Krugman: 'Obama's Victory Feels Like Defeat'

In the New York Times, Paul Krugman wonders why President Obama's stimulus win doesn't feel like one:

By any normal political standards, this week's Congressional agreement on an economic stimulus package was a great victory for President Obama. He got more or less what he asked for: almost $800 billion to rescue the economy, with most of the money allocated to spending rather than tax cuts. Break out the Champagne!

Or maybe not. These aren't normal times, so normal political standards don't apply: Mr. Obama's victory feels more than a bit like defeat. The stimulus bill looks helpful but inadequate, especially when combined with a disappointing plan for rescuing the banks. And the politics of the stimulus fight have made nonsense of Mr. Obama's postpartisan dreams.

Republicans are still committed to "deep voodoo" economics, he writes. (Indeed, later on Thursday, the stimulus once again passed the House of Representatives with no Republican support.) And the "ugliness of the political debate," Krugman adds, suggests Obama would have trouble passing more stimulus legislation if this package falls short. Like many economists, Krugman believes the stimulus is too small -- cut down for political rather than practical reasons. He's also disappointed by Treasury Secretary Timothy Geithner's financial rescue.

"Over all," Krugman concludes, "the effect was to kick the can down the road. And that's not good enough."

At the American Prospect, Ezra Klein seconds Krugman's misgivings:

A large Democratic congressional majority brought to office over two successive elections in which voters repudiated the right. A new and popular Democratic president. And yet it still doesn't seem enough. The incentives of partisanship seem to easily outpace the urgency of crisis. But if this isn't enough, than what is? If our system can't respond to threat with cool planning during good times or quick responses during crises, then what can it do?

But Time's Justin Fox argues for a little patience.

First of all, Obama has been in office for all of three weeks. In that time he has gotten a stimulus package of a size that would have been pretty much unimaginable (except maybe to Krugman) a couple of months ago almost all the way through the legislative process, filled his cabinet and top advisory ranks at dizzying speed but made a few missteps along the way, and has yet to unveil a definitive plan for fixing a banking system embroiled in a once-in-a-century crisis.

Read Krugman's whole column here.

Comments

[momof3inGA]

For the last time -- Obama cannot single-handedly RAM legislation down the throat of Washington without "buy-in" from the Senate and House. It's what our Founding Fathers intelligently labeled "balance of power". Though those powers are being abused by the GOP -- it's what our nation was founded on. And as always is in Washington -- that leads to concessions.

[momof3inGA]

One thing that I've noticed even during the primaries -- Krugman is the ultimate pessimist.

[ideasmatter]

Krugman is right, of course. A much better stimulus bill could have been had if the Democrats had suspended or eliminated the filibuster rule. Just consider: the "centrists'" cut 40 billion $ for repairing crumbling schools! And around 200 billion $ is needed for all the backlog repairs in our schools: it would have been just a down payment.

It is a bit sad to see that the commentators here have nothing left but personal attacks on Prof. Krugman. I ask you, how many of Obama's economic advisers have Nobel prizes? Look at Mr. Geithner: he was actually laughed at in public when he presented his "rescue" plan for the banks. And the laughter was not just from the GOP side.

I am a strong supporter of President Obama, but I have not been impressed with some of the economic advisers he has appointed: those are the same men that got us into this mess. The question now is: will there be a chance for a second stimulus bill when it becomes clear that the first one has not been sufficient? I hope Krugman is wrong about this and there will be such a chance. But even if there will be, it would have been better to get it right the first time. Forget about bi-partisanship, what matters now is saving the economy. Do we really need to wait until Mr. Limbaugh's GOP sees the light?

[Dayahka]

Krugman and many other people seem to be addicted to the immediate gratification model life--as if suddenly you press ENTER and zip everything is changed by a magic wand. In real life, we don't always get what we want. Obama got much of what he wanted. So what if the bipartisanship was a bit one-sided? You cannot expect sudden change on the part of anyone, much less Republicans, who are acting 180 degrees the opposite of how Lincoln, the first Republican president, acted. Obama has the Republicans in a total muddle--they're acting against their own best interests, shooting themselves in the foot, head, arm, and any other part they can hit, and appear as total fools.

[suzyku]

Please stop putting krugman stories in as news! He has become self important and arrogant and has nothing but negativity! It was difficult enough to get this stimulus package passed and krugman whines and complains like a baby! I don't think he understands the ways of WA. and in particular the rethugs! krugman thinks he's the only person who knows anything and we should all bow down to him and his lousy opinions!

[joeinvt]

Right on Suzyku

If "Mr. Smartypants, Show-off, All about himself cause he win the Nobel prize" can't say something nice he shouldn't say anything at all. You know like it was with conservative economists during the Bush administration. Besides Obama doesn't need no stinkin' economists. He's got Rahm Emanuel, David Axelrod, and Judd Gregg (not).

[Querent]

Only a person of shallow intellect with no arguments to offer resorts to characterizing every statement he or she disagrees with as "whining". If such a person can't do better than that, he or she should just not bother.

[billw8017]

Now, in the winter of our misery as we confront a crisis widely compared to the Great Depression, we might remember the Paul Krugman was saying in the election year of 2000 that the Bush policies were nonsense. This was, in fact, more pessimistic than Republican supply side economist who were predicting a new era of prosperity. Krugman and Stiglitz criticized the "Washington consensus" as driving suffering societies in the less developed world to riots and revolution. Whining? Sure compared to the right wing monetarists who said stability was less important than food.

Now that Krugman is proven correct, it may seem sort of annoying that somebody could be so smart or get recognition for it. Certainly, if you like the way things are and want to see the crash continue, Krugman is an abiding pest.

[billw8017]

I wrote "less" when i meant to write "more." Sorry.

Wolfowitz and Summers messed up in their pursuit of the "Washington consensus." The consensus is basically, the ideology behind Bremmer's policies in Iraq as head of the CPA. Knowing of the riots in Indonesia, Argentina and elsewhere, he conceded that things could get rough in Iraq, but predicted ultimate prosperity. He got corruption and insurrection. An Iraqi poll indicates that 90% of the people think the route to recovery is getting rid of US domination.

[LiberTLover]

Only to you Mr. Krugman.

[ktmchris]

I think you are all missing the point. We don't have multiple chances to get this right. We have stimulus V1.0 right now and frankly, it stinks of all things that will not be directly stimulative to our economy in the near term; it is pork barrel politics at its worst. What all of you socialists don't understand is that the treasury markets will dry up as a source of borrowing.....and then what?? We will have:

1) bankrupt nation
2) tax rates will rise to compensate for our lowered credit rating.

Let's do some math: every man woman and child currently owes ~$36K to settle our national debt. This bill, with interest, is roughly 10% of the national debt. This brings our total per-person debt to $40K. So, for the average family of 3, you will owe $120K. Please think about this every time you have the urge to support $1T in spending.

We are in this problem because of the massive expansion of corporate and personal debt. Everyone is responsible. Our government is trying to solve a debt crisis, by creating more debt. It is a downward spiral that will not stop until the nation is bankrupt or Obama realizes that we need to let failed institutions fail and gut out the inevitable consequences of this action. That is where the government will be potentially needed...after letting these institutions fail.

Right now, all of this "stimulus" is an absolute waste of time and money.

[Knowitall]

Thought you were making a serious point until I saw the word "socialists". Moving on...........

[momof3inGA]

Exactly. Bleh...

[billw8017]

The credit markets will dry up provided the government chooses to cover the debt by competing for investments. The government plans to print the money and replace the bank-made money that was reduced as the banks stopped extending credit. This has its own risks, of course.

The biggest effect is a bad inflation somewhat down the line. We have no choice but to accept that and should concentrate on keeping the effects egalitarian. Is it really that bad if the 3 cent stamp (1st oz 1st class 1940) costs a dollar and we have the dollar?

Milwaukee had a socialist government. It was characterized as honest and frugal. Milwaukee did build community health centers. In the depths of the depression, Mayor Daniel Hoan did run at-cost grocery stores that became a model to private grocers here, and with the result that national grocery firms find it a very tough market to prosper in. The "socialism" consisted of being a government of, by, and for the people. Tell me that turning our highways over to Spanish investors and our schools to Neil Bush is the better idea!

[OlskoolDem]

Mr. Krugman, tell this to the 3.4 million who lost their jobs and to those on the bubble.
Get Real.

[katekid]

Hey Krugman, come down from the ivory tower and run for POLITICAL office.
Geeez ur are utterly ponderous.

[babyboomerorig]

IMHO, the stimulus bill came through just about where Obama wanted it. He knew that if he set the goal too high, Congress would find a way to cut it down to where he actually wanted it to be. From all reports, it still came out 4B higher than his initial goal.

Once the Republicans decide to follow what each individual thinks is right and stop paying attention to the Boehners, Cantors and McConnells of their world, things will change. It never does any good to keep threatening people who know what the right thing to do is. They'll either start doing what's right for this country or be out of office. Their constituants aren't going to tolerate losing the homes and jobs because some idiot in Congress is more interested in trying to ruin a new Presidency.

[JHancock]

The republicans can't think on their own. They need a dumbenFührer to lead them over the cliff.

[riona]

Krugman is as eloquent as ever in saying what many understand, and many others perhaps don't want to face. That is - our hero screwed up. He screwed up in not asking for more from Congress and he screwed up in picking Timothy Geithner as Treasury Secretary. The Geithner choice was essentially like picking a fox to guard the henhouse-someone disturbingly similar to what we have experienced for the last 8 years. He is basically trying to give adrenaline shots to a few big banks that have been flatlining for months. Many banks, represented at the Congressional hearing this week, are basically insolvent. We will never see the billions we taxpayers have already given them, back. The banks need to just be left to die and go through bankruptcy. What will happen next is not apocalyptic. The system will bounce back-and be healthier and better in the long run. Throwing billions at banks that will fail anyway is a gross failure of leadership-which Obama must ultimately take responsibility for. Furthermore, the idea of subsidizing bank failures of the nature we are experiencing now is starting to look like fascism. Remember, the 3 or 4 decades after the Great Depression - when banks were regulated the most, was the period in American history that has been the most prosperous - actually we build the largest middle class ever in the history of time. Let's get with the program.

[Givethemhellharry]

I agree. I have spent my work life in the computer fied. When I started there was IBM and the 7 dwarfs as they were called. Not only are the 7 dwarfs gone, but over the years I have seen numerous companies rise to the top and then fade away. Let the old banking system die and it will be replaced by a much more efficient and productive system. Just as we are building new energy sources, so can we build a new financial structure. Throwing money at the old is just throwing money away.

[katekid]

Good point.

[MsLiz]

The prosperity of the late forties, fifties and sixties was also created by the destruction of Europe and Japan in WWII. There was no competition for American products.

[ideasmatter]

Great points Riona. I had commented basically the same before I saw your post that makes the point so much more eloquently.

[kshawNCvoter]

Who?

[MsLiz]

Who is asking?

[schicklett3]

I love the way all the naysayers keep pounding their "socialist" crap down the throats of those that will listen. I actually find it comical.
The stimulus will work....wait and see.

[CallMeCrazy4Now]

Almost every economist disagrees with you including Krugman, so please explain how it will work.

[Knowitall]

Not true. The ones who disagree including Krugman, think the stimulus was TOO SMALL. But there was no way at this time to get any more out of the Congress. (economists and Krugman know this.) But almost none of them thought there shouldn't be a stimulus, and that it wouldn't work. Seems to me that if economists think a bigger stimulus will work, than they must think this one will do SOMETHING, because it's better than NOTHING......get it......?

[13lotus]

did krugman draft anything to submit for obama's people to read? did he try and make any contact to say he is willing to help if this thing is a sinking ship? he sure can write a lot and complain a lot...but, if he has all the answers why isn't he trying to knock down some doors to be heard?

it was a very daunting task, i am sure. i could not imagine trying to hammer out this type of thing with a bunch of egomaniacs (on both sides of the political fence).

who knows if this will work...it sure beats just complaining about it....

[RTIII]

If you search back about 10 days ago or so, yes, he offered his services to the administration.
.

[Knowitall]

If you search back a little further than that, he was trashing Obama all over the place, but Obama was gracious about it, and said at a news conference that he would be glad to look at Krugman's suggestions. However, he didn't guarantee that he would use them. This is about Krugman's ego. Is it just possible that there's someone else in Washington that may have a better idea than Krugman? People like to put Washington down, but some very intelligent people live there. A few almost as brilliant as Krugman.

People who've lived in Washington and worked there know that nobody--NOBODY there is irreplaceable or indispensible. As soon as one bright person moves, there are 10 more waiting to take their place.

Think about it. How long ago was the Republican party celebrating the beginning of a "permanent" majority. Read my lips: That .....is.....never......going......to......happen.......on......either.....side.

So if Krugman wants to be useful, he needs to wind down and stop throwing bombs. Nobody wants to work with a cry baby.

[chargerman]

Krugman is wrong regarding Obama's Victory sounds like Defeat. First of all its not a Victory its a joke.

If the socialists in the Democratic Party really desired to stimulate the economy significant tax credits would have been given for house purchases and buying energy efficient cars. Oops I forgot there was money in the joke bill for these same items but they were lowered so more money could be diverted to things like painting light poles.

[bascombe]

riding the short yellow bus, I'm sure.

[gemzenith]

either way the public is getting impatient and angry.Any forward momentum at this point should be welcome.

[astheworldturns]

Get a new tune.

[MsLiz]

One must have good sources of income and credit to purchase a car or house, oh practicioner of deep voodoo economics. Your proposal helps the "haves" but not the "have nots". It is not healthy for a culture to have significant numbers of people involuntarily unemployed. Many of those unemployed people have training, experience, education and the willingness to work. They need jobs to put food on the table and pay their mortgages/rent and utilities.