Brad DeLong continues to be puzzled by the Obama administration's unwillingness to aggressively pursue more expansionist fiscal policies:
Yes, uncertainty is enormous. And any one policy might not work. But that any one individul policy initiative might not work is not an argument for not trying anything — unless you are happy if things develop according to the current-policy forecast and we see an unemployment rate between 9% and 11% for the next year and a half at least.
Thus if I were in the administration I would be trying everything:
He follows this with a list of suggestions, including several Fed actions, a bunch of spending actions, and some regulatory stuff. So given the weak state of the economy, and the fact that unemployment promises to stay high for 4-5 years, why isn't Obama's team pushing for any of these things?
It's a good question, but I think the answer is pretty simple. However, it requires you to ignore what people are actually saying. I imagine that no one in the administration will ever admit this, even off the record, but the main reason for inaction is almost certainly because they believe there's zero chance of getting any of this stuff done. Politically, then, there's nothing but downside here: yet another long, bruising battle with both Congress and the Fed, ending in total defeat. If everyone in the administration were utterly convinced that the economy was completely sunk otherwise, they might risk that. But no one in his right mind will risk it for anything less.
The key thing to remember here is simple: the original stimulus bill passed the Senate 60-38. That was for a bill passed a month after inauguration, while the economy was still in deep recession, and that was supported by virtually every economist with an IQ higher than Donald Luskin. Given that, what are the odds of passing anything significant now? The only thing that prevents the answer from being negative is the laws of probability.
So we'll get a little playing around the edges, maybe with the remnants of TARP, and maybe the Fed will do a bit of tinkering too. But unless there's another crisis that sends the world into a tailspin, a little bit of uncertainty combined with the same Republican intransigence that's marked the entire previous year will prevent any serious new action. Welcome to America.