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I recommend Bruce Bartlett's latest Fiscal Times column to you, where he discusses how "Obama's Lack of Focus Could Be Politically Fatal."  I'd like to offer two refinements:

First, Bruce argues that with regard to the 2009 stimulus plan, the medicine was appropriate but the dosage was inadequate:

By way of analogy, suppose you went to your doctor for an illness and he prescribed the correct medicine. But for some reason, you were given a dosage only half as big as necessary to cure your condition. Consequently, while you got better, you were not cured and continued to suffer. Under these circumstances, it is clear that the problem was not the medicine itself, but the dosage. Had you been given the correct dosage in the first place you would have been cured.

I agree with Bruce that it is important to get the history correct.  An alternative of no increase in fiscal policy would not have been better.  But I would characterize the problem as the primarily in the medicine, not the dosage.  My analogy is nutrition.  The 2009 stimulus plan contained too much fat and carbs and not enough protein.  Fat is the stuff that gets stored -- think of temporary tax cuts to households that could already have incrased their spending if they had wanted to.  Carbs are the stuff that gets used up immediately, with no impact on long-term expectations -- think of the various tax giveaways to households and firms that will consume them immediately rather than invest them.  Protein is the stuff that builds muscle and improves your ability to perform in the future -- think of public infrastructure investment.  I think that $787 billion (calories?) were enough, but what should have been a meal for a contestant in a bodybuilding competition actually turned out to be take-out from a greasy spoon.  There was a better way to deal with downturns.  Known at the time.

Second, Bruce argues that the time the President spent focused on health care reform could have been better spent focusing on the economy.  He writes:

He appeared to believe that he had done quite enough to turn the economy around and thus moved on to other issues such as health reform, the environment and energy policy, which occupied an enormous amount of White House attention in 2009 and 2010.

I think this was a mistake, not because I think the Affordable Care Act was inherently bad policy, as Republicans do, but because it diverted Obama’s attention from the economy and caused him to take his eye off the ball.

Politically, it was only a mistake to focus on health care reform first if President Obama is not going to campaign on it as a success.  As I wrote last month regarding President Obama's Re-Election Chances:

At the level of policy, I don't see why Obamacare, Dodd-Frank, and ARRA are not policies that he can run on.  And remember that I am a conservative saying this.  [Ed. Some readers have reasonably questioned this assertion.]  The first provides badly needed insurance reform and greater health care access to millions.  It does so at too high a projected cost (primarily the design of the subsidies up to 400% of the poverty level), in my opinion, but it is a step forward.  The second improves the framework for preventing financial crises and resolving them once they arrive.  A lot will depend on whether the new regulatory structure actually raises capital requirements, clamps down on the most abusive practices, and puts a profligate financial institution out of its misery at its first opportunity.  And the stimulus package was either too small if it was to be "timely, targeted, and temporary" or simply spent on the wrong things (consumption, not public investment).  But the president can make the case that it provided assistance when assistance was needed.  The economy may not improve rapidly enough for any of this to matter, but I reject any suggestion that he cannot make a credible case for re-election based on his policies.

I think re-election strategies are fairly straightforward -- whatever you did, then that's what you campaign on.  I don't see why a "They made the mess.  We've been cleaning it up.  Even though they keep hiding the key to the broom closet." theme wouldn't strike the right tone.

Aaron Blake and Chris Cillizza write in The Fix that President Obama almost granted me one of my wishes last evening. "There was a word missing from President Obama's jobs speech Thursday night: 'stimulus.'"  Their statement reminded me of something I wrote in December 2008 when asked about the ideal stimulus package by the Economix blog:

If I had my druthers, the word ’stimulus’ would be expunged from public discussion, along with ‘bailout’ and ‘rescue.’ These words convey the idea that, because we have so mismanaged our economic and financial affairs, we are somehow able or entitled to conjure up additional funds out of thin air to fix our problems. There are two problems with this idea.

First, the purpose of government spending is to purchase goods and services that the government needs to meet its responsibilities, not to hand out resources to those who panhandle most loudly for them. The reason to spend more in a recession is not to employ idle resources — it is to be able to stretch the taxpayers’ money further by getting a better price for its purchases because workers without jobs will work for less and owners of empty factories will charge less. Second, there is no free lunch: the money we spend today is a loss to the Treasury, whether as ‘timely, temporary, and targeted’ tax cuts that have no discernible impact; payments to delay bankruptcy for large, mismanaged entities, whether A.I.G. or the Big Three; or the largest public works program since the Interstate highway system. That loss to the Treasury must be made up at some future date, by later cohorts of taxpayers.

Fortunately, both of these problems can be overcome by focusing all new spending on investment rather than consumption and on public investment rather than private investment. By their nature, capital investments last for years or decades, so that there is a better chance that those who are paying for the spending are reaping its benefits. Public investment also meets the criterion that the spending goes for projects that are within the government’s responsibilities. Repairing roads today removes the need to repair them for a number of years. In 2005, the American Society of Civil Engineers released a report card in which it estimated that $1.6 trillion would be required over a five-year period to restore the nation’s physical infrastructure to good condition. If I had a target of $500 billion to spend, every dime would go for public infrastructure investments, and we’d still have quite a bit of work left to do.

A couple of months later, the ASCE increased that estimated to $2.2 trillion (about half of which was not authorized over the five-year time period).  I would stick to these criteria for how the Federal government ought to be passing legislation -- if you are going to spend money, address an identified need and get something of lasting value.  So the first trillion of additional deficit spending goes to fixing the deficiencies in our public infrastructure.

Tonight's was the first Republican primary debate I watched start to finish.  My bottom line is that, based on this performance, only Mitt Romney and Jon Huntsman looked like viable candidates in the general election.  I was underwhelmed by Rick Perry, and sadly disappointed in the discussion of Social Security as a Ponzi scheme.  There is a difference between a Ponzi scheme and a pay-as-you-go system.  The Social Security Administration provides a very clear explanation here.  The key excerpt:

There is a superficial analogy between pyramid or Ponzi schemes and pay-as-you-go programs in that in both money from later participants goes to pay the benefits of earlier participants. But that is where the similarity ends. A pay-as-you-go system can be visualized as a simple pipeline, with money from current contributors coming in the front end and money to current beneficiaries paid out the back end.

So we could image that at any given time there might be, say, 40 million people receiving benefits at the back end of the pipeline; and as long as we had 40 million people paying taxes in the front end of the pipe, the program could be sustained forever. It does not require a doubling of participants every time a payment is made to a current beneficiary, or a geometric increase in the number of participants. (There does not have to be precisely the same number of workers and beneficiaries at a given time--there just needs to be a fairly stable relationship between the two.) As long as the amount of money coming in the front end of the pipe maintains a rough balance with the money paid out, the system can continue forever. There is no unsustainable progression driving the mechanism of a pay-as-you-go pension system and so it is not a pyramid or Ponzi scheme.

The problem with Social Security is that over the long-term, the flow into the pipeline is projected to be less than the flow out of the pipeline.  Republican candidates should have been talking about ways to gradually phase in progressive reductions in that outflow to match the inflow.  If instead they want to fix the projected imbalance with new revenues, they should have been talking about ways to separate that money from the rest of the government's budget with personal accounts.

In case anyone cared about the facts ...

Kevin Drum has joined the chorus, with "My Jobs Plan: A Trillion Dollars for Infrastructure:"

All of us have our fantasies about what we'd like President Obama to say in his big speech next week about jobs. Here's mine: ask Congress to appropriate a trillion dollars to be spent on infrastructure upgrades over the next five years. That's it. That's the jobs plan. A trillion dollars to make us into a first-world country again. And as part of the enabling legislation, ask for emergency powers to temporarily streamline the regulatory red tape, interagency approval processes, environmental-impact statements, and labor rules that might otherwise keep the money from being put to work speedily.

Will a Republican Congress agree to do this? Almost certainly not—at first, anyway. But building and repairing infrastructure is no boondoggle. It needs to be done, it needs to be done now, and it would be an easy sell to a public cynical about the government's ability to do anything concrete to help them. Make the case aggressively and you never know. Free money is free money, and even Republican voters like the idea of clean water, safe bridges, pipelines that don't blow up, electrical grids that work, and dams and schools that aren't crumbling.

So that's it. A trillion dollars for infrastructure. That's the plan. Let's do it.

I couldn't have said it better myself.  Just much, much earlier.

My colleague, Matt Slaughter, holds forth today on the link between infrastructure and jobs.  He is a former member of the CEA and an expert in interanational economics:

There is a crucial connection between potholes and unemployment. America's crumbling infrastructure is eroding America's competitiveness in the global economy by eroding America's ability to attract and retain global corporations and their high-productivity, high-wage jobs.

This was not always so. Over much of the 20th century, America's strong infrastructure investment was a major factor attracting global corporations headquartered in other countries to invest and create jobs here. Rising U.S. standards of living were fueled by a strong infrastructure system that facilitated the growth of companies in America, both global and domestic alike: transportation systems to move people and products, electrical systems to power plants and offices, communications backbones to drive computers and creativity. By 2008, the U.S. subsidiaries of foreign companies employed over 5.6 million Americans -- nearly 2 million in manufacturing -- and exported $232.4 billion in goods. That's 18.1% of America's total.

Today is very different. America's decaying infrastructure costs the typical American worker hundreds of hours in lost productivity. It also costs companies time and efficiency in moving their products around -- and also out of -- the country. This decay is particularly stark for global companies, whose executives are witness to the dynamism of emerging economies like China and India that present them with ever-widening choices for where to grow jobs and investments around the world.

An excellent choice.  Here's the video:

One cannot help but notice the pleading tone of the President's remarks, for Congress to actually do something.  I bet he wishes he was Prime Minister now.

What should the Obama Administration's fiscal priorities be?  Public infrastructure investment, to build while it's cheap, debt-financed if necessary.  There is some evidence that the incoming CEA Chair gets it.

In a column last week, Fareed Zakaria asked, "Does America Need a Prime Minister?"  It is a question that often comes up when political gridlock makes it appear that we cannot respond to a crisis.  My answer is no.  Answer yes if you would have rather had the country governed with the Speaker of the House as the chief executive rather than the President over all of the last two decades.  Prime Minister Gingrich.  Prime Minister Pelosi.  Answer yes if you would like to have more and possibly more influential Tea Party movements legitimized as parties of their own, or if you would like Bernie Sanders (Socialist-VT) to have more company serving in elected office on Capitol Hill.

An advantage of the parliamentary system that I do wish we could find a way to replicate in our non-parliamentary system is the requirement that a party cannot obtain control of the national executive branch without demonstrating its appeal in the national legislative branch.  This is no guarantee of good government, but I think it would improve our system, at least based on the experience of recent decades.  It is a feature of our system that we tend to elect governors, rather than senators, to the Presidency.  We haven't elected a senator who wasn't facing another senator since JFK.  So every 4-8 years, the party that does not control the Presidency has a shot at gaining the Presidency -- and thus "half" of the power in the Washington -- with a candidate who has had nothing to do with Washington and its current predicament.  Look at the way all governors, from Carter to Reagan to Clinton to Bush, have run as "outsiders."

Stated differently, in our system, there may be insufficient reward to a political party for good behavior in the legislature, and not nearly enough punishment to a political party for bad behavior in the legislature.  Since control of the legislature is the ultimate electoral prize in a parliamentary system, that is a problem those systems don't have to quite the same degree as we do.

I enjoyed this essay on the many failures of Steve Jobs, by Nick Schultz at NRO.  But I think he misses the point with this cautionary tale for Washington:

There’s a moral here for a Washington culture that fears failure too much. In today’s Washington, large banks aren’t permitted to fail; nor are large auto firms. Next up will be too-big-to-fail hospital systems. Steve Jobs is a reminder that failure is a good and necessary thing. And that sometimes the greatest glories are born of catastrophe.

The analogy would have more meaning if thousands of Steve Jobses of varying degrees of quality had been bundled and securitized in the most opaque of ways, given ratings by agencies that were on the take, and funded by enormous amounts of debt backed by minimal capital.  We didn't have that and thus we had very little to fear from failure on anyone of the many ideas Steve Jobs launched.

Dartmouth welcomed the Gallup Poll's editor-in-chief, Frank Newport, to campus yesterday for the closing lecture in our "Leading Voices in Politics and Policy" series.  His assessment of President Obama's re-election chances was negative:

Ten presidents have run for re-election since we’ve had modern polling, since Harry Truman. Seven of them have been successful, and three have been defeated. … in August before his election year his current 38 percent job approval rating is lower than any other president who was successfully re-elected. So history would say he’s in big trouble.

There has been a rash of commentary in recent weeks about what the Obama Administration could have done better.  (Pick up one thread here and follow it back.)  At a very general level, I think President Obama's biggest problem is that he wants to be the president who transcends politics.  The president who wants to transcend politics will be a patsy for a Congress that doesn't. 

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At the level of policy, I don't see why Obamacare, Dodd-Frank, and ARRA are not policies that he can run on.  And remember that I am a conservative saying this.  The first provides badly needed insurance reform and greater health care access to millions.  It does so at too high a projected cost (primarily the design of the subsidies up to 400% of the poverty level), in my opinion, but it is a step forward.  The second improves the framework for preventing financial crises and resolving them once they arrive.  A lot will depend on whether the new regulatory structure actually raises capital requirements, clamps down on the most abusive practices, and puts a profligate financial institution out of its misery at its first opportunity.  And the stimulus package was either too small if it was to be "timely, targeted, and temporary" or simply spent on the wrong things (consumption, not public investment).  But the president can make the case that it provided assistance when assistance was needed.  The economy may not improve rapidly enough for any of this to matter, but I reject any suggestion that he cannot make a credible case for re-election based on his policies.

At the level of tactics, President Obama's actions have been puzzling in some cases.  He should never, as a matter of principle, allowed the Bush era tax cuts on the highest income groups to be renewed.  He ran away from a fight, lost credibility with his base, and gained little in return.  The critical part of engaging in that fight would have been to use the tools available to him through the political process to block the agenda of Congressional Republicans.  I find it hard to believe that his fiscal policy changes he has enacted would have turned out materially worse for him if the Democrats did not have the majority in the Senate and the Constitution did not afford him a veto.

Sometimes, the way to transcend politics is to be extremely good at it.

Not much, in my opinion.  In my last post, I argued that I'd take the debt deal even at the expense of the negative publicity we got for the juvenile way the negotiations were conducted.  So we avoided default and got downgraded by S&P anyway.  S&P's arithmetic mistake aside, I don't think potential investors in U.S. Treasuries relied too much on its previous AAA rating in actively valuing the bonds and bills.  And even if they did, they should be only minimally bothered by its current AA+ rating.  Potential investors have plenty of public information on current and projected cash flows of the U.S. government.  In those circumstances, there is little value added by a ratings agency's grade.

Where ratings agencies can add value is in rating securities that are harder to value.  I cannot say it better than E.J. Dionne did:

And to complete this portrait of fecklessness, Standard & Poor’s, which once happily and profitably stamped triple-A ratings on rip-off mortgage-backed securities, ended the week by downgrading the federal government’s creditworthiness. S&P once caved to pressure from Goldman Sachs in its rating of private securities, yet it refused even to pause in its dissing of American creditworthiness despite the Obama administration’s successful challenge to some of its numbers. We need to learn far more about what forces pushed S&P to this outlandish and highly politicized decision. [links in original]

The consequences of the downgrade, if any, will play out over time in the level of the term structure for U.S. Treasuries.  At present, the U.S. government can borrow at ridiculously low levels.  We should do so, as needed, to support investment that will boost output, employment, and productivity in the future.