On Obama and the Economic News

Earlier today, I wondered whether the Obama Administration had accepted the Republicans' (incorrect and cynical) claim that it was possible to belt-tighten and budget-cut our way out of a collapsing job market. Readers' reactions.

From FVH, a businessman on the East Coast:

>>As an owner/manager of a small manufacturing business I suffer a combination of despair and anger each time a political animal, of whatever color, promises to "focus like a laser on job creation." I neither need nor want Government to focus on "job creation" (as though it were in their power to do anything in that realm). I need it to focus on "customer creation"! IT'S DEMAND, STUPID!

If governments can induce demand, I will happily handle the part about "job creation." Get me to the point where my 1.5 production workers have to be put on overtime to fill the orders and I will quickly make my part-time employee full-time. A few more customers and I'll hire another worker. Look, guys, that's what we do out here! Don't worry about cutting my taxes, don't concern yourself with over-regulating me, don't fuss about the "death tax" depriving my progeny of the joy of running my business. That is all trivia! This is all about Demand Side Economics.

Oh, and don't look now, but if we can get a little "demand creation" goin' on, so I (and my ilk) can hire some folks, then maybe those folks can think about dumping their overpriced rentals and buying foreclosed homes, thus addressing the housing inventory glut and moving us toward housing recovery. And thus beginneth a Virtuous Circle.<<

From JK, whereabouts unknown:

>>My greatest disappointment with Obama so far has been his inability to explain economics.

just saying 'stimulus' is not an explanation. And saying that the government, like a family, must balance its budget is crazy -- as Krugman repeatedly points out.

Why has Obama NOT EVER tried to explain counter-cyclic government spending?
Why has he not explained the need for deficit spending?
Why has he NOT used the Great Depression as an example?
Why has he NOT taken on the inconsistent and self-serving arguments of the Republicans?

The level of discussion has been appallingly low. The points are not difficult to present. But, at some stage, a bit of economics must be presented and defended. It's not an argument of the morality of economics -- share the burden -- its how a government fights a weak economy.<<

From DM:

>>I don't understand why Obama is parroting the right's economic justfications that make no sense whatever. Business confidence?  All business knows is what walks in the door. If people walk in the door, business expands to meet the need. If they don't, business sits on its cash until such time as investment will bring a return. Duh.

If business confidence were anything real, the crash of 2007 would have occurred much earlier when all the writing was on the wall.  But business kept investing and expanding until people actually stopped walking in the door. Business wanted to keep expanding, but the banks stopped lending them money.  Business is reactive; not proactive.<<

Let's hope that this week's "we can save our way out of a recession" talk by Obama was a lapse. Otherwise we've got a reverse-sweet-spot combination of tragically misguided economics and self-defeating politics. Next year no one will care whether Obama was "reasonable" rather than "partisan" in this budget showdown with Boehner, Cantor, McConnell, Ryan, et al. People will care about whether they're employed or not, and will judge him mainly on those grounds.