FOOT ON THE GAS…. Not surprisingly, Barack Obama is getting all kinds of advice about how aggressive to be after taking office. A growing number of prominent voices seem to be saying the same thing: err on the side of being bold.
Paul Krugman notes that FDR, early on, wasn’t bold enough in responding to the Great Depression, and thinks Obama shouldn’t be timid in tackling the ongoing financial crisis.
The economic lesson is the importance of doing enough. F.D.R. thought he was being prudent by reining in his spending plans; in reality, he was taking big risks with the economy and with his legacy. My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent. It’s much better, in a depressed economy, to err on the side of too much stimulus than on the side of too little.
In short, Mr. Obama’s chances of leading a new New Deal depend largely on whether his short-run economic plans are sufficiently bold. Progressives can only hope that he has the necessary audacity.
Likewise, Fareed Zakaria believes Obama would benefit from being as ambitious as possible.
For the last few weeks, most of the A-list pundits have been arguing that Obama needs to jettison some of his grandiose plans, given the high budget deficits he will inherit and dangers of overreaching politically. Fareed Zakaria argued against this, strongly, and made two crucial points.
One was about the analogy to 1993, when high deficits compelled Bill Clinton to ditch his spending plans. But, as Zakaria noted, Clinton did that in part to bring down interest rates, which were bound to get in the way of a recovery. (This was Robert Rubin’s essential argument: Bring down the deficit and the Fed will cooperate with lower interest rates, thereby boosting the economy.) Today interest rates are already low. The same rationale simply doesn’t exist. Besides, when interest rates are low, borrowing is cheap. In that sense, this is an ideal time to run deficits, assuming they are temporary.
Zakaria’s other argument was about the international economy. One reason you worry about deficits is the loss of confidence it might generate abroad. If foreigners lose faith in the federal government’s ability to pay its bills, they could dump their dollars and switch to other currencies. But, as Zakaria pointed out, the rest of the world facing the same economic plight we are; they’re all going to be running high deficits in the short- to medium-term. A run on the dollar seems extremely unlikely.
And E. J. Dionne Jr. is on board.
…Reagan offers another lesson: His first moves were bold, and Obama should not fear following his example. The president-elect is hearing that his greatest mistake would be something called “overreach.” Democrats in Congress, it’s implied, are hungry to impose wacky left-wing schemes that Obama must resist.
In fact, timidity is a far greater danger than overreaching, simply because it’s quite easy to be cautious…. President-elect Obama can spend most of his time fretting warily about the shortcomings of past presidents and how to avoid their errors. Or he can think hopefully about truly successful presidents and how their daring changed the country. Is there any doubt as to which of these would more usefully engage his imagination?
Sounds like an audacious consensus is starting to built around the need for a bold presidency.