WHEN HOPE IS THE ONLY PLAN LEFT…. Atrios summarized the painful state of the economic debate nicely: “It’s all about the deficit, nobody talks about jobs anymore, and the administration isn’t making the case that there’s something they want that Congress won’t give them. The plan is… hope for the best.”
Quite right. President Obama could announce today that he’s launching an ambitious jobs plan, but he won’t, because he knows Congress would reject it. Indeed, Americans, for whatever reason, elected a House majority that wants to make unemployment worse on purpose, and actively dislikes those who are unemployed.
And so, while the public is clamoring for Washington to focus on economic growth and job creation, policymakers are focused on the opposite: taking money out of the economy. The best — the very best — we can hope for is a president who’ll stop Republicans from making matters much worse, and maybe a reluctant Federal Reserve that might choose to play a more constructive role.
But really, that’s it. The White House can’t act without Congress, and Congress doesn’t want to act at all. We’re left to simply hope the economy continues to improve on its own.
The NYT‘s David Leonhardt isn’t sure hope is enough.
White House advisers and Ben Bernanke, the Federal Reserve chairman, argue that the bad news is a merely a blip caused by bad weather, a temporary cut in military purchases and other one-time factors. They may be right, too. Stock market investors certainly share their optimism: the Standard & Poor’s 500 index is near a postrecession high.
But both Wall Street and Washington were also optimistic around this time last year — too optimistic. The unfortunate truth is that the recoveries from financial crises have a habit of disappointing.
Crises do so much damage that they leave businesses and households predisposed to believe the worst and to pull back at the first hint of economic weakness. Households are slow to resume spending. Banks are slow to lend, especially to small businesses. Companies are slow to hire.
All this is why the typical financial crisis has caused unemployment to rise for almost five years, according to historical work by the economists Carmen Reinhart and Kenneth Rogoff. We are well ahead of that timetable, thanks to aggressive action by the Fed, the Obama administration and, in its final months, the Bush administration. But our working assumption should be that this recovery will remain at risk for a long time.
Leonhardt added that the “sensible” response from Congress would be some sort of short-term stimulus, perhaps tied to a long-term deficit reduction plan.
But Americans ensured last November that no “sensible” economic policies will come out of this Congress any time soon.
