What this shows is that the Obama Administration SHOULD have gone for a more Keynesian stimulus

By trying to be 'Bi-Partisan' the stimulus was weak and apparently not effective enough
Such are the limits of 'compromise' with Republicans

It appears that the Obama administration didn't know how to negotiate; whatever they proposed, Congress would reduce its size, so they should have started with a larger number so it would have ended up where their economic advisers told them it needed to be. There are reports that Larry Summers blocked other advisors from making the case to Obama for a larger stimulus.

Yes, frisco, SF, because even though the "compromise" package barely made it through Congress a full Keynesian package would have sailed through.

I refuse to try, once again, explain reality to firebaggers. So I will resort to the only tactic available for people with their heads so firmly up their asses.

What a dumb fuck.

It's amazing that this even requires detailed debate like this.

Krugman and others claimed that a larger stimulus was needed. The smaller stimulus did improve GDP, we now know from the Congressional Budget Office, by more than 4%. However this wasn't enough to bring unemployment down to a level lower than 9% and to start the economy growing more strongly than it is now.

So a larger stimulus was needed and would have accomplished what we needed.

The claim that "this means that stimulus doesn't work" is Republican propaganda, it's hogwash. It's transparently false, it's easily disproved.

The fact that it's being taken as the more serious position is the real problem, a political one, which was actually the point of Krugman's piece.

The fact that President Obama isn't talking about stimulus at all but going on about deficits and debt means that the political problem starts right at the top.

Krugman also points out that critics of stimulus predicted higher interest rates and inflation. Instead, exactly the opposite occurred. But Americans in their collective wisdom will reward these failed Cassandras with electoral victories in November. Democracy in action.

(2) Pass a trimmed down economic stimulus that could overcome a Republican filibuster.

I respect that some people believe that the stimulus package was trimmed to get Senate votes, but Steve should really not state it as if we all agree on that point. I have repeatedly cited evidence strongly showing that the WH got the stimulus that it wanted. To wit:

1. The WH never publicly asked for a $1T+ stimulus (or like a good negotiator asked for a $2T+ stimulus in anticipation of negotiations.)

2. You either believe that Keynesianism works or you don't. Any Republican who would vote for ANY stimulus clearly buys into the concept and simply wants to appear as having extracted concessions before voting for the bill. Start out with a bigger demand and negotiate down to your goal.

3. Reports are that Summers never briefed Obama on the biggest stimulus packages.

4. The WH has repeatedly undermined it's own message by making statements like "government can't create jobs". If they say it they probably believe it.

5. The WH has been glacially slow in suggesting additional stimulus even after first bill didn't work. We are supposed to believe that they always thought it was too small?

6. If Democrats had forced a filibuster in the wake of the 2008 electoral bloodbath the GOP would be unlikely to hold the line.

7. If Democrats had forced an actual filibuster, with cots, etc., the GOP would have lasted, at best, a week. In the meantime it would have been a p.r. disaster for the GOP.

Yes, frisco, SF, because even though the "compromise" package barely made it through Congress a full Keynesian package would have sailed through.

That's not the point.The point is that by not even asking for a larger stimulus Obama set the stage for the debate to be stimulus/no stimulus, rather than big/small/none.

Had he tried for big, and gotten small, he would today have a strong argument that he was blocked from doing more by the Republicans. Instead he's in the utterly predictable situation of being attacked because the stimulus "didn't work" and therefore was a bad idea all along.

Yes Dr. Morpheus, it was such a wise choice for the Obama Administration to decide not to try to push a larger stimulus through Congress, because after all, there's economic reality and then there's political reality, and people just don't want to face this fact.

I mean, it's clearly impossible for any President to influence Congress in any way to pass what he wants, just look at how impossible it was for Bush!

If Obama and his administration had taken such an unpopular position, one that would have drawn such ridicule from the Republicans, then in November they could really be in political trouble.

As it stands now, the smaller stimulus didn't work, at least not enough to make a visible recovery that people would have to acknowledge, things feel like they're floundering, and as a result when the Republicans regain the House in November the administration can THEN go about passing more serious measures, in between all of the non-stop investigations that is. I mean it's got to become easier once the GOP has a majority, right?

Spare us your arrogant "wisdom" please. Or at least the arrogance.

There is another dimension to this. Republican governors misused the stimulus dollars. In today's Jackson Clarion-Ledger it is reported that Mississippi Republican legislators and Governor Barbour want to tuck the stimulus dollars that they didn't want and haven't spent into the state's rainy day fund. In other words, a stimulus that is used as a state's personal savings account isn't stimulating anything. Then Barbour can say, see there, the stimulus didn't work- need more tax cuts.

Whether Obama could have rallied the nation to support a larger, more effective stimulus package is something we'll never know. But we do know how maladroit the Obama team was in estimating the economic damage from the crash, essentially underestimating it by a third. When the extent of the damage became clear, they should have stated as much instead of empowering the Republicans with another smug gotcha point.

One more thing: we're headed for a depression. This isn't Obama's fault, of course, but it proves how pessimism is a better game plan than optimism. ALWAYS assume the worst. As it stands, Americans aren't particularly motivated to demand governmental activism since the New Deal provides enough of a safety net to keep people passive. Of course, they'll consider the comfort of this safety net insufficient and elect Repubicans, who in turn will make sure that comfort is finally terminated. Democracy is hope tempered by disbelief.

What would happen if roles were reversed -- not if Republicans wanted to help the country, silly. If Republicans really wanted something and only had 59 votes to get it?

Well, they'd go on a media offensive and threaten very grave consequences if Democrats didn't go along with the plan. They'd threaten to make it THE issue of the next election, and they'd leak a few ads painting Democrats as terrorist-lovers impeding the efforts of patriotic Republicans everywhere.

Then, of course, Democrats would capitulate and give Republicans twice what they asked for.

@ Dr. Morpheus on September 1, 2010 at 3:32 PM

In the end you're correct. The puny ineffective stimulus was the best that could have been done.

However, my problem is how it was done. The Dems have just got to start playing the same game Republicans play. Raise holy hell for three weeks straight, making sure the lead story on the nightly news is that the Democrats want to fix the economy and Republicans don't. At the last minute, pass the compromise while also mounting a media campaign about how the traitor Republicans hate the country and want it to fail and how there was no choice but to give into them.

How the Dems continue to get victimized by this game without learning from it sort of mystifies me.

I, too, think that Obama should have asked for large (perhaps even unreasonably huge) and settled for medium, instead of asking for medium and settling for small. And, while a medium stimulus wouldn't have "sailed" through Congress, it might have passed; at that point, Repubs still didn't know how far they'd be able to push, because Obama was hugely popular. But, with the way things happened, the Repub sharks smelled blood on the water and, afterwards, almost everything was automatically opposed, whether large or small, reasonable or not.

Still... It's useless to re-fight old battles endlessly; there's no profit in it. We're in the situation we're in, and it's up to us to do the best with it.

If the Republicans win this November, it will be because people blamed the Democrats for things the Republicans did. And Krugman has spent the last year and a half using his NYT pulpit encouraging people to do just that.

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This comment thread boggles my mind.

If the Democrats are such bad negotiators, then why do their plans keep working? The stimulus passed. The health care bill passed. DADT repeal is likely to pass in the next few weeks. And I have people telling me that all three of these things aren't huge, difficult accomplishments that previous Presidents failed at (Clinton tried for all three of these things in his first two years and wound up with nothing), in fact not only aren't accomplishments, but are evil betrayals because the Democrats didn't demand more sooner. Of course, when the Democrats did try to demand more on these things (put the public option in the the base Senate bill, spent the whole last year trying to pass a followup jobs stimulus), it didn't work and couldn't get over the vote thresholds in the Senate, but in the blog-bubble fantasy world these unsuccessful tests aren't seen as a sign that those things were reaching too far for the current vote thresholds in the Senate at the time, they're just viewed as more examples of the Democrats stabbing us in the back. This is all just wishful thinking and nonsense. Elaborate conspiracy theories about Larry Summers don't get us three more seats in the Senate.

I don't get what any of this is accomplishing. I can think of some ways the Democrats could pass more stimulus in future (pass the small business aid bill after the break, pass reconciliation instructions in the House after the election that would allow an infrastructure-based stimulus to pass with 50 Senate votes next year-- that last thing's possible as I understand because we didn't pass "a budget" this year). But you're never going to go back in time and get a bigger stimulus passed in early 2009 no matter how many angry blog posts/comments you make.

I don't claim to be the world's best negotiator, but it is something that I do on a daily basis, and I would say that I am fairly well versed in the basic principles.

When people criticize the Obama administration for being lousy negotiators, it is because they violate basic, well-established principles of negotiation that thousands of people use as guides on a daily basis. Those who object to the criticism would have us believe that the rules don't apply. That the White House is filled with such political geniuses that they can negotiate against themselves, concede key points without getting anything in return, make large concessions early, and telegraph their "bottom line" positions ...and still come out ahead. Sorry. Doesn't work like that.

Which is why I don't think they are lousy negotiators. For the most part, I think they are bamboozling the Democrats into believing they want more liberal legislation but in reality they are getting exactly the legislation that they want. The fact that the policy sucks (e.g. HCR with virtually no cost containment, undersized stimulus, and FinReg that doesn't end TBTF) is apparently irrelevant to them. A win is a win is a win.

At least until the public votes on it. Then you can blame Paul Krugman and Jane Hamsher.

The other point that I would make about GOP obstructionism is that just because people stomp their feet and say they will filibuster legislation doesn't mean that they really will.

Would Specter, Collins, and Snowe REALLY have joined in a filibuster of a $1.5T stimulus bill as the country appeared on the verge of dropping into a second great depression? It is impossible to know, but I highly doubt it.

As I recall, there are plenty of liberals in the House who promised to vote against any HCR bill without a robust public option. Hmmm. Funny how Obama called their bluff, but refused to challenge 3 Republicans.

Oh, jeezus, this again.

Screw $2 trillion. That's kid stuff. The Obama stimulus plan should have been $500 trillion dollars. That way Congress would cut it down a bit, and they'd still have, like, $400 trillion. Negotiating 101!

What's that? $500 trillion is cartoonishly large and no one would back that? Well, that's the way $1 trillion sounds to conservative Democrats.

I think it's pretty clear that $1T was a powerful psychological barrier. They tried to push it as close to $1T as possible, without hitting $1T, because $1T is an unthinkable thought -- not to a handful of Senators, A LOT of them. They don't care that more spending has a bigger effect on the economy. They care that $1T is a big number. They're more worried about the optics than about the effectiveness.

Would Specter, Collins, and Snowe REALLY have joined in a filibuster of a $1.5T stimulus bill as the country appeared on the verge of dropping into a second great depression?

They filibustered a bill for disabled 9/11 responders. They filibustered a bill for small-business lending. I don't see why they wouldn't filibuster $1.5T in spending: just say, "The American people need help, but that help has to be done in a responsible way, and I cannot in good conscience back a bill that adds more than A TRILLION DOLLARS of debt to our children." There's no way that loses in the court of public opinion. You really can't win an argument that says, "We need $1.5T and not a penny less." It'd be like saying, "I'm starving to death but don't give me that IV, because I'll be hungry again tomorrow."

@ mcc: But you're never going to go back in time and get a bigger stimulus passed in early 2009 no matter how many angry blog posts/comments you make.

I keep saying the same thing. They passed what they could pass then, _so let's talk about how to make up for the shortfall NOW_.

Flip:

1. The difference between approx. $1.5T and $500T is that the former is good policy that was being suggested in real time by some of the most brilliant economic minds in the country. Your argument seems to be that we are governed by a bunch of clowns who are too stupid to pass good policy because they have a "psychological barrier" to big numbers.

Okay. If that is the case then I have no reason to believe that they will ever pass additional bills that cumulatively add up to $1T+. If you are right, you might as well prepare now for these asshats to be routinely mocked by those of us who stayed awake in Econ 101.

2. The Republicans do not filibuster bills. They threaten to filibuster them. Then Reid withdraws them. When you see Olympia Snowe reading from a phone book in opposition to a stimulus bill then you will have been proven correct. Until then...

3. You want to talk about the present and not the past? Go ahead. Tell us what current spending package you would put together NOW. I assume you will be able to show how the votes are there.

The fact is that the Democrats, led by Obama, blew it.

A final remark on the original size of the stimulus legislation: I am convinced that the final amount for the stimulus was chosen for exactly the reason that Mr. Benen says "...the policy was effective and worked as it was intended...". The legislation was only designed to prevent a depression; which it did. Once the slide was halted and the economy stabilized, the Administration and Congress could get together to see what further spending would be needed and then pass the necessary legislation. After all, it's a crisis, for crying out loud! Everyone wants to do what's best for the country and its' citizens, right?
The warnings from Prof. Krugman et al, concerning, not only the size of the stimulus but also there only being "one shot" at passing such legislation have been proven, unfortunately, completely correct.
The Administration erred I believe, in not realizing much sooner that the present Republican Party places itself 'way, 'way above any such plebian concepts as "patriotism" or "working for the common good". We should also remember that this is the ONLY national crisis in our country's history where one political party has united in complete and total opposition to ANY effort, not only to solve, but to even ameliorate, the effects of the crisis.
So, yes, one CAN say that the Obama Administration failed regarding the stimulus bill. I guess they shouldn't have counted on the Republican Party having any sense of civic duty...

I'll take your word for it that it was (2), but it sure as hell looked like (3) to me.

A month ago I attended a conference where David Wyss, chief economist for S&P, was one of the keynote speakers. He explained that China weathered the economic downturn better than the U.S., primarily because they spent twice as much on stimulus as we did - because they could afford it. They had not given $2.5 trillion in tax cuts over the previous 8 years.

Let's be clear. The U.S. Doesn't need to worry about being able to "afford" a larger stimulus. If we need more money, we don't go looking under the couch. We borrow it or print it. There are, admittedly downsides to such measures. Namely, inflation may increase as the value of the dollar drops. But has anyone seen long term interest rates lately? Even after the first stimulus bill?

It is also worth noting that bankers and the wealthy do -- and should -- fear inflation far more than average American citizens and businesses.

With the benefit of hindsight, we can safely say that (1) was the best option...
No. Economics is not an experimental science, so you can only take one course of action and can never later compare it to a different course of action. Economics is more political than scientific and objective.

Certainly short term you can perk up the economy by borrowing from China, as you can make yourself feel good by putting an item on the credit card when you're broke; but whether you can pay back the borrowed money in the long term is questionable for the U.S.

Your argument seems to be that we are governed by a bunch of clowns who are too stupid to pass good policy because they have a "psychological barrier" to big numbers.

Tell me how I'm wrong. And I _don't_ think they sit down and add it all up, to be honest. I truly think they're scared of the word "trillion." Those are the "conservative Democrats" who want to be "deficit hawks" and "fiscally responsible." They're pretty fucking irritating, aren't they?

And, no, I don't know how to get more stimulus through, but my sense is that it would have to be "surgical" in nature and be easy to link to "jobs." It'll probably be something like tax cuts for small businesses who hire new employees. Which is insufficient, penny-ante stuff.

But I seriously think you cannot underestimate the passionate resistance on one wing of the Democratic party -- the part that used to be the pro-business, socially tolerant Republicans -- to the government spending [Big Number] on anything. They freak out like a cat near a vacuum cleaner. "The Democrats" encompass that wing, and the more orthodoxly Democratic Keynesian New Deal/Great Society wing. We want to see the second one prevail, and figure that any remotely intelligent Democrat has to see it as we do, but that's where the Bunch of Clowns comes in to push the dollars down and the ideological vision to the right. And without their support, "Democratic" initiatives go nowhere.