, warned in July of 2009: "I think one of the cautions that has to be given to the president -- and I've talked to some of his people about this -- is that you can't have so many things on the table that you can't absorb it all. And we can't pay for it all." 

Rather than deploy every ounce of his leverage to force moderate Republicans, whose votes he needed, to swallow a larger stimulus than they wanted, Obama clearly husbanded some of his political capital. Why? Because in the position of choosing between the agenda he came into office hoping to enact and the short-term imperative of economic rescue, he picked the former. At the time, this was the course liberals wanted and centrists opposed.

I'm confused by the writing here. What I gather is this: Chait starts out attacking liberals. He then moves to outline the thinking of people who more often than not aren't liberals (Congress, pundits, business leaders, Colin Powell.) He shifts back one more time to say that liberals supported going soft on moderate Republicans, while centrists were against it. (If someone has a better summary, I welcome it.)

It's tough to evaluate Chait's final claim as he doesn't cite any centrists who thought Obama should expend political capital on a bigger stimulus, or any liberals who opposed it. But his core claim that "everyone who mattered" thought the $787 billion stimulus was "mind-boggling large" only works if "everyone who mattered" disqualifies liberals. Maybe that's what Chait means to say--but that would be really odd in a column entitled "What The Left Gets Wrong About Obama."

At any rate, the record is fairly clear and any distillation of what liberals thought at the time about the stimulus had better reckon with what the most prominent liberal economist said at the time:

For while Mr. Obama got more or less what he asked for, he almost certainly didn't ask for enough. We're probably facing the worst slump since the Great Depression. The Congressional Budget Office, not usually given to hyperbole, predicts that over the next three years there will be a $2.9 trillion gap between what the economy could produce and what it will actually produce. 

And $800 billion, while it sounds like a lot of money, isn't nearly enough to bridge that chasm. Officially, the administration insists that the plan is adequate to the economy's need. But few economists agree. And it's widely believed that political considerations led to a plan that was weaker and contains more tax cuts than it should have -- that Mr. Obama compromised in advance in the hope of gaining broad bipartisan support. We've just seen how well that worked.

That's Paul Krugman, of course, and maybe he's what Chait means when he says "centrist," because Krugman clearly isn't urging Obama to "husband political capital." (More citations from firedoglake.)

Later Chait dings Robert Reich, but doesn't bother to deal with what Reich said at the time about the stimulus:

In my judgment, this will require a stimulus of about 6 and a half percent of gross domestic product, or a total of some $900 billion, spread over two years. That's my estimate for the shortfall in private demand. But the federal government should stand ready to spend larger sums if necessary to get the economy back on track toward full capacity. The danger is not that the government will do too much; the danger is that it will do too little, too late. 

Without such action, I estimate that another 3 million jobs will be lost in 2009, unemployment will rise to 10 percent of the workforce by the end of this year, and under-employment - including people working part-time who would rather be working full time, and those too discouraged even to look for work - will reach 15 percent. Without federal action, next year could be even worse.

Reich was still to low but he wasn't amazed with size of the stimulus, and pointedly notes that the danger is doing "too little, too late."

David Leonhardt probably doesn't qualify as a liberal, but it's worth reading this piece in which he summarizes the feelings of liberal economists, and his own misgivings:

The most serious charge against the stimulus package is that it does not pack enough punch. Two different camps have been making this argument over the last few weeks. Publicly, the Obama administration hasn't really answered either one. 

The first camp says that the stimulus is simply too small. The recession is likely to idle almost $2 trillion of resources -- buildings, equipment and people -- this year and next, yet the current stimulus will fill only $700 billion of the hole. Several liberal economists, the forecasters at Goldman Sachs and Mark Zandi (an economist whose forecasts the administration has used) all argue for a bill of at least $1 trillion.

I'm not sure why Chait neglected to mention these misgivings--the avoidance of Krugman is especially puzzling. As is the argument that it was actually liberals who thought Obama should mollify Susan Collins and Olympia Snowe, and moderates who thought Obama should show the mailed fist. I don't remember it that way, but I'm open to the argument if I can see some actual citations.

With that said, everyone should read the rest of the Leonhardt column. While he ultimately believes Obama should have done more, he spends a lot of time making a point about the diminishing returns of a larger stimulus. (Same point made here, by Ezra.) This isn't my area, but it give pause to the notion that more money would have surely done the trick.