In his article Fixing the economy: We got it wrong, James K. Galbraith explains why Obama and his advisers “misunderestimated” the needed size of the stimulus package. Here is a tiny excerpt to whet your appetite for reading the whole article:

The next mistake was to base policy on the forecasts. The sensible thing would have been to paint the bleakest possible picture, emphasizing the extraordinary crisis, and so justify the largest possible policy action. Then if things turned out all right President Obama would have gotten credit, and any excess actions could easily have been cut back. Instead, the president set himself and his policies up for blame.

Obama’s approach contrasts sharply with how President Reagan handled the recession of 1981-82 — with massive tax cuts enacted in 1981. I did not like Reagan’s tax cuts, but everyone could see that they implied a truly massive stimulus. This was politically smart, as Reagan’s reelection proved. And when the message had been delivered, the cuts were trimmed in 1982, 1984 and 1986.

The above two paragraphs cover only a part of Galbraith’s recommendations.  Even so, Galbraith missed one factor.  The skewed distribution of wealth and income makes a self-sustaining employment recovery just about impossible.  If the middle-class no longer would have enough income to buy all that a full-employment economy could produce, what would be the economic justification to put everyone back to work?  Without the buying power, the full-employment economy would produce more than needed by the customer demand.

Tax and other policies must be changed in order to fix this issue.

Galbraith also should be careful to define who the “we” is in the “We got it wrong”

Doing just a little Google searching to see if anybody recognized in 2009 that the stimulus was too small, I came up with the following:

Senate Dems on Obama Stimulus: Size Matters, January 09, 2009

I’d guess that the Democratic dismay must run pretty damned deep for them to oppose Obama on his stimulus plan. Good, because it isn’t big enough:

Economic stimulus on the cheap, February 9, 2009

For US senators, decreasing the size of the stimulus package may be clever politics. But it’s not smart economics

Krugman: Obama’s Stimulus Doesn’t Go Far Enough – The Obama Gap,  January 8, 2009

 Bear in mind just how big the U.S. economy is. Given sufficient demand for its output, America would produce more than $30 trillion worth of goods and services over the next two years. But with both consumer spending and business investment plunging, a huge gap is opening up between what the American economy can produce and what it’s able to sell.

And the Obama plan is nowhere near big enough to fill this “output gap.”

Even taking a quick look at what was on this Steve’s Politics Blog in January, 2009, I find the following:

Be Bold With Economic Stimulus. January 14, 2009

To put it another way, if Obama proposes to do more than we find out that we need, he can always cancel some of his proposals.  On the other hand, if we eventually find out that we need more than he has proposed, it may be too late to add these items by the time we find that we need them.

One of my reasons for having this blog is so that I can have a record of who said what and when.  I can bring out the “I told you so” whenever someone claims that “nobody knew at the time.”

I have finally been able to get the video of Rep. Schakowsky talking about her bill.

I referred to this bill in the previous post, Representative Jan Schakowsky Introduces Plan to Create 2.2 Million Jobs.

Brad DeLong’s article Department of “Huh?!”: Labor Market Demand and Supply for the Elderly Edition has some comments that are particularly relevant to my previous blog post The Return Of Depression Economics.

DeLong said:

The old Keynesian line was that nominal wage flexibility–and the union-smashing recommended by Hayekians–was a side issue. In an economy with nominal debt contracts downward-flexible nominal wages were likely to produce deeper depressions as the economy was subjected to much stronger downward shocks from the deflation, debt, and bankruptcy cattle prod. Wage inertia was thus a blessing–albeit a poorly-understood blessing–rather than a curse.

I think that everybody open-minded and nuanced is finding themselves moving rapidly toward the old Keynesian position under the pressure of events and data right now.

Compare this to the quote that I pulled out of Paul Krugman’s book The Return Of Depression Economics.

In reality prices don’t fall quickly in the face of the recession, but economists have been unable to agree about exactly why.

On August 10, I took Krugman to task for pretending that economists could not agree on the obvious cause.  I said:

 Could it be that the need for homeowners to sell their houses at above market value to be able to pay off their mortgages kept them from lowering the prices right away in the forlorn hope that they could come out of the deal financially whole?

If you translate the economics jargon, Brad DeLong is saying the same thing.

It may not have much to do with my particular point in this blog post, but I want to keep track of the following graph from DeLong’s article.

Dean Baker is the author of the article President Obama Joins the Cult of Economics Deniers published in Nation of Change. He says:

But, President Obama is apparently not listening to economists anymore, so he wouldn’t care in any case. Just as we have many politicians who ignore climatologists in the design of energy policy, and politicians who think that biology has no place in teaching the origins of species, we now have politicians who think that economics has no place in designing economic policy.

I guess President Obama has gotten weary of occupying his position in the reality based community and has decided to make up his own set of facts.  It worked for George Bush, why not for Obama?

I go even further than Cenk Uygur in the above video.

What I complain about is Obama’s complete lack of effort to defend my principles. Even if he still lost, he would have made a good, strong case for my principles. Eventually the point might start to sink in with the public, 80% of whom already agree with the point that Obama should be making. If Obama can’t rally 80% of the public, what kind of a leader is he?

What we are discovering, though, is that Obama and his minions don’t believe in the principles I think he should be fighting for. The point that Dennis Kucinich has made is that Obama is not really losing his battles since Obama is really more on the side of the Republicans than we could have believed when we elected him.

I may be slow, but I just became aware of the October 2011 organization.

Stop the Machine! Create a New World!

A Call to Action – Oct. 6, 2011 and onward

October 2011 is the 10th anniversary of the invasion of Afghanistan and the beginning of the 2012 federal austerity budget. It is time to light the spark that sets off a true democratic, nonviolent transition to a world in which people are freed to create just and sustainable solutions.

We call on people of conscience and courage—all who seek peace, economic justice, human rights and a healthy environment—to join together in Washington, D.C., beginning on Oct. 6, 2011, in nonviolent resistance similar to the Arab Spring and the Midwest awakening.

I have been wondering how long it would take for the US to join in the movement that seems to be sweeping the world.

Warren Buffet wrote the opinion piece Stop Coddling the Super-Rich for The New York Times.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.
…
My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

He may be premature in sending this message, but eventually people may be ready to hear it. He might as well put it out there to be picked up when the time is ripe for the message to be accepted.

If the article, White House Debates Fight on Economy, in The New York Times is true, then there can be no clearer indication that this President is toast.

“Playing it safe is not going to cut it,” said Ms. Romer, a professor of economics at the University of California, Berkeley. “Not proposing anything bold and not trying to do something to definitively deal with our problems would mean that we’re going to have another year and a half like the last year and a half — and then it’s awfully hard to get re-elected.”

But there is little support for such an approach inside the administration. A series of departures has left few economists among Mr. Obama’s senior advisers. Several of his political advisers are skeptical about the merits of stimulus spending, and they are certain about the politics: voters do not like it.

The very fact that the political advisers think voters do not like the only action that can get this economy going again shows the administration’s abysmal failure to even try to convince the public of what the right action is.  What kind of a leader only picks policies that the electorate has been fooled by the opposition into thinking they want?  If the opposition can convince the public to want the wrong policies, doesn’t Obama think he owes it to us to try to change the public’s thinking on the issue?  It’s almost as if the Republicans have succeeded in bamboozling the President as well as a large part of the electorate. If  Obama is not even sure of what the right policies are, we can’t expect him to be a strong voice fighting for those policies. That is why I think all is lost.

How do you define a Republican?  Usually a Republican of any standing is “skeptical about the merits of stimulus spending”.  Is this the person we thought we elected?  Why, the very audacity of hope!!

The only hope we have left is that The New York Times is making up this story as they have done with many stories in the past.  Although the most documented lies that they have told have been involved with creating excuses to go to war.  Their usual technique is to use anonymous sources.  In this story they appear to name names.  They give names to the different people on the different sides of the debate.  However, they do not claim that the named people gave them the information.

Dan Pfeiffer, the White House director of communications, said that there was no internal debate.

There is at least one named White House official that claims The New York Times story is bunk.  It is rather a thin thread to hang your hopes on.

Don’t be so sure about previous Republicans ever wavering on this principle.

WikiPedia throws some doubt on the claim that Richard Nixon said, “We are all Keynesians now.”

The Hijacked Crisis is another gem from Paul Krugman.

I have picked the following quote because it is a subject I have harped on.

What would a real response to our problems involve? First of all, it would involve more, not less, government spending for the time being — with mass unemployment and incredibly low borrowing costs, we should be rebuilding our schools, our roads, our water systems and more.

In a call to Senator Scott Brown’s office quite a while ago, I made this same point.  I also made this point in a previous blog post in, Mugged by the Moralizers. I’ll quote what I said there.

The American Society of Civil Engineers in its 2009 Report Card for America’s Infrastructure estimates that we need to spend $2.2 trillion dollars over the next 5 years repairing our infrastructure just to prevent it from failing. If we know we need to spend this money at some point in the future, when would be the best time to spend it? I claim that now is the best time.  When private spending is underperforming, there is no better time for public spending. There is little competition for the borrowing capacity.  The infrastructure use is at the lowest ebb that it is going to be (not that it is low, but relatively it is). There is idle labor, equipment, and raw materials, so construction prices are low. There is little risk of inflation because there is so much idle capacity in the system

It is much better to do the work now than wait until the economy booms.  Borrowing will be expensive then as the private sector is competing for loans as they are borrowing to increase capacity.  Workers will be scarce and therefore expensive. Raw materials will be costlier. Adding government spending to private spending at that time will stoke the fires of inflation.

Why would we pass up such a golden opportunity to do work that we know has to get done?

I found the story about Post-Partum Compassion on RawStory. RawStory provided the following transcript:

“This is the problem with entitlements,” he explained. “They are really only entitlements when they are something other people want. When it’s something you want, they are a hallmark of a civilized society, a foundation of a great people. ‘I just had a baby and found out that maternity leave strengthens society, but since I still have a job, unemployment benefits are clearly socialism.’”

“So either Megyn Kelly has inadvertently exposed the hypocrisy at the heart of conservative demonization of unions and the working class or… Oh my God, it’s worse than I thought. Megyn Kelly is suffering from post-partum compassion.”

Here is the video clip.