Did investors dump stocks on Monday because they’d lost faith in America’s ability to pay its bills? Because they thought the federal government would cut spending further, slowing down the economy? Because they were adjusting to the latest news from Europe? The list of experts qualified to address those questions is long. And it does not include me.
But I don’t need the stock market to tell me the American economy is sick. And you shouldn’t either. More than 9 percent of Americans looking for work can’t find it, according to official statistics, not including those who have stopped looking for work altogether. Almost 4.5 million have been out of work for more than a year, according to a new congressional report, with another 1.7 million out of work for between six months and a year.
As many of us have written before -- Matt Yglesias has been consistently sharp on this point -- this is a crisis. A real crisis. And a crisis partly, although not entirely, of our own making. We can’t rewrite history to prevent the housing bubble, and we can’t reach across the oceans to fix the financial troubles of Europe. But in the present day and in this country, we can put more spending money in the pockets of people who will spend it, by extending unemployment insurance and renewing a payroll tax holiday. We can put construction workers back on the job, by financing projects to fix up America’s roads, public schools, and other common assets. We can provide assistance to the states, so that they’ll stop adding people to the unemployment lines.
And on a day otherwise filled with gloom, I saw one sign that maybe we’re about to have a real conversation about doing those sorts of things, if only in moderation.
It came during President Obama’s mostly unremarkable remarks from the White House. He seemed a bit listless, to be honest, and he spent much of his time talking about deficit reduction, which has become distraction from (and perhaps impediment to) action to bolster employment. But then Obama said something else: "The good news here is that by coming together to deal with the long-term debt challenge, we would have more room to implement key proposals that can get the economy to grow faster."
At a few points during the debt ceiling debate, usually in response to progressive critics, Obama vowed that a deal would make it easier to put the deficit issue "to rest" and focus more intently on jobs. It hasn't exactly worked out that way, thanks to S&P and the formation of a super-commission that will suck up Washington's oxygen for the next few months. But Obama, happily, may be trying to shift the conversation anyway. The White House has scheduled a midwest bus tour for later this month and, in his Monday remarks, he went on to endorse most of the policies I listed above. Better still, he made an even more explicit pitch on infrastructure later in the day, at a fundraiser for the Democratic National Committee:
I don't want to get carried away here. This White House isn't known for the kind of message discipline it would take to shift the political conversation over to an employment agenda -- on Monday, for instance, the message was all too typically muddled. And even a relentless, focused campaign of persuasion might not be enough to enact a serious set of initiatives, given GOP resistance. As my colleague Jonathan Chait notes, Republicans have even turned against the payroll tax holiday – a tax cut! – for the very simple reason that Obama is now for it.
Still, if this is the beginning of a serious push -- emphasis on the "if" -- it's possible the Republicans would relent, putting in place the policies that could put substantial numbers of Americans back to work. And if not? Well, then, at least Americans would have a better sense of who has ideas for boosting employment – and who doesn’t. Either way, we’d have taken a step towards fixing our real economic problems, of which the stock market collapse is most likely a lagging indicator.
Update: I revised the language a bit, just to emphasize my uncertainty about what's coming next.
I'd feel much more optimistic about the way you're reading Obama's tea leaves, Jonathan, if: 1) he were to come out with a whole-hearted campaign for a stimulus; 2) if he had proven far better at arguing with bullet points and passion rather than with detailed analysis; and 3) most of all, if he hadn't dug himself into such a deep hole by agreeing to so many Republicans arguments/perspectives.
I just don't see how he pivots from likening the US economy to a family that must balance its budget to, on the other hand, pressing for stimulus/infrastructure/job-creating spending that temporarily increases the deficit. Talk about flip-flops! But I fervently hope that you're right and I'm wrong.
I'd feel much more optimistic about the way you're reading Obama's tea leaves, Jonathan, if: 1) he were to come out with a whole-hearted campaign for a stimulus; 2) if he had proven far better at arguing with bullet points and passion rather than with detailed analysis; and 3) most of all, if he hadn't dug himself into such a deep hole by agreeing to so many Republicans arguments/perspectives.
I just don't see how he pivots from likening the US economy to a family that must balance its budget to, on the other hand, pressing for stimulus/infrastructure/job-creating spending that temporarily increases the deficit. Talk about flip-flops! But I fervently hope that you're right and I'm wrong.
How big a stimulus do we need, Jon? Two trillion? Seems about right to me. Two trillion might not even be big enough. But let's agree for the sake of argument that somewhere in the ballpark of $1-2 trillion spent over the next three years is what America needs. I'd like you to explain to me how President Balanced Approach EVER going to ask for anything remotely close to 2 trillion? He isn't. Wake up. From here on out it's all campaign smoke and mirrors.
You reap what you sow. Obama came out as a full bore deficit hawk. Now you want him to transmogrify into a Keynsian white knight? Get real.
How big a stimulus do we need, Jon? Two trillion? Seems about right to me. Two trillion might not even be big enough. But let's agree for the sake of argument that somewhere in the ballpark of $1-2 trillion spent over the next three years is what America needs. I'd like you to explain to me how President Balanced Approach EVER going to ask for anything remotely close to 2 trillion? He isn't. Wake up. From here on out it's all campaign smoke and mirrors.
You reap what you sow. Obama came out as a full bore deficit hawk. Now you want him to transmogrify into a Keynsian white knight? Get real.
What if there were a Democratic primary challenger who ran on a platform of massive stimulus spending, a new New Deal? Blow up the debt ceiling compromise and start again with an eye this time on the truly dire straights in which America finds herself? Could such a candidate win? I doubt it? Could such a candidate shift the discourse in a beneficial direction? Possibly, yes.
The United States of America is drowning in bullshit. God help us.
What if there were a Democratic primary challenger who ran on a platform of massive stimulus spending, a new New Deal? Blow up the debt ceiling compromise and start again with an eye this time on the truly dire straights in which America finds herself? Could such a candidate win? I doubt it? Could such a candidate shift the discourse in a beneficial direction? Possibly, yes.
The United States of America is drowning in bullshit. God help us.
I doubt it, period...not question mark.
I doubt it, period...not question mark.
Roosevelt made that transformation (albeit in reverse), it's certainly possible that Obama could. Yes Obama came out as a full bore deficit hawk, but I'm guessing that was more the result of the changing political discourse making it a political necessity for him to do so rather than the fact that he actually believed cutting the deficit was of supreme importance. Obama's not stupid, and I'm sure he knows that what the economy really needs is more stimulus and that deficit reduction is useless, if not counterproductive, in the short term. However, once both the wise men in both parties and the media decided that deficit reduction was of supreme importance, i doubt Obama could have done ... view full comment
Roosevelt made that transformation (albeit in reverse), it's certainly possible that Obama could. Yes Obama came out as a full bore deficit hawk, but I'm guessing that was more the result of the changing political discourse making it a political necessity for him to do so rather than the fact that he actually believed cutting the deficit was of supreme importance. Obama's not stupid, and I'm sure he knows that what the economy really needs is more stimulus and that deficit reduction is useless, if not counterproductive, in the short term. However, once both the wise men in both parties and the media decided that deficit reduction was of supreme importance, i doubt Obama could have done much to change the track of that conversation. If he had answered that trying to deal with the deficit at this point was ridiculous then he would have been ridiculed not only by the republicans but by the media and probably some moderate democrats as well. In short, he would have lost all credibility on economic issues. What has happened instead, i feel, is that through the way the republicans have acted throughout the debt-ceiling debate has made them lose their credibility instead.
Polls have shown that what the public wanted was for the two parties to compromise in making a deal. Obama was willing to compromise, the Republicans were not. In fact, the Republicans were so unwilling to compromise that they were willing not only to sacrifice the chance to cut the deficit, but also to hold the world economy hostage in order to ensure that taxes were not raised a single cent. Now, seeing that the public wanted compromise to occur in forming a deal, who do you think they're going to perceive as the most responsible party? Do you think they'll give any credibility to the party that basically threw a tantrum, basically insisting that they were going to hold their breath, like a child, until they got every single thing they wanted? Now, Obama's critics to the left are probably right that this deal resembles, objectively, a surrender rather than a compromise, but nevertheless that's how it will be perceived.
At this point Obama can basically say that he's very much aware of the importance of cutting the debt, so much so that he was willing to give up every single one of his own preferences simply so he could get a deal. He can then say that nevertheless, at this point in time, with the dow in free-fall again, what the economy needs is more stimulus. Then when the Republicans yell that he doesn't care about the deficit he can say that, while his opponents claim to view deficit reduction as of paramount importance, how committed to it can they really be if they refused to sacrifice a single one of their policy preferences in order to achieve it? How committed to deficit reduction can they be if they felt that it was more important to stop even the tiniest tax increase, even one that came from eliminating loopholes, than to reach a deal to reduce the deficit.
Now, perhaps Obama plans to do no such thing. It's also possible (perhaps probable) that Obama has been playing it by ear this entire time and there was no grand strategy to discredit the Republicans. However, if I'm smart enough to realize that the opportunity is there, I'm pretty sure Obama, with an enormous team of political advisers, must have become aware that this opportunity exists.
My worry in such a situation is basically Cohn's worry, that Obama's messaging will once again be off and the much more unified conservative machine will be able to nonetheless frame Obama as reckless.
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