This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy.' Click here to read other contributions to the series.



After innumerable false starts, it finally appears that President Obama will begin to focus his energy on the country’s unemployment problems. Unfortunately, the initial signs suggest that his pivot won’t nearly be strong enough. According to news reports, his key advisors are telling him to stick to small-bore ideas—like free trade deals and patent protections for inventors—that may not have much economic impact, but seem able to survive passage in a House of Representatives dominated by Republicans. The advisors are arguing that Keynesianism—the notion that the government should spend money at times of economic crisis—simply can’t be sold to the American people.

Obama should ignore these advisors. While public opinion polls consistently show that Americans are skeptical of Keynesian ideas, they can still be won over on the merits of many specific Keynesian policies. It’s by exploiting this seeming contradiction that Obama can win over the public and take concrete steps to boost the economy.

From an economic perspective, there is very little chance the economy will right itself without significant intervention—intervention that is large scale and fast acting as recently noted by Jonathan Cohn. The Obama administration won’t get much get credit from proposing modest policies, even if they gain the assent of the House, because those policies aren’t apt to make any actual difference. The White House would be better off offering bold ideas to solve the jobs crisis—ideas like extending unemployment insurance; extending and possibly increasing the payroll tax holiday; providing a tax credit for hiring new workers; new infrastructure spending, especially on fixing schools; and direct aid to state and local governments—even if they risk offending John Boehner.

Indeed, in the event that the economy remains stalled, Obama’s best and perhaps only chance to gain reelection is to make a strong argument that Republicans, by failing to act on his proposals, are responsible for the state of the economy. As political scientist Lynn Vavreck discussed in her influential study of the economy and Presidential campaigns, when the economy is bad, the incumbent candidate’s job is to create uncertainty about who is responsible for the situation. Obama cannot do that by passing small bore steps that don’t lead to real economic improvement. Voters will conclude that his programs failed to work, setting up an easy narrative for his Republican challenger to latch on to.

Obama’s political advisors are no doubt arguing that the American public will be hostile to any program that involves further government spending—that a strong jobs proposal would be tainted by its association with Keynesian ideas. Such policies, so the theory goes, will just annoy the public, which will further tank Obama’s already fading chances of retaining the presidency.