Blogging has been slow and may continue to be as law review submission season begins. But if I can't be prolific, maybe I can be provocative.
I have a friend who has a tendency to refer to some of those with whom he disagrees as "freakin' morons." Although he is one of the very smartest people I know, I think he uses the term too often and tell him that God must have loved freakin' morons because, in his view, She made so many of them.
This guy has one of the world's great man crushes on Obama so let me be heretical.
Barack Obama just may be a freakin' moron.
Of course, I don't really think that, but his economic performance so far does not quite make it to dull average.
Let's put aside for a moment the debate over whether the past few months have revived Keynesian economics. What does classical Keynesianism tell us about debt financed responses to a recession which was brought on by, at least in the administration's view, too much borrowing? Really, who knows? Does it make sense to say, if people have borrowed too much and are now hunkered down, that the answer is to let the government borrow for them? If that idea is problematic, isn't it rendered more problematic by the coming entitlement crisis? What about the fact that, unlike times past, we are borrowing overseas and thus become dependent on foreigners willingness to continue? To quote the Boss, do we have debts no honest man can pay?
If that's so, one option is to inflate them away and John Cochrane has argued that, for stimulus to work, people must believe that is what will happen. They must believe that government does not intend to raise taxes to pay the debt back. Otherwise, they will save the injected funds in anticipation of the coming taxes and economic slowdown.
But Obama has announced that he is going do precisely that. Having blown the deficit through the roof, he now wants to talk about fiscal responsibility. Well, at least he's given himself a big target.
One way out of that trap is to use the stimulus money to create value, i.e., to make the economy more productive or to direct resources from less to more productive uses. But Obama outsourced the package to people like Nancy Pelosi, Henry Waxman and Dave Obey and got a grab bag of Democrats' pet projects tailored to total the $800 billion he wanted.
A certain type of unreconstructed Keynesianism says that this does not matter. We could, as Lord Keynes himself said, pay people to fill up bottles with old currency or as Larry Summers says, pay them to dig and then fill ditches. The idea is to get money in hands that will spend it. Now.
But that didn't happen either. Much of the package is backloaded. A moratorium on the payroll tax - giving moderate and low income earners a 7.5& raise after taxes - would have done that more effectively. But that was the GOP's proposal.
Off the stimulus package, there is no plan to address the underlying credit problem other than suggestions to nationalize banks. The proposal to spend huge amounts (more than the announced amount) to rescue improvident borrowers has been met with much deserved derision.
And, although finally got religion last night, the President has talked the economy down. Perhaps he is speaking words that are hard but true. Or maybe he is trying to play down expectations for political purposes. In any event, economics is, to a large degree, applied psychology and when the President tells us that catastrophe is imminent, folks do not feel good about spending and investing.
Back to that theme of fiscal responsibility. How do you reconcile it with last night's ambitious talk about what government can do you for just about anybody.
The result: The markets do believe that Obama is a freakin' moron. They were roiled. But since it became clear that he would win, they have tanked.