海角大神

Americans are deeply confused about why the economy is so bad 鈥� and their President isn鈥檛 telling them. In fact, the White House apparently has decided to join with Republicans and blame it on the long-term budget deficit.

Before I turn to the President, though, let鈥檚 be clear: The lousy economy is due to insufficient demand. Consumers 鈥� who are 70 percent of the economy 鈥� can鈥檛 and won鈥檛 buy because they鈥檙e running out of cash. They can鈥檛 borrow against homes that are worth a third less than they were five years ago, and most consumers are bad credit risks anyway because they鈥檙e losing their jobs and their wages are dropping. They also have to start saving for the kids鈥� college or for retirement, which will cut their spending even more.

Without enough consumers, businesses won鈥檛 hire enough people and pay them enough to reverse the vicious cycle. So we鈥檙e dead in the water. Even the stock market has caught on to the truth.

Which means government has to step in to boost the economy 鈥� as it has every time the economy has fallen into recession over the last eight downturns. Include the massive spending on World War II that lifted us out of the Great Recession, and it鈥檚 nine. The Fed can help, but it can鈥檛 do it alone. And it鈥檚 least helpful after a huge asset bubble has burst because the financial system won鈥檛 channel low interest rates where they鈥檙e most needed 鈥� to small businesses and average consumers.

This time we tried one stimulus that was way too small relative to the size of the falloff in demand that started in 2008 鈥� especially given that states and locales cut their spending by almost as much as the federal government increased it.

So we need another 鈥� a bold jobs plan. (I鈥檝e offered an outline of what it might look like in prior posts.)

Which gets me to the President. Even though the President鈥檚 two former top economic advisors (Larry Summers and Christy Roemer) have called for a major fiscal boost to the economy, the President has remained mum. Why?

I鈥檓 told White House political operatives are against a bold jobs plan. They believe the only jobs plan that could get through Congress would be so watered down as to have almost no impact by Election Day. They also worry the public wouldn鈥檛 understand how more government spending in the near term can be consistent with long-term deficit reduction. And they fear Republicans would use any such initiative to further bash Obama as a big spender.

So rather than fight for a bold jobs plan, the White House has apparently decided it鈥檚 politically wiser to continue fighting about the deficit. The idea is to keep the public focused on the deficit drama 鈥� to convince them their current economic woes have something to do with it, decry Washington鈥檚 paralysis over fixing it, and then claim victory over whatever outcome emerges from the process recently negotiated to fix it. They hope all this will distract the public鈥檚 attention from the President鈥檚 failure to do anything about continuing high unemployment and economic anemia.

When I first heard this I didn鈥檛 want to believe it. But then I listened to the President鈥檚 statement yesterday in the midst of yesterday鈥檚 634-point drop in the Dow.

At a time when the nation鈥檚 eyes were on him, seeking an answer to what was happening, he chose not to talk about the need for a bold jobs plan but to talk instead about the budget deficit 鈥� as if it were responsible for the terrible economy, including Wall Street鈥檚 plunge. He spoke of Standard & Poor鈥檚 decision to downgrade the nation鈥檚 debt as proof that Washington鈥檚 political paralysis over deficit reduction 鈥渃ould do enormous damage to our economy and the world鈥檚,鈥� and said the nation could reduce its deficit and jump-start the economy if there was 鈥減olitical will in Washington.鈥�

The President then called upon the nation鈥檚 political leadership to stop 鈥渄rawing lines in the sand.鈥� The lines were obviously Republicans鈥� insistence on cutting entitlements and enacting a balanced-budget amendment while refusing to raise taxes on the rich, and the Democrats鈥� insistence on tax increases on the rich while refusing to cut entitlements.

These partisan 鈥渓ines in the sand鈥� are irrelevant to the current crisis. They鈥檙e not even relevant to the budget standoff now that Congress and the President have agreed to a process that postpones the next round of debt-ceiling chicken until after the election.

But that process itself will offer enough distraction over coming months to let the White House avoid coming up with a bold jobs plan 鈥� even if the nation succumbs to a double dip.

The drama continues this week and next as congressional leaders decide on their 鈥渟uper committee鈥� of 12 lawmakers (six from each party). It then runs for another three months as the super committee decides on $1.2 trillion of proposed cuts, culminating in a tumultuous December when Congress votes on the package. Then we鈥檒l have more drama if, as seems likely, Congress votes it down and the budget triggers go into effect 鈥� cutting sharply into defense and Medicare. But this stage won鈥檛 require any new decisions from Congress or the White House because the cuts happen automatically.

After that, we鈥檙e deep into campaign season and very possibly a double dip recession. Republicans will blame 鈥渂ig government鈥� and the President and Democrats will blame Republican intransigence over the budget.

During yesterday鈥檚 pep talk, Obama restated his small-bore calls for extending a payroll tax cut that expires at the end of the year, extending unemployment insurance benefits, and creating an ill-defined 鈥渋nfrastructure bank鈥� to create construction jobs. But these policy miniatures were added as a postscript to the debt talk, as if he felt obligated to mention jobs.

There鈥檚 still time for political operatives in the White House 鈥� and the person they work for 鈥� to change their minds. If economic stresses increase, Americans may insist on government doing more. A poll released Monday found 60% believe the nation remains in an economic downturn and conditions are worsening. Only 36% believed that in April.

But for now the President is being badly advised. The magnitude of the current jobs and growth crisis demands a boldness and urgency that鈥檚 utterly lacking. As the President continues to wallow in the quagmire of long-term debt reduction, Congress is on summer recess and the rest of Washington is asleep.

The President should present a bold plan, summon lawmakers back to Washington to pass it, and, if they don鈥檛, vow to fight for it right up through Election Day.

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