Are Obama's Policies Working?

 |  Includes: AIG, GS
by: Felix Salmon

The iq2us website is rather horrible, all flash-based and white-on-black and lacking permalinks, but tonight’s debate was well worth attending all the same. The motion was “Obama’s economic policies are working effectively”, and the interesting thing about it was that it wasn’t a left vs right thing at all.

Proposing the motion we had old-fashioned lefty Larry Mishel, who was joined by Steve Rattner and Mark Zandi. Opposing it were the even more interesting bedfellows of Jamie Galbraith, Eliot Spitzer, and, of all people, Allan Meltzer. An interesting debate was pretty much guaranteed.

The voting was interesting too. At the beginning of the debate, 32% of the audience supported the motion, 29% opposed it, and a very large 39% were undecided. By the end, the undecideds had shrunk to just 12%, the proponents were up to 46%, and the opposition was up to 42%. With an increase of 14 percentage points compared to the opposition’s 13 percentage points, the proposers were named the winners. But it was a very close-run thing, and in my view it was actually the opposition which clearly won the debate, not least because they had by far the best two debaters, in Galbraith and Spitzer.

The arguments for the motion were predictable: things aren’t as bad as they were a year ago, the Obama administration did everything that was politically within its power, and although things are certainly pretty gruesome now, they would be much worse were it not for the administration’s legislation.

The opposition was surprisingly cohesive, given that I can’t imagine Jamie Galbraith and Allan Meltzer ever agreeing on anything. The bailout was an attempt to recreate, at vast expense, the broken status quo ante which got us all into this mess to begin with. Yes, the stimulus and other Obama administration policies were necessary, but they were far from sufficient. And they have overwhelmingly helped the financial-services industry, rather than real Americans, who are still losing jobs at a rate of 200,000 a month.

The revelation was Eliot Spitzer, who was impassioned, fluent, compelling, and clearly enjoying himself. He made some very good points: how come Tim Geithner has managed to get away without ever being forced to justify the decision to pay all of AIG’s counterparties at 100 cents on the dollar? How come no one in the White House seriously pushed for judges to be able to modify mortgages in bankruptcy? How come more effort hasn’t been spent on preventing manufacturing jobs from disappearing, given that once such jobs go, they never come back?

In general, the proponents came across as weak and dry statistics-spewers suffering from a failure of imagination: they couldn’t even conceive of persuading the Democratic Congress to pass anything truly ambitious, even as the opponents were citing precedents from FDR to Reagan. That then prompted Steve Rattner to channel Rahm Emanuel, and accuse Eliot Spitzer, of all people, of being the kind of person who thinks up bright ideas while sitting in the shade at the Aspen Institute.

What’s more, the motion wasn’t whether the current economic policy was the best we could hope for given political realities, it was whether it’s working effectively. And if you’d asked Larry Summers when the stimulus bill was being passed what kind of year-end 2009 unemployment rate would indicate that his policies weren’t working effectively, he would have given a figure much lower than 10.2%. I think we should take him at his hypothesized and counterfactual word. The administration has tried its best, and done some necessary-but-not-sufficient things, but it hasn’t succeeded in its stated aims.