Yet I think he lets Obama and company off the hook too much. A few specific points:To really appreciate the above, you need to read Ron Suskind's book Confidence Men that spells out in gory detail just how Obama failed to lead his administration, failed to make the necessary decisions, and failed to live up to his campaign rhetoric about "change" and "hope". It ends up that Obama is really a centre-right politician who managed to win as a centre-left Democratic campaigner but once in office dropped the pretense and moved to the right. Even today when Obama is running for "fair taxation" of the rich, he is lined up with Reagan and not on the left. Obama is not willing to strongly go after the corruption of the American political system. He isn't willing to lead in a legislative agenda to turn around the Lesser Depression of 2008-??.
1. I think too much is being made of the fact that subsequent revisions have shown that the economy was in even worse shape in early 2009 than we knew at the time. There was already plenty of evidence that it was in terrible shape and needed a much bigger boost than the administration proposed. And as regular readers know, this isn’t 20-20 hindsight: I was frantic about this at the time.
2. The forecast that assumed rapid recovery even without stimulus has been a deep source of embarrassment, and remains inexplicable to me. We had lots of reason to believe that this was going to be a prolonged slump — not just Reinhart Rogoff, but also the evidence of the last two US business cycles. Again, I was warning about this at the time.
3. This in turn means that the focus on fast-acting policies was misplaced. Shovel-ready wasn’t as important as it was made out to be. And the stimulus would have been a lot closer to adequate if more of it had consisted of infrastructure spending rather than tax cuts.
4. Politically, the administration was wildly naive in believing that it could easily come back for more if the initial stimulus proved inadequate. Again, this isn’t hindsight; I was frantic about this too, right from the beginning. If they thought this likely — as they should have — they should have laid the legislative groundwork for a second round, through reconciliation if necessary, right at the start.
5. Even without that groundwork, my sense is that there was a window for additional action in the fall of 2009, and that the administration sheered off from even trying.
6. Relatedly, the insistence of the administration that the stimulus was just right, long after it was obvious that it had been too small, did a lot of political damage. Remember the “summer of recovery”?
7. The political response to the new jobs bill has been pretty good — which in turn strongly suggests that the “pivot” from jobs to deficit reduction in early 2010 was a big mistake. Maybe — probably — nothing could have passed; but the White House might have been able to make a better case by accusing Republicans of blocking job creation rather than adopting their rhetoric.
Now, Ezra may be right that none of this would have made much difference. But the White House was weak and confused in the face of a political and economic debacle, when it should have gone all out.
And you know what? It should still go all out. The chances of success are lower than they would have been if it had taken a strong position two years ago, but it ain’t over until it’s over.
Update: Here is the Dean Baker reaction to the Ezra Klein article:
Ezra Klein on the Stimulus and AfterBaker points out the same thing as Krugman: Obama believed his stimulus was "adequate" and ran around selling this idea even when it was utterly obvious that it was too small. Rather than correct for this mistake and go for a second stimulus, Obama turned his attention to the Republican theme of deficits and the debt, i.e. he turned towards austerity in the midst of the 2008 Lesser Depression. A horrible, horrible mistake! A mistake that to this very day he hasn't admitted to making. That is the very definition of "bad leadership".
Ezra Klein has a seriously researched piece in the Post on why the stimulus was inadequate and what else could have been done. The major item missing in my book is any discussion of the overselling of the stimulus after its passage.
By all accounts, Obama's economic team knew that the stimulus they got through Congress was inadequate for the task. They needed a stimulus that was at least twice as large as what Congress passed and quite possibly three or four times as large. Nonetheless, President Obama was quickly running around touting the "green shoots of recovery" and talking about the need to focus on deficit reduction.
By overselling the stimulus and putting deficit reduction at the top of the agenda, Obama was virtually shutting the door on the possibility of getting further stimulus. Since they knew that additional stimulus would almost certainly be necessary, why did they dig themselves into this hole?
It would be interesting to some explanation of this situation. Nonetheless, the piece is well worth reading. The Post deserves some credit for running it.
Update: Click here to see commentary by Paul Krugman and Randy Steve Waldman.