I’ve actually been avoiding thinking about the latest Obama cave-in, on ozone regulation; these repeated retreats are getting painful to watch. For what it’s worth, I think it’s bad politics. The Obama political people seem to think that their route to victory is to avoid doing anything that the GOP might attack — but the GOP will call Obama a socialist job-killer no matter what they do. Meanwhile, they just keep reinforcing the perception of mush from the wimp, of a president who doesn’t stand for anything.It is amazing to me that back in 2008 when America elected Obama there were such high hopes. I had read his books. I liked the arc of his career. He was obviously intelligent. He seemed to have a deft political touch. He claimed to be a real fan of Abraham Lincoln and saw himself as coming to play a Lincoln-esque role in a deeply divided country. It sounded so very good.
Whatever. Let’s talk about the economics. Because the ozone decision is definitely a mistake on that front.
As some of us keep trying to point out, the United States is in a liquidity trap: private spending is inadequate to achieve full employment, and with short-term interest rates close to zero, conventional monetary policy is exhausted.
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This puts us in a world of topsy-turvy, in which many of the usual rules of economics cease to hold. Thrift leads to lower investment; wage cuts reduce employment; even higher productivity can be a bad thing. And the broken windows fallacy ceases to be a fallacy: something that forces firms to replace capital, even if that something seemingly makes them poorer, can stimulate spending and raise employment. Indeed, in the absence of effective policy, that’s how recovery eventually happens: as Keynes put it, a slump goes on until “the shortage of capital through use, decay and obsolescence” gets firms spending again to replace their plant and equipment.
And now you can see why tighter ozone regulation would actually have created jobs: it would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money — but that’s the point! And with corporations sitting on lots of idle cash, the money spent would not, to any significant extent, come at the expense of other investment.
More broadly, if you’re going to do environmental investments — things that are worth doing even in flush times — it’s hard to think of a better time to do them than when the resources needed to make those investments would otherwise have been idle.
So, a lousy decision all around. Are you surprised?
Then he took office and he failed to carry through on promises. Lots of little things left his partisans puzzled. He seemed oddly passive in the face of great problems. He seemed obsessive about "reaching out" to Republicans while ignoring his base. He "led" by following. He left to Congress the task of framing the great programs that would save the country. He frittered away time. He was unresponsive to the great suffering in the land. Amazing.
I, like Krugman, have reached the end of my rope. I expect nothing good out of Obama. I really would like to see the Democrats nominate somebody else to run 2012. He will be a disaster if he wins in 2012. He won't be as great a disaster as a Republican victor, but he will be a disaster. I'm not sure America can survive with another 4 years of Obama. That will have been 8 disastrous years under Bush and 8 frittered away, rudderless, falling short years under Obama. I'm not sure the country has the remaining internal resources to wait out this string of bad presidencies until 2016.
Here is Brad DeLong's disillusionment with Obama:
I remember being told that in January 2001 Larry Lindsey had showed up at the Council of Economic Advisers' office in the Eisenhower Executive Office Building and said "Well, the people who understand economics are back in charge!", and at the time I thought that Larry's belief that George W. Bush and his administration in any sense "understood" economics was the most pathetic and self-delusional thing that I had heard. But now I think of my confidence in December 2008 and January 2009 that the Obama administration understood that you needed not economic policies that sounded good and polled good but economic policies that actually worked, and I wince.Go read the full post to get specifics of his disillusionment with regard to Obama's fixation on austerity.