His new slogan and new strategy are right on target. But they may be too little too late.
“We can’t wait,” says President Obama. He is now out pushing some modest programs to help underwater homeowners and the unemployed. We can’t wait for Congress, which won’t pass his jobs bill, he tells Americans.
He is right. But where was Obama two and a half years ago when he took office? We couldn’t wait then, either. Where was he after the 2010 mid-term loss? We could not wait then, either. As I wrote in November 2010, Obama will be running for reelection with an unemployment rate no lower than 8.5 percent, maybe 8.2 percent. It will probably be higher than 8.5 percent, as it turns out. No incumbent won before with an unemployment rate above 7.2 percent. The exception is Reagan, under whom unemployment, after soaring, had fallen by three full percentage points.
Soon enough, the media got on the message about the dangerously high unemployment rate. But the Obama team countered that all they needed was economic momentum in their favor. If rates are falling, it doesn’t matter how high the absolute level is. After all, that is what election models like Ray Fair’s of Yale implied. But these high rates were unprecedented.
No worry, we will get our financial house in order, the administration said. We’ll get that irksome government spending down. That’s what the surveys say the people want. Spending on social programs is the issue. (Of course what created the deficits had nothing to do with Social Security or Medicare. It was almost all the recession, Bush tax cuts, and the wars. Medicare part D was a smaller contributor, but not basic Medicare.)
All I can say is holy cow. By now, maybe few remember that one of the president’s first priorities on taking office in early 2009 was “fiscal responsibility.” He started out wanting to cut government, just like Clinton pronounced the end of the age of big government. Yes, he wanted a health care package and eventually came up with a brave, if inadequate, stimulus plan. But a few days before he was inaugurated, he announced that he would call a White House Fiscal Responsibility Summit for February 2009. He had indeed inherited a trillion dollar deficit that perhaps he thought he could pin on George Bush to score political points. At the summit, notes Tom Edsall in a fine new book, The Age of Austerity, he promised “to cut the deficit we inherited by half by the end of the first term in office.”
In fact, we already had a jobs crisis in early 2009. Even before the recession of late 2007 to mid-2009, far fewer jobs had been created under George Bush during recovery and expansion than in any comparable post-World War II period. GDP growth was slow, but job growth almost invisible. In January, before the summit, the unemployment rate was 7.8 percent, up from 5 percent 12 months earlier. It was on its way to 10.1 percent in October.
Obama had signed into law the $800 billion stimulus plan. His economists seriously overestimated its benefits, expecting unemployment to top out at the then seemingly high rate of 8 percent. It is important to get one thing correct: Christina Romer and Jared Bernstein weren’t wrong about the value of Keynesian stimulus. (By all accounts, Romer wanted more.) But they were wrong about how big a hole America had fallen into already.
Despite the disappointing economic performance, Obama proposed a commission early the next year to balance the budget. It was to be headed by a conservative Democrat, Erskine Bowles, and a very conservative Republican, Alan Simpson.
We are all not Keynesians now. Throughout his first and second years in office, Obama promoted fiscal responsibility. Apparently his economic team agreed. He bought into austerity economics instead of trumpeting the success of the stimulus. My gut feeling by now is that he really believes in austerity and “fiscal responsibility,” much like Jimmy Carter did. And when the Democrats lost badly in the November 2010 elections, he still didn’t get it. He welcomed the proposals of his budget balancing commission, and by then there were quite a few others singing the benefits of spending cuts and budget balancing. All the proposals called for more spending cuts than tax increases.
Only when the unemployment rate rose back to 9 percent or so and stayed there throughout the spring and fall of 2011 did the president decide to change his tune. He discovered we had a jobs crisis. He discovered that’s what the American people were really upset about. He did the unthinkable and proposed a jobs program that in fact was half good. He changed the tone of his rhetoric. Clearly, he was now at last running for office again. This seems to be what focuses his mind.
The Republicans shrugged him off. Why not? It worked every other time. But he demanded that they pass the jobs bill “now.” The shift seemed a little cynical, but it was an improvement. He is no longer waiting for the Republicans. He is doing what he can by executive orders. This is the right plan. But he has so turned off the American people with his obliviousness to their plight that they will be hard to bring back to his side.
And he doesn’t stick up for himself even now. His budget plan would actually stabilize American debt at about 70 percent of GDP by 2017 or so, a territory even most cautious economists believe is sustainable. Has Obama told anyone that? Ask anyone in the press whether they know that.
This is why Occupy Wall Street has been so successful. No one in Washington heard Americans' distress. Democracy was not working. Obama, who promised change, surrounded himself with old-time Washington pros who had tin ears and small-time ambitions -- and economists who had no sense of the depth of the crisis.
We can’t wait. Darned right. But Obama did wait. Too long?
Roosevelt Institute Senior Fellow Jeff Madrick is the author of Age of Greed.