Reading Laura Tyson's New York Times op-ed over the weekend on why we need a second stimulus underscored what a loss it is for the Obama administration that it couldn't manage to find a place for her on its economic team. Last month, Tyson was on the short list to replace Peter Orszag as OMB director--actually, she was more than on the short list; she was the presumed successor--but something happened, and the job went to Jacob Lew instead. Lew is, by most accounts, eminently qualified for the job. Indeed, he's held it once before, in the Clinton administration. But he lacks the amiable plainspokenness on economic issues, the ability to distill complicated issues to their essence, especially on television, that Tyson possesses--which is to say, he lacks the very thing the administration needs most.
This also happens to be the chief quality of Tyson's op-ed. It presents in simple, straightforward language a plausible case that the original $787 billion stimulus is working as intended (as most economists believe), but that our problems are so severe that it simply isn't sufficient and another round is needed. These two paragraphs frame the political, historic, and economic situation better than anything I've seen, and with admirable efficiency:
Our national debate about fiscal policy has become skewed, with far too much focus on the deficit and far too little on unemployment. There is too much worry about the size of government, and too little appreciation for how stimulus spending has helped stabilize the economy and how more of the right kind of government spending could boost job creation and economic growth. By focusing on the wrong things, we are in serious danger of failing to do the right things to help the economy recover from its worst labor market crisis since the Great Depression.
The primary cause of the labor market crisis is a collapse in private demand -- the same problem that bedeviled the economy in the 1930s. In the wake of the financial shocks at the end of 2008, spending by American households and businesses plummeted, and companies responded by curbing production and shedding workers. By late 2009, in response to unprecedented fiscal and monetary stimulus, household and business spending began to recover. But by the second quarter of this year, economic growth had slowed to 1.6 percent, according to a government estimate issued Friday. Clearly, the pace of recovery is far slower than what is needed to restore the millions of jobs that have been lost.
It's pretty obvious that the White House has all but given up on pursuing a second stimulus or anything else that's significant along those lines. They've resigned themselves to the onslaught in November. White House officials complain ("seethe and whine" is a more accurate characterization) that it's all the fault of Congress, that they understand what's needed, but are simply helpless to bring it about.