"Tell me again why Barack Obama has been such a bad president? I'm not talking here about him as a tactician and communicator. We can agree that he has played some bad poker with Congress. ... (But) what, specifically, has he done wrong on policy?"
OK, I'll play.
Obama made three crucially bad economic decisions in the first year of his presidency:
1) Obama deferred to Democrats in Congress on the writing of his fiscal stimulus. He fought for a big total, but he paid much less attention to what was included in the total. The predictable result: a stimulus that most economists condemn as very poorly designed.
Congress larded up the stimulus with ancient Democratic wish lists utterly irrelevant to the crisis at hand: $15 billion for more Pell grants, $9 billion for community and rural development, $20 billion for the renewable energy tax credit and so on. $87 billion was used to bail out state governments that had overspent on Medicaid. About $140 billion was put toward individual tax rebates that -- most economists warned -- would do little or nothing to stimulate economic activity.
Should we give Obama a break?
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Barack Obama
Central Banking
Economic Crisis
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Only about $100 billion of the stimulus -- one dollar in eight -- went to support new infrastructure projects. When Americans wonder: "Where's our Hoover Dam? Where's our East River Drive?" the answer is directly traced to Obama's abdication of decision-making in 2009.
Obama may have assumed that if his first stimulus failed, he could always go back for a second. But his mission in 2009 was to overwhelm the crisis. Instead, he allowed congressional Democratic spending priorities to overwhelm his economic leadership.
2) Obama failed to mobilize the Federal Reserve to support his fiscal stimulus.
During the financial meltdown of 2008-09, the Fed acted boldly and decisively to save the banking system. Once the banking crisis was contained, however, the Fed's boldness faded. It ended its first round of quantitative easing in spring 2010, for fear of sparking inflation. Yet inflation barely existed as a problem in 2010, while unemployment remained desperate.
When the economy sputtered and stalled in summer 2010, the Fed reacted slowly. Not until almost the end of the year did it try a second -- and much smaller -- round of quantitative easing. QE2 provided a little economic impetus in early 2011, but by summer 2011, the U.S. economy had stalled again.
The Federal Reserve has not delivered anywhere close to the monetary stimulus the U.S. economy needs. Yes, the Fed is independent of the president. But presidents can shape the Fed through their power to name Federal Reserve governors. Obama has failed to get his people on the board. Yes, he's encountered Republican obstruction. I make no excuse for such behavior by some figures in my party. On the other hand, Obama is hardly the first president in history to encounter obstruction. The difference between Obama and his predecessors: When obstructed, Obama usually yields.
3) Obama bet his presidency on the best-case scenario.
By happy coincidence, the best-ever study of the aftermath of financial crises -- Kenneth Rogoff's and Carmen Reinhart's "This Time Is Different" -- was published just in time for 2009.
They warn: Recovery from a crash like 2008 can take years. Yet even armed with this information, Obama did nothing to prepare the public or his administration for the worst. Instead, he allowed his vice president to tout 2010 as "recovery summer."
There was no contingency plan, and by the time Obama at last produces his Plan B when he gives a jobs speech in September, he will face an implacably hostile Congress. That September plan will become his 2012 campaign manifesto -- which means that the unemployed can hope for no action from him until early 2013.
I can anticipate the reaction of Obama defenders like Alter to this indictment: "Obama did all that was politically possible."
To which I can answer: Invoking the limits of the possible may be a sympathetic excuse for failure -- but it does not transform failure into success.
I don't minimize the difficulty of the situation Obama faced in 2009. Maybe no president could have been equal to the crisis. But let's not pretend that the right choices were made in those critical months. They were not, and the country is now suffering the consequences.
