In the New York Times this past weekend, David Leonhardt has written possibly the most persuasive argument about what the Obama administration could have done better to respond to the economic crisis. The basic criticism of Obama is that he underestimated the severity of the crisis and failed to secure a large enough stimulus. The basic defense is that most economists underestimated the depth of the crisis, and Congress was already so freaked out about deficits in early 2009 that a bigger stimulus would have been impossible.
Leonhardt moves the ball forward by suggesting ways Obama could have circumvented some of these obstacles. He waited far too long to appoint candidates to fill open seats on the Federal Reserve board (a point that’s proven by the fact that the Fed is now, finally, committing itself to a sustained reduction in unemployment). Additionally, Obama could have more cleverly designed the stimulus so that it had a trigger: If the recession proved deeper than expected, it would have automatically set off more tax cuts or spending to cushion the blow. Since the Congressional Budget office forecasted a shallower recession than we got, it would not have “cost” any extra.
Leonhardt also proposes a more aggressive housing plan, though he doesn’t explain how Obama could have gotten Congress to pass it. Most homeowners were not underwater and were pretty unenthusiastic about spending tax dollars to support homeowners who were. Leonhardt does note that Obama left some available money unspent, though this is a pretty marginal impact kind of move.
So that’s Leonhardt’s indictment of Obama’s recession response, and it’s pretty solid. On the other hand, there are a couple of things worth pointing out here. First, he’s not endorsing the argument that Obama erred by pursuing health-care reform (and I doubt he would believe that, either). Writing the original stimulus to include a trigger and getting on the stick with the Fed aren’t things he couldn’t do because of health-care reform.
Second, Leonhardt is implicitly measuring Obama against a very tough baseline. He asks is there anything more Obama could have done, and the answer is yes. But that is true of almost any leader in history. Could Roosevelt have done more to win World War II? Secretly aiding the allies earlier, or more generously, or helping hold together the anti-fascist alliance in Europe? Absolutely. Could Lincoln have done more to free the slaves? Certainly. The real world is not generally able to produce leaders who max out their available tools.
On the whole, Obama’s response was quite good. But if Obama is going to say he did everything in his power to alleviate the crisis, then people like Leonhardt should point out that he didn’t.