“2010: What happened?” in light of 2018

Back in November 2010 I wrote an article that I still like, attempting to answer the question: “How could the voters have swung so much in two years? And, why didn’t Obama give Americans a better sense of his long-term economic plan in 2009, back when he still had a political mandate?”

My focus was on the economic slump at the time: how it happened, what were the Obama team’s strategies for boosting the economy, and in particular why they Democrats didn’t do more to prime the pump in 2009-2010, when they controlled the presidency and both houses of congress and had every motivation to get the economy moving again.

As I wrote elsewhere, I suspect that, back when Obama was elected in 2008 in the midst of an economic crisis, lots of people thought it was 1932 all over again, but it was really 1930:

Obama’s decisive victory echoed Roosevelt’s in 1932. But history doesn’t really repeat itself. . . With his latest plan of a spending freeze, Obama is being labeled by many liberals as the second coming of Herbert Hoover—another well-meaning technocrat who can’t put together a political coalition to do anything to stop the slide. Conservatives, too, may have switched from thinking of Obama as a scary realigning Roosevelt to viewing him as a Hoover from their own perspective—as a well-meaning fellow who took a stock market crash and made it worse through a series of ill-timed government interventions.

My take on all this in 2010 was that, when they came into office, the Obama team was expecting a recovery in any case (as in this notorious graph) and, if anything, were concerned about reheating the economy too quickly.

My perspective on this is a mix of liberal and conservative perspectives: liberal, or Keynesian, in that I’m accepting the idea that government spending can stimulate the economy and do useful things; conservative in that I’m accepting the idea that there’s some underlying business cycle or reality that governments will find it difficult to avoid. “I was astonished to see the recession in Baghdad, for I had an appointment with him tonight in Samarra.”

I have no deep understanding of macroeconomics, though, so you can think of my musings here as representing a political perspective on economic policy—a perspective that is relevant, given that I’m talking about the actions of politicians.

In any case, a big story of the 2010 election was a feeling that Obama and the Democrats were floundering on the economy, which added some force to the expected “party balancing” in which the out-party gains in congress in the off-year election.

That was then, this is now

Now on to 2018, where the big story is, and has been, the expected swing toward the Democrats (party balancing plus the unpopularity of the president), but where the second biggest story is that, yes, Trump and his party are unpopular, but not as unpopular as he was a couple months ago. And a big part of that story is the booming economy, and a big part of that story is the large and increasing budget deficit, which defies Keynesian and traditional conservative prescriptions (you’re supposed to run a surplus, not a deficit, in boom times).

From that perspective, I wonder if the Republicans’ current pro-cyclical fiscal policy, so different from traditional conservative recommendations, is consistent with a larger pattern in the last two years in which the Republican leadership feels that it’s living on borrowed time. The Democrats received more votes in the last presidential election and are expected to outpoll the Republicans in the upcoming congressional elections too, so they may well feel more pressure to get better economic performance now, both to keep themselves in power by keeping the balls in the air as long as possible, and because if they’re gonna lose power, they want to grab what they can when they can still do it.

In contrast the Democratic leadership in 2008 expected to be in charge for a long time, so (a) they were in no hurry to implement policies that they could do at their leisure, and (b) they just didn’t want to screw things up and lose their permanent majority.

Different perspectives and expectations lead to different strategies.

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