Joe Gagnon points out that the Obama Administration and the Federal Reserve have plenty of tools available to boost hiring and generate growth — tools that could not be held hostage by the Teaocrats in the House of Representatives:
Many actions that would be helpful — extension and enlargement of the payroll tax cut, extension of unemployment benefits, extension of aid to the states, and a substantial and accelerated infrastructure program — require Congressional approval. I have no insights as to how to get such actions approved in the face of determined opposition by many members of Congress.
Instead, I propose aggressive actions that can be taken by the Obama Administration and the Federal Reserve without a single vote in Congress. …
First and foremost, the Federal Reserve should announce an additional $2 trillion of asset purchases, including longer-term Treasury bonds, agency mortgage-backed securities (MBS), and foreign exchange. This is more than three times the size of the woefully underpowered quantitative easing of late last year (dubbed QE2) and it should be accompanied by a clear statement that more is forthcoming if the economy continues to underperform. The goals are to push down bond yields and mortgage rates, to push down the value of the dollar in terms of foreign currencies, and to boost stock prices. All of these help households deleverage their balance sheets and encourage consumption, investment, and exports … Businesses would need to hire more workers to meet the additional demand. …
Well, the Fed didn’t announce anything like that today. I guess they’re waiting until …
… until …
I have no idea what they’re waiting for. They should have done this stuff two years ago.
Gagnon also outlines some steps the White House could take without needing to go through the impenetrable, intractable Do-Nothing Congress:
First, the Administration should use its control of Fannie Mae and Freddie Mac to force them to invite all homeowners whose mortgages are already guaranteed by Fannie and Freddie, and who are not delinquent in their mortgage payments, to refinance their current mortgage balance at the new low rates regardless of loan-to-value ratio. … Lowering mortgage interest payments on underwater loans would be the best way to prevent future defaults that would harm Fannie, Freddie, the holders of second liens, and US taxpayers. It is a win-win for all involved. …
Second, the Administration needs to acknowledge that the strong dollar policy, as enunciated for many years, is defunct and opt to embrace moderate further dollar depreciation consistent with monetary easing. Developing economies are spending more than $1 trillion each year manipulating the values of their currencies to subsidize their exports to the United States and Europe. Fiscal austerity in Europe and countervailing currency manipulation in Japan mean that the United States bears most of the cost of this modern mercantilism. As the world’s largest net debtor, it is time for the United States to just say no to trade deficits. We need the high-paying jobs that come from exports.
President Obama, unfortunately, also seems to be waiting for whatever it is the Fed is waiting for before he does anything that substantial about the jobs crisis either. That’s depressing (emotionally, but also economically).
Meanwhile, there is another call for massive stimulus spending from — and here’s where it gets weird — Judson Phillips, the head of Tea Party Nation.
Who knew that the leader of the farthest-right tea party organization was a closet Keynesian? Probably not Judson Phillips himself, but Keynesian stimulus is exactly what Phillips is calling for in his cry for an expansion of America’s fleet of aircraft carriers.
If we decided to build a couple of new carriers, thousands of workers would be hired for the shipyards. Thousands of employees would be hired for the steel mills that would provide the steel for the hull and various subcontractors would hire thousands. … They would receive paychecks and go out and spend that money. That would help a recovery. …
Yep. All true. I’m not sure what we need two more aircraft carriers for, but in the current jobs crisis, I’ll happily second Phillips motion. Let’s build two more. Heck, let’s build 20 more. Then we can hire even more people to dismantle them and start over, or we could turn them into artificial reefs, or convert them into floating schools for coastal cities.
Phillips, oddly, is apparently only a Keynesian when it comes to aircraft carriers. He seems to think that aircraft carriers are magical. Mills producing steel for aircraft carriers, he believes, are generating economic growth and a ripple effect that will lead to more hiring.
But if the steel from those mills were to go, instead, to rebuilding bridges or levees, then he believes it would have no ripple effect and would do nothing to stimulate economic growth and hiring. Same mill, same workers producing the same steel — but if that steel winds up anywhere other than in one of his magical aircraft carriers, then it would be a socialist boondoggle.
Judson Phillips is a very confused man. As M.S. writes:
The tea-party movement has spent the past year arguing that stimulus doesn’t work and cannot, by nature, create more jobs or economic activity. The idea that a major tea-party figure can turn around and make a bog-standard argument for defence spending on Keynesian grounds testifies to a startling capacity for cognitive dissonance.