A piece in today’s The New Yorker called “The Obama Memos” is causing quite a stir among politicos. It is, as you may expect, about a number of memos that President Obama has used to make decisions during his term. By far the most compelling is an untitled memo from President Obama’s team of economic advisers written December 15, 2008 and headlined with the intriguing words “Sensitive and Confidential.”
The New Yorker piece mainly used the memo to show just what a fiscal mess president-elect Obama was walking into. But that barely scratches the surface of its content. In this humble writer’s opinion the memo gives the best behind-the-scenes, cut-the-bullshit view into the early decisionmaking of Obama at a crucial time for the economy.
Although the memo contains enough juicy tidbits to fill several articles, let’s take a look at two of the more fascinating (for more, check out James Pethokoukis’ invaluable work HERE):
The president’s team understood what most liberal pundits still refuse to grasp – the stimulus was as big as it could get.
Paul Krugman (who else?) has been perhaps the worst offender of this chain of logic. “Those of us who took our macro seriously warned, often and strenuously, that it was far short of what was needed – that given what we already knew about the likely depth of the slump, the plan would fill only a fraction of the hole,” wrote Krugman in 2011.
What the Obama team realized, that Krugman and others still do not, is that even with a government aparatus as vast as Washington, they can only spend money so fast (surprising, right?).
“Constructing a package of this size, or even in the $500 billion range, is a major challenge. While the most effective stimulus is government investment, it is difficult to identify feasible spending projects on the scale that is needed to stabilize the economy macroeconomy,” Obama’s team wrote. “Moreover, there is a tension between the need to spend money quickly and the desire to spend money wisely.”
Sadly, given the rampant waste and stilly projects subsequently identified, it’s clear that even the amount given was too large to ensure quality proejcts. Unless that is you think spending $554,763 to replace the windows in a shuttered visitors center doesn’t count as wasteful.
But even if they could have judiciously spent more cash, Obama’s advisers still believed that the enormous deficits would do more harm than good.
“To accomplish a more significant reduction in the output gap would require stimulus of well over $1 trillion,” Obama’s advisers argued, “which would likely not accomplish the goal because of the impact it would have on markets.”
Obama’s advisers knew that deficits were going to be a huge problem and Obama’s campaign promises were only going to make them worse.
“Even without any new proposals, the budget deficit averages about 5 percent of GDP over the coming deecade – an unsustainable course that is particularly troubling,” concluded Obama’s economic team.
To most people that would suggest the need to implement cost-cutting reforms, find and eliminate government waste, or at least try and put the brakes on growth. But this is Obama.
Instead, his team found that “the net impact of the campaign’s proposals is to expand budget deficits over the next ten years – so the budget path including all those proposals is even more ominous.”
We just went from troubling to ominous in the course of a paragraph. That’s never a good sign.
One of the main reasons is that the Obama wasn’t all that honest on the campaign trail. “Your campaign proposals add about $100 billion per year to the deficit largely because rescoring indicates that some of your revenue raisers do not raise as much as the campaign assumed and some of our proposals cost more than the campaign assumed,” the memo says.
And it’s not as if Obama was not made aware of the ever-increasing importance to deal with this accumulation of debt. “This would be entireley unsustainable and could cause serious economic problems in both the short run and the long run,” his team warned.”
Despite all of this, the President has pushed forward with his misleadingly priced campaign proposals and gone on a record spending binge independent of them. And he did it all knowing full well the damaging impact it was likely to have on the nation’s fiscal health.
All told the memo reveals a reckless attitude of cold indifference to economics coupled with a liberal-attitude that would have him disregard his most trusted advisers. It’s no wonder that not a single member of his original economic team remains in place. After all, you can only be ignored for so long.