There are many quadrennial rites of occasion -- the Olympics, the World Cup, the, er... [C'mon, you need one more!!--ed.] the Quadrennial Defense Review [Nice save!--ed.]. And, of course, the first post-inauguration press conference. Your humble blogger will be covering it live by updating this post quite frequently.
8:00 PM: I'll be watching this on CNN, in the hopes that Anderson Cooper will ask a question via hologram.
8:05 PM: The key economic statement of the opening statement: "The federal goverment is the only entity left with the resources that that can jolt this economy into life."
8:08 PM: Good initial response to the AP question, referencing the Japan recession. Of course, the repeated efforts at fiscal stimulus in that country didn't work terribly well. And he went on way too long.
8:14 PM: At this rate, Obama will answer less than ten questions at this press conference.
8:16 PM: Just realized that the press conference will pre-empt the criminally underrated How I Met Your Mother. Suddenly feeling that Obama is part of the problem, not part of the solution.
8:20 PM: Non-answer on Iran, until the very end, when he mentions that Iran has both rights and responsibilities as a member of the international community. This could be a clever way of signaling that the U.S. is prepared to recognize Iran's right to a nuclear program, so long as Tehran is prepared to accede to safeguards. We'll see how this formulation plays in Iran.
8:30 PM: In response to a good question from Chuck Todd, Obama says, "the party now is over" and that "we have to adapt to new circumstances." I think he's subtly hinting that he wants Todd to leave the building.
8:33 PM: Bloomberg reporter, in her question, says, "Many experts, from Nouriel Roubini to Senator Chuck Schumer..." I fail to hear the rest of the question, as the notion of calling Schumer an "expert" at anything to do with economics causes my head to explode.
8:35 PM: It appears that Obama is asking for questions in a pre-arranged order. Did any president before Bush 43 do this?
8:39 PM: Obama's metrics for economic success: the creation of 4 million jobs, the unfreezing of credit markets, and the stabilization of housing prices. It's gracious of Obama to acknowedge that the federal govenment doesn't have "complete control" over that last category.
8:41 PM: In answer a question on Afghanistan, Obama takes pains to distance himself from Hamid Karzai. Also mentions the actions of the Taliban and Al Qaeda in the region. Obama should really ead my colleague Tom Ricks on this matter.
8:45 PM: Oooohhh, Fox News's first question!! And it's about Joe Biden!! This gives Obama his first real opportunity for an easy laugh in his response.
8:48 PM: A question about A-Rod! I'm mostly glad that Obama's answer was short and did praise MLB's toughening stance on the issue.
8:49 PM: Obama loses his Helen Thomas virginity. Good answer on preventing a nuclear arms race in the Middle East, managing to connect it to arms control with Russia. Thomas, God bless her, tries to keep talking.
8:53 PM: The Huffington Post gets a White House reporter? Who knew?!
8:57 PM: Obama closes with an appeal to pragmatism, but I wonder if there's as much expert consensus on important issues as Obama thinks there is.
9:01 PM: And it's over. I thought all players played their part well, but I would have liked to have seen shorter answers. For all his talk about the stimulus, I actually think his answer on Iran might be the most newsworthy.
I'm 50% convinced that Paul Krugman's op-ed today is correct, and the moderates wound up damaging the stimulus more than they improved it.
The thing is, I'm also 50% convinced that Krugman is to Keynesians as Richard Perle is to neoconservatives. When an embittered ideologue derides his political leader for demonstrating a willingness to compromise and "negotiating with yourself," well, one does get the sense of deja vu.
The rhetorical parallels between neocons and Keynesians are increasingly disturbing. Martin Wolf argued late last week that "shock and awe" is required to stimulate the global economy -- a point seconded by Krugman. Critics of the Keynesian approach are summarily dismissed as wingnuts.
I'm in the Ken Rogoff camp on the economy -- I'm somewhat dubious about the ability of any stimulus package to really jumpstart the economy, and very wary about the long-term costs of this strategy (for one thing, Bretton Woods II still needs to be unwound). But I also don't have a better idea and "the situation is so dangerous it has to be tried."
But I also know that when I hear anyone using rhetorical tropes that remind me of Richard Perle, I run like hell in the opposite direction. And Krugman is increasingly sounding like Perle.
Shorter Paul Krugman: "We're headed for deflation and depression, we need a really big stimulus, and if Barack Obama keeps trying to placate Republicans in the name of post-partisanship, we're all gonna be living in grass huts."
Shorter David Brooks: "There's a new coalition of moderates asking sensible questions about waste in the stimulus package, and if Barack Obama keeps trying to placate liberal interest groups and Congressman, we're all gonna continue to live in the era of extreme partisanship."
Intriguingly enough, there is one point on which both Brooks and Krugman agree -- Barack Obama has been surprisingly passive during the drafting of the stimulus bills.
I think there's a way to thread the needle. If all the moderates want is to trim the package a little, then Obama could likely get yes votes from GOP moderates. That would (just) be enough for him to claim bipartisan support, and then a package is passed. I don't think it would be large enough for Krugman's tastes, but on the other hand I'm hard-pressed to believe that ust another $100 billion in stimulus is the difference between recovery and grass huts.
This, by the way, is the most pernicious effect of the entire financial meltdown on fiscal policy. When $100 billion no longer seems like a significant sum of money, it's time for a good stiff drink.
As I've said before, in recent months there is a danger of creeping protectionism getting in the way of countries enacting expansionary fiscal policies (and the bill that passed the House only reinforces this danger, by the way)
In the past few days at Davos, others have voiced this concern, but with a twist. Rather than complaining about the underprovision of a fiscal boost, some are complaining that the Americans are hogging all the expansionary plans. First, there's Russia:
A senior adviser to Dmitry Medvedev, Russia’s president, has sharply criticised the scale of the new US administration’s economic rescue package and projected budget deficit, saying it would suck up liquidity from other global markets.
“What is discouraging is [President Barack] Obama’s statement that he is going to run a $1 trillion deficit for years to come. For us, that means that all the free liquidity in the world will run into American Treasury bills,” said Igor Yurgens, who heads a think-tank advising Mr Medvedev. “That liquidity will not be available in other parts of the world. For us, it will be worse.”
Mr Yurgens said the policy was akin to the “beggar thy neighbour” protectionist policies of the 1930s. “Of course [Mr Obama] expects the Chinese or Russians to buy US Treasury bills. That is pretty selfish and philosophically it is protectionism.”
He's not the only one making this complaint. The NYT's Nelson Schwartz has a good chronicle of these concerns:
Few people attending the World Economic Forum question the need to kick-start America’s economy, the world’s largest, with a package that could reach $1 trillion over two years. But the long-term fallout from increased borrowing by the federal government, and its potential to drive up inflation and interest rates around the world, seems to getting more attention here than in Washington.
“The U.S. needs to show some proof they have a plan to get out of the fiscal problem,” said Ernesto Zedillo, the former Mexican president who helped steer his country through a financial crisis in 1994. “We, as developing countries, need to know we won’t be crowded out of the capital markets, which is already happening.”....
“Even before Obama walked through the White House door, there were plans for $1 trillion of new debt,” said Niall Ferguson, a Harvard historian who has studied borrowing and its impact on national power. He now estimates that some $2.2 trillion in new government debt will be issued this year, assuming the stimulus plan is approved.
“You either crowd out other borrowers or you print money,” Mr. Ferguson added. “There is no way you can have $2.2 trillion in borrowing without influencing interest rates or inflation in the long-term.”
Meh. To be generous, these complaints are not completely without foundation. They are a little odd, however. If the United States does not engage in greater stimulus, then other countries are going to have to pick up the slack, or this recession will last a long time. Indeed, count me in the Martin Wolf/Brad Setser camp of those who would love to see other countries -- *cough* China, *cough* -- starting to boost their own consumption as a means for igniting global growth, because that would also help to redress the macroeconomic imbalances that are at the heart of the current predicament.
To date, however, the efforts by most of these other countries have been underwhelming. [What about China?--ed. Their stimulus has targeted investment rather than personal consumption, so yes, them too.] If I were Obama, I wouldn't trust other countries to provide the locomotive power necessary to get the global economy moving again. So I don't see how they can blame the United States for doing what they are choosing not to do.
Writing in the Financial Times, Jeffrey Sachs fires a warning shot across the bow of stimulus enthusiasts:
The US debate over the fiscal stimulus is remarkable in its neglect of the medium term – that is, the budgetary challenges over a period of five to 10 years. Neither the White House nor Congress has offered the public a scenario of how the proposed mega-deficits will affect the budget and government programmes beyond the next 12 to 24 months. Without a sound medium-term fiscal framework, the stimulus package can easily do more harm than good, since the prospect of trillion-dollar-plus deficits as far as the eye can see will weigh heavily on the confidence of consumers and businesses, and thereby undermine even the short-term benefits of the stimulus package....
The most obvious problem with the stimulus package is that it has been turned into a fiscal piñata – with a mad scramble for candy on the floor. We seem all too eager to rectify a generation of a nation saving too little by saving even less – this time through expanding government borrowing. First it was former US Federal Reserve chairman Alan Greenspan’s bubble, then Wall Street’s, and now – in the third act – it will be Washington’s....
Perhaps Mr Obama should reflect on the fact that the Clinton-era boom began in 1993 with tax rises and a congressional rejection of a fiscal stimulus package. This time, there is certainly a cyclical case for deficit- financed public spending, but accompanied by phased-in tax increases to provide proper financing of crucial government functions in the medium term.
Hmmm... Sachs makes some valid points here. Maybe we should take a moment or two to ponder this.
Hey, what's this Sam Dillon story in the New York Times saying?
The economic stimulus plan that Congress has scheduled for a vote on Wednesday would shower the nation’s school districts, child care centers and university campuses with $150 billion in new federal spending, a vast two-year investment that would more than double the Department of Education’s current budget.
The proposed emergency expenditures on nearly every realm of education, including school renovation, special education, Head Start and grants to needy college students, would amount to the largest increase in federal aid since Washington began to spend significantly on education after World War II.
You know, it's nay-sayers like Sachs that are keeping our country mired in recession. I can't believe his nitpicking is going to stand in the way of
my tasty slab of pork getting America going again.
Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.