The president badly needs to make more realistic pronouncements. No one expects him to say his policies have failed (although most have delivered far less than claimed at large cost). A little candor about the results of experimentation in uncharted waters would go a long way. But at the very least, his staff needs to avoid putting these exaggerations on the teleprompter. It undermines confidence and raises concerns about competence. It's doing nobody any good—not the economy and certainly not Mr. Obama.
The entire article is well-worth the read.
Boskin also says:
ReplyDeleteMr. Obama's economic statements are increasingly divorced not only from competing viewpoints but from those of his own economic advisers. It is surprising how many numerically challenged pronouncements come from this most scripted and political of White Houses. One slip is eventually forgiven, but when a pattern emerges, no one believes it is an accident.
Barry is certain that his true believers will continue to accept anything he says, and that his media will continue to report anything he might say as unquestioned truth.
ReplyDeleteTherefore, why should he be botherd to actually TELL the truth?
Fascinating article. I must say, however, that nothing the President has done has undermined my confidence in him. That implies that I had some confidence in him to begin with -- which I didn't. I would have loved to have been surprized. But I wasn't.
ReplyDeleteThe government is going to do what it can to control the alternative media. They will find a way to destroy that pesky little critter called Truth.
I think Boskin in turn exaggerates a few points in order to simplify his story and avoid unpopular arguments.
ReplyDeleteI'd divide up the actions in response to the financial crisis in four parts:
1) The Fannie/Freddie bailout, followed by TARP after the collapse of Lehman. I maintain that these actions did indeed prevent a Depression (as defined by 10% peak-trough destruction of GDP). Whether or not this would have ultimately been "for the best" or "a necessary cleansing" (possibly) or "things would have bounced back quickly" (very dubious) is beside the point - if the argument is whether or not a Depression was averted, the answer (IMHO) is yes. Of course, the Bush administration gets the credit/blame for this one - so Obama has to reference subsequent actions.
2) The plethora of acronym'd programs initiated by the Fed, but principally the zero interest rate policy, relaxed collateral rules for discount window lending and the purchase of over a trillion in mortgage obligations. Fed calls in "credit easing", also known as "money printing". The ocean of "liquidity" meant banks don't need to worry about bank runs, and can slowly write down crap loans and assets by making money on the Treasury curve. (Downside: you make nothing on your savings account). These actions saved the banking system, which prevented a Depression. (Unfortunately, they also... saved the banking system.) Again, Obama gets no credit/blame for this one, either.
3) The Treasury actions of March 2009 - the stress tests, the PPIP (toxic asset purchase plan), and the further bailout of Citi in the form of securities guarantees (contingent liabilities of the US Treasury, not actual expenditures) and common stock purchase (actual expenditures). This one may be assigned to Obama - he decided to put Tim Geithner in charge. And although this is not a popular opinion, I have to give him credit - the global economy risked relapsing into cardiac arrest (which it was in for about a month after Lehman). Most of this was pure theater to restore confidence, and it worked. Make no mistake, I'm not a Tim G fan, but again - on the straight up question of "did this avert a Depression", I have to say at least "very possibly yes" to this one.
4) The stimulus: this one is 100% Obama, and at least 70% crap. Seven hundred billion more or less pissed away. Pathetic. (I allow for the fact that some of the infrastructure spending did some good - and at least we got some infrastructure out of it.) The fact is that entering the crisis, the US still had some borrowing capacity, and if you accept that boom and bust is inevitable in capitalist economies, then bust time is a very good time to do some necessary infrastructure work.
Instead we got... patronage and pr0k. ("pr0k" is "pork which is so disgusting as to be obscene").
Awesome.
(continued from above - maxed out length limit; that's new...)
ReplyDeleteEven Keynes sympathizers such as myself were aghast. And if you're not Keynesian, then all of it is crap - and you'd have a point, which is the point that Boskin is making - just considering the stimulus, there is no way Obama can claim he averted a Depression. Complete bullshit. Perhaps we'd be a few points higher in unemployment... or perhaps not, since confidence in our fiscal position would be better. Tossup, and in any case the money has now been pissed away, and we're that much further in debt. We are out of ammo. Sad economy is sad.
However - the strong form of the argument, which is along the lines of "no government action forestalled a Depression"... no, I don't agree with that. Ideologically, I'd like to believe it, but practically I don't. Austrian school economics says busts can never be prevented, only delayed. With balance sheet recession / debt deflation spiral like this, they may be right. But we won't know until things play out.
Looking back, though, if the collapse that Lehman started had been allowed to run its course through most of the banking system around the world, I fear our electric schedule would resemble that of Baghdad - if the lights were on at all. In fact, in hindsight, Bernanke, Paulson and Geithner probably regret not being bolder - Lehman should not have been allowed to go down the way it did.