Dear Professor DeLong

Because Clinton-era Rubinomics is all they know how to do.

Republicans seem to think that every problem can be solved by tax cuts and spending cuts. This is objectively untrue. Democrats are painted as believing every problem can be solved with tax increases and spending. This is also objectively not true, but it’s also not what any executive-branch Democrat has believed since the 1960s—and since this was when the modern Conservative movement was born, they are always refighting the same fight, trying to keep the Negroes from busting their block. Actual, non media-straw-man Democrats, believe in technocratic and complicated formulas for jerking off Wall Street, usually by hoping to score on bond-holder rate cuts due to balanced budgets and no-inflation policies at the Fed.

This is how you manage an economy in normal times. (At least times when the Federal Reserve is willing to inflate new bubbles.) As everyone who moved beyond Econ 101 knows, in times of severe crisis economics, a stimulus is indicated. A stimulus that offsets the shortfalls produced by the crisis, not one that merely gives the appearance of a stimulus. For a guy that may have the biggest smartest-guy-in-the-room narcissism this side of Bill Gates, Larry Summers really fucked the dog on this one because, I believe, he and the rest of the Obama team thought it was 1993 or 1998, not 1933 or 1907. Oh, and incidentally, one of the most efficient stimuli is a payroll tax cut. Others include extended unemployment benefits and WPA-like direct employment. This involves both tax cuts and spending increases not one or the other. As such it does involve running deficits, something that the Obama administration started sharting themselves about a year ago.

This was truly the “nobody could have predicted” moment for the Obama administration. Just as Bush was warned about an impending attack by al-Qaeda in the United States on August 2001, the Obama administration was warned on the pages of the New York Times by Paul Krugman (and all over the place by others) that this was not 1998. Summers chuckled about Krugman’s tendency to see everything as needed a revolutionary fix in a recent New York Magazine article. Well, Larry—was he wrong?

Clinton got away with Republican-lite economics because, for whatever reasons, the economy was booming. I tend to believe it was because Greenspan was willing to blow up another bubble. This one’s failure would be more catastrophic than the Savings & Loan recession of the early 90s (does anyone remember that?). When the banksters saw they had social insurance for whatever ridiculous scheme they could cook up, whether it was investing old lady’s passbook savings in junk bonds in the 80s, or buttraping “day traders” with sock puppets in the 90s, they cooked up an even greater, more structural scheme in the 00s to confiscate trillions from the middle class. They got away with it twice, right? Third time’s the charm.

Given a situation that is different in kind and not degree, the Obama team fucked the dog by trying to do what worked before and not having the courage to do what any objective analysis of the facts would have shown the need to do. This type of political cowardice on everything except the individual mandate (i.e., conservative as of 2009) health insurance reform has typified this administration.

You have less than 18 months, Barry. Time to do something.

May I suggest trade reform? Not only is that the ticket to making our economy sound again, balancing our budgets while being able to cut income taxes, reducing unemployment, and restoring manufacturing, it will also break the GOP’s current coalition up in a nasty, nasty way. You see, your average blue collar, red neck GOP-leaning independent has had his future stolen by NAFTA and the WTO and he knows it.