Cleaning Up After Obama

by Steve

We head into a July 4th weekend holiday, where the Senate Republicans and Ben Nelson happily left town and let millions of families lose unemployment benefits, even after a bad jobs report that shows we're headed for a double-dip recession. On “Charlie Rose” last night, Paul Krugman followed up on yesterday’s column, and said that another stimulus in the range of the first one (over $800 billion) was needed to kick start the economy. He freely admitted to Rose that this was unlikely to happen because of the prevailing and intellectually bankrupt conventional wisdom among some in Washington and amongst the G20 that argues incredibly for budget cutting and faith. Other economists don’t necessarily agree with Krugman on the size of what’s needed in a second package, but do agree that a second package of smaller size that is better targeted can work just as well.

Yet we’ll get none of these things before the midterm elections, which is a political calculation that the overrated Obama team should have seen as far back as Februry 2009. It will be left to the lame duck Congress to pass a second stimulus package, by which point it will be too late to stop the double-dip in 2011 and the loss of thousands of more jobs.

“We may have seen the best of employment for some time,” said Paul Kasriel, chief economist at Northern Trust. “In general the economy is downshifting, maybe to stall speed, or just above stall.”

Think of this dynamic: An economy that has stalled by November, giving the GOP what it needs to take back one house of Congress, and yet come into office in January with no answer to fix the economy except less regulations and taxes, which will do nothing to spur demand. Yet that’s where we’re headed, which is why I think the lame duck Congress will be left with the task of doing the dirty work on its way out the door. That’s right, a bunch of “dead man walking” Democrats, about to lose their seats because Obama wimped out on the first stimulus and botched his agenda, will be asked to vote for what’s necessary as they leave town, just so the incoming GOP replacements can blame them for being spendthrifts and yet benefit from the revived economy to hold onto those same seats in 2012.

I'm not interested anymore in arguing with Obama supporters about the first stimulus package; it was too small and had too many tax cuts. Plenty of economists thought so, and yet couldn't tell him because he let Larry Summers and Tim Geithner be his gatekeepers as they pushed for a smaller package that would please bondholders. Well, they and he fucked up, and now a Democratic Congress is about to pay the price for his mistake on the stimulus and his wrongheaded decision to push health care reform ahead of financial reform and a jobs agenda.