Somewhere along the line, the Obama administration lost control of the economic debate, allowing deficit hawks to step in and steer the ship at a time when we need some serious Keynesian action.
Here is what Paul Krugman had to say today:
We have the Obama stimulus plan, which aims to create 3 ½ million jobs by late next year. That’s much better than nothing, but it’s not remotely enough. And there doesn’t seem to be much else going on. Do you remember the administration’s plan to sharply reduce the rate of foreclosures, or its plan to get the banks lending again by taking toxic assets off their balance sheets? Neither do I.
All of this is depressingly familiar to anyone who has studied economic policy in the 1930s. Once again a Democratic president has pushed through job-creation policies that will mitigate the slump but aren’t aggressive enough to produce a full recovery. Once again much of the stimulus at the federal level is being undone by budget retrenchment at the state and local level.
Krugman calls for the Obama team “to ramp up their efforts, starting with a plan to make the stimulus bigger.”
He acknowledges the difficulties, which include recalcitrant Republicans and misguided centrists “who partially eviscerated the original stimulus plan by demanding cuts in aid to state and local governments — aid that, as we’re now seeing, was desperately needed.” And he blames his own colleagues for
recycling old fallacies — like the claim that any rise in government spending automatically displaces an equal amount of private spending, even when there is mass unemployment — and lending their names to grossly exaggerated claims about the evils of short-run budget deficits. (Right now the risks associated with additional debt are much less than the risks associated with failing to give the economy adequate support.)
Rather than worry about the deficit at a time when we are facing the serious likelihood of deflation, Krugman said, we need more stimulus. The first plan was not nearly enough and the healthcare plans being discussed, which suffer far too much from an attempt to make the budget neutral, do not go far enough.
And all of this retrenchment is happening at the same time that our elected officials essentially ignore the wars in Iraq and Afghanistan. They talk about them, but have stopped talking about anything resembling a real withdrawal, which would do a lot more to tame the deficit than anything else in the government’s tool box.
I was out to dinner with my family tonight. Our waiter, Bru, was a bit of a comic. Part of his schtick was a presidential platform that included some interesting services for the poor — yearlong job training and other services for the homeless, for instance. (He also said that all the corporate folks involved in cratering the economy should be prosecuted and that Bernie Madoff shouldn’t be sent to jail, but instead should be made to pay off his debt by performing low-wage work, like landscaping.)
Where would he get the money for his ideas? By ending the war. As he said to us, the job is not nearly as difficult as the politicians make it.
Hank Kalet 
John Maynard Keynes is still dead …