In my previous post Errors Dealing With Economic Recovery Originate With Obama, I used the quote from Brad DeLong’s post:

I learn that Barack Obama was attracted to the idea that on top of our business-cycle demand-driven downturn was a longer-run trend rise in technological unemployment that virtually guaranteed that the recovery would be “jobless”:

[Summers and Romer] were concerned by something the president had said in a morning briefing: that he thought the high unemployment was due to productivity gains in the economy. Summers and Romer were startled. “What was driving unemployment was clearly deficient aggregate demand,” Romer said. “We wondered where this could have been coming from. We both tried to convince him otherwise. He wouldn’t budge.” Summers had been focused intently on how to spur demand, and on what might drive a meaningful recovery…. [W]ithout a rise in demand, in Summers’s view, nothing else would work…. But productivity?… If Obama felt that 10 percent unemployment was the product of sound, productivity-driven decisions by American business, then short-term government measures to spur hiring were not only futile but unwise. The two economists strained their memory… had they said something he’d misconstrued?… After a month, frustration turned to resignation. “The president seems to have developed his own view,” Romer said.

I’d like to talk about what is so wrong about Obama’s thinking.

Obama is short sighted when he thinks, “high unemployment was due to productivity gains in the economy.”  He needs to realize that because of the way our taxes are structured and the rules that have been set up for our economy since 1980, the fruits of increasing productivity flow almost exclusively to the top of the economic pyramid.  The rest of the economy  is left to suffer only the bad consequences of how this economic structure is set up.

In my previous post Imagine – Total Automation, I tried to show that by taking the rise of productivity to an extreme it might be clearer that one could imagine a different outcome is possible for the 98% of the economy that is actually harmed by increasing productivity under the current system.

Where Romer missed making an effective argument, was in saying that “What was driving unemployment was clearly deficient aggregate demand,”  as if that were totally unrelated to the President’s vision of the cause of high unemployment being the fault of increased productivity.

Letting the top 2% of the population take all of the benefits of increased productivity, robs the other 98% of the money needed to buy all that can be produced by this highly productive economy.  This combination is what leads to high unemployment.  Contrary to what Obama was thinking, the high productivity does not inevitably lead to high unemployment.

This flow of all benefits upward is a product of our tax structure and economic rules and regulations created by the government.  Both of these are within Obama’s domain to try to change.  When faced with the thought that “the high unemployment was due to productivity gains in the economy”, he needed to ask himself, so how can we change this outcome of productivity gains without losing the benefits of those gains.

There are plenty of experts around who can explain to Obama how to do this.

When I voted for Obama, I thought of him as a man of vision and great enough intellectual curiosity that he would learn the things he needed to in order to be a success.  In the case of economics, he has been a man of little vision.  He has been completely intellectually unaware that he was not an economics expert. There is no reason why he would have even thought that he was an expert.

Somehow, his erroneous thinking has shifted him from “Yes we can”, to “Oh well, I guess we really can’t” with respect to fixing the economic problems of the country.

He is going to have to work extremely hard in the next 14 months to convince me that he has seen the error of his ways.  So far he blames the discouragement of his natural constituency on themselves.  All the exhortation in the world won’t get these people excited about him again unless he gives them something to be excited about.

The one lesson we learned from Ronald Reagan’s tenure is that when faced with such dire problems, we may not be able to fix them until someone comes along with the courage and the heartlessness to let the economy crash so that it can finally be reshaped in a better way.  With his programs, Reagan was finally able to break the back of OPEC and solve our inflation problems.  Of course, what he and his descendants in the office of President did after  he solved the inflation problem is the proximate cause of our current problems.

In 2012, should I vote for Obama if he shows signs that he is just going to manage to prolong the agony?  Or I should I vote for someone to crash the economy so we can finally go on to the next phase of resolving the issues?   As in Reagan’s case, the actions of the person who solves the problem of economic depression will be taken to extremes and in the long run will swing the pendulum too far in the opposite direction.

On Brad DeLong’s blog, the article Review of Ron Suskind’s “Confidence Men” confirms my worst fears about how the Obama administration has dealt with the economy.  That fear is that Obama’s economic policy was anemic not because he didn’t fight hard enough for the right policies.  It was anemic because Obama convinced himself, contrary to all good advice, that the wrong policies were needed and that the right policies were not needed.

On this blog I don’t intend to repeat the information in the articles to which I point.  I want to give you enough information to encourage you to read the whole articles yourself.  This is especially true of this article.  So, keep in mind that in the following you will only get a pale shadow of the information of the whole article.

For the most part DeLong does not think that Ron Suskind did a good job with his book.

And, as Ezra Klein points out, the stories Suskind does tell repeatedly undermine his global narrative claim that the administration’s big problem was that Lawrence Summers was (a) too sure of himself, and (b) so good a debater that he won internal arguments he ought to have lost. If Larry Summers had been winning all the internal policy arguments, Ezra points out, then administration policy would have gone in “the direction Suskind clearly wishes the White House had gone.”

However, DeLong does list quite a few things that he learned from the book.  The following is one of the items I find indicative of Obama’s failings:

I learn that Barack Obama was attracted to the idea that on top of our business-cycle demand-driven downturn was a longer-run trend rise in technological unemployment that virtually guaranteed that the recovery would be “jobless”:

[Summers and Romer] were concerned by something the president had said in a morning briefing: that he thought the high unemployment was due to productivity gains in the economy. Summers and Romer were startled. “What was driving unemployment was clearly deficient aggregate demand,” Romer said. “We wondered where this could have been coming from. We both tried to convince him otherwise. He wouldn’t budge.” Summers had been focused intently on how to spur demand, and on what might drive a meaningful recovery…. [W]ithout a rise in demand, in Summers’s view, nothing else would work…. But productivity?… If Obama felt that 10 percent unemployment was the product of sound, productivity-driven decisions by American business, then short-term government measures to spur hiring were not only futile but unwise. The two economists strained their memory… had they said something he’d misconstrued?… After a month, frustration turned to resignation. “The president seems to have developed his own view,” Romer said.

I found a link to chapter 1 of Confidence Men: Wall Street, Washington and the Education of a President by Ronald Suskind.

The New Yorker has an article on the book titled The Book on Barack.

Robert Reich: Why This is Exactly The Time to Rebuild America’s Infrastructure explains the following:

Now connect the dots. Anyone with half a brain will see this is the ideal time to borrow money from the rest of the world to put Americans to work rebuilding the nation’s infrastructure.

Problem is, too many in Washington have less than half a brain.

Coincidentally, before I read this article, I had posted a comment that with trillions of dollars of needed infrastructure investment and prices so low to do the work, it should be a no-brainer to do the work now.  The only difference between Reich and me is that I don’t even think it should take any brains to figure this out.

With the Republicans and Faux Noise spewing the opposite idea 24/7, it just takes as much repetition on our side as they have on their side.  People are not thinking (not using any brains).  They are on automatic pilot and following what they hear most often.

If we could repeat the truth often enough, maybe we could get people to think.  Once they started thinking, they too might see the obvious.

Maybe we also need to repeat the part where Robert Reich says:

Seems like only yesterday conservative nabobs of negativity predicted America’s ballooning budget deficit would generate soaring inflation and crippling costs of additional federal borrowing.

Remember Standard & Poor’s downgrade of the United States? Recall the intense worry about investors’ confidence in government bonds — America’s IOUs?

Hmmm.

Last week ten-year yields on U.S. Treasuries closed at 1.83 percent.

In other words, they were wrong.

In the article DOJ Says They’ve Debunked The ‘$16 Muffin’ Myth, the cost is explained.

“The package consisted of food, beverages, staff services and function space, including a 450-seat ballroom and more than a dozen workshop and breakout rooms each of the five days of the conference.”

This answer is so obvious, one wonders how the DOJ’s Inspector General could have been so silly as to make the accusation in the first place.  Imagine an Inspector General going after this kind of stuff when we have issues of past corruption and approval of torture in the DOJ.  I guess any little thing that will distract from the real issues is what the Inspector General’s job requires.

As I watched CBS new anchor Scott Pelley repeat the charge on several nights, I wondered about his competence.  Is it possible to  suppose a person in his position has never been to a large social function to see the resources that a hotel puts out to host a large gathering before they even set out the food?

Surely not.  So you know that when Scott Pelley sits there and says these things with a straight face, that he is pulling your leg.  This kind of “understanding” of what they report is what has turned me off from watching Scott Pelley’s previous program 60 Minutes. I can’t remember when it was that I finally got sick and tired of 60 Minutes.  It must be 20 to 30 years ago.

For a brief while after I decided to give Pelley another chance by watching CBS Evening News, I thought that Pelley might have left behind the shenanigans of 60 Minutes.  What a forlorn hope that a news anchor could exhibit half the intelligence of most of his audience.