Six months into the Obama presidency and the New York Times is already running an autopsy analysing how he could have been so wrong about the economy.
David Leonhardt’s bottom line? The administration was deluded by hope.
We doubt it. We suspect Obama, Summers, Geithner & Co. just decided that they had to issue rose-coloured projections about the unemployment rate and recovery or they would never have a hope in hell of ramming such huge spending increases through. And if the forecasts proved optimistic? Well, by then, maybe everyone would have forgotten.
At the time, we noted that Obama was taking a huge risk here: The collapse of the economy certainly wasn’t his fault, and, no matter what, recovery was likely going to take years. If nothing else, we thought, Obama should preserve his own credibility.
And now he has already blown it.
David Leonhardt: There are two possible explanations that the administration was so wrong. And sorting through them matters a great deal, because they point in opposite policy directions.
The first explanation is that the economy has deteriorated because the stimulus package failed. Some critics say that stimulus just doesn’t work, while others argue that this particular package was too small or too badly constructed to make a difference.
The second answer is that the economy has deteriorated in spite of the stimulus. In other words, the patient is not as sick as he would have been without the medicine he received. But he is a lot sicker than doctors realised when they prescribed it.
To me, the evidence is fairly compelling that the second answer is the right one…
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