TPM Reader JB is one of our longtime readers, a one-time Republican Hill staffer. I think he sums up pretty clearly the stakes and assumptions behind this tax cut deal …
We should keep in mind President Obama’s governing assumption about the economy, which is that we are in a recovery that is just not proceeding as fast as we need it to.
Obama has said repeatedly that he is “dissatisfied” with the pace of the recovery, that “more must be done,” and so forth. Stylized political rhetoric this surely is, but Obama appears to believe it sincerely. If his assumption is correct, a stimulus — any stimulus, even one he acknowledges is inadequate or based on the wrong kind of measure — that gets us through the next few months until the economy “turns around” and “gets moving again” is a victory.
The problem comes about if it turns out Obama’s governing assumption about the economy is not correct. In that case, what he has just agreed to is a massive transfer of private sector debt to the public sector, and a prolonged period that will see many millions of hitherto middle class Americans in great economic distress while the federal government does nothing — beyond sending out unemployment checks, of course.
The people advising Obama on economic affairs did not think the financial crisis two years ago would be as bad as it was, and did not foresee unemployment and underemployment rising to the levels we see today. This does not guarantee they are wrong about a recovery that just hasn’t moved fast enough. Nor does the historical fact that recessions following asset price crashes tend to take much longer to turn around than cyclical recessions like those of twenty and thirty years ago. The evidence, though, suggests that Obama’s hopeful talk about what the tax cut compromise means contains a very large component of wishful thinking — not just about the politics, but also about the economy.
I don’t go in with a clear sense of which prediction is right. I certainly hope the optimistic assumption is right. And sometimes I think that the White House sees the situation as I imagine they did in early 2009: no point saying the Stimulus Bill won’t be enough since we don’t have the political capacity to get anymore. But I do keep coming back to that original fact — that the president’s key economic advisors did not accurately judge the depth the downturn on round one.
Josh Marshall is editor and publisher of TalkingPointsMemo.com.