Friday, March 08, 2013

Obama Economy?

Dow Jones hovering over 14K for days while propelling global equities further. February created 236K new jobs. For the first time unemployment going below the rate when President Obama started his first term. No wonder folks are toying phrases like 'Obama Economy' and coming vehemently after why Paul Krugman is wrong.

Agreed, Obama Administration did not follow dictates of Paul Krugman. Krugman wanted larger stimulus whereas President opted for a political compromise (apart from Solenydra not much of a controversy, big political achievement?). When Krugman wanted Bank Nationalization, Geithner-Summers-Bernanke trio opted for stress tests which finally have resulted in healthy Banking Sector laying foundation for a good recovery. But still, people do not stop equating Obama Administration with Paul Krugman and then after taking Krugman as the 'straw man' keep criticizing Obama Administration policies.

I am not denying that Obama Administration policies have been more near to what Krugman has been prescribing than many other pundits on the Right side. I am glad that Administration considers Krugman prescriptions more seriously than others because:
- despite cherished illusion on Right about ObamaCare as further expansion of entitlements, it was done to help constrain health care costs and expand the coverage to folks who are left out today; and
- despite in hindsight folks want to criticize President for Afghan surge, he did end the Iraq war as promised and Right was clamoring for more 'doubling down' on Afghanistan when President Obama started his term.

Overall chances of History judging 'Obama's hand' much more stable compared to misguided austerity of David Cameroon in UK or People's revolt in Italy or 'lost in woods ways of Hollande in France'; are much higher. 

No one is denying that 'debt' is not an issue for America. To be specific Medical Cost is the real issue for America. But when Economic Growth is the immediate task on hand, Krugman has a point. Difference is Kgruaman effectively sees Medicare as some kind of stimulus spending in absence of an actual stimulus; whereas President Obama should have adopted a policy to 'pile on debt for future of America' rather than spending all that borrowed money on 'past of America' (i.e. Medicare). 

But then President Obama might have reached a point, where he can 'afford to call the truce' on these endless fiscal wars with GOP - deficit is decreasing and it is not a bad deal: to give up around half a Trillion Dollars of tax revenues in return for protecting all entitlements while simply accepting 'sequester' as the collateral damage. May be Hillary or the next president then will have a  room to undertake entitlement reforms from a cleaner slate while Economy would have rendered the need of raising further revenues less urgent.

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