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What Obama Should Have Done in 2009

What Obama Should Have Done in 2009

By Sean Trende - June 12, 2012


Kevin Drum and Ezra Klein make the case that President Obama's insistence on pursuing health care reform in 2009 was not a mistake. Specifically, they claim that there wasn't a real trade-off between the pursuit of reform and helping the economy.

Their basic argument runs like this: The $787 billion stimulus had been approved at the beginning of the year, and job losses were decelerating sharply by the time health care was undertaken. Obama needed to do something else between February 2009 and March 2010; if he hadn’t focused on health care, there was no way the Democratic Congress was going to pass more deficit spending while the economy seemed to be turning around and most of the stimulus funds had yet to be spent.

This point of view makes a lot of sense when you consider the chart that Drum appends to his blog post, showing non-farm payroll losses bottoming out in March, and then slowly moving upward throughout the year.

He concludes: “So what are the odds that Congress would have passed a second stimulus in the fall of 2009? About zero, I'd say.”

This is definitely something about which reasonable minds can disagree, but I think there are three good arguments that point in the opposite direction.

(Before beginning, I’ll just note that I’m not interested in the larger discussion of whether Obama should have taken a completely different tack on the economy. In other words, aside from noting that the arguments exist, I’ll avoid [a] the contention that Keynesian stimulus simply doesn’t work, and [b] the [much stronger] contention that the first stimulus was sapped of its strength because too much of it was spent implementing a policy agenda that came without much in the way of Keynesian multipliers.)

1. It was clear by August that the hole was deeper than anticipated.

In contrast to Drum’s chart, consider the infamous Romer-Bernstein chart, as edited by umpteen conservative pundits over the course of the past few years:

The common liberal narrative on the stimulus is that it did not produce the desired results because it was too small, and that it was too small because Senate Republicans insisted on making it so. Moreover, we’re reminded that economists didn’t understand the depth of the hole we were in when the stimulus was designed.

The latter point is the most relevant one here (the former is dealt with below). Late-2008 jobs numbers were substantially revised downward throughout the end of 2008 and beginning of 2009, which is part of why the dots representing the actual unemployment rate begin to rise above the “worst case scenario” line before Obama was even inaugurated.

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Sean Trende is senior elections analyst for RealClearPolitics. He is a co-author of the 2014 Almanac of American Politics and author of The Lost Majority. He can be reached at strende@realclearpolitics.com. Follow him on Twitter @SeanTrende.

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