Government Spending

Good Luck, America!


The Beltwaytastic National Journal today was reborn as a new (and newly accessible) journalistic entity, with the requisite cover interview with the president of the United States of America to prove it. Here's what that fellow says about the economy, and economic policy:

NJ Let me start by asking you about the issue that's most on the minds of Americans: the economy. I'm wondering, absent any big change in policy, is there anything you see on the trajectory that would cause the economy, particularly jobs, to grow faster in the next year than they have been growing in the last year?

OBAMA Well, the American economy is massive, it's complicated, and so anybody who says they know exactly what the economy will do is probably overestimating their foresight. What we know is that we're coming out of the worst financial crisis and the worst recession since the Great Depression. So we've suffered a significant body blow. Because of the steps we've taken, the economy is now growing again, and we've seen nine consecutive months of private-sector job growth. Businesses are profitable and consumers are cautious, but they're spending. If businesses got more confident about demand being out there to justify their investments, and in turn that led to slightly increased spending, which then created a virtuous cycle, then you could see significant improvement in 2011 over 2010. But given the hole that we're in, it would still take a significantly long time to make up for the 8 million jobs that have been lost, so that's why we think it's still important to take those extra measures that can improve demand, give small businesses more confidence in terms of their ability to get financing. The steps we took in terms of cutting capital gains tax for start-ups, trying to accelerate business investment, allowing them to depreciate faster if they make those investments next year, those kinds of measures can potentially make a difference because even if all goes well, we lost 8 million jobs. The housing market is still very weak. And those headwinds are going to keep on blowing for some time to come. […]

[W]e've got some structural issues that we put off for a long time, and we're not going to transform overnight. What we have tried to do is to make sure we get started on some of those, that we get started addressing some of those structural issues knowing that the payoff is not going to be immediate, it's not going to be next year. The best example of that is probably the education issue. We used to rank first in the proportion of college graduates; we now rank ninth. We used to be at the top of the heap in math and science; we're now 21st and 25th in math and science when you look at the performance of 15-year-olds. So what we're doing with Race to the Top, what we're doing in terms of expanding student-loan programs, all those steps are designed to make sure that in this highly competitive environment, we're going to be better positioned. When it comes to manufacturing, the investments we made in research and development, particularly in sectors like clean energy that show promise for the future. Those aren't going to pay off immediately, but if we start positioning ourselves so that we're a leader in advanced battery manufacturing, we're a leader when it comes to solar and wind energy, then we have the opportunity once again to make up some of that ground that we lost over the last decade.

Note the centrality of the federal government at every stage above–in boosting demand (even though the multiplier is a myth), giving small businesses goodies (even though the resulting policy hurts taxpayers and businesses alike), strengthening the housing market (even though the political intolerability of declining housing prices is one of the key reasons we're in this mess), impacting education policy (even though Obama's ballyhooed rhetoric on this issue issue masks a terribly disappointing and big-spending performance), sloshing more money into student loans (even though signs point to increased defaults and a higher education bubble), and investing in clean tech (even though that failed the first time around, and the long-promised "green jobs" are literally countless).

Later in the interview Obama says, of the resurgent GOP, "I have yet to hear anybody, with the exception, to his credit, of Paul Ryan, give me any specifics on what exactly do they want to cut." Which is a fair enough point (if hyperbolized). But what about the president? Out of one side of his mouth he acknowledges that the fiscal situation of the country he presides over is "untenable." But out of the other, when talking about an economy that has far undershot the administration's own initial worst-case scenarios, he wants to keep throwing bad money after bad. The president and those within his bubble see zero connection between his massively interventionist economic policies and the massively disappointing economy. As long as that remains the case, there will be a growth market in political "restraining orders," no matter how crudely imagined.