From the New York Times:
But the policy disaster of the past two years wasn’t just the result of GOP obstructionism, which wouldn’t have been so effective if the policy elite — including at least some senior figures in the Obama administration — hadn’t agreed that deficit reduction, not job creation, should be our main priority. Nor should we let Ben Bernanke and his colleagues off the hook: The Fed has by no means done all it could, partly because it was more concerned with hypothetical inflation than with real unemployment, partly because it let itself be intimidated by the Ron Paul types.
Well, it’s time for all that to stop. Those plunging interest rates and stock prices say that the markets aren’t worried about either U.S. solvency or inflation. They’re worried about U.S. lack of growth. And they’re right, even if on Wednesday the White House press secretary chose, inexplicably, to declare that there’s no threat of a double-dip recession.
Earlier this week, the word was that the Obama administration would “pivot” to jobs now that the debt ceiling has been raised. But what that pivot would mean, as far as I can tell, was proposing some minor measures that would be more symbolic than substantive. And, at this point, that kind of proposal would just make President Obama look ridiculous.
The point is that it’s now time — long past time — to get serious about the real crisis the economy faces. The Fed needs to stop making excuses, while the president needs to come up with real job-creation proposals. And if Republicans block those proposals, he needs to make a Harry Truman-style campaign against the do-nothing GOP.
This might or might not work. But we already know what isn’t working: the economic policy of the past two years — and the millions of Americans who should have jobs, but don’t.
Cullen Roche at Pragmatic Capitalist points out that the only real new direction open to the Obama administration is to call for tax cuts.
And Dr. Krugman is the kind of economist who would make ears perk up in Washington. The only problem is whether Dr. Krugman is willing to walk across the aisle in these trying times and shake some hands to get some more fiscal policy?
In a sort of sick way, we are looking more and more European every day because of our failure to unite. To me, this is the sort of compromise we can all love. The Democrats get more fiscal stimulus and the Republicans get their beloved tax cuts. I think it would be a bold and patriotic move for someone like Dr. Krugman (or even [Treasury Secretary] Tim Geithner or the President himself) to come out and push aggressively for more aid to the American people. The only question is whether we are willing to unite as Americans to make it happen?
How about it, Dr. Krugman?
I'm actually hopeful that Krugman is starting to see the wisdom of this idea. From his perspective, tax cut stimulus is no doubt less than ideal. But since spending increases are just off the table, I think he understands economic policy well enough not to let the best be the enemy of the better.
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