> Yesterday I started really wondering why this stimulus bill falls so
> short and is so bad. Because I can't believe that all the big econ
> brains assembled in this administration (Summers, Bernstein, Romer,
> Bernancke) don't understand this shortfall issue better than we do.
>
> It could all be a deep plan of course. But I can't help feeling that
> even though there aren't conservative "freshwater" economists in his
> administration, this plan is splitting the difference between their
> views and liberal economists. And conservative economists have been
> abysmal in this debate, with many of even the most respectable and
> intelligent ones (Mankiw, Barro) saying crazy stupid pre-Keynesian
> things. (Krugman argues in his blog that they seem to be up against
> an existential wall, such that if Keynes is right about this output
> gap stuff, then their lifework has been misguided, a conclusion they
> are understandably flailing against with all their might and any
> quarter-assed idea that comes to hand.)
>
> And then I thought: I wonder where Austan Goolsbee stands. He's a
> freshwater economist. And I wonder if he's still whispering in
> Obama's ear. Or if Obama's basic principles are the one Goolsbee gave
> him.
I suspect this is much more about politics than policy. If the White House had been able to dictate a stimulus bill at will, the bill probably wouldn't have been a bad one. The problem started when it came time to get it passed in Congress. Obama really, really wants Republicans to support his policies. He cares about that far more than he does about adopting policies that (he thinks) are actually good. And even if he were somehow to shake himself out of that delusion, how could he fight back? The GOP have won their victories on the stimulus by activating Rush Limbaugh and Drudge to scream about wasteful government spending. That line of attack worked not because the Republicans are demonic geniuses, but because presuming government spending to be dubious and wasteful is (still) currently the conventional wisdom in America, no matter how much the current crisis has shaken existing certainties in the intellectual world. The only way to fight the conventional wisdom, as I've said before, is to try to formulate an alternative vision of political economy and find a language in which to express it. That is exactly the opposite of the kind of governance Obama is interested in. His ideal style of politics, even more than most politicians, is to identify whatever the ambient "American" language and vision of the moment is, then appropriate it and regurgitate it back to the country bathed in a hazy glow of pseudo-idealistic eloquence. (Hence Rick Warren.) He himself perceptively noted that he tends to become screen on which people project their hopes. He noticed this early on and he decided that that's the kind of politician he wants to be. So if Republicans go screaming about how the stimulus is wasteful government spending, he recognizes that they have shrewdly put their finger on a sensitive spot and he wants to compromise immediately.
SA