demandside

The Presidents Economic Recovery Advisory Board, a giant step toward recovery.

We are very heartened by the announcement of the Presidents Economic Recovery Advisory Board to be composed of the full range of economic thinkers and business interests. This is a complete break with the past practice of advocates controlling the conversations. It is the seat at the table that progressives need and the assurance they will be heard. Most of all, it is the place where it will be determined whether a policy is working or not working.

Progressive demand side economics will work, so it will thrive in such a venue. In the Bush II administration the response to the policy’s not working was to apply more of the same medicine. Tax cuts were supposed to engender prosperity. When they did not, and interest rates were at an all-time low, no adjustment was made to policy. You had literally the lowest taxes and the lowest interest rates and the highest deficits all operating to produce a tepid economy and greater and greater insecurity, yet there was no adjustment, only entrenchment of the official line.

This is a healthy policy framework. Policy is key to economic performance. As we’ve documented here at Demand Side, Democrats have produced markedly better economic performance when they have been in the White House. We have not had a president with the demand side vision, the interests of the middle class, so well defined and so prominent in his thinking since Harry Truman.

The economic stimulus package now under consideration is not clear in its details. We suspect that help to states and localities, conspicuously missing from Mr. Obama’s most recent list, is going to be omitted from the package. Possibly this is simply politically not do-able. That would be unfortunate. The scale of the package that is being talked about is appropriate. The importance of mortgage debt stabilization, of creating the infrastructure sector as an engine of growth, along with the green energy sector, is very encouraging, but the baggage carried over from the flailing TARP, the liquidity fetish of the Fed, and the various obligations to private banks already on the books will not be helpful. The stability of the dollar is in our view a question.

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