The 10-year budget gets an A. It's an extraordinary vision of what America can and should become, including universal health insurance and environmental protections against climate change. And the budget takes a little bit more from the rich and gives a little bit more back to the poor and lower middle class, which seems appropriate given that the income gap is wider than it's been since the 1920s. I'd give the budget an A plus except for its far-too-rosy economic projections.
The stimulus package gets a B. Good as far as it goes but doesn't go nearly far enough. $787 billion over two years sounds like a lot of stimulus. But the economy is operating at about a trillion and a half dollars below its capacity this year alone. And considering that the states are cutting services and increasing taxes to the tune of $350 billion over this year and next, the stimulus is even smaller.
The last grade is for the bank bailouts. I give them an F. I'm a big fan of this administration, but I've got to be honest. The bailouts are failing. So far American taxpayers have shoveled out almost $600 billion. Yet the banks are lending less money than they did five months ago. Bank executives are still taking home princely sums, their toxic assets and non-performing loans are growing, and the banks are still cooking their books. And now the Treasury is talking about converting taxpayer dollars into bank equity, which exposes taxpayers to even greater losses.
So that's the report card. An A on the budget, B on the stimulus, and F on the bailout.
Tuesday, April 21, 2009
Reich Grades Obama
In his weblog Robert Reich grades the first 100 days of Obama's administration:
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3 comments:
What is your opinion on this grade?
I'm not an expert, so this is my estimate based on readings and my mental model of how this stuff works. (Ultimately in a democracy you have to muddle through with "best guess" opinion because the electorate cannot be experts and even with representational democracy, the representatives fail to be much of "an expert" in anything other than politicking.)
I would say the budget is probably a B+, maybe an A-. Obama's heart is in the right place, but I don't feel he has galvanized the population on the commitments necessary for the social spending required. He really needed to drive home the point that taxes were much more "progressive" under Truman, Eisenhauer, Kennedy, and Johnson and the US economy boomed in those years. I think he has let the Republicans sandbag him on "taxes". I hope I'm wrong. I really, really want to be surprised by him surpassing my expectations.
I would give him a C+ on the stimulus. It is clear that there will be a $900 billion "hole" in the 2009 economy. Obama's $787 billion stimulus plan will spend only 40% in 2009. So it doesn't fill the hole. The OECD estimates the output gap will be 6.8% in 2009 and 8.8% in 2010 (see page 60 of the March 2009 OECD report). That's the difference between a "normal" economy and the shrinkage caused by the recession. His stimulus will add 2% extra GDP in 2009 and 2010 (page 26 of the report). That means his "stimulus" is far too weak.
I think Reich may be too extreme with a grade of F on the banks. I would give him a D. Generally I agree with those who think that he is dallying and create a Japanese "lost decade" situation. But I also agree with Brad DeLong who thinks you need to throw everything including the kitchen sink at the problem. So I'm not opposed to some of the inventiveness shown. I just think he's allowed the Republican rhetoric about "nationalization" to spook him. That is a tragedy because Obama has allowed that to inhibit his moves.
So... as usual I tend to muddle toward the middle in my estimation. I'm not as optimistic and I'm not as pessimistic as Reich. I think Obama, like FDR, will eventually slay the dragon. But like FDR he is making a lot of wasted moves in the process because he doesn't understand the economics and he's surrounded himself with ex-Wall Street sharpsters.
Let's hope that he is paying attention to these progress reports and makes some adjustments. I, too, thought that the F was a little low and the A was a little high. And, the stimulus would need 1.5 trillion plus administration costs to come out even close to enough. So, anyway, in my opinion Dr Reich is mostly correct. I like his writing.
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