Economists on the Budget Freeze

Here’s how one economist responded to President Obama’s idea of a spending freeze, which is likely to be a major topic of his State of the Union speech.

A spending freeze? That’s the brilliant response of the Obama team to their first serious political setback?
It’s appalling on every level.
It’s bad economics, depressing demand when the economy is still suffering from mass unemployment. Jonathan Zasloff writes that Obama seems to have decided to fire Tim Geithner and replace him with “the rotting corpse of Andrew Mellon” (Mellon was Herbert Hoover’s Treasury Secretary, who according to Hoover told him to “liquidate the workers, liquidate the farmers, purge the rottenness”.)

That economist is Princeton professor Paul Krugman, winner of the 2008 Nobel Prize in Economics.
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And while the administration is busy not denting the long-run budget deficit, it’s also not addressing short-term economic weakness. The CBO’s latest projections on near-term economic performance are pretty dismal. Real GDP is expected to increase by 2.1% in 2010 and 2.4% in 2011. That’s extremely sluggish growth coming out of a deep recession. Core consumer price inflation is forecast to be 1.1% in 2010 and 0.9% in 2011. And CBO has unemployment at 10.1% in 2010, 9.5% in 2011, and averaging 6.5% from 2012 to 2014.

iPhone app from the Campaign


For my part, if it proves politically expedient and allows the President to refocus on health care, then I support it. But it won’t. The absurd overreaction of the victory of Scott Brown has let the opposition see there is blood in the water and the sharks are circling.
When you get a sign like the Republican victory in Massachusetts that your message is not being received, you have two options. You can change the message or you can work that much harder to get the message out. Where is the organization of candidate Obama that had an iPhone app with talking points allowing me to convey precisely the campaigns stance of any given issue? The White House and the DNC need that kind of organization now.