Susan Madrak, at Crooks and Liars, asks a very pertinent question: Should Obama own up to his mistakes? Should he admit that he hasn't been the president he promised? She cites Neil Barofsky, who writes:
As I recount in my recently released book, Bailout, during my time as the special inspector general in charge of oversight of the TARP bailouts, Treasury Secretary Timothy Geithner, using the same justifications now offered by DeMarco, consistently blocked efforts to use TARP funds already designated for homeowner relief through a principal reduction program that could have a meaningful impact on the overall economy. For example, in 2009, $50 billion in TARP funds had been committed to help homeowners through the Home Affordable Modification Program (HAMP), a program that the president announced was intended to help up to 4 million struggling families stay in their homes through sustainable mortgage modifications. Hundreds of billions more were still available and could have been used by the White House and the Treasury Department to help support a massive reduction in mortgage debt. But Geithner avoided this path to a housing recovery, explaining that he believed it would be “dramatically more expensive for the American taxpayer, harder to justify, [and] create much greater risk of unfairness.”Madrak adds the following:
How do we turn out the vote until the Obama administration openly acknowledges these conditions, those mistakes? If an ER doctor ordered the wrong dosage of antibiotics, and your child's infection grew life-threatening as a result, wouldn't you want, at the very least, an apology? Because that's what the administration did. They pushed an inadequate stimulus, they put bankers before voters, and they made things worse than they have to be.Geithner has consistently focused on the deficit at the wrong time. He should have restricted his vision to the task of recovery.
To be fair, the administration was forced to bow to popular opinion. Much of this country has been persuaded that the deficit somehow caused the job losses and the crash in house prices. That's not true. Lack of regulation during the Bush era caused the housing market to crater.
It's a bit difficult to tell whether Geithner has bent with the Republican propaganda winds or if he has blown in the same direction. But it's impossible to argue that he has stood on Keynesian principle.
On the other hand, there has been a lot of talk about the likelihood that Obama will replace Geithner in a second administration. Perhaps the most cynical headline to arise out of this speculation is this one: "Which Goldman Stooge Will Replace Treasury Secretary Geithner?"
Let's attempt a more optimistic assessment. Of Obama's three most infuriating choices -- Larry Summers, Tim Geithner, and Rahm Emanuel -- two are gone, and one will probably soon say adios. I find hope in that fact. There's no hope in Romneyland.
Some observers want Obama to replace Geithner with Paul Krugman or Robert Reich. It seems more likely that the replacement will be Jon Corzine, former Governor of New Jersey and present executive at MF Global. His Wall Street links do not bode well, although Corzine otherwise has a good reputation with liberals.
The political problem may be stated simply. Obama can't come right out and say "I picked the wrong guys. I'll pick better people next time." I think he must acknowledge his errors -- but he has to choose his words with extreme care.
What to do? The proper course of action for a second Obama term has been articulated by -- of course -- Bill Clinton:
"Then, I served for eight years, and we kept bringing the deficit down. We had four surplus budgets in a row. Then what happened? We put them [Republicans] back in -- or the Supreme Court did -- and they got rid of pay as you go, they [passed] the tax cuts and spent lots of money. ... We had a projected surplus of $5.7 trillion and turned it into a projected debt of $5.8 trillion over the next 10 years. We would have been out of debt by next year or the year after next."
The solution, said Clinton, was to pass the recommendations by the Simpson-Bowles debt commission and "pass a 10-year plan to reduce the debt, starting the year after growth has clearly returned."That's it: Put in place a debt reduction plan that kicks into gear after the economy has rebounded.
He added that it was impossible to balance a budget without the presence of economic growth, adequate revenues and spending controls -- all of which do not currently exist.
I think people will understand and accept that premise.
Despite what right-wing propagandists would have you believe, John Maynard Keynes hated debt. Despised it. His recipe was simple: The government should go into debt only when the economy has rusted shut, because economic rust does not magically cure itself. "Priming the pump" is the usual metaphor one hears. Once good times have returned, pay the money back.
That's simple, innit? And fair. And prudent. In fact, this advice is downright conservative, in the best sense of the term.
Yet our current GOP -- which is anything but conservative -- has reversed those rules.
The great economic horror wrought by the Republicans is now easily understood. During the boom years, they did not pay the pay money back. To the contrary: They kept borrowing and borrowing and borrowing, running up trillions of dollars in debt.
Dubya insanely fought two wars on the credit card while lowering taxes for the rich. That is the proverbial recipe for disaster.
We can lower the debt only after the jobs have returned. Yes, most of the jobs will, initially, be low-wage. That, alas, is how the economy works: The low-paying jobs get filled up first. Then -- as the job market becomes more favorable to working people, as the average person has more cash to spend on goods and services -- wages will rise and the better-paying gigs will become more plentiful. Once people begin to segue back into higher tax brackets, that will be the time for the federal government to transform the red ink into black.
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