"The truth is, we and everyone else misread the economy. The figures we worked off of in January were the consensus figures and most of the blue chip indexes out there." Vice President Joe Biden on "This Week"
He's right. They did misread the economy and I'm glad that someone within the administration is willing to own up to his part in the problem. Yes, President Barack Obama's predecessor bares most of the blame for getting us into this mess but the onus for reversing the economic trend falls on the Obama administration. Obama must enact the policies that would reverse the trend and protect us from a future economic downturn.
He must think big. World War II helped us get through the Great Depression of the 1930s. Republicans like to use that to "disprove" the claim that President Franklin Delano Roosevelt's spending programs didn't work. What they forget to note was that WWII was a spending program. The whole country was mobilized. We turned the nation into one colossal manufacturing plant that employed nearly everyone including those who were not even in the labor force (women). That's one helluva job program!
I think Paul Krugman had it right from the very beginning. The "stimulus" package that Congress passed was too small. The vice president says it isn't working because it really wasn't implemented as of yet. That may be true but its effect will be offset by the cuts in spending (and in some cases the taxes raised) by the state governments which are required (in many cases) to balance their budgets. Those tax levies will hurt potential consumers. Job security must be at an all-time high now that the unemployment rate is at 9.5%. Many families are cutting back and the tax raises will force them to cut back even more.
States that do not raise taxes (or can't) will have to gut state programs and lay off workers (thus adding to the unemployment rolls). At this time, officials on Capitol Hill and Pennsylvania Avenue should not be thinking about our long term debt. They have to pump a lot of money into the states' coffers so that the states do not have to (a) raise taxes and/or (in some cases states have to do both) (b) gut programs that provide services to the public. At the same time the Obama administration must invest in a new environmentally-friendly energy infrastructure. The funding provided for the electrical grid and high speed rail is a start.
The president's ability to revitalize this economy has no doubt been hindered in part by the Republican obstructionists with some help from "moderate" Democrats. They negotiated a weak bill down further and the fact that Senator Alan Specter thought he couldn't win after voting for the weak stimulus bill Obama signed into law says more about the Republican base than it does about him.
Mr. Obama will have to make the case for a second stimulus package and push his spineless Democratic allies in the senate to vote for it.