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February 11, 2009

Krugman v Obama

I think Paul Krugman's critiques of Barack Obama (starting early in the primary season and continuing today) represent one of the most interesting debates in American politics. Here's a simplified version:

Now Krugman says that the stimulus plan is too small, and the cuts engineered by "centrist" Senators have made it worse. "But how did this happen? I blame President Obama’s belief that he can transcend the partisan divide--a belief that warped his economic strategy."

The stakes are as high as can be, and if Krugman is correct, Obama's whole "theory of change" is badly flawed.

We don't really know how big a stimulus is big enough, but when a Nobel prize-winner says that $800 billion is too small, who am I to argue? What I would question is Krugman's political explanation for how that number arose. Obama annoyed Krugman by meeting with Republicans and conservatives, acting respectfully toward them, and appearing to welcome negotiation. I think that behavior was completely unrelated to the outcome of the bargaining in Congress. The Administration could have proposed a $1.2 trillion stimulus, followed by much respectful listening and negotiation. The result would have been a $1 trillion package--more acceptable to Krugman the economist (but perhaps just as annoying to Krugman the political strategist). Instead, the Administration started lower and ended at around $800 billion. I doubt very much that they chose their original number because they thought it would encourage dialog and civility. Economic and administrative considerations must have determined that initial number. Perhaps it was too low, but that had nothing to do with Obama's style of interaction after he put a bid on the table.

As I've written several times before, it is not just the editorial board of the Washington Post that likes bipartisanship. The public likes it, and that shows in Obama's stratospheric popularity right now. People think that he's trying to deliberate. Once he tries to talk, he's free to criticize the opposition. That's not merely a clever strategy,; it's also good manners.

Obviously, being popular is not an end in itself. But the public will oppose government spending unless they respect the people in charge of the government; and comity is the path to respectability.

Here's what I'm left unsure of. Presuming that $800 billion is too little money, which of the following is true?

I obviously hope that #2 is correct, but #1 could be better economics.

February 11, 2009 9:00 AM | category: Barack Obama | Comments



Another nice post! I think you've summarized the approaches of Obama and Krugman nicely.

Like you, I support Obama's deliberative approach over Krugman's real politic one. That said, I think Krugman's specific policy proposals are correct whereas Obama's stimulus policy and, especially his bailout policy, are going very badly.

For the bailout, Krugman is right that we have to nationalize failed banks and then resell them. This "bad bank" proposal by Obama stinks and could take us down a truly disastrous path. Why can't anyone give details about how the toxic assets will be valued? Because there is no reasonable answer to the question!!

Meanwhile, Obama has not done enough to decentralize the planning of the stimulus. Following politics as usual, the package has been put together behind closed doors. Hence, hundreds of millions of dollars are going to wasteful projects like building new public schools in Milwaukee even as they close other schools for lack of attendance (as reported in the WSJ). I am sure that the citizens of Milwaukee have dozens of better ideas how to send that large sum of money to improve their own education system.

So, I think that Obama is failing, in part now, because he says the right things but he isn't fully walking the walk. And the stakes could not be higher.

February 11, 2009 12:48 PM | Comments (1) | posted by Michael Weiksner

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