Krugman:

Mr. Obama had this to say about the economics of the budget: “Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.”

That’s three of the right’s favorite economic fallacies in just two sentences. No, the government shouldn’t budget the way families do; on the contrary, trying to balance the budget in times of economic distress is a recipe for deepening the slump. Spending cuts right now wouldn’t “put the economy on sounder footing.” They would reduce growth and raise unemployment. And last but not least, businesses aren’t holding back because they lack confidence in government policies; they’re holding back because they don’t have enough customers — a problem that would be made worse, not better, by short-term spending cuts.

Whether Obama believes this or not, that is his policy now. Apparently he has decided this approach is the best way for him to win reelection. What is a progressive or liberal to do? Stop counting on President Obama. He is not your policy ally with regard to economic policy. You want to stop him on economic policy. Time to wake up. As Krugman notes:

Matt Yglesias:

Let's hope this rumor is true:

Treasury Secretary Timothy F. Geithner is considering leaving the Obama administration after a deal is reached to reduce the federal deficit, two officials familiar with his thinking said Wednesday. If Mr. Geithner does exit later this year, he would be the last member of Mr. Obama’s economic brain trust to leave the administration, after two-and-a-half years of turmoil, during which the White House confronted a financial crisis, a historic recession, near double-digit unemployment, and a recovery that has yet to gain traction.

Geithner's record of disastrous service, first as head of the New York Fed, and then as the worst Treasury Secretary since Mellon, should leave him a disgraced man. But one name floated would make Geithner look better:

Booman writes:

On this whole debt limit deal, the White House seems to be supremely confident that they'll get something done and that it will be the Republicans who will blink. [. . .] The thing I am still worried about is that Boehner won't be able to figure out how to get this done. It's basically a suicide mission, as I can't imagine him surviving in a leadership position if he passes a Democratic-majority debt limit bill. But it doesn't appear he has any other choice. The White House just isn't buying his threats. They know his masters expect a deal, and soon.

I'm not seeing that. Instead, I see the White House resigned to $2 trillion in spending cuts (over 10 years) and no tax increases as the deal to raise the debt ceiling. The GOP demanded bigger cuts it is true, and in that sense they will not have delivered, but now Boehner can trumpet his "no tax increases" win. Of course the problem here is that the GOP won on taxes in December - yes, The Deal. Andrew Leonard of Salon writes:

Atrios found this nifty embed:

[Sorry everyone, but the video plays automatically and until I can figure out how to change the embed code, it has to be deleted -- TL. Update: The link is here.]

Calls for increased taxes on oil companies and jet plane owners. Not a bad political gambit, but in the end, he has to show resolve in the negotiation. In answer to a question on GOP cooperation, President says "Call me naive." Ok, you're naive.

Yglesias:

I believe all critiques of Obama that aren’t critiques of his macroeconomic management are slighting the role that poor macroeconomic management has played in exacerbating everything else. It’s certainly true that his team has faced an unprecedented level of non-cooperation from Republicans. But at the same time, Obama hasn’t shown much in the way of so-called “Rooseveltian resolve” to keep trying things and appears to have quite sincerely pivoted toward deficit control and structural reform last winter even with unemployment stuck at sharply elevated levels.

Is is too late to alter course? I fear it is. Listening to Tim Geithner has clearly been the President's biggest mistake and it is what imperils his reelection.

Speaking for me only

Krugman:

[D]ebt relief for homeowners — which could have done a lot to promote overall economic recovery — has simply dropped off the agenda. The existing program for mortgage relief has been a bust, spending only a tiny fraction of the funds allocated, but there seems to be no interest in revamping and restarting the effort.

NYTimes article yesterday:

As the nation’s housing market continues to teeter, the Treasury Department on Thursday penalized three of the nation’s largest banks for subpar performance in administrating a government-sponsored program to modify mortgage loans for distressed homeowners. [. . .] Neil M. Barofsky, who resigned in March as special inspector general for the bank bailout, described the assessments and penalties as a “lost opportunity” to hold lenders more accountable. “It further reaffirms Treasury’s long-running toothless response to the servicers’ disregard of their contract with Treasury, and by extension, the American taxpayer,” Mr. Barofsky said in an e-mail.

[. . .] The administration predicted that three million to four million Americans would benefit, but so far, only 699,053 permanent modifications have been started. To date, Treasury has spent about $1.34 billion on HAMP.

(Emphasis supplied.) The good news is $48.7 billion is still available for an actual plan for the homeowner crisis. Now all we need is Obama to fire Geithner . . .

Speaking for me only

Regular readers know how I have felt about Tim Geithner for a long while now. I think I first called for his resignation the day after he was confirmed as Treasury Secretary. I think my view has become the consensus of anyone not a Republican. See, e.g., Krugman, DeLong, Salmon and Judis.

Salmon says "It’s clear at this point that such a stimulus is not going to happen. The result is going to be devastating for millions of needlessly-unemployed Americans — and also for the fiscal health of the country as a whole. Geithner, it seems, deserves to shoulder a large part of the blame for that." Judis writes:

Will Obama continue to listen to Geithner? I certainly hope not. I used to blame the administration’s timid and self-defeating fiscal policy on Republican intransigence, but as Goldfarb’s profile shows, Obama and his Treasury Secretary deserve a good part of the blame for what is becoming Obama’s “Great Recession.”

(Emphasis supplied.) Speaking for me only

Atrios says Geithner is awful. He cites to Americablog's writeup about this WaPo writeup on how Geithner is the head honcho for the Obama economy:

Geithner has [. . .] quietly gained influence, which he has used to press President Obama to curb the nation’s soaring debt even at the expense of spending that might more directly spur employment.

His success at driving the agenda signals his status as the president’s closest economic counselor. [. . .] Geithner’s efforts inside the White House have shaped how Obama confronts this defining moment. [. . .] The policies molded by Geithner — and the balance they strike between slashing the deficit and supporting the economic recovery — could also ultimately determine whether Obama will win a second term.

[. . .] Geithner says Obama must tackle the deficit now if he wants the government to be in a position to support the economy in the future and to continue to protect the elderly and the poor. “It’s been my view for some time that unless he played a major role in shaping and negotiating the broad fiscal framework . . . we would be left without the capacity to do a whole range of things that are really important,” Geithner [. . .] said. [. . .] “I have been a consistent advocate of him doing that early and often.”

[. . .] Once, as Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was “sugar,” and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt.

Obama has made his bed with Geithner, and we have to suffer for it. We'll see if Obama has to suffer come next November. Oh btw, in this long article, the number of words written about the housing crisis? Zero.

Speaking for me only

Brad DeLong on Ryan Avent's comment about Obama and the economy:

[Ryan Avent]:

[W]hat is Mr Obama's plan? When Americans look at him now, what does he want them to see? Having bought so completely into the story that immediate deficit-cutting is necessary, Mr Obama can't easily demand new stimulus. At best, he can argue that his painful cuts are better in some way than those proposed by Republicans. "I'm not as bad as the other guy", is not a winning incumbent message when voters are upset.... Right now, the Obama administration seems short of economic ideas and (perhaps worse still) uninterested in labour market troubles. His Republican challengers aren't offering anything better. But Mr Obama has made himself extraordinarily vulnerable on the economy, and if he loses his job as a result he has only himself to blame.

The five things to do are: 1) recess-appoint qualified Federal Reserve Governors who understand the macroeconomics; 2) take as much risk as possible onto the Treasury's balance sheet so that the skittish private sector does not need to hold it; 3) use FANNIE and FREDDIE to goose the housing market; 4) have Tim Geithner say that at the moment a weaker dollar is in America's interest; 5) pray that the bond market does not panic.

(Emphasis supplied.) I'm not sure what DeLong means by "use FANNIE and FREDDIE to goose the housing market." I'm for using them to give relief to distressed homeowners, which should also help the housing market. Oh by the way, there is also $50 billion of HAMP money just sitting there.

Speaking for me only

Atrios and Krugman point favorably to this Christine Romer speech (PDF):

My main criticism is that they took their eye off the ball in late 2009 and 2010. [. . .]Like the Federal Reserve, the Administration and Congress should have done more in the fall of 2009 and early 2010 to aid the recovery. I remember that fall of 2009 as a very frustrating one. It was very clear to me that the economy was still struggling, but the will to do more to help it had died. There was a definite split among the economics team about whether we should push for more fiscal stimulus, or switch our focus to the deficit.

I'm not a Nobel prizing winning economist but I find Romer's arguments unpersuasive on when the "main" mistake occurred. In my view it was during the First Hundred Days, and not just because the fiscal stimulus was grossly inadequate (and was too dependent on tax cuts.) The biggest failure was in its grossly negligent response to the housing crisis. Romer writes:

Geithner The Incompetent:

As part of the bank bailout, the Treasury Department was given $46 billion to spend on keeping homeowners in their houses; to date, the agency has spent about $1.85 billion. [. . .] “The money was there and they didn’t spend it,” said Mr. Davis, an associate real estate professor at the University of Wisconsin. “I don’t mean to sound outraged, but I am pretty outraged.”

If only the Czar President knew.

Speaking for me only