President Obama makes an interesting point about economic messaging

November 20th, 2015 at 8:47 am

From a recent interview with the President in GQ:

You can’t separate good policy from the need to bring the American people along and make sure that they know why you’re doing what you’re doing. And that’s particularly true now in this new communications era. I think that we were ahead of the curve in 2008 in social media and the Internet and digital communications. When we came into office, instead of taking some of those lessons, we suddenly adapted ourselves to the White House press room and structures that had been built back in the 1940s and ’50s. As a consequence of those missteps early, we got the policies right, and that’s why the economy now has grown for five and a half straight years, six years, and why unemployment rates have gone from 10 percent to 5.1 percent. But there was a lot of political pain along the way that might not have been necessary.

Accurately diagnosing economic problems is often challenging. Figuring out the right policy prescriptions to treat the diagnosis is also hard, as is effectively and efficiently implementing the fixes.

But on top of all of that, effectively explaining what you’re doing to “the American people,” who, despite that unfortunate phrase, are not a monolith, is especially challenging.

First, if we’re talking about countercyclical policies of the type that the administration implemented in the heart of the Great Recession, there are two strong forces pushing against efforts to sell measures like the Recovery Act. One, people don’t do “counterfactuals”—what economists think would have happened to key variables had we not intervened. The jobless rate was 8.3% in February 2009 when the Recovery Act passed. It climbed to 10% later that year and didn’t fall below 8.3% until early 2012.

The message that “yes, unemployment’s gone up since we launched the stimulus but it would have gone up more absent the intervention” is not one most people are at all willing to entertain.

Two, opposition political forces take it as their job to discredit these actions. Despite evidence to the contrary, they dubbed the Recovery Act the “failed stimulus” pretty much out of the box (no question, Christy Romer and I didn’t help by using the consensus forecast at the time to predict the impact of the Recovery Act on unemployment; ftr, we had the deltas right—the changes in unemployment, jobs, and GDP—but the levels were too optimistic; this was a huge kick in our own goal that played into opponents hands and vastly complicated the messaging; see the offending Figure 1 here, but also see our beloved Endnote 1).

If those factors didn’t pose enough of a messaging challenge, the fact that we were bailing out banks didn’t help. People correctly perceived that the folks who helped get them into the mess were being rescued with taxpayer dollars. I don’t think anyone could sell that to the public.

President Obama’s point is more about the medium than the message. After using social media arguably more successfully than any prior national election, he notes it was largely dropped in favor of old school methods. Could more Twitter have meant less “political pain?”

I don’t know and have no idea how to back out that counterfactual. I tried writing blogs for the Huffington Post (here’s an e.g.), explaining in granular terms the positive impact of the Recovery Act, but I don’t think they reached anyone. The White House has certainly well adapted social media since then, but the economy’s improved and all those countercyclical interventions are way in the past.

He’s right that the policies were effective, and in many ways, that’s the most important message to get out there now, as in this important new paper by economists Alan Blinder and Mark Zandi. There’s another recession out there somewhere and it is essential that we the correct lessons regarding what worked and what didn’t from the last one.

But other than not scoring a win for the other side, I kinda doubt we could have done a much better job selling the policies in real time, even with a bunch more Snapchatting, etc. I’m not letting us off the hook, nor am I suggesting we did everything right; we didn’t. I just think the nature of the moment, the need for the bailouts, and the fact that things were going to get worse before they got better overwhelmed our messaging skills, such as they were.

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3 comments in reply to "President Obama makes an interesting point about economic messaging"

  1. Peter K. says:

    I supported Obama in both elections but I’m afraid the politician in him is more of the one talking here. Yes the economy has grown and the “unemployment rate has dropped from 10 percent to 5.1 percent” but that doesn’t tell the whole story. Compared to past recoveries this was a bad one and the blame lies in the austerity the Republicans forced on the economy and the fact the Fed didn’t do more.

    It didn’t help that the ARRA wasn’t bigger and longer and the White House turned to deficit reduction too quickly. According to Bernanke’s book, Obama’s FOMC appointees Powell and Stein were fighting Bernanke to end QE in 2013.

    If the recovery was better and much quicker, people wouldn’t be so unhappy and perhaps the Democrats keep the Senate in 2014. That should be the take away. Instead he sounds like he’s in campaign mode for the Democrats, arguing that their policies worked well. Yes voters don’t appreciate the counterfactuals but the recovery could have and should have been a lot better. Of course most of the blame lies with the Republicans’ unprecedented austerity forced on the economy like the sequester and debt ceiling clown show.

  2. Richard says:

    Glad to read that you realized in 2014 that you/Obama did not get all things right in 2009, etc. The bailing out of the big banks, AIG, etc without any prosecution of the people responsible was/still is a huge mistake. It made/still makes Obama look as if he is in the ‘hip pocket’ of Wall Street and the big banks rather than looking out for the average American.

    As you have noted many times even though the unemployment rate has improved significantly the labor participation rate is still lower than it should be. There are still millions of people out there who have dropped out of the labor market. And millions more still employed in part time, low paying jobs.

  3. Nick Estes says:

    I love Barack Obama; I know his heart is in the right place. He gets credit for the ACA and for keeping us from doing anything crazy in foreign policy. But he totally blew the public relations side of reacting to the biggest recession since the 1930s. It had nothing to do with mastery of social media–it was the message.

    I have read 3-4 books about this era in the White House and it seems pretty clear that Obama just never really absorbed Keynesian economics; the country has paid dearly for his failure to take Economics 101 at Columbia. He had no real convictions about how you deal with a deep recession, so he was easily swayed by bad advice (not from you).

    He told Americans that government would have to tighten its belt just like families, and ordered a 3-year freeze on federal salaries. He told Americans that we had to be careful not leave a crushing national debt on future generations and that foreigners acquiring our Treasury debt signaled a real problem (without explaining that this was entirely due to our trade deficit). He called a Fiscal Summit in February 2009 when he should have called a Recovery Summit.

    Here’s what he should have said at that Summit:

    “My fellow Americans, because a huge housing bubble burst and people have lost billions of dollars, spending by households and businesses has dropped through the floor, throwing millions of our citizens out of work. But we do not have to despair: we have been here before–in the Great Depression–and we know how to get out of this. When people and business are reluctant to spend, the government has to jump in and spend instead. The spending of World War II pulled us right out of the Depression, which was a lot worse than the mess we’re in now. But we don’t need a war to stimulate our economy; there are plenty of incredibly important investments we can make right now that will put people back to work and benefit our nation for generations to come. Paying for these projects will raise the national debt, but it is far better to get the economy back on track–then we can pay the debt down out of a much larger national income. I know a lot of people will react negatively to this idea, but it is the truth, and you will hear it from me again and again over the coming weeks. We will get out of these very bad times if we learn from history and make investments like Roosevelt did in the 30s that put people to work and provide lasting benefits.”

    That’s what Barack Obama should have said. And perhaps should have posted on Facebook. Thanks