Monday, March 9, 2009

Not Enough?

Paul Krugman thinks that the “bold” Obama economic plans are not enough to stop the slide.

The latest data confirm those worries — and suggest that the Obama administration’s economic policies are already falling behind the curve.

To see how bad the numbers are, consider this: The administration’s budget proposals, released less than two weeks ago, assumed an average unemployment rate of 8.1 percent for the whole of this year. In reality, unemployment hit that level in February — and it’s rising fast.

Employment has already fallen more in this recession than in the 1981-82 slump, considered the worst since the Great Depression. As a result, Mr. Obama’s promise that his plan will create or save 3.5 million jobs by the end of 2010 looks underwhelming, to say the least. It’s a credible promise — his economists used solidly mainstream estimates of the impacts of tax and spending policies. But 3.5 million jobs almost two years from now isn’t enough in the face of an economy that has already lost 4.4 million jobs, and is losing 600,000 more each month.

There are now three big questions about economic policy. First, does the administration realize that it isn’t doing enough? Second, is it prepared to do more? Third, will Congress go along with stronger policies?

You can guess his answers: No, Perhaps, and Are You Kidding?

Dr. Krugman bases his assessment on the interview Mr. Obama gave the New York Times last week in which he said that the plan was for everything to be in place this year despite any data to back that up and that further steps would depend on how soon the economy recovers… assuming it does.

The third part — expecting Congress to go along with more stimulus — is problematic. They have already indicated that they see the previous attempts to get things going as failures, and the Republicans, who know little about economics except tax cuts and everything about how to exploit something for political gain, will complain that throwing good money after bad didn’t work (in spite of the fact they went along with it when it was Mr. Bush’s administration that tried it) and will use the moment to pronounce Mr. Obama’s plans as failures, so why try more? The fact that the economy doesn’t turn on a dime — so to speak — and that the first stimulus plan is barely in place now doesn’t mean anything.

So here’s the picture that scares me: It’s September 2009, the unemployment rate has passed 9 percent, and despite the early round of stimulus spending it’s still headed up. Mr. Obama finally concedes that a bigger stimulus is needed.

But he can’t get his new plan through Congress because approval for his economic policies has plummeted, partly because his policies are seen to have failed, partly because job-creation policies are conflated in the public mind with deeply unpopular bank bailouts. And as a result, the recession rages on, unchecked.

O.K., that’s a warning, not a prediction. But economic policy is falling behind the curve, and there’s a real, growing danger that it will never catch up.

I hope he’s wrong. I hope the president and Congress keep trying. If not, these will be the good old days.