The best reaction to the policy effect of the terrible jobs numbers today was from Timothy Lee, who sarcastically tweeted:
This month’s job numbers vindicate my pre-existing beliefs about macroeconomics!
That’s about right. I mentioned a good post by John Sides yesterday, but I didn’t mention perhaps the most important thing he said: “People underestimate how much the behavior of politicians is sincere.” And whatever you believe the best economic course to be, it’s unlikely that a couple months of new data are going to change your mind. If you’ve always believed that there hasn’t been enough stimulus, well, look, see what’s happened. If you’ve always believed that “out-of-control spending” is the problem: well, look, see what’s happened.
Of course, that doesn’t mean that no one is correct, or that these opinions are not testable. But, really, there’s no reason to believe that people are going to change their minds. There’s no reason to believe, in particular, that those who believe that slashing spending is good for the economy are going to change their minds. And I disagree with Jonathan Chait, who basically accuses the Republicans of preferring the economic conditions that would help them elect a president in 2012. After all, the Conservative Party Brits are gung-ho for austerity while in office.
Check that: there is one group that should, in fact, change their minds based on new data. That would be anyone who believes in stimulus during hard times and austerity once economic health is restored, but mistakenly believed that the economy was now thriving, or at least close to it. That might, indeed, include much of the Barack Obama Administration.
Or is that not what the president thinks? That’s what Paul Krugman is proposing: perhaps Obama just is an austerity guy (in my terms, a deficit idealist), end of story. The problem for outsiders is that even though what John said is right — that a lot of what politicians do is sincere — it’s also correct that figuring out what they want is tricky. Let me try to explain that a bit…let’s take an easy example. Say that President Smith really wants $100M of spending on something, but Congress wants $20M. Smith might ask for $100M. She might, however, ask for $30M, if she believed that asking for a lower number was the best way to get the most she could get. She might go on TV and advocate for more spending…or, she might decide to downplay the issue, to keep it from being a partisan talking point, if she thought (correctly or not) that it would help get the most money out of Congress.
What do I think? I agree with Krugman that whatever the reasons, it’s foolish for Obama to echo (what I believe are) phony GOP deficit talking points. I certainly think that it’s been foolish of Obama to move slowly on Fed appointments. Maybe Obama could have squeezed a state government bailout through the Senate in late 2009, but I mostly doubt it. Beyond that…it’s just hard to know much. The fact of GOP control of the House isn’t something that liberals can wish away — and those Republicans really do seem to believe, in my view contrary to all the evidence, but still — that slashing government spending is the key to prosperity. Regardless of what Obama believes about long-term or even medium-term deficits, there’s not much evidence that he believes that…but there’s also not a whole lot he can do about it (on that, I think I agree completely with Chait). All of which is highly depressing for those who believe in, well, mainstream economics.
[Cross-posted at A plain blog about politics]