President Obama and DC’s “Damaging Framework”

July 28th, 2013 at 7:03 am

OK, he’s coming to this later than many of the rest of us, but I was happy to read this from an NYT interview with President Obama:

“I want to make sure that all of us in Washington are investing as much time, as much energy, as much debate on how we grow the economy and grow the middle class as we’ve spent over the last two to three years arguing about how we reduce the deficits,” Mr. Obama said. He called for a shift “away from what I think has been a damaging framework in Washington.”

I can hear groans from both sides.  “He’s giving up on fiscal rectitude!”  “What took him so long to get there?!”

Re the latter point, one could cut the President a break and argue that he’s following the numbers: as the deficit has receded as an alleged near-term problem, he’s changing his views.  I’m a big admirer of the man, but I don’t readily accept that explanation.  Of course the deficit went up in the deep recession—the near-term deficit question was never “is it too big?”—it was “is it temporarily big enough to offset the large private sector demand contraction.”

And of course it was going to come down.  Here, the near-term question is whether it’s coming down to quickly, austerity-style—I’d argue it is: spending cuts, including sequestration, and tax increases, along with the fading of stimulus and safety net expenditures, have contributed to its fall from 10% of GDP at its 2009 peak to 4% and falling next year.

I hear in that quote above some recognition of these facts.  “All of us in Washington” includes the President himself.  And to flatly call deficit obsession in a persistently weak economy a “damaging framework” goes further than I’ve heard him go before.

Obviously, the politics are not there—R’s are about to launch an austerity campaign around the end of the fiscal year (Sept 30) and debt ceiling, so we’ll have to see where these insights take the administration and the rest of us in upcoming fiscal fights.  It certainly sounds like they’re going to hold fast against more damaging cuts and fight to replace the sequester.  Stay tuned.

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3 comments in reply to "President Obama and DC’s “Damaging Framework”"

  1. Smith says:

    The President’s purpose (maybe all are terribly obvious)
    1) Influence popular opinion recognize deficit is yesterday’s problem, jobs and wages again the country’s main concern.
    2) Control agenda, silence lets Republicans fill void, speak even if nothing new to say.
    3) Go on the offensive, don’t wait for Republicans to say crazy things.
    4) After four years, new focus shows President may have learned a thing or two about economics.
    5) Legacy threatened if economy remains weak after eight years in office, stagnant bottom 80%, bottom 30% losing ground.
    6) The 2014 election could turn into a 2010 like debacle, nullifying last two years, possibly reversing gains. Improving economy or imparting blame to Republican obstructionism is key.

    Somewhat wonkish.
    May 14, 2013 wrote in response to:
    http://jaredbernsteinblog.com/full-employment-series-2-pushback-re-technological-unemployment
    About GDP measurement
    “The inflection point where annual GDP increases accelerated seems to be around 1997. In 1995 GDP measurement methodology changed which was anticipated to lower estimates. Related?”

    But more to the point was how I argued computers allow appearance of work (documents billed at $50/hr) without actual value (products).

    Apropos to both points:
    http://www.nytimes.com/2013/07/28/your-money/getting-creative-with-the-gdp.html

    “The changes could have profound implications. R.& D. and the creation of entertainment originals have generally been treated as a cost of doing business, reducing G.D.P. Now they will be recognized for their potential to add economic value for years to come. Business software has been treated this way since the 1990s.”

    “Combined, these two changes would have swelled G.D.P. by almost 3 percent, Mr. Kornfeld said. How it will affect G.D.P. this year and in the restatement of past numbers was being calculated as we spoke. “


  2. Frederic Mari says:

    I think you’re being incredibly generous with President Obama, to be honest.

    If he didn’t realise till now that the hollowing of the middle class was the main challenge for the economy, he is an idiot. Not that I believe that. Obama-the-campaigner was quite clear on this issue.

    But you’re also being generous inasmuch as, because Obama is, at heart, quite conservative (small c) and a believer in small steps, he did not try to force the issue earlier. And that was a major blunder, imho.

    It was relatively clear, relatively early on, that the Congress Rs would not negotiate in good faith or compromise or govern in any responsible way.

    Given that, Obama should have worked to convince the American people to back him up as fully as possible to deliver a knock-out blow to the ‘cut taxes for rich and slash spending for the poor’ dogma of the Congress Rs.

    He didn’t, the Tea Party and its offshoots in the Republican Party and in the Congress are holding everyone hostage and, now, several years later, Obama’s discourse is still extremely measured.

    I am not sure that moderation will work.


  3. Nichol Brummer (@Twundit) says:

    Wasn’t it the electorate that handed him a ‘shellacking’ in 2010, and handed the GOP the House? Should he not have listened to the message that this sent him? It is only now, after having won the 2012 election himself, that he has regained the authority to go on the offensive again. And going on the offensive is the only chance to at least retain the Senate majority? He also seems to be riding a slow demographic shift, allowing him to ‘evolve’ on gays, climate, energy transition, economy, jobs and deficits. He seems to be careful to stay just a little ahead, to surf that wave.


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