Geithner NYT Editorial Not a Game Changer

August 3, 2010

A defense of the Obama economic policy record by Treasury Secretary Geithner appears in today’s New York Times.  The accomplishments mentioned are standard ones.  They contain no fresh claims, and will do little to resurrect the administration’s popularity.  Geithner writes that

  • Nobody expected recovery from the great recession to be easy or quick.
  • GDP has been growing for a year, and components of demand like consumption, investment, exports, and even imports are each expanding.
  • The private sector is creating jobs again. 
  • Corporate balance sheets are healing.
  • Household debt is becoming a lessening burden.
  • Federal aid to banks was repaid at a profit to taxpayers and sooner than planned.
  • Simulations of how the economy would have performed without the fiscal, monetary, and specific aid earmarked for the financial system claim a savings of “8.5 million jobs” and GDP boost of “6.5 percentage points.”  This is the most powerful point but rests on a forecast, which can never be proven right or wrong.  A different forecast early in 2009 by Obama’s people never saw unemployment climbing above 9%, let alone 10%, but it did.

Geithner’s editorial reiterates that administration inherited catastrophic trends that revised figures show to have been even more severe than reported at first but concludes with a promise that continuing challenges will be overcome and a claim that “no one should bet against the American worker, American business and American ingenuity.”

The editorial is selective in what is said and what is not.  One certainly has to wonder how come, if improvement is proceeding on so many fronts, the president’s approval ratings keep wasting away.  A 60-65% of polled Americans approved Obama in February 2009 but less than half do so now.  And while disapproval ratings started out below 30%, such have caught up and slightly passed the president’s approval ratings.  On that evidence alone, team Obama has failed to define the criteria for being judged, meaning the White House is losing the public relations war of which today’s uninventive editorial is another example.  Image isn’t a mere sideshow to the economy.  It will affect November elections and therefore future legislation and enforcement of existing law.  A country that disapproves of its political leadership has worried people, and if confidence sags, real economic trends will be impeded.

Only a small part of the editorial addresses the paramount national problem of unemployment, and almost no suggested policy answers are offered for fixing it.  Instead of singling out the highest share of long-term unemployment in over 60 years, arguably a disgraceful development, why not lay out the scope of the jobs deficit?  Point out that jobs climbed 2.5% per annum during the 30 years between end-1949 and end-1979, 1.83% per annum to 108.8 million during the decade of the 1980s, and an almost identical 1.84% per annum to 131.7 million in the 1990s, but note that jobs fell in the noughties by 0.1% per annum to 129.6K.  Note too that there would now be 159.7 million jobs in America if they had grown since the end of 1999 at the pace sustained over the last twenty years of the twentieth century, and point out that actual jobs instead only total 130.5 million.  The difference between the trend level and the actual level represents 22% of the present level of total jobs.  Lay some blame for this enormous jobs deficiency at the feet of political opponents who controlled the executive branch of the government for 80% of the last decade and radically changed tax policy and other key traditions under their command. 

Most importantly, Geithner and others in the administration need to spell out their plan for ending the labor market problem, define the situation as both too few jobs and too much unused and under-employed labor, and tell the American people how they intend to close the jobs deficit including a date for raising employment back to its trendline. Staying the course of what’s been done already would be broadly inadequate.  It will not be good enough to accept 8-10% unemployment as the new normal and to count on the trickle-down benefit from doing more of the same.  Appeasement was tried with rising inflation, and it didn’t work.  If politicians of both parties turn their back on the U.S. labor market problem, betting on America in the 21st century will be a little like betting on the Roman Empire in the 5th century.

The Obama administration should not take solace from forecasts of continuing economic recovery at least through the 2012 election and the inference that American households will be less angry then than now.  Reagan had approval ratings of 44% at this stage of his presidency yet got reelected over Mondale in a landslide in 1984.  Reagan’s economic recovery was far more robust than Obama’s has been.  In the first post-recession year, GDP rose 7.7% for Reagan but just 3.2% under Obama, and jobs shot up 3.9% under Reagan while dipping 0.1% with Obama.  Reagan understood how to simplify issues for the American voter, who identified with him in ways they cannot do with Obama.  The first U.S. president of color was bound to encounter some hard-wired animosity.  Living extensive periods as a youth abroad reinforces impressions that Obama is different, and it can’t help voter confidence that Obama’s elective experience prior to declaring his run for the presidency consisted of four years as a state senator and two years as a U.S. senator.  Reagan had been in the public eye for decades as an actor, head of a political movement, and two-term governor of the most populated state in the country.  When the going was tough, a high recognition factor gave Reagan resiliency that served him well.  Without a clear message, none of that would have mattered.  Obama needs to find two missions, one in foreign policy and the other on domestic policy, which I believe ought to be the jobs deficit.   Everything that he and his people like Geithner say should inform the American people how those missions are going to be met and why doing so is more important than everything else.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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