Paul Krugman: Ideas for Obama

[cal04]

http://www.nytimes.com/2009/01/12/opinion/12krugman.html?_r=1

Last week President-elect Barack Obama was asked to respond to critics who say that his stimulus plan won’t do enough to help the economy. Mr. Obama answered that he wants to hear ideas about “how to spend money efficiently and effectively to jump-start the economy.”

O.K., I’ll bite — although as I’ll explain shortly, the “jump-start” metaphor is part of the problem.

First, Mr. Obama should scrap his proposal for $150 billion in business tax cuts, which would do little to help the economy. Ideally he’d scrap the proposed $150 billion payroll tax cut as well, though I’m aware that it was a campaign promise.

Money not squandered on ineffective tax cuts could be used to provide further relief to Americans in distress — enhanced unemployment benefits, expanded Medicaid and more. And why not get an early start on the insurance subsidies — probably running at $100 billion or more per year — that will be essential if we’re going to achieve universal health care?

Mainly, though, Mr. Obama needs to make his plan bigger. To see why, consider a new report from his own economic team.

[w4rma]

1. 'Free' trade and the hording of resources by the ultra-wealthy are the core issues, imho. (nt)

[rockymountaindem]

2. Another good article

Obama needs to do what it takes to get this right, even if it means not getting any Republican votes for the measure.

[mikehiggins]

4. The problem is the Democrats are not reliable

The Democratic Party may have 57 (8)(9) seats in the Senate but they simply cannot be relied upon to vote in support of Obama's initiative. Period. If the Democratic leadership had the habit of insisting on party loyalty it would be a different situation, but they do not and it is not.

[EconomicLiberal]

5. Democratic votes are more reliable than Republican votes.

The best chance he has of passing this bill is united the Democratic base in Congress behind him and shoving this bill down the GOP's throat. We can brute force it with our numbers.

[John Q. Citizen]

6. The Dems give you prime chairmanships if you campaign against them. Ask Joe L.

[kennetha]

7. Can't rely on Democratic votes only

Look at the projected unemployment numbers. They will be very high by historical standards throughout most of Obama's administration. Obama's team projects 6.3% unemployment as far out as the final quarter of 2011 -- just about the time the Republican primary contest for 2012 is kicking into high gear. 6.3% unemployment is historically very high. If Republicans vote FOR the plan, they are co-owners of it. If they vote against it, then they will be able to run against years of democratic unemployment because unemployment is going to be high throughout Obama's entire first term in office, unfortunately.

Of course, it won't really be Obama and the Democrats who are to blame for this mess. It's Bush and the Republicans who got us into it. But it's now our job to get us out. Unfortunately, the American voting public has a very short attention span and a very poor memory. I hope Obama keeps reminding people -- at least sotto voce -- as unemployment deepens over the next couple of years that it was the previous administration that got us into this mess.

One big problem is that all that the stimulus plan may be able to accomplish in the near term is to keep us from sinking into near depression level rates of unemployment. Given the state of the credit markets, etc, that would be a significant achievement. But if the main achievement is to prevent a total meltdown and we get an economy that sort of stumbling along, people will feel that Obama has "failed. " THat's because you don't really ever get credit for preventing what might have happened -- because people are blind to the base rate.

[sandnsea]

3. We need short term and long term

And if the plan that Obama has laid out doesn't work, the one that includes infrasructure spending, then he can ask for more programs after he's had more time to analyze what we still need and where we need it. This is an economic intervention, not a long term spending program. I don't know why these economists don't get the difference. FDR didn't do everything in one fell swoop either.

[Dawgs]

8. Agree. Krugman seems stuck on the idea that Obama can only do this once.

FWIW, I agree with him on everything else. Business tax cuts do not need to be a part of this plan.