Obama's approach to jobs is out of touch with reality
Source Dave Anderson
Date 10/06/25/12:16

Obama's approach to jobs is out of touch with reality
By William Greider, The Nation

THE FIRST FUNDAMENTAL failure of Keynesian economics
occurred forty years ago during the Vietnam War when the
economy was overheating but the political system failed to
take the corrective steps that would restrain price
inflation-that is, raise taxes and reduce federal spending.
The decade of economic stagnation that followed became a
central factor in discrediting both liberalism and the
Democratic Party.

We are now witnessing a second great failure of the doctrine
John Maynard Keynes devised for managing a healthy economy.
This time, Washington faces the opposite problem-a starkly
underperforming economy in which 10 percent of the workforce
are without jobs and income. Yet the President and
Democratic Congress, spooked by the swollen federal
deficits, are unwilling to do what Keynes prescribed in
these circumstances-pump up federal spending enormously and
run even larger budget deficits in order to force-feed a
stronger recovery.

The results of this political decision will be tragic for
millions of struggling families, but also potentially
devastating for the Democratic party. Democrats are
implicitly choosing to do nothing more to rescue the country
from the deepening dislocations and lost output. Making
mistakes can be forgiven, but not giving up.

The president and his lieutenants have evidently decided
they have already done enough. Indeed, they keep reminding
us they saved the country from something worse. Millions
withhold their congratulations, since something worse is
what they are now experiencing. The losses will last longer
and multiply more widely so long as Washington declines to
act more forcefully. Americans who never heard of Keynes
will make their own judgments about whom to blame.

This represents a failure of politics, not of the Keynesian
logic. But the distinction hardly matters to ordinary folks.
If the political system can never find the stomach to
deliver the hard medicine that Keynes prescribes, what good
is the doctrine for governing? The political order failed
Keynes on the upside in the sixties-unwilling to restrain an
over-stimulated economy. Now politicians are failing Keynes
on downside-declining to force-feed the injured economy when
it desperately needs government's help.

Years ago, the late John Kenneth Galbraith explained why
politicians did not act against incipient inflation back in
the late sixties when Lyndon Johnson was president. "An
increase in taxes at a time when prices are rising appears
to all but the most enlightened citizens as a peculiarly
gratuitous action," Galbraith wrote. "'More is being paid
for goods: now the government adds insult to injury with
higher taxes."

This time, Barack Obama will not have good excuses. If the
economy slips back into recession or simply stagnates for
many years, forfeiting potential production, jobs and
incomes, the president will rightly be the goat. Deficits
are the cure, not the disease, as many of us have been
writing for months. It's true the red ink upsets people who
cluck and express alarm. But no political party ever lost a
national election on the deficit issue. Ronald Reagan's
feel-good deficits made the opposite point.

Obama's governing problem is that he tries to have it both
ways. His presidency started with stimulus spending, but far
short of what even some of his own economists said would be
needed. Then the president swiftly took up the other side of
the argument and joined the chorus of deficit hawks,
bemoaning the red ink and promising to do something about it
(like maybe by cutting Social Security?).

Obama, instead of making the case for continuing stimulus
with clarity and conviction, sends cloudy mixed signals. The
White House makes cozy with Blue Dog Democrats and
right-wing Republicans. The president refused to give strong
instructions to Congress and, not surprisingly, nervous
members of Congress took this as permission for them to duck
too. The net effect will be emasculated stimulus
legislation, too trivial to do much of anything for the

Obama's economic strategy turns out to be closer to Herbert
Hoover's than to Franklin Roosevelt's. You cannot really
tell from presidential speeches whether he adheres to Keynes
or the "old-time religion" preached by balanced-budget
conservatives. Maybe that could change if the economic
numbers suddenly turn negative, but it is already too
little, too late. The president looks to be under the
influence of stale bromides-the thinkers Keynes once derided
as "defunct economists."

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