President Obama is blowing his credibility on the economy–a mistake that could be fatal to his presidency.
Importantly, however, he is doing this not because he has failed to take the necessary action to fix it but because he has failed to adequately prepare the country for how long the repairs will take.
Obama wasn’t helped last weekend when Joe Biden told the world the administration had “misread how bad the economy was”–thus loading up the cannons for Obama critics on both sides of the aisle. Biden was presumably trying to pave the way for a second stimulus, but this silly statement created the impression that:
- Obama was in denial (he said wouldn’t have done anything differently), as well as
- The economy would have been fixed already if only the administration hadn’t “misread” it.
The Republicans, meanwhile, have jumped all over Obama in recent weeks, howling that the stimulus obviously hasn’t worked because the country is still losing jobs.
All of this is ridiculous.
Because digging our way out of this hole was always going to take years. And because it is way too early to tell whether we need a second stimulus because the vast majority of the first one hasn’t even hit the economy yet.
Take a look at these stats from the Congressional Budget Office presentation (full presentation below). This table shows the timing of the planned stimulus expenditures by year:
So only one-quarter of the stimulus will be spent by the end of the year. Only 1% of it, moreover, had been spent by May 22nd. So how on earth are we supposed to tell whether it’s working?
You can argue that the stimulus was a bad idea in the first place, that Keynesian spending just doesn’t work…. You can argue that the stimulus was poorly constructed (too much to “entitlements,” too little to infrastructure). You can argue that the government should just have mailed out checks to individuals in the form of tax rebates. But arguing that the stimulus has failed is silly.
Where Obama has failed, however, is getting the message across about how long the recovery will take and how little an impact the stimulus is likely to have. Unless and until he does that, he’ll continue to be blamed for the mess we’re in. He’ll also continue to burn his credibility.
Here’s the CBO estimate of the economy without the stimulus (black line) and with the stimulus (red line) over the next decade. Not exactly an earth-shattering difference. And that’s if everything goes well.
The Obama Administration’s own forecasts, of course, are considerably more optimistic…which is another factor helping to destroy the president’s credibility.
But let’s be clear: The perceived “failure” of the stimulus is largely a communication and failure-to-manage-expectations problem, not a policy problem. At least not yet.*
*The exception is the banks. By bailing out insolvent banks and allowing them to limp along as zombies, the administration has likely prolonged the recovery process. But Obama’s critics are (no longer) yelling about that.
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