NOTE TO OBAMA - LISTEN TO THE GOP, BUT GO LONG AND BIG WITH SPENDING
I think that team Obama are suffering from having it backwards and from being short time enough to be thoughtful and thorough.
Sometimes, you just have to get basic. They ought to tackle things in this order:
- Part 1. A comprehensive housing and financial market approach ("TARP-II Plus")
- Part 2. An accelerating, massive jobs spending-program, designed as much for the long-term as the short-term (if not more).
Understanding the scope, timing, cost, and duration of the first will inflect what can be done in the second.
WHEN EVERYTHING SEEMS TO BE THE PROBLEM, IT'S OFTEN HARD TO KNOW WHERE TO START
Accordingly, the key decision-making pitfalls they face are the ones the Republicans managed so poorly: (a), underestimating the cost and duration of action and having no 'plan B'; (b), hoping for the best or hoping to be done quickly, when the key economic adjustments simply are not short-term or when the proposed fixes are designed to smooth out those adjustments, rather than accelerate them.
As it is now, they seem to have it backwards.Also, they may be confusing 'solutions' with diagnosis or something. If you take 'cutting entitlements' as a part of their unrevealed comprehensive solution, then Obama's foreboding speech obviates Paul Krugman's well thought-out criticisms, for instance.
There are indications of further confusion. They indicate 'our problems' may not be solved overnight. Yet, today, we have news that 18 months is the duration of what they have in mind, for far and away most of their spending. Why is 18 months magic?
There are indications they are not targeted, because they haven't done or finished the work on part one. Adding 'stimulus' (to seniors?) in New Hampshire isn't going to help near 10% unemployment and an ongoing housing crisis in California. Neither are tax breaks going to help the unemployed, if that money ends up unspent by those with the jobs or companies. More jobs and money isn't going to return growth prospects, if credit card companies and others continue to tighten standards.
Obama has clearly got the priority right. He appointed a team pronto and indicated he knew multiple priorities had to be juggled. However, his team is hamstrung because they need something now, but do not appear to have it ready-to-go, at least on part one (so part two is already suspect, right?).
THE RIGHT STRUCTURE FOR THE TASK <> 'COUNCIL OF ECONOMIC ADVISERS' + OMB
Okay, next up: A daily economic briefing shows outstanding commitment from the top. But, what they need is not Larry Summers interpreting monthly indicators (if that is what it is). They need an economic situation room, not unlike the real situation room. Any they ought to move quickly to get the data and people to fill up that room to the brim and beyond, especially if that involves legislation to acquire new and complete data. I'm sorry, but sitting down with Paul Volker, Charlie Rose style, is simply woefully inadequate to the challenge, if that is what is going on.
Finally, they need to shoulder reality. Depending on the assessment done in part one and the solution-type adopted, this downturn could go for more than two years. A recovery without both a rebound in the housing markets and, subsequently, banking is hard to imagine (although it is not impossible).
ROBUST DECISION MAKING - AVOIDING GEORGE BUSH'S POOR DECISION MAKING UNDER UNCERTAINTY
Accordingly, the key decision-making pitfalls they face are the ones the Republicans managed so poorly: (a) underestimating the cost and duration of action and having no 'plan B'; (b) hoping for the best or hoping to be done quickly, when the key economic adjustments simply are not short-term or when the proposed policy fixes are designed to smooth out those adjustments, rather than accelerate them.
Last, the need more communication that was given by Paulson, et. al. They need to demonstrate that they are actually in command of the risk at banks, not caught responding to further, poor risk-taking. They need to come up with nifty ways to describe and sell the plan and who is going to do it. (If it is Geithner, he has to work on those magic eyebrows, IMHO).
PLAYING FOR TIME
If they need more time to craft a proper, well thought-through 'Reinvestment in America Plan', then there are stop-gap measures that can hold them over.
The idea that there is all this pressure for a comprehensive everything in three more weeks is false.
