Did Rahm Emanuel Ruin The Economy?


Indeed, that would be the not-so-thinly-veiled point of Paul Krugman’s latest NYT op-ed, in which he argues that the political side of the Obama administration (Rahm Emanuel) overruled the policy side of the administration (everyone else) in enacting a stimulus that was way too small to do any good.

But as Krugman sees it, The White House could have saved the economy AND been in a much better position politically if it had gone bigger early on (as Krugman suggested back then).

What should Mr. Obama have done? Some political analysts, like Charlie Cook, say that he made a mistake by pursuing health reform, that he should have focused on the economy. As far as I can tell, however, these analysts aren’t talking about pursuing different policies — they’re saying that he should have talked more about the subject. But what matters is actual economic results.

The best way for Mr. Obama to have avoided an electoral setback this fall would have been enacting a stimulus that matched the scale of the economic crisis. Obviously, he didn’t do that. Maybe he couldn’t have passed an adequate-sized plan, but the fact is that he didn’t even try.

The argument is obviously impossible to prove, but it raises an interesting question.

We know that the deficit is an extremely salient political question right now. Would it be so were the real economy behaving better? In other words, if we were adding private sector jobs at a rapid monthly clip, would the anti-deficit message of the GOP (and the Tea Party) have any resonance? It might not.

In the meantime, however, Obama probably has the worst of both worlds: A mediocre economy and a bad political hand.

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