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09-20-2011, 11:52 AM   #1
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Why the stimulus didn't work well (redux)

I know, bit old news but it never really gets old does it????

QuoteQuote:
But the question is: Why was the original stimulus so feeble? We've had hints before (The administration assumed that the recession was like any other, Geithner was always worried about the deficit, etc.) but a new book from Ron Suskind sheds totally brand new light on what was going on in the administration during those early days.

Now what's funny is that this book is "controversial" because it has anecdotes about Obama supposedly encouraging Geithner to draft a plan for the liquidation of Citigroup, and Geithner supposedly disobeying (something that everyone's denying him). There's also a line (supposedly taken out of context) about the Obama White House being hostile towards women.

But really, these "controversial" parts pale in significance to what seems like undisputed bits about the White House's thinking about the deficit and economic policy.

Brad Delong has posted a bunch of excerpts from the book that are pretty devastating.

For example, despite insane demand for Treasuries, Peter Orszag had him convinced that there was a chance of failed auctions if the US borrowed too much.


Brad DeLong posts another revealing aspect of the book: The index listings for the top people who advised Obama:

133 Lawrence Summers
131 Tim Geithner
59 Peter Orszag

On the other hand, check out economists who have been super-forceful advocates of big spending...

11 Paul Krugman
6 Robert Reich
5 Joe Stiglitz
4 Jared Bernstein

Bottom line: From the very beginning, Obama was advised by those favoring a "balanced", deficit-mindful approach, while he himself bought into self-defeating structural arguments. And so the stimulus turned out to be a wet blanket that leaves the economy faltering today.

And really, not much has changed in terms of the administration's thinking. They're still ceding ground on deficit reduction, failing to make the forceful case for stimulus (much to the chagrin of sidelined economists like Krugman and Bernstein.
IT FINALLY COMES OUT: Why The Original Obama Stimulus Was Such A Disaster

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