Dday has a great post today featuring Krugman’s column today and ex-Biden economic advisor Jared Bernstein’s response. He notes a little piece of information in Bernstein’s post that sheds some light on our ongoing quest to understand the decision making in the administration over the past few years. I’ll just excerpt a small bit here:
1) on a WPA program, Bernstein explicitly says it was the White House, not Republicans, who had no appetite for direct, public job creation during the first term. Bernstein says he made the arguments about public works jobs inside the White House, but he was clearly outvoted. He doesn’t give the arguments made in response, tantalizingly alluding to “interesting” reasons that he will “speak to another day.” But he says very clearly that the reason we did all of this hoops-jumping and nudging in the stimulus package rather than just paying people to work at jobs that needed to be done was a philosophical decision inside the White House. In a sense we already knew this, but it’s important that a former White House insider re-emphasized it.
2) on mortgage modification, Bernstein agrees that this would be a wise course of action. But he adds that there’s a restraint on politicians, presumably also at the White House, about moral hazard, about the “wrong kind of people” getting a mod. He references the Rick Santelli rant, which happened over two years ago, as proof for this difficulty.
I can’t wait to hear what the “interesting” reasons for #1 are, but if I had to guess, it probably goes something like this:
Clinton’s experience shows what such pressure can do to a president’s agenda. Promises of spending on education, public works and a middle-class tax cut fell by the wayside as advisers led by Robert Rubin, who later became Treasury secretary, convinced the new president the best thing he could do for the economy was to show investors his resolve on fiscal discipline.
“You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a bunch of fucking bond traders?” Clinton raged at aides, according to journalist Bob Woodward’s book, “The Agenda.’
As for the second piece well … I guess they really believed that offering help to people destroyed by the greatest case of systemic mortgage fraud and reckless Wall Street gambling in history would send the wrong message to the polloi. They should have known better. We just can’t sanction such lack of personal responsibility and moral hazard in our society.
No, what we needed to do was discharge a nuclear powered firehose full of money at the people who perpetrated the fraud and ask them nicely, if they didn’t mind, not to do it again. Just as the institutions in question are all Too Big To Fail, these very, very important people are Too Rich To Fuck With.