Idiots or Liars?

Pay Freeze Decision Smacks of Too-Cute Political Team Running the Show

By: David Dayen Monday November 29, 2010 12:06 pm

There are two options. One is that Obama necessarily gravitates toward people with really bad economic ideas, and as a result of this advice makes really bad economic decisions. The other, and I would probably say the right, option is that the economic team isn’t really driving the debate, certainly not anymore. The political team thinks in terms of 11-dimensional chess and putting Republicans in a bad spot and all of the things you’d expect out of this federal pay freeze decision. Never mind that this hasn’t worked in the entire history of the Obama Administration. So a politically-minded official saying that unemployment is structural reinforces that we should really get around to those budget cuts which will please centrists in 2012.

There’s a lot of turmoil on the economic team right now, with new people moving in and out. The political team, outside of Rahm Emanuel, has remained basically stable, certainly in terms of worldview. And that worldview (mis)reads polls, and thinks that being the “good guys” who cut worker pay and freeze discretionary spending to “look tough” on the deficit is eminently responsible. It’s also responsible to extend unemployment benefits to people who have no other visible means of support, but that’s out of their hands, and if they fail, ah well. What’s important is to convey responsibility to the elites, who will pat them on the head as they carry out their austerity plans.

Oh, and while raising taxes on or otherwise “punishing” the banksters will instantly result in these “talented” Masters of the Universe going Galt, the same logic doesn’t apply at all to government employees-

"Responsible" Obama Administration Doesn’t Think Federal Employees Facing Pay Cut Will Leave to the Private Sector

By: David Dayen Monday November 29, 2010 11:30 am

On a conference call just now, White House Communications Director Dan Pfeiffer and U.S. Chief Performance Officer and the Office of Management and Budget’s Deputy Director for Management Jeffrey Zients defended the White House’s [proposed pay freeze ] for federal employees from the charge that this will drive talented workers out of government as they see no prospects for individual advancement. Seeking a better return on their talent, the theory goes, they would move to the private sector, probably a government contractor, where their services can be “rented” from the government at a higher rate. If the government has the same amount of services to deliver and less skilled know-how at their disposal, they would need to draw upon that from somewhere. So under this scenario, government would end up paying more for the same pool of talent, despite freezing salaries.

Zients disputed the notion that this pay freeze will lead to a dissolution of talent. “On recruitment and retention, we believe that people come to government service for range of reasons…. We feel comfortable that we have a strong value proposition and can retain the best and brightest.” Given this, Zients didn’t feel that there would be an expanded reliance on government contracting as a result of this decision. They believe they can wring enough out of federal contracting to save $40 billion dollars, in fact.

And finally, the problem with the economy is NOT THE DEFICIT!  It’s a lack of Aggregate Demand!

Obama Flunks Economics with Pointless Federal Wage Freeze

By: Scarecrow Monday November 29, 2010 8:35 am

(F)or the umpteenth time, this President has repeated discredited Republican gibberish that when households are having to cut back spending during a recession, government should do the same thing.

That’s just wrong. Foolishly wrong. Depressingly (literally), tragically wrong.

…

With 15 million unemployed and millions more living in job and health insecurity, typical non-wealthy households have no choice but to cut back. So private spending cannot pull the economy out of the ditch as it has in the past. But that is not true of the federal government.

Government spending can pull the economy up from the bottom. And only government has the resources and the power to fill in the gap in aggregate demand to bring the economy and jobs back.

A government with its own currency is not a household. It has different abilities, different ways of affecting the economy and paying for things. It controls the money supply. And it has different responsibilities, including the obligation to pull the economy out of a deep recession, to help create jobs and foster job creation in the private sector. To do this under today’s conditions requires enhanced spending/investments by government, not less. And there has never been a better time for government to act, nor has the cost of acting ever been lower.

It’s counterproductive and stupid for the President of the United States to keep telling Americans the false argument that government needs to tighten its belt when households are tightening theirs. And it’s even worse to falsely claim that by focusing on deficit reduction, the government is “doing everything we can to help boost economic growth and spur job creation.”

As Krugman said–

(Y)ou have to wonder what it will take for serious people to realize that punishing the populace for the bankers’ sins is worse than a crime; it’s a mistake.