Bacon's Rebellion

Democracy Thrives in Sunlight

Obama’s looming “Profile in Courage”?

—

by

James A. Bacon
in

In 1955, then-Senator John F. Kennedy wrote the book “Profiles in Courage”. The book documents eight US senators who took tremendous political risks by supporting unpopular causes. President Kennedy’s book won the Pulitzer Prize.

Despite being published 55 years ago I know of no effort to publish a new edition of the book updated with recent biographies of US senators putting themselves at political risk in order to “do the right thing”. I suspect a lack of material. However, that may be about to change. Former Senator (and current President) Barack Obama is about to come face-to-face with an opportunity to be the ninth chapter in the updated “Profiles in Courage”.
In order to understand President Obama’s looming Kodak moment it might be instructive to look at the actions and commentary of two former US Presidents – Bill Clinton and Herbert Hoover.
Let’s start with William Jefferson “Slick Willy” Clinton. President Clinton is a bright man and an astute politician. However, in the primary season of 1992 he was the governor of a state generally seen as somewhat backwards and poorly managed. To most, he looked like a long shot to win the nomination let alone unseat the sitting president. However, Clinton had focus. He could boil an issue down to its bones and stay “on message”. The most famous example of this capability was his informal campaign motto – “It’s the economy, stupid”. Certainly, President Obama understands that former President Clinton was quite correct in putting the economy at the top of the electorate’s concerns.
In 1929 Herbert Hoover had a problem. The stock market completely and totally crashed just seven and a half months after he took the oath of office. His first inclination was to invent New Keynesian economics long before either Paul Krugman or Barack Obama were born. He fired up the printing presses and flooded the economy with money. It was kind of working when a funny thing happened – people started getting very nervous about the deficits. Hoover blinked. The economy really tanked. And FDR became a legend. It’s certainly debatable whether the New Deal really ended the Great Depression. It’s equally debatable whether the high power money hose associated with New Keynesian economics is a good thing or a bad thing. However, what’s less debatable is that Herbert Hoover started down the New Keynesian path, got political cold feet and blinked. For more on this – look here.
President Obama is in much the same position as Herbert Hoover. He has backed historically unprecedented levels of spending and stimulus. The popular backlash is in full bloom. Congressional elections will be held in just over four months. The Democratic Party faces the harrowing prospect of reversing perhaps all of its recent legislative gains. Obama could help his party by starting to backtrack on the New Keynesian bandwagon. He could start talking about the need for fiscal responsibility now that the worst is over. He could slow down the printing presses. In other words, he could blink.
I seriously doubt the wisdom of the New Keynesians. However, if I suspend my disbelief for a moment I realize that once you open the door to the money flood you can’t just slam it shut. For better or worse we have opened that door. For better or worse our best chance for a decent future depends on the stimulus continuing for some time to come. Almost nobody wants to hear that – especially not the electorate. As John Kennedy documented, sometimes doing the right thing is unpopular.
Don’t blink Mr. President.

Share this article

ADVERTISEMENT

(comments below)

ADVERTISEMENT

(comments below)

Comments

3 responses to “Obama’s looming “Profile in Courage”?”

  1. James A. Bacon Avatar
    James A. Bacon

    Groveton, You say that we will continue to need fiscal "stimulus" for some time. What does that mean? Are you arguing for stimulus in the Krugmanian sense — we need bigger deficits right now? Or in the sense that we still need to achieve a balanced budget (or a surplus, if you are a true Keynesian) during the growth phase of the business cycle, but we need to get there slowly so as to avoid tipping the economy back into recession?

    If you believe the former, all I can say is, "We're all lost. If we've lost Groveton, we've lost the battle."

    If you believe the latter, then I'm totally with you. There is no way to reduce the budget deficit by $1 trillion in a $14 trillion economy without doing great damage. Here's the tricky part: We have to shave down the budget deficit faster than Obama's blueprint as found in his budget deficit.

    A technical aside: While Hoover did commence deficit spending on a grand scale, he did not "fire up the printing presses," a phrase normally construed to mean that he increased the money supply. To the contrary, the Federal Reserve severely contracted the money supply, an action that, with Hoover's signing of the Smoot-Hawley tariff, turned a normal business recession into a full-fledged depression.

  2. Groveton Avatar
    Groveton

    Once upon a time I played football at Groveton High School. I played a few positions but was often lined up as a safety on defense. Sometimes, I had to call the defensive plays. Sometimes I called an all out blitz. When that happened we had to blitz. Everybody in the backfield. No hesitation. No tentativeness. Sometimes it worked. Usually it did not. However, once the blitz was called there was no turning back. If we started blitzing and then held up it didn't matter what play we called – we were going to get our butts kicked.

    Obama called an all out blitz. I think it's the wrong call. However, once called, we have to finish the blitz. The blitz has some small chance of working. Stopping in the middle of a blitz is doomed to fail.

    Sometimes you are past the point of no return. For the next few years, with the stimulus, we are past that point. Our best bet (given where we are) is to hope the 10% chance that the New Kenyesians are right comes true. The alternative is an almost guaranteed depression.

  3. Groveton Avatar
    Groveton

    Here are the stats I have on Hoover –

    Spend, spend, spend (with deficits, deficits, deficits) – For the federal fiscal year July 1929 – June 1930 tax receipts were $4.1B, outlays were $3.3B, the surplus was +$.7B or +0.8% of GDP. Two years later from July 1931 – June 1932 tax receipts were $1.9B, outlays were $4.7B, the deficit was -$2.7B or -4.0% of GDP. Two years after that, from July 1933 – June 1934 tax receipts were $3.0 B, outlays were $6.5B, the deficit was -$3.6B or -5.9% of GDP.

Leave a Reply

Read More