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Sunday, June 05, 2011

No Pivot

by digby

In light of ongoing tepid job growth, Jared Bernstein had some good advice for the White House the other day:

Someone just asked me, “how does the White House pivot from targeting deficits to targeting jobs?”

How’s this? “Based on new information, we are now pivoting from targeting deficits to targeting jobs!”

So much for the "pivot":

AMANPOUR:...So, economists are asking and people are asking, is this kind of a wake-up call, do you think, to sort of shift the political debate from what's been all about debt reduction and shift it back to job creation? I mean, is this an opportunity, for instance, to try to talk about creating jobs and adding maybe another stimulus? Let's say there was no politics involved, in a perfect environment. What would you do to get this off the slow burner?

GOOLSBEE: Well, I would say two or three thing. The first is, the president has never stopped talking about jobs. For him, the growth strategy is the number-one issue.

Now, we must live within our means. We have a moment that we can talk about long-run deficit reduction. And the vice president's leading an effort to do that, that the president has asked him to. But the president is getting up every day -- on Friday, he's going out to Ohio to talk about jobs in manufacturing, which manufacturing is having its best employment year in almost 15 years.

From what Goolsbee said, it appears their strategy is going to be on dual tracks, not a pivot from deficit reduction. The growth strategy appears to be this:

GOOLSBEE: OK. So the -- we have shifted in the economy from a rescue phase, which is government-directed, to a phase in which government policies have got -- we've got to rely on government policies that are trying to leverage the private sector and give incentives to the private sector to be doing the growth.

And that -- so the president has started these tax cuts that will continue over the rest of this year, has put in place this regulatory review in which all of the major agencies are going to go through, find any outmoded regulations, ones that are excessively costly for their benefits, find ways to streamline.

AMANPOUR: Would there be more payroll cuts...

GOOLSBEE: The free-trade agreements...

AMANPOUR: ... tax cut holiday?

GOOLSBEE: Well, we still -- there will be more payroll tax cut over the entire course of this year. It's more than $1,000 a worker for 150 million workers.

The free-trade agreements, trying to increase exports, which are rising at 15 percent annual rates. The infrastructure bank that the president has called for, which, again, is trying to leverage, using government incentives to get private capital to enter and help grow the economy. That -- that -- those are the things that we've got to be doing.

So what we are going to see is deficit reduction plus tax cuts, deregulation, "government incentives to get private capital to help grow the economy" and free trade agreements. No wonder the Republicans have gone completely over the cliff. The Democrats stole their agenda.

Now I wouldn't mind this nearly as much if the administration would at least use the excuse that these are the only options because Mitch McConnell and Paul Ryan are lunatics. It's not much but they wouldn't be teaching the country are the optimal choices and they're just pleased as punch to enact these awesome policies because they are the best policies --- and at least liberalism might then live to fight another day.

Matt Yglesias had an interesting post discussing a comment by President Obama at his facebook Townhall in which he said that because the recession came at a time of immense debt they have to deal with it or the markets will become spooked. (Where have I heard that before?)

Anyway, he believes that Obama was influenced by a study which shows that financial crises lead to unusually long and painful recessions, which back in 2010 Tim Geithner attributed to political cowardice. He said at the time, "but sometimes a policymaker has to say, I’ll take pain now against pain later.”

Yglesias concludes:

Some time in the ensuing year, the administration abandoned this Geithner/activist interpretation of the Reinhardt/Rogoff result and instead shifted to a fatalist interpretation. Yes, the economy is in bad shape. And yes, growth is likely to continue to be disappointing. But not because of policy failures. It’s just one of these things, like how it gets cold in the winter. You deal with it. But you don’t let it dominate your life. You focus on the long term. It’s a convenient story to believe, because it aligns with short-term political imperatives. It’s also flattering, it says to the people in charge, “It’s not your fault, there’s nothing more you can do.” But it’s wrong.

I don't know that they were ever willing to "take the pain now" but I do agree that they decided that their only hope was to believe that the confidence fairy would fix everything in time if only we all clapped louder.

Update: I see Krugman already hit this fatalism bug, here.