Photo: The White House, Flickr
For the first time since the Great Recession, the economy is showing some signs of being on a “sustainable” recovery path. And the timing is pretty great for Obama, if the momentum can continue through the year — a big if.But it’s hard to argue with the fact that through the first couple years of the administration, job creation was achingly slow, even as GDP bounded back nicely from the ’08-’09 depths.
A new article from Noam Scheiber at TNR — adapted from a forthcoming book of his — sheds new light on the fumbling, dysfunctional economic team that Obama had in place during the first two years. It’s a depressing read.
Probably the saddest part is how quickly the administration pivoted to deficits, rather than stimulus.
The article tells how in the summer of 2009, after the first stimulus, Larry Summers and Peter Orszag still had wildly different views on stimulus and deficits. Orszag reportedly wanted deficit cuts; Summers recognised that the economy needed new stimulus.
In the end…
Seated in the Roosevelt Room in early December 2009, the president wondered why both sets of ideas were so timid. Orszag grumbled that it was, in fact, disappointing to offer so little on the deficit front. Summers interjected that the economy was in dire need of more stimulus. Each side then labelled the other’s proposals political nonstarters, and the president lost his patience. “You know what, this is the same meeting we’ve been having,” he said, excusing himself. “Talk to me when you’ve thought this through.” The bickering soon grew so loud that Orszag’s deputy, Rob Nabors, lunged to shut the door.
With no agreement forthcoming, it was Orszag who filled the vacuum throughout the fall. He urged the president to freeze domestic spending in his next budget and favoured setting up a commission of Washington elders to recommend trillions in savings over a decade. Summers believed such ideas were gimmicks unworthy of a president. To colleagues he complained that “what’s really important in life is not to believe your own bullshit.” The president sided with Orszag.
Again, the key here is that this was 2009, with the economy barely out of technical recession.
The unemployment rate had been steadily marching higher for most of the year.
We’ve called the mis-placed fear of deficits the “costliest mistake in all of economics” and this clinches it.
Obviously the “freeze” was the worst of both worlds. It didn’t help the real economy, it didn’t do anything meaningful deficit-wise, and it didn’t help politically, as the GOP routed Obama a year later on the matter of the deficit.
There’s basically no chance that the deficit would have been such a salient issue in the 2010 midterms if the unemployment situation hadn’t gotten so out of hand in 2009-2010. Notice how nobody talks about the deficit anymore, with the jobs situation improving?
Scheiber’s story actually gets even more depressing, because then it segues into how the White House badly mis-played the debt ceiling negotiations, blowing an opportunity to end it early, and then not realising the tenacity of the GOP on this issue before it was way too late.
The real testament here is to the underlying strength of the US economy, that with all its gone through — including an economic team that wasn’t prepared for the one job it had in front of it — it’s still kicking, and even getting better.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.