Why Obama Fell Short

Here's a simple summary by Brad DeLong of the failed economic policy of Barack Obama:

There are always two paths to boost employment in the short term. The first path is to boost demand for goods and services, and then sit back and watch employment rise as businesses hire people to make the goods and services to meet that demand. The second path is not to worry about production of goods and services, but rather to try to boost employment directly through direct government hiring.

The first path is better: not only do you get more jobs, but you also get more useful stuff produced. The problem is that it does not take effect very quickly. It is subject to what Milton Friedman called “long and variable lags.” Thus, policies aimed at boosting employment by the end of, say, this calendar year needed to be put in place about a year ago to have time to have reached their full effect.

Some countries – China, for example – did, indeed, implement such job-creation policies a year ago and are already seeing the benefits. Others, like the United States, did not, and so unemployment remains at around 10%.

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This brings us to the present moment, with US unemployment unacceptably high and refusing to fall. As a result, there is now a very strong case to turn the focus of the US economy from measures aimed at increasing demand to measures aimed at boosting employment directly (without worrying much about whether these measures are efficient in the sense of substantially raising the quantity of goods and services produced).

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There is still time for a substantial shift in federal spending toward high-employment (but in all likelihood low-value) projects to reduce unemployment before the end of 2010 – if Congress acts quickly. And there is still time for a substantial temporary and incremental new-hire tax credit aimed at getting businesses to boost employment before the end of 2010.

But will Congress act quickly? Given the depth of political polarization in the US, and thus the need for 60 of 100 votes in the Senate to end a Republican filibuster, there is no sign of it being able to do so.

DeLong gives Obama more credit than I do. If you go read the whole article he claims Obama achieve 2.5 out of 5 policy objectives. I'm dejected and "feel" he achieved little if anything. I can't quantify. I'm not an expert and don't follow it that closely. But it sure feels like Obama achieved little or nothing.

In my mind, a leader would lead. Obama would have given a fire & brimstone State of the Union laying down the law to the legislators. He would have mapped out a vision of recovery that would have dazzled. He didn't.

My problem with Obama is that he has had a year to see he is falling short. All along the way he should have gotten onto the "bully pulpit" of the Presidency and hectored the nation and the legislators to rise to the occasion, but he didn't. His laid back, cool dude approach is a "feel good" approach but not appropriate for a leader in a crisis. In a crisis you want a hard-as-nail, glint-in-the-eye leader who is over the ramparts before anybody else yelling "follow me boys!".

For more comments by DeLong, comments specifically on Obama's State of the Union address, go read this.