The president needs to make the case for his economic policies, not hide from them.Posted Monday, June 6, 2011, at 4:19 PM ET
The White House may hope to dismiss last week's dismal jobs data as a "little bump,"
but the reality is that the state of the economy is dire. President
Obama must acknowledge the economic malaise. Then he can make the
powerful and true case that the policies he has been pursuing are
correct while the Republican alternatives are horrendous canards.
alarming that once again we are letting the Republican candidates'
rhetoric and near-hysterical fear of government spending distort the
national debate and keep us from the more dramatic economic changes we
The lessons of the Great Recession and the semi-recovery are clear:
- Keynes was, and is, right.
Though much-maligned by Greenspan neo-libertarians, government spending
in the absence of private sector demand can resuscitate an economy. The
stimulus bill worked. It saved millions of jobs, generated demand when
there was none, and kept the economy from near total collapse. The
unemployment rate kept going up, but it would have been so much worse
without it. Take a look at the data. There is no doubt that the jobs picture stabilized and then improved after the stimulus kicked in.
- Targeted government intervention works. Carefully
calibrated government intervention in individual sectors can return
those sectors to solvency and also force needed reform when done
properly. The auto bailouts are a case study in wise use of capital both
to overcome a short-term cash flow crisis and to impose necessary
structural changes. The bank bailout was only a partial success, because
although the sector was returned to solvency, the needed reforms were
not imposed. Hence the social gains have been much more limited. But
both sectors prove that government can play a hugely important and
positive role as a lender of last resort.
- An individual health insurance mandate works.
Look at the Massachusetts example. The requirement that people pay for
their coverage when they can do so overcomes an enormous free-rider
problem, as both Newt Gingrich and Mitt Romney have admitted, and it
saves the government huge sums of money. The president should offer a
full-throated defense of the mandate invoking both Romney and Gingrich.
- Making the Bush tax cuts permanent has not created jobs.
The lack of job growth is driven by inadequate demand and excess
capacity. Marginal tax rates at this point have a minimal impact.
- The housing crisis still needs to be addressed head-on.
Too many homeowners—especially unemployed homeowners—have mortgages
they can't afford, and this will be a drag on the economy for years to
come. We know we can't depend on the housing sector to provide
significant growth during the next few years, but we also must ensure
that it doesn't drag us down. The failure to require significant
mortgage reform as part of the bank bailout was an egregious policy
- Joblessness—not the deficit—should be our immediate policy concern.
The debt crisis is real—but in the medium and long term, not the short
term. The market is still saying to the U.S. government: We want to lend
to you. While the issue of long-term entitlement costs looms, it will
not metastasize for a decade or so. The immediate crisis is joblessness
and the resulting anemic growth rate. If growth remains in the range of
1.8 percent to 2 percent, we will never generate enough revenue to
balance our books. If growth accelerates to 4 percent, then deficits
will organically decline. Priming the pump to increase growth is the
imperative. Leave the deficit to next year.
All this argues
for a more robust presidential response. He should trumpet the success
of the stimulus, not just the bailout of Chrysler. He should starting
pushing back against the Tea Party's rhetoric.
president should go to bat for Keynes, for Roosevelt, for the policy
tools that have worked. He should again challenge the deregulatory,
Hoover-based-thinking that created the mess we are in. We need a
full-throated defense of the policies of the past several years, not
meekness and apology.