Rants & Reasons

David Leonhardt’s column in the NY Times  has an important reminder for those who think Obama’s mantra of change during his campaign was an empty slogan.

With the Senate’s passage of financial regulation, Congress and the White House have completed 16 months of activity that rival any other since the New Deal in scope or ambition. Like the Reagan Revolution or Lyndon Johnson’s Great Society, the new progressive period has the makings of a generational shift in how Washington operates.

First came a stimulus bill that, while aimed mainly at ending a deep recession, also set out to remake the nation’s educational system and vastly expand scientific research. Then President Obama signed a health care bill that was the biggest expansion of the safety net in 40 years. And now Congress is in the final stages of a bill that would tighten Wall Street’s rules and probably shrink its profit margins. [...]

[T]he turnabout since Jan. 20 — the first anniversary of Mr. Obama’s inauguration and the day after Scott Brown, a Republican, won a Senate seat in liberal Massachusetts — has been remarkable. Then, commentators pronounced the Obama presidency nearly dead. Today, he looks more like a liberal answer to Ronald Reagan.

Financial reform, health care reform, student loan overhaul, withdrawal from Iraq, restoring the stature and reputation of the U.S. throughout the world, the Lilly Ledbetter Fair Pay Act, expanded stem-cell research, new regulation of the credit card industry, new regulation of the tobacco industry, a national service bill, new mileage standards for automobiles, the beginning of the end of Don’t Ask, Don’t Tell, etc. These are all progressive goals that Obama has achieved and any progressive who is disappointed is simply not paying attention.

What is most remarkable about this is the change in the media’s narrative over the past few months.

Steve Benen reminds us of what the political discourse looked like a few months ago:

I’m occasionally reminded of a David Brooks column from early February. Scott Brown had just been sworn in to fill Ted Kennedy’s Senate seat, and there was a real and pervasive sense that the Obama presidency was not just moving in the wrong direction, but would fail to achieve anything else of consequence.

“If, a year ago, you had been asked to describe the administration’s goals in one sentence it would have been this: Barack Obama will usher in the third great wave of Democratic reform,” Brooks wrote at the time. “Franklin Roosevelt had the New Deal. Lyndon Johnson had the Great Society. Obama would take the third step, transforming health care, energy, education, financial regulation and many other sectors of American life…. It was not to be…. [T]he original Obama project, the third Democratic wave, is dead.”

As Leonhardt’s column makes clear, Obama’s agenda is anything but dead. Whether it succeeds as mightily as FDR’s accomplishments only time will tell. But this story once again is a healthy reminder that the mainstream media narrative is not worth paying much attention to.

But despite these accomplishments, the moribund economy inherited from the Bush Administration remains Obama’s Achilles heel. Paul Krugman continues to be pessimistic.

For the past few months, much commentary on the economy — some of it posing as reporting — has had one central theme: policy makers are doing too much. Governments need to stop spending, we’re told. Greece is held up as a cautionary tale, and every uptick in the interest rate on U.S. government bonds is treated as an indication that markets are turning on America over its deficits. Meanwhile, there are continual warnings that inflation is just around the corner, and that the Fed needs to pull back from its efforts to support the economy and get started on its “exit strategy,” tightening credit by selling off assets and raising interest rates. […]

But the truth is that policy makers aren’t doing too much; they’re doing too little. Recent data don’t suggest that America is heading for a Greece-style collapse of investor confidence. Instead, they suggest that we may be heading for a Japan-style lost decade, trapped in a prolonged era of high unemployment and slow growth.

As Krugman notes, interest rates are still low, inflation is nowhere to be seen, and in fact the danger is now deflation.

So what we should really be asking right now isn’t whether we’re about to turn into Greece. We should, instead, be asking what we’re doing to avoid turning Japanese. And the answer is, nothing.

It’s not that nobody understands the risk. I strongly suspect that some officials at the Fed see the Japan parallels all too clearly and wish they could do more to support the economy. But in practice it’s all they can do to contain the tightening impulses of their colleagues, who (like central bankers in the 1930s) remain desperately afraid of inflation despite the absence of any evidence of rising prices. I also suspect that Obama administration economists would very much like to see another stimulus plan. But they know that such a plan would have no chance of getting through a Congress that has been spooked by the deficit hawks.

In short, fear of imaginary threats has prevented any effective response to the real danger facing our economy.

It will be one of the great ironies of the Obama Administration that his laudable attempt to rise above partisanship in Washington led him to listen to conservatives who insisted on limiting the economic stimulus.

One should never listen to conservatives. Never.