Tuesday, August 30, 2011

Obama's Economic Dilemma

I think Jon Chait gets Obama's problem with jobs and Congress exactly right:
...if Obama potentially had the votes in Congress to pass another stimulus, it would be worth taking an unpopular vote in order to rescue the economy. Since Obama does not and will not have those votes, he needs to conceive of his plan as a political message. There is no point in holding a message vote when the message is unpopular. 
This seems to be a reality liberals have trouble acknowledging. There are a lot of issues where the public agrees with the left. Economic stimulus does not appear to be one of them. Now, public opinion is fairly hazy and ill-informed about this, and certain elements of economic stimulus can command majorities. But the passage of the first stimulus, at the height of Obama's popularity, shows pretty clearly that people instinctively think that, when the economy is terrible, having the government spend a lot of new money is not going to help. That they're wrong doesn't really matter for the purposes of this question.
The administration floated the idea of using a mortgage refinance plan that would not need Congressional approval and might provide some stimulus, but would still need acceptance by a regulator who is not answerable to the Obama administration. He needs several more ideas like this.

This is the nub of the problem. Obama needs to find some way now to rectify the problem that arises from the inadequacy of stimulus plans two years ago, and he is likely going to have to do it without Congress. One way or the other he needs a great deal of luck in restarting growth, or he will face an enormous obstacle to re-election (he could still get re-elected if the Republicans move too far to the right).

An addendum: a few weeks back Brad Delong summed up the mistakes and missed opportunities of Obama's first year or two in office and what he should do now. It is worth reading.

Overall, it is clear that Obama faces immense obstacles to restarting economic growth. It is not all clear how he gets the U.S. economy moving again, especially given the loony political opposition he faces from Republicans.