WaPo blogger Ezra Klein yet again comes rushing to the defense of the Obama administration by making the case that the economy is pretty much as good as can be expected given the nature of the financial meltdown and recession.
A look at the history of financial crises shows that our slow, halting recovery is right on schedule and the business community’s caution is predictable.Not all recessions are created equal. Recessions caused by financial crises take a lot longer to dig out of than their more common cousins. One is like the flu. The other, a car crash. When the flu goes away, you’re good. When a collision spins to a stop, that’s when the long, slow process of healing begins.
In “This Time is Different: Eight Centuries of Financial Folly,” Carmen Reinhart and Kenneth Rogoff study every financial crisis of the past 800 years. It’s an exhaustive study, and its conclusions are depressing for a country that believes itself exceptional even in its suffering: We’re not special. If you consider unemployment, housing prices, government debt and the stock market, Rogoff says, “the U.S. is just driving down the tracks of a typical post-WWII deep financial crisis.” In some areas, we’re even a bit ahead of the game: Economic output usually falls by 9 percent. We held the drop to 4 percent.
A few thoughts here:
1) Team Obama itself is dismissive of the R&R argument. The U.S. is so unique an economy (the dollar as the global reserve currency, for instance), they argue, such historical and cross-economy comparisons are not applicable.
2) I would like to see a counterfactual simulation run on this plan: a $400 billion payroll tax holiday in 2009, a permanent 10-percentage point cut in corporate taxes, a five-year extension of all the Bush tax cuts (giving time to totally revamp the code), and a regulatory freeze.
