Washington Post columnist Ezra Klein recently spent nearly 7,000 words explaining why voters might want to consider cutting the Obama administration a break for the terribly weak economic recovery. Especially since it’s kinda-sorta their own fault.
It’s a two-part argument. First, Klein says, the depth and nature of the downturn was worse than almost everybody realized back in early 2009, including government statisticians. He notes that the infamous stimulus chart created by White House economists Jared Bernstein and Christina Romer showed unemployment peaking at 9 percent in 2010 and falling below 7 percent by the end of 2011; with the stimulus, unemployment would supposedly never even hit 8 percent and be back in the 5-percent range by 2012. Reality: It’s been 8.6 percent or higher for 31 straight months even with the stimulus.
Yet Bernstein himself said in December 2008 that double-digit unemployment was quite possible. So did Moody’s economist Mark Zandi, whose forecasting model the White House used. In January 2009, Zandi predicted unemployment would rise to 11.1 percent with no stimulus. So it’s really baffling that the official White House forecast was so relatively benign.
But maybe it was wishful thinking. That would also explain why the White House initially dismissed the idea—proposed by economists Carmen Reinhart and Ken Rogoff—that recessions after debt-induced financial crises tend to be lengthy and the eventual recoveries sickly. Team Obama, particularly all-star economists Larry Summers and Peter Orszag, disagreed and argued that the rebound would be a robust one.
Second, by the time the White House better understood the Great Recession’s dynamics, politics—by which Klein means Republicans and the Tea Party—limited a more dramatic Keynesian response, i.e., lots more stimulus and mortgage debt relief. Klein, again: “These sorts of economic crises are … inherently politically destabilizing, and that makes a sufficient response, at least in a democracy, nearly impossible … The policies that are vastly better than whatever you are doing are not politically achievable, and the policies that are politically achievable are not vastly better.”
Do I detect here a bit of the China envy that’s now so commonplace among liberals and the Left? Maybe the problem isn’t democracy but zero recognition by Team Obama that a) its Keynesian-inspired economic formula is anyway mistaken, b) federal debt levels place the economy at risk of another financial crisis, c) taxes and regulation are suffocating the private sector. But it’s easier to make excuses than to admit error.