Obama’s First Big Mistake July 2, 2009Posted by Dwight Furrow in Dwight Furrow's Posts, politics.
Tags: bipartisanship, Paul Krugman on economic stimulus, when will the recession end
The economic news is not good.
The American economy lost 467,000 more jobs in June, and the unemployment rate edged up to 9.5 percent in a sobering indication that the longest recession since the 1930s had yet to release its hold.
And although the rate of the price decline in the housing crash has slowed, housing prices are still falling at an 18% yearly rate.
According to Business Insider’s Henry Blodget:
So the folks who use this slight moderation in the rate of decline to spin tales of a “bottom” or, worse, a “recovery” are smoking something. Prices have at least another 10%-15% to fall, and they’ll likely be falling for at least another year or two.
Oh, and the financial health of states is sharply declining:
As of June, more than 30 states faced deficits totaling a projected $40 billion, or more than triple the gap of the previous year, according to the NCSL.
The recession is not over and many economists predict that when growth does return, it will not produce many jobs. Paul Krugman tells ABC News:
“The fact of the matter is that the unemployment rate is much worse than the administration contemplated or that most people expected,” Krugman told ABC News. “So the economy is much weaker than we thought it’d be, meaning, in fact, it could use more stimulus.”
It is becoming obvious that it was a mistake for Obama to bow to political realities and dial back the stimulus package that was passed in February, ignoring the advice of Krugman and other economists who called even then for a larger stimulus package. In particular money should have been made immediately available to the states to help balance their budgets and avoid the massive layoffs and furloughs that will make the employment picture even worse.
Granted, Obama may not have been able to get a larger package through congress given the obstruction of Republicans and the handwringing of centrist Democrats. But, at the very least, Obama should have made clear that he was signing an inadequate stimulus package under duress, thereby setting up an argument for more stimulus later on. All the cheerleading about bipartisanship might have felt good at the time but the drugs are quickly wearing off.
As I have argued in the past (here and here) occupying a centrist position in order to seem reasonable to the opposition is a mug’s game when you are negotiating with people who want you to fail and don’t have the public interest in mind.
And this mistake will cost Obama big time.
X-posted at Reviving the Left
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