Friday, January 29, 2010

Krugman: Obama Liquidates Himself

Obama has to throw a bone at those who are dogging him because he is spending too much and that is what this is. That it makes no economic sense is of no significance. It may make voter approval sense. However Obama has constantly irritated his supporters on the left. Soon only the most diehard left Democrats will be left. I have noticed on a list I subscribe to that almost all those who originally supported Obama and were thrilled when he was elected have now abandoned the Democratic cause altogether. Earlier this was because of his foreign policy moves but now after the health care compromises and disaster and this move it is domestic policy that is fueling the flight from Obama.

Obama Liquidates Himself
A spending freeze? That’s the brilliant response of the Obama team to their first serious political setback?

It’s appalling on every level.

It’s bad economics, depressing demand when the economy is still suffering from mass unemployment. Jonathan Zasloff writes that Obama seems to have decided to fire Tim Geithner and replace him with “the rotting corpse of Andrew Mellon” (Mellon was Herbert Hoover’s Treasury Secretary, who according to Hoover told him to “liquidate the workers, liquidate the farmers, purge the rottenness”.)

It’s bad long-run fiscal policy, shifting attention away from the essential need to reform health care and focusing on small change instead.

And it’s a betrayal of everything Obama’s supporters thought they were working for. Just like that, Obama has embraced and validated the Republican world-view — and more specifically, he has embraced the policy ideas of the man he defeated in 2008. A correspondent writes, “I feel like an idiot for supporting this guy.”

Now, I still cling to a fantasy: maybe, just possibly, Obama is going to tie his spending freeze to something that would actually help the economy, like an employment tax credit. (No, trivial tax breaks don’t count). There has, however, been no hint of anything like that in the reports so far. Right now, this looks like pure disaster.

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