March 12, 2009 – 10:31:37
President Barack Obama scored an “F” on his efforts to revive the economy in a recent Wall Street Journal survey of 49 economists. I suspect the grade has less to do with his competence than an impossibly divided Congress.
A minority of economists reject the use of fiscal policy (deficit spending) to stimulate the economy. Obviously they would grade Obama as a failure, because he has embraced the Keynesian view that the government must increase spending to pull out of the recession. A majority of economists believe increasing aggregate demand is necessary, but most of them think Obama is not spending enough. They would also give Obama a low score — not because he’s spending too much, but because he is spending too little.
In truth, Obama appears to be aligned with the majority, but he is hamstrung by politicians that want to treat the Keynesian approach to avoiding a depression as being in the same category as normal deficit spending. Political leaders who rightly decry deficit spending in normal times can’t seem to grasp that this is an abnormal time.
What we’re seeing is the economic equivalent of the Vietnam War. The nation desperately needs to pick a policy and run with it. Instead we’ve picked a policy — that of expansionary fiscal policy to avoid a depression — and we’re limping toward it. Congress is still debating the policy when it needs to be going forward. As in the Vietnam War, straddling the two policy directions may be the worst possible approach. If we run up debt in a half-hearted approach at fiscal expansion, we won’t stimulate the recovery we need to pay off the debt later.
Obama will continue to get low grades, and unemployment will keep growing, until Congress unites around the necessary evil of short-term deficit spending.