How Obama blew the recovery

Felix Salmon, Reuters - In one of his biggest errors as economic advisor to the president, Larry Summers told Barack Obama that “It is easier to add down the road to insufficient fiscal stimulus than to subtract from excessive fiscal stimulus. We can if necessary take further steps.”

He was absolutely wrong, of course, as Obama himself realized as early as the summer of 2009. Noam Scheiber reports:

A play for more stimulus, on the other hand, would be a defiant action, and Obama clearly recognized this. When Romer later urged him to double-down, he groused, “The American people don’t think it worked, so I can’t do it.”

This makes it seem as though the administration tried to get America to see the effects of the stimulus, and failed. But in fact, the opposite is true: a large part of the stimulus — the payroll-tax cut — was specifically designed to be invisible...

There’s evidence that the Obama economic team wasn’t entirely unhappy with the lack of a second stimulus:

By January 2011, two months after Democrats suffered a rout in the congressional midterm elections, the West Wing again faced a critical choice… Should they tackle the trillion-dollar deficit, co-opting the anti-government zeal that Republicans had ridden to power? Or should they try to lower the stubbornly high unemployment rate, which had exceeded 9 percent for 20 straight months? The president’s team quickly concluded that the deficit was the higher priority.

Scheiber is sympathetic. He says that the decision to concentrate on unemployment would constitute “playing partisan hardball”, and adds:

The decision to focus on the deficit in 2011 was defensible at the time. It wasn’t until much later that the economy’s weakness became clear.

This is simply bonkers: I was describing the stubbornly-high unemployment rate as “Obama’s Katrina” as early as June 2010, when unemployment stood at 9.6%. By January 2011, nothing much had changed: the unemployment rate was still 9.4%. It’s hard to see what’s happened since then which has made the economy’s weakness any clearer.

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