While a global debate rages about United States monetary policy, Barack Obama is again exposed to dither. This time, his deer in the headlights look – after leadership paralysis with life and death matters for volunteers in the military – concerns his weak conduct of economic policy that lacks a comprehensive plan. “Whatever the philosophical predilections of the government,” the first American to win a Nobel Prize in economics said, “Every advanced economy conducts both fiscal and monetary policy.”
But as explained by another Nobel laureate, Paul Krugman, a big reason why people are suffering through malaise is rudderless leadership that made a priority of unconstitutional legislation for health insurance at the expense of an economic plan.
Right at the beginning of his administration, what Mr. Obama needed to do, above all, was fight for an economic plan commensurate with the scale of the crisis. Instead, he negotiated with himself before he ever got around to negotiating with Congress, proposing a plan that was clearly, grossly inadequate – then allowed that plan to be scaled back even further without protest. And the failure to act forcefully on the economy, more than anything else, accounts for the midterm “shellacking.”
Recent proposals by a fiscal commission, supported by Obama’s first choice for director of the Office of Management and Budget, make the lack of preparation for a plan more disgraceful when close to one-tenth of Americans are still without a job.
An effective chief executive knows that time is the limiting factor in every plan. What’s needed is a plan for demand management, the use of fiscal policy to complement monetary policy, for influencing the sum of all spending in the American economy.
The Republican leadership in the United States Senate and House of Representatives should judge it as necessary and expedient to extend the Bush tax cuts for all Americans, while influencing action with appropriate legislation for reducing the deficit, thus stimulating economic growth with a comprehensive austerity plan to effect safety and happiness.
Paul Krugman, “The World as He Finds It,” The New York Times, November 15, 2010, Op-Ed.
Paul A. Samuelson and William D. Nordhaus, Economics, Fifteenth Edition (New York: McGraw-Hill, 1995).