One of the most frustrating things about having a two-party dominated political system, especially in the heat of an election, is that many important points get ignored if they don’t fit the partisan paradigm. One of the best examples is the impoverished debate about Obama’s record on the economy.
The only arguments most people hear against Obama’s record come from Republicans, but their criticisms are normally incoherent attacks based on fantasies about investor/consumer confidence and government “crowding out” the private sector. And at this moment most prominent Kenesians are defending Obama’s poor record, mainly because his policies are noticeably less terrible than any proposal from Mitt Romney.
The reality is that if you believe in Keynesian economics, as President Obama at least at one point clearly did, then you must conclude that Obama made several costly mistakes that significantly hurt the economy. Below are just five of the bigger ones:
- Not using automatic stabilizers - Instead of having set amounts spent on programs in the American Recovery Act, the law should have made the spending levels conditional. For example, unemployment benefits would be extended until unemployment dropped below a certain number. The law could have been designed to have had the same official price tag, but when the economy ended up growing more slowly than the administration wanted, the amount that was spent would have ended up much larger.
- Reconciliation – There is this myth Obama couldn’t get more stimulus because there were not 60 votes in the Senate for it. This completely ignores the fact reconciliation was always an option. There is no reason Obama couldn’t have used reconciliation for a bigger stimulus (or a second stimulus) with only 50 votes in the Senate.
- Health care as stimulus – The Affordable Care Act was a huge law but it was designed to spend almost no money in the near term. Democrats could have changed the law to front-load more spending to help the economy.
- Federal Reserve appointments – For the first two years the Obama administration made very little effort to appoint individuals to Federal Reserve vacancies who would have supported stimulative monetary policies. Obama could have even made recess appoints if the Senate refused to act.
- Unspent HAMP money – The Obama administration had a pot of money they could have used as stimulus to help struggling home owners but they only spent 10 percent of it. What limited amount was spent was used in a highly ineffective manner.
I feel the last two are the most damning. People trying to defend Obama’s record from the left will often claim Obama didn’t try to get more stimulus only because Obama knew he wouldn’t be able to get the votes in the Senate. Yet here are things Obama could have done for the economy without Congress, but he chose not to do them. Given that Obama didn’t even try to spend all the potential money for stimulus he had at his disposal, it is safe to assume the real reason Obama didn’t seek more stimulus money was simply because he mistakenly believed the economy didn’t need it.
The behavior and statements of the administration clearly show that they consistently underestimated the size of our economic problems for years.
While Bill Clinton is defending Obama by claiming no president could have magically turned the economy to full employment, an honest look at the record would indicate another president could have done a better job even with the constraints Obama faced. Sadly, though, this critique of Obama’s record from the left is almost completely absent. Careful examination of Obama’s failings are completely overshadowed by how completely misguided Mitt Romney’s policy ideas are.