President Obama’s Hat Tip To Keynes

July 11th, 2011 at 6:40 pm

In his press conference today, the President signaled an understanding of the effectiveness of stimulus along with the need for more of it.  He also stressed the very real political constraints he faces in this regard.

“I’m absolutely convinced, and the vast majority of economists are convinced, that the steps we took in the Recovery Act saved millions of people their jobs or created a whole bunch of jobs.

So my strong preference would be for us to figure out ways that we can continue to provide help across the board.  But I’m operating within some political constraints here, because whatever I do has to go through the House of Representatives.

So as part of a component of a deal, I think it’s very important for us to look at what are the steps we can take short term in order to put folks back to work.  I am not somebody who believes that just because we solve the deficit and debt problems short term, medium term, or long term, that that automatically solves the unemployment problem.”

He talked about a payroll tax holiday (“…which might not be exactly the kind of program that I would design in order to boost employment but does make a difference”–I agree), extending unemployment benefits, infrastructure, and trade deals.  All “coulds,” if not “shoulds.”

Clearly, the President is responding to the perception that he’s abandoned fiscal stimulus at a time when that’s about the best medicine for what ails us.  He may not press as hard as some of us would like, but I was glad to hear him make these points.

The ghost of Keynes may not be staying over in the Lincoln Bedroom anytime soon, but at least he made a brief appearance at the White House today.

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12 comments in reply to "President Obama’s Hat Tip To Keynes"

  1. Matt Ahrens says:

    Where I got confused by those statements is his qualification that we first take care of the deficit and then we can focus on jobs. But wouldn’t any effective Keynesian jobs program involved deficit spending? How would that get funded? It seems like the President is merely moving the spending around to get a better multiplier. Sure, it’d help, but I’m doubtful that it would be enough to pull us out of this jobless recovery.


  2. foosion says:

    Grasping for silver linings, are we? The main thrust of Obama’s approach has been govt must tighten its belt so that the confidence fairy and the austerity fairy will sprinkle prosperity on us. That he threw in something that seemed sane is small consolation for his efforts to remove any public support for necessary stimulus spending.

    Add in his lack of support for Social Security, Medicare and Medicaid and it would be easy to see mostly clouds.


  3. Anthony Miller says:

    My response to both comments. The President cannot simply write an Executive Order and put a jobs program in place. It takes an act of Congress. If you were listening closely to past few press conferences, President Obama listed five things before Congress that they can act on now proposed by his administration that would help to create jobs. Finally, he stated that he cannot talk about jobs and jobs until he and Congress can get beyond the issue of raising the debt.

    Comments from people like you helps me to understand why America is losing ground and the Republicans have the following that they do have in this current environment.


  4. David R says:

    While one has to agree with your comments about Obama and Keynes, the fact is that he is abandoning Keynesian policy and adopting the very policy that Keynes admantly opposed. Why does that make you have any positive take on his press conference?

    Here is another opinion on his statements and policies,

    http://dismalpoliticaleconomist.blogspot.com/2011/07/news-conference-news-obama-to-run-in.html

    and just exactly what does anyone think will be the reaction when we finally know exactly what social, health care, education and welfare programs are going to be decimated? There is good reason why budget cutters never ever reveal the names of the programs they will obliterate.

    At this point in time Mr. Obama’s only hope is that the Republicans are too rigid to take his offer. And they appear to be so, they may save him yet again.


  5. Taryn H. says:

    I can’t believe there are political constraints – to the point it can’t even be mentioned – when we have 9.2% unemployment. Not many years ago that number would have been unthinkable. Unthinkable! Now we can’t even discuss stimulus?

    Maybe this is the political climate, but we should speak out the way Keynes did against giving harsh terms to Germany after WWI:

    I cannot leave this subject as though its just treatment wholly depended either on our own pledges or on economic facts. The policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable,–abhorrent and detestable, even if it were possible, even if it enriched ourselves, even if it did not sow the decay of the whole civilised life of Europe.

    Not doing anything about 9.2% unemployment will result in real human suffering. And nothing can be said?


  6. David R says:

    And this is what I think the ghost of Keynes would say about the whole mess.

    http://dismalpoliticaleconomist.blogspot.com/2011/05/dismal-political-economist-interviews.html

    To quote from the interview, “haven’t you people learned anything . . .”


  7. Wasabi says:

    Jared, this was not a Keynesian moment for Obama. It was just a bit of rhetoric tossed out to the Dem base as a way of escaping responsibility by blaming the Republicans. We have seen this bad habit of shifting responsibility to the Republicans as if nothing more could be done so many times that it has become tiresome and meaningless.

    Also, speaking of wanting to do A but doing B (the opposite of A) because it is also effective shows cognitive dissonance on the part of the speaker. If Obama believes fiscal stimulus would increase demand and grow the economy, then he cannot at the same time hold that massive austerity during a very weak recovery would also help the economy, since austerity would almost certainly hurt or destroy the very fragile recovery and increase unemployment, ironically increasing the deficit. Austerity during bad times is an ideological formula designed to shrink governments and get them off the backs of banks and corporations, i.e., a way to force governments to stop their “bothersome” and expensive counter-cyclical fiscal policies designed to help Main Street. It has nothing to do with actually shrinking the budget. Yet from 2009 on Obama has been talking about cutting the budget during a severe recession as if it were rational and necessary. And Mr. Goolsbee recently spoke of the need to “shrink the government” almost as if he were a Reaganite.

    By enthusiastically embracing supply-side voodoo economics, the president is necessarily denying that Keynesian economics works. In his April speech he even criticized Keynes by denying that FDR’s big budget cuts caused the terrible contraction and unemployment of 1937-8. In the speech Obama went out of his way to say he doesn’t believe budget cuts were the cause of the disaster, even though FDR himself proved otherwise and then reversed policy, shrinking unemployment from 17% to 14% after that. Rhetoric aside, Mr. Obama actively opposes Keynesian economics.


  8. Ben says:

    Dr B:

    I appreciate your distinction between “coulds” and “shoulds”. It is a vital point and one that bears constant repetition. There is an element of excuse-making in it — you were there for these decisions until recently, even if they didn’t go your way, and it sounds a bit like you’re seeking exculpation from the impending disaster — but that is not the greatest part.

    The problem is that we have experienced a continuous downward drift in what we “could” do. That is directly related to the rhetorical and political stances the White House has taken, very notably including a claim to be focused on the possible at the expense of the ideal. I’ll leave arguments over negotiation strategies to others, but it is important to note that by continuing to ring that bell you don’t actually provide cover for the White House to stand strong on some principles while negotiating to achieve a deal; rather, we have seen empirically, you embolden and seem to empower those voices within the administration who — either for political or ideological purposes — have explicitly incorrect ideas about how to extricate ourselves from this mess.

    More importantly than weighing coulds vs shoulds, we should learn from that old adage about the best way to get out of a hole: STOP DIGGING.


  9. Lee A. Arnold says:

    The basic confusion is short-term vs. long-term. Short-term, we need stimulus, whether deficit spending or deficit tax-cuts. Long-term, gov’t is going to grow due to medicine and aging boomers, we need to work more on medical costs, and collect enough taxes to fund necessary spending. It won’t hurt the market economy.


  10. priller says:

    If Obama really did have a “strong preference” for more Keynesian solutions he do *something* to try to implement them. At the very least, explain to the American people what he would like to do and why, and point out who is standing in the way. You know, try to CHANGE THE CONVERSATION.

    But Obama seems to think that political constraints are fixed, rigid things that can’t be removed or altered. Or either he is happy to work inside those constraints, because the Keynesian approach is not really his strong preference.

    I think I come down on the side of Wasabi and other commenters here. The hat tip to Keynes is just “blue meat” for the lefties. Empty rhetoric. Jared, I’d be happy to hear that it’s not the case.


  11. DLM says:

    It may be more of a hat tip to Jeff Immelt and repatriation.


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